Introduction

One of the important aspects of globalization is the international transformation of the companies around the world. The companies have evolved from being a domestic firm to a multinational corporation and being present almost everywhere in the world either physically or via internet. These international companies are regarded as true MNCs only if they have made substantial direct investment in foreign countries and have actively and continuously taken part in the management of these assets (Barlett, Ghoshal, p2). Though the companies had started the internationalization process as early as in the seventeenth and the eighteenth century when the developed nations moved towards the under developed ones for acquiring key resources and in search for markets, but the latter part of the twentieth century and the beginning of twenty-first century witnessed a huge expansion in the extent to which the firms go international (Barlett, ghoshal, p1). The internationalization process has transformed greatly due to the evolution of the motives and the way firms integrate and expand their businesses around the world. There are both proactive and reactive motivations for a firm to go international. Proactive motivations are evident in firms that see a need for a strategic change and want to go international; whereas reactive firms are those that go international because they have to in order to deal with the competition from the domestic firms growing internationally as well as the foreign players entering the domestic market. (Czinkota, The Export Marketing Imperative, 2004, pg 4). This essay discusses these motives for firms to become MNEs and how they go about it.

Why firms become Multinational Enterprises

In the increasingly global business environment, many companies cannot afford to be under the assumption that their domestic markets will always be profitable. For this reason, many companies start with selling their existing products to the countries which have more number of consumers (e.g. China and India) or where consumers have more purchasing power (e.g., USA) (Rennie, Michael W, 193). This arises from the primary profit-seeking motive of the companies but also helps them to increase their brand identity and global presence (Czinkota, p4). These companies then customize their product line according to the country in which they are selling in order to expand their customer base and tackle the competition from the domestic players. So increased sales are a major motive for a company’s expansion, and in fact, many of the world’s largest companies – including Volkswagen (Germany), Ericsson (Sweden), IBM (United States), Michelin (France), Nestle (Switzerland), and Sony (Japan) – derive more than half their sales from outside their home countries (UN Conference: Promoting Linkages, 2001).