A multinational enterprise according to Brooke and Remmers is a company that is present in more than one country, the home country” and the host country and provides valuable activities in a service or manufacturing area (Dunning, 1993, p.3). Though Maurice Bye 1958 began to see and recognize multinational enterprises by the definition Multi-territorial firm indicating that a MNE was purely given the name by the amount of countries a company occupied”(Maurice Bye 1958). Academics see the multinationals in great depth and definitions are slightly different, J.Dunning defines a Multinational enterprise as an enterprise that engages in foreign direct investment (FDI) and owns or controls value adding activities in more than one country (J.Dunning 1992). MNEs therefore, control a package of resources, which they move across national borders, and continue to control over those borders. This transfer is often conceived solely in financial terms, but in practical terms the role of MNEs in transferring capital between countries is one of their less important functions. The critical resources, which multinationals transfer across borders, are the areas of technology and organisation, entrepreneurship and culture. MNEs are imperative because they have the capacity to move technologies and ideas around the world. This gives the firms the potential to serve as engines of growth. This essay will explain why and how firms become multinational enterprise.

The subsistence of MNEs might seem apparent, in the sense that firms in the capitalist system exist to make profits, and investing in foreign countries could be seen as a coherent way of making more wealth than staying in one country. In spite of that not all firms in the world are multinational. In addition to this, according to Jack Behrman there are four main types of Multinational corporations motives (Jack Behrman 1972). The first motive, the resource seekers” the enterprises, to obtain particular and specific resources at lower real cost that cannot be obtained in their home country aim to invest abroad. One kind of these is the physical resources like, raw materials, minerals, agricultural product and location advantage, which generally involves substantial capital expenditure. Another kind of resources is semi-skilled and unskilled labour that is available at lower costs, in countries developing in advanced industrialization like, Mexico, Taiwan, China and like Primark outsourcing from India. One more motive why firms seeking FDI in resources is to obtain technological skill, management and organizational skills already accessed there.

The second motive – the market seekers” enterprises, aim to prolong or protect existing market or to promote in new markets. Thereby, there are four main reasons – firstly, to cope-up with the suppliers and customers who have set up foreign producing facilities. Secondly, to hunt the market, the product needs to be modifying according to the local customers preferences. Thirdly, sometimes it is a lot cheaper to produce in the host country than to export from home country. This is becoming more necessary if there are trade barriers and restrictive government laws. Furthermore, the last reason for market seeking investment is that enterprise wants to have physical presence in the foremost markets served by its competitors. Therefore, companies like Nestle, Bayer and Ford expanded internationally in search of new markets. The third motive the efficiency seekers” enterprises want to obtain from the common governance of geographically scattered activities and to have benefit of economies of scale and of risk diversification. Therefore, enterprises wants to compete on the basis of the product it offers and its ability to diversify its assets and capabilities by exploiting the benefits of producing in several countries. The fourth motive the strategic asset seeker” enterprises to sustain their international competitiveness acquire the assets of foreign corporations. Like one company might acquire a business so as to thwart competitor from doing so or another might merge with its foreign rivals or one might acquire suppliers to corner the market for raw materials. Enterprises seeking strategic FDI are trying to protect or advance their long-term competitive position. Apart from these four motives other motives like escape investments, support investments, passive investments also play a big role why firms want to go international (Dunning 1992).