Internationalization of MNC: Understanding Stages and Advantages

This report provides a comprehensive analysis of the internationalization process of Multinational Corporations (MNCs). It delves into the core concept of internationalization, emphasizing its importance in expanding businesses beyond national borders. The report outlines the key advantages of internationalization, such as enhanced market reach, customer satisfaction, and operational efficiency. It then meticulously details the five evolutionary stages of internationalization: domestic operations, export operations, joint ventures or subsidiaries, multinational operations, and transnational operations. Each stage is thoroughly explained, supported by the practical example of Rio Tinto, a leading multinational company. The report examines how Rio Tinto has navigated these stages, offering insights into the practical application of internationalization strategies. The conclusion summarizes the significance of internationalization for MNCs, highlighting its role in achieving global competitiveness and financial success. This report is a valuable resource for understanding the complexities and benefits of MNC internationalization.

INTERNATIONALIZATION OF MNC 0
Internationalization of MNC
Student’s Details-
SEPTEMBER 4, 2019

INTERNATIONALIZATION OF MNC 1
Executive Summary
Internationalization plays a vital role in crossing the national boundaries of the business in order
to achieve a better stage where customers are satisfied and the company has achieved efficiency
into the operations. The main aim of the report is to gather an understanding of
internationalization concept and to enhance the operations of the Multinational Corporations. It
seeks to identify the stages of internationalization. The results of the analysis can be helpful in
the overall understanding of various stages involved and gaining the knowledge of multinational
operations through examples.

INTERNATIONALIZATION OF MNC 2
Contents
Introduction......................................................................................................................................3
Advantages of Internationalization..................................................................................................3
Stages of Internationalization..........................................................................................................3
Domestic Operations....................................................................................................................4
Export Operations........................................................................................................................4
Joint Ventures or Subsidiaries......................................................................................................4
Multinational Operations.............................................................................................................5
Transnational Operations.............................................................................................................5
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

INTERNATIONALIZATION OF MNC 3
Introduction
Internationalization of MNC is the process of assessing the business and exploring the
opportunities for business outside the national boundaries of a nation (Eriksson, et al., 2015).
Nowadays, multinational corporations are highly involved in internationalizing their business
activities and strives to get profit from the strategies that the company makes to enter into
another country through making a vision of global operations. Here, the report is prepared on the
discussion of evolutionary stages that are undertaken for internationalization of MNC for
analyzing the process of emerging from a local market to getting the desired multinational
approach. For that, example of Rio and Tinto company is taken for better understanding of the
concept. However, Rio Tinto is a leading multinational company of Australia that has operations
of mining of metals and minerals.
Advantages of Internationalization
Internationalizing the products of the company can bring faster growth to the company. As the
company is engaged in global operations, it gives opportunity for the company to enhance their
portfolio and cover the larger segments of the market (Landau, et al., 2016). It helps in meeting
the needs of customers who are constantly looking for new brands entering into the market. This
practice is further assisted by innovation. However, adding new features or creating an entirely
new product can and entering into another country’ market can facilitate a company to get new
customers. Further, this helps in building a reputation of the company and thereby fosters the
growth of the company to a larger extent (Yaprak, et al., 2018). Also, it creates enormous
amount of job opportunity for the people as this subsequently increases the efforts of the
company which persuades them to employ new workers who are efficient and skilled. Moreover,
it provides an opportunity for the companies to attract new investments and bring new
technologies into the business. Therefore, it can be said that when a company undertakes global
operations it tends to bring new technologies and also leads to financial growth of the company.
Stages of Internationalization
Internationalization of operations can be a good opportunity for the company to expand their
business operations. There are five stages through which multinational corporations can get

INTERNATIONALIZATION OF MNC 4
involved into international operations. These are explained as below along with the example of
Rio Tinto:
Domestic Operations
For internationalizing the operations, the first stage is concerned with undertaking of domestic
operations. In this stage, companies are intended to perform their domestic operations rather than
exporting their products, focus on the domestic operations only (Desai , et al., 2009). Further,
domestic company has the ability to limit the operations within the national boundaries of a
country. Usually, domestic companies use diversification strategy in order to expand into the
international markets. Similarly, Rio Tinto is an international company but has domestic origin
in Perth. From that single locations, the company handles all of their mining operations like rail
systems and ports. This has given shared experience for all of the employees. The company has
collaborative and visualization tools that are prevalent in providing real time information and
helps in optimizing all the domestic operations into one place.
Export Operations
In this, the companies undertake export operations but operate within the domestic boundaries.
Export operations are usually undertaken to expand the market in order to reach large number of
audiences. It can be noted that the companies who want to grow beyond their domestic
operation, strive for internationalizing their operations (Uner, et al., 2013). The company spreads
their wings by selling their products to another country in order to get more profits. However,
Rio Tinto has a diverse portfolio that contains of the metals and minerals which are need by the
people. The company has successful operations in Australia and North America. The company
has exported their iron ore to other countries such as South Korea, Japan and China and have
gained 348 million tons of iron ore by doing operations in Australia and Canada (Rio Tinto,
2018). Apart from this, the company is expected to be world-class producer of bauxite and the
company is having a dedicative team that maintained reduced cost and have undertaken bauxite
export business with efficiency and management.
Joint Ventures or Subsidiaries.
For undertaking the internationalization, the company adopts the extension strategy through
opening joint venture and subsidiaries. The opening of these ventures requires investment and
often leads to effective management. The company opens the subsidiary in the host country and

