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“Why do firms become multinational enterprises? Using
examples, explain what motivates organisations to engage in
international business and how they internationalise”
A multinational enterprise refers to a firm situated in and actively utilising numerous
countries across the globe for the likes of manufacturing, production, and trading
...
A multinational enterprise (MNE) is most likely situated in a
variety of contrasting countries in terms of economic prosperity, each country providing
specific benefits to the MNE and hence providing motivation for the cause of
internationalisation
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(Meyer, 2004) In this essay, I’ll be looking at a variation of reasons for motives and a

variety of strategies involved in becoming international
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(Kim, et al
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Small or
medium enterprise’s (SME’s) may also feel that establishing a business that’s as large as
possible provides an element of stability to their managements perspective in respect to
their personal lives
...
I shall be discussing the motivations and
approaches taken by a business in achieving the accolade
...
In
illustrating these measures, I’ll be describing how the likes of current multinational
enterprises such as Apple, Tesco and Mercedes were motivated and hence their routes to
them successfully in achieving a multinational status
...
The essay will depict not only motives for an SME in becoming a
multinational but also the motivations behind an already established multinational
expanding into various countries for specific reasons
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A company
which only operates at a national level is fundamentally disadvantaged to a multinational
enterprise in terms of potential revenue and hence ceteris paribus profit
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An immediately greater volume
of potential consumers is likely to provide surges in instant revenue as consumers look to
experience the business for the first time in regards to it providing a new trend or as a
potentially better alternative to an existing business in the market
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“Economics and management literatures tend to explain new market entry as a
profit-seeking firm behaviour” (Kim, et al
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By possessing superior retained
earnings at the end of the financial year, the business can use the necessary funds for
expansion
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Often businesses who internationalise for the first time will have built up a
certain reputation, bringing with it an already existing demand for the firm’s products or
goods in the new country
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Often experts of the region are a prerequisite and various risk
assessments along with highly scrutinised field research are disembarked
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“Recent studies on firms’ strategic movement began to emphasize another dimension of
new market entry based on the concept of interfirm competition and benchmarking
activities
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, 2014) If all proves satisfactory, the businesses venture to a new
company “internationalising” if you will, is in accordance with the correct

implementation techniques such as setting up local offices and network distribution
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Tesco’s gain expertise from the markets they wish to venture into
through the enlisting of specialist consultants for guidance
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Satisfied with the
Irish market criteria, Tesco embarked on an acquisition of ABF’s an Irish catering
business in 1997 for approximately £630 million
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Indeed, Tesco has often undertaken handfuls of failing
internationalisation strategies most notably ‘Fresh an Easy’ in the US, however by virtue
their internationalisation strategy in general is somewhat of a success provided it is
thoroughly executed (US proposition often blamed for lack and ignoration of market
research findings)
On another scale, firms may be motivated to internationalise on the allure of a reduction
of costs rather than an increase in revenue
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Indeed, eminently in the likes
of emerging economies for example Nigeria, whereby regulation towards the likes of
employee rights and other statutory legislation is often significantly less scrutinized
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In addition, other
countries may provide cheaper natural resources, be it the process of extracting them or
manufacturing the materials
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The process of branching out into another country
can often bring with it complications for a business
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Negative spillovers risk triggering
adverse reactions from stakeholders such as local politicians concerned about
employment, and consumer NGO’s concerned about ethics
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Utilising and
taking advantage of poor workers’ rights in a developing country can be viewed with
prejudice amongst consumers of developed nations
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Under
the premise the internationalising firm will bring with it economic prosperity to a
significant extent, leniency toward the firm will categorically manifest
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(Meyer, 2004) Indeed, internationalising countries may face a
certain wrath from the public as it looks to replace workers in the current country with a

contingent of cheaper overseas equivalent, causing unemployment in the pre-existing
areas
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Alternative countries aren’t just a stimulus for a
reduction in costs, often they provide motivation for Tax avoidance
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Such a feature is a high
motif for an internationalising firm
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Established multinational enterprises have come under scrutiny for poor corporate social
responsibility in their previous routes to internationalisation
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“Most international business scholars, it
appears, would rather influence the boardroom than the office of the president or prime
minister
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(Meyer, 2004)
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The costs of production subsisted at a rather exorbitant
level
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Apple couldn’t afford to export to China
at a consistent price, they faced huge import tariffs and couldn’t match domestic
manufacturers
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All components were now manufactured in
China
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Infamously, Apple have over utilised the poor Chinese employment laws and hence
obtain incredibly cheap labour all of which served as motivation for their
internationalisation to China
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A merger for a small or medium enterprise (SME) provides a premise of future
internationalisation
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“Many scholars argue that due to
resource scarcity, SMEs must collaborate with foreign partners when internationalising
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Conjointly growth in each category will
boost the firm’s performance
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In addition, the firm will likely experience the benefits of
economies of scale and hence utilise the beneficiary to provide substance to other areas or
the overall dynamism of the business
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The latter category often as a result of the
newly occupancy of the likes of patents and both firm’s research and development which
in itself often provides substance alone for an acquisition
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, 2000; Boateng and Glaister, 2003
cited in Nisar et al
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The use of the new firm’s knowledge of the market, the
cliental and other fundamentals towards the success of a newly internationalised SME is
often unquestionably quintessential
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Speaking from a purely
motivational point of view, internationalising through merging represents a significant
opportunity to create more prosperity for managerial positions, theoretically the merger
acts as substitute for the original enterprises investment in the likes of for example
productivity
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“There is virtually unanimous evidence that shareholders of acquired firms benefit, often
very handsomely, from mergers”
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, 2012) Overall, mergers provide
substance for motivation for internationalisation, as it provides opportunity to
internationalise
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The merger allowed them
to improve their competitive terms on a global sense
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Immediately Chrysler had access to Mercedes luxury parts,
suppliers and assets and hence could establish themselves in the European market
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To conclude, reiterating my points, I initiated the essay discussing the significance the
possibility of expansion has in a motivational respect to a SME, illustrating my point with
Tesco’s endeavours when they pursued a similar strategy
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I
ultimately spoke about the role that mergers play in the internationalising process of a
company
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Often
however the internationalisation process is widely reputed to be a depiction of
management’s characteristics; their knowledge, perspicacity, and perceptions all
contributing to the motivation of a firm
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(Nisar, et al
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A paradigm that explains the
strategic management behind a firm’s internationalisation, incorporates a variety of
motivations and implementations
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Despite various propensities to fail, firms which
internationalise are distinguished by one motive that supersedes any other
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, 2014)
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, 2012
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Technology Analysis and Strategic Management , XXIV(3), pp
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Kim, N
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& Seoil, C
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Why Do Firms Enter a New Product Market? A Two Dimensional
Framework for Market Entry Motivation and Behaviour
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263-278
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E
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Perspectives on Multinational Enterprises in Emerging Economies
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259-276
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, Boateng, A
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& Leung, M
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Understanding the motives for SMEs entry choice of
international entry mode
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717-739
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T
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Creating Value Through Mergers and Acquisitions: Some Motivations
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3-7

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