International Business: Motives, Strategies, and MNE Case Studies

This report delves into the reasons why companies choose to become Multinational Enterprises (MNEs), exploring various motives such as market opportunities, sales expansion, risk diversification, resource acquisition, and economies of scale. It examines the processes of internationalization, including country selection, market analysis, and market entry planning. The report presents different MNE models like the innovation, Uppsala, network, and strategic models. Furthermore, it provides real-life examples of Coca-Cola and Johnson & Johnson to illustrate the practical application of internationalization theories. The report concludes by emphasizing the importance of market analysis and strategic decision-making for businesses aiming to expand internationally, highlighting the benefits of leveraging technology, expertise, and brand recognition for enhanced profitability. This report is available on Desklib, a platform providing AI-based study tools and resources for students.

Running Head: INTERNATIONALIZATION
0
International Business
Multi-national Enterprises
(Student Details: )
1/7/2020

Internationalization
1
Contents
Introduction................................................................................................................................2
Motives of internationalization..................................................................................................2
Market opportunities..............................................................................................................2
Sales Expansion.....................................................................................................................3
Risks diversification...............................................................................................................3
Resources acquisition.............................................................................................................3
Economies of scale.................................................................................................................3
How business internationalize....................................................................................................4
MNE models..........................................................................................................................4
Use of two MNE examples........................................................................................................5
Conclusion..................................................................................................................................6
References..................................................................................................................................7

Internationalization
2
Introduction
This report is based on identifying the reasons why do firms become Multinational
Enterprises (MNEs). In this context, the paper will find which factors motivate organizations
to engage in international businesses (MSG, 2020). Moreover, this discussion will contain the
procedure of how companies internationalize while exploring the reason why they switch to
become an MNE. With this paper, motives for internationalization will be investigated for
different companies specifically for two real-life examples (Yerkin, Nazym, & Gulmira,
2019). In general, there are so many reasons for which firms get to engage in foreign direct
investment. Thus, this research will be based on internationalization drivers’ theories which
motivate organizations to inaugurate themselves abroad. Here, the aforementioned categories
are efficiency, market, resource and strategic resources seeking motives ( Toni, 2011). It has
been found that most of the companies usually start their operations domestically while
conducting value-added activities in the borders of the native country only. It is because
becoming an MNE typically needs a change of mindset and view to a large extent. Thus, this
paper will explain how businesses internationalize with the help of two MNE examples to
summarize the main findings later.
Motives of internationalization
There can be a number of reasons why companies become MNE and hence these
reasons are usually known as motives behind becoming MNE while engaging in international
business. It is because companies expand internationally for so many reasons such as:
Market opportunities
This motive of an MNE explains the desire for market opportunities exist abroad.
Here, market opportunities may include the absence of competition, favourable changes for
the product into foreign markets, and demand for the organization’s product in international
markets. Thus, a company’s desire to grow through extending from saturated domestic
markets to the international market is one of the biggest motives behind internationalization
(Adams, Jeanrenaud, Bessant, & Denyer, 2016).

Internationalization
3
Sales Expansion
Here, it is also one of the MNE motives which allow modern firms to expand their
sales as well as acquire newer markets in a way that they can easily record decent growth
rates (Federal Reserve Bank of St.Louis, 2015).
Risks diversification
This is one of the reasons companies internationalize as it helps them to diversify the
risks of the organization. In this context, risk diversification helps organizations to minimize
risks of stagnating growth within their native country and other countries as well (MSG,
2020).
Resources acquisition
It has been found that resource acquisition is the major reason for organizations to
expand globally. It is because the emerging, as well as developing countries, has
comparatively enhanced deposited minerals, land, metals, and other business resources.
Another reason is that many of the developing and emerging nations are not having the
resources or the expertise required to tap their reserves of such metals and minerals. Thus, it
is a motive of MNE to internationalize its business (Federal Reserve Bank of St.Louis, 2015).
Economies of scale
Researchers have found that companies globalize their business in order to achieve
economies of scale. It is because economies of scale are hugely advantageous and it enables
an organization to economize the distribution network and the transport as well. Therefore,
companies get motivated for internationalization for increasing competitiveness against
international firms of the relevant industry (Yerkin, Nazym, & Gulmira, 2019).
In this way, there are some proactive reasons or motives behind companies’
internationalization include profit-seeking, exclusivity and uniqueness, overproduction,
competitive strike, declining domestic sales, political reasons, economic changes, and many
more (Wilson & John, 2014). As per the theory of ownership advantage, MNEs typically are
technological leaders and hence invest hugely into developing novel products and services.
This theory of internationalization suggests that maintaining stronger protection of IP rights
and brands through internationalization always helps companies to leverage enhanced profits
from innovation (MSG, 2020).