INTERNATIONALIZATION OF MNC 5
regulates the policies or strategies that are applicable for the country they are concerned with
(Ko, 2019). This stage is also regarded as multi domestic company. For example, for achieving
the global excellence in the mining industry by opening a joint venture in China for making
collaborations with China and Minmetals which is a renowned industry of China. The venture
was regarded as 50-50 joint venture where Rio Tinto and China and Minmetals decided to make
collaborations with respect to search of minerals (Jamasmie, 2018). The purpose of the venture is
to explore new mineral deposits particularly China and also the company will take initiatives for
looking into rest of the world after China for the mining opportunities.
Multinational Operations
This stage is involved in undertaking multinational operations in various countries or regions
where the companies want to expand their business for the purpose of internationalization
(Butler, 2016). The company uses global strategy and global marketing techniques for reaching
the global trends. Multinational operations are usually undertaken to achieve global efficiency
where the company has understood the required way to achieve global excellence and is engaged
in global operations in order to reach large part of the market. Similarly, Rio Tinto Group has
multinational operations in six continents but has major operations in Australia and Canada. The
company has subsidiaries in many countries that overlook their operations as per the product
specifically offered. For example, Rio Tinto Borax the major subsidiary of Rio Tinto where it
has full ownership and produces borates, situated at United States. Therefore, these subsidiaries
have provided enough profits to the company and the company has been in a good financial
condition when it operates in the global markets.
Transnational Operations
The companies are expected to undertake transnational operations when they passed on the
above stages. Moreover, if a company has an individual body that has achieved global efficiency
and each business unit under the subsidiary that achieve the possibility to take individual
decisions without the effective control of the corporation then the company is in the possible
stage where it can invest, market and operate all around the globe (Yeung, 2017). Similarly, Rio
Tinto will achieve this stage after making joint ventures with China and opening subsidiaries in
various countries where it has full ownership over them. The company can undertake

INTERNATIONALIZATION OF MNC 6
transnational operations by making sufficient collaborations with other industries in order to
undertake operations.
Conclusion
To conclude it can be said that internationalization of operations is crucial for the multinational
corporations as it helps the company reach the global trends and achieve financial efficiency
through expanding the market either by exporting or making partnerships with other companies
through joint venture. Here, the report discusses the advantages of internationalization along with
the evolutionary stages that are required to be undertaken by the company who want to undertake
multinational operations. The context of industrialization is discussed by taking a business
example of Rio Tinto where the operations global activities of the company are explained along
with how the company emerges from domestic operations are also being elaborated into the
report.

INTERNATIONALIZATION OF MNC 7
References
Butler, K., 2016. Multinational Finance: Evaluating the Opportunities, Costs, and Risks of
Multinational Operations. s.l.:John Wiley & Sons.
Desai , M., Foley, C. & Hines, J., 2009. Domestic effects of the foreign activities of US
multinationals. American Economic Journal: Economic Policy, 1(1), pp. 181-203.
Eriksson, K., Johanson, J., Majkgård, A. & Sharma, D., 2015. Experiential knowledge and cost
in the internationalization process. In: Knowledge, Networks and Power. London: Palgrave
Macmillan, pp. 41-63.
Jamasmie, C., 2018. Rio Tinto signs JV exploration deal with China’s Minmetals. [Online]
Available at: http://www.mining.com/rio-tinto-signs-jv-exploration-deal-chinas-minmetals/
[Accessed 4 September 2019].
Ko, S., 2019. The Differing Foreign Entry Mode Choices for Sales and Production Subsidiaries
of Multinational Corporations in the Manufacturing Industry. Sustainability, 11(15), p. 4089.
Landau, C., Karna, A., Richter, A. & Uhlenbruck, K., 2016. Institutional leverage capability:
Creating and using institutional advantages for internationalization. Global Strategy Journal,
6(1), pp. 50-68.
R. T., 2018. Rio Tinto recognised for Northern Territory export success. [Online]
Available at: http://www.riotinto.com/media/media-releases-237_26168.aspx?
utm_medium=RSS
Uner, M., Kocak, A., Cavusgil, E. & Cavusgil, S., 2013. Do barriers to export vary for born
globals and across stages of internationalization? An empirical inquiry in the emerging market of
Turkey. International Business Review, 22(5), pp. 800-813.
Yaprak, A., Yosun, T. & Cetindamar, D., 2018. The influence of firm-specific and country-
specific advantages in the internationalization of emerging market firms: Evidence from Turkey..
nternational Business Review, 27(1), pp. 198-207.
Yeung, H., 2017. The political economy of transnational corporations: a study of the
regionalization of Singaporean firms. In: Singapore . s.l.:Routledge, pp. 57-84.

INTERNATIONALIZATION OF MNC 8