Internationalization
4
How business internationalize
It is well-aware that internationalization refers to the process of introducing business
into one or more than one foreign markets while developing products as well as services for
satisfying the basic or local requirements of new markets (Almutairi, 2019). In this context,
internationalization of any business is a significant undertaking; however, if it is done
thoughtfully and methodically then it can definitely transform a company (Federal Reserve
Bank of St.Louis, 2015). Thus, internationalization can always lead to incredible
opportunities while practicing into the following steps:
1. Selection of the expansion country: the businesses usually evaluate the market
attractiveness of all countries under consideration while using accurate and reliable
metrics. Here, some key factors which are considered include taxation issues, demand
for products, certification and licensing and local regulations (Wilson & John, 2014).
2. Conduct a detailed market analysis: in this context, companies utilise classic SWOT
analysis, PESTLE analysis and classic SWOT analysis for determining the merits as
well as demerits of setting up their business within particular countries. It is because
market analysis usually requires special attention to the internal and external
environment ( Hamilton & Webster, 2018).
3. Planning the market entry
4. Evaluating the market position
5. Consider targets ( Toni, 2011).
6. Fine-tuning of products and services
7. Evaluating core competencies
8. Analysing value chain and supply chain options
MNE models
Apart from this, based on literature and studies internalization can be done with the
help of different models as follows:
 Innovation model: this model of internationalization typically emphasizes
internationalization forms and company resources so that companies can
internationalize effectively (MSG, 2020).
 Uppsala model: according to this internationalization model companies focus on
different forms of internationalization, relationships with other companies and
company resources.

Internationalization
5
 The eclectic paradigm is mainly focused on relations with other firm and forms of
internationalization only
 Network model: this model of MNE is majorly focused on company resources as well
as relationships with the rest of the companies worldwide (Wilson & John, 2014).
 Strategic MNE model: this model of internationalization depends on three key factors
include internationalization forms, firm resources, and relationships with rest
organizations (Vijayasri, 2013).
Use of two MNE examples
Based on the above analysis and research, it is clear that the MNE concept can be
explained with the help of real-life examples effectively ( Luiz & Sanchez, 2018). Here, the
MNE examples which can be used to explain and support the motives of internationalization
into real context are as follows:
Coca-Cola: the firm is the leading company in the food and beverage industry which sells
soft-drinks like Coke all across the world. It is a company which manufactures carbonated
soft drink since the 19th century (MSG, 2020). The company has been chosen as a real-life
MNE as it is the best example and benchmark relevant to the selected topic. It is worth
knowing that Coca-Cola is selling its products into more than 200 nations as well as having
more than 84,000 suppliers all across the world (Almutairi, 2019). It is because the MNE is
generating more than 80% of the profit from foreign markets only. Moreover, there are some
key factors that motivated the company to internationalize its business. These factors are as
follows:
 Political and economic conditions
 Internal economies of scale
 Recognition of the brand (Adams, Jeanrenaud, Bessant, & Denyer, 2016).
 Growth and Access to new markets
Johnson and Johnson: this is the best example of multinational enterprise which
experienced as well as leveraged the benefits of internationalization in an effective manner. It
is an American MNE founded in the year 1886 which develops pharmaceutical, medical
devices and consumer packaged products. This company believed in the good health of
people living all across the world. With the help of internationalization, the company has

Internationalization
6
improved access and affordability, while creating healthier communities and putting a healthy
body, mind as well as environment worldwide (Yerkin, Nazym, & Gulmira, 2019).
Conclusion
In whole, this report has successfully explored the reasons why companies become
multinational enterprises (MNEs). In addition to that, the paper has used real-life examples
such as Coca-Cola and Johnson & Johnson Co. Moreover, this paper has explored all possible
motives behind organizations engage in international business. For example, sales expansion,
resource acquisition, risk minimization are the key motives of the modern firm when they
decide to internationalize. Apart from this, after identifying the motives of the
internationalization the paper has been discussed how these companies internationalize with
the strategies and MNE models. For instance, MNE models such as porters five forces,
Uppsala, pestle, SWOT, porter diamond model have been explored to find the process of how
they internationalize. In this way, MNEs always wish to internalize the benefits from owning
a particular technology, expertise or patents, brand, that they find too risky or unprofitable to
rent or license to other firms. In addition to that, it has been found that enforcing international
contracts can also be costly as well as ineffective within countries where the law is weak and
court procedures are inefficient or long. In a nutshell, organizations and managers should
always be cautious of market analysis and opportunities for making business decisions
regarding expansion internationally.

Internationalization
7
References
Hamilton, L., & Webster, P. (2018). The International Business Environment (4th ed.).
london: oxford university press .
Luiz , M., & Sanchez, A. V. (2018). Strategic Management in Tourism (3rd ed.).
Oxfordshire: CAB international .
Toni, A. F. (2011). International Operations Management: Lessons in Global Business.
england: gower publishing limited.
Adams, R., Jeanrenaud, S., Bessant, J., & Denyer, D. (2016). Sustainability‐oriented
innovation: A systematic review. . International Journal of Management Reviews,
18(2), 180-205.
Almutairi, M. (2019). Analysis of Samsung's internationalization process and the strategies
implemented to generate an effective positioning of its brand and products in foreign
markets. Journal of the community development in Asia, 2(1).
Federal Reserve Bank of St.Louis. (2015). Why Would a Firm Want to Become a
Multinational? Retrieved from St.LouisFed: https://www.stlouisfed.org/on-the-
economy/2015/april/why-would-a-firm-want-to-become-a-multinational
MSG. (2020). Why Companies Engage in International Business. Retrieved from MSG:
https://www.managementstudyguide.com/need-for-international-business.htm
Vijayasri, G. (2013). The Importance of International Trade in the World. International
Journal of Marketing, Financial Services and Management Research, 2(9), 111-119.
Wilson, & John, P. (2014). International human resource development: Learning, education
and training for individuals and organisations. Development and Learning in
Organizations, 28(2).
Yerkin, N., Nazym, S., & Gulmira, S. (2019). Governance and Internalisation in Social
Policy: Definition, Concepts and Causes. Journal of Legal, Ethical and Regulatory
Issues, 22(1).

Internationalization
8