Globalization is the key word that characterizes the 21st century; the world is the stage of all the

economic, social and financial activities. The MNEs are the major players that dominate the scene. But what is exactly an MNE? The Working Definition International business is all commercial transactions (private and

governmental) between two countries. The word MULTINATIONAL is often used to describe a giant conglomerate but multinationals are not only huge players such as Coca Cola, there are a lot of medium sized enterprises that have limited market authority in domestic and foreign markets and they have one or more subsidiaries in foreign countries. Investing overseas and becoming a Multinational is a scheme open to many types of firms. It is a lot harder to define because over time the very nature of a multinational has changed. For Example "in 1958 Maurice Bye began to see and recognise multinational enterprises (MNE's) by the definition Multi-territorial firm indicating that a MNE was purely given the name by the amount of countries a company occupied. By 1960, this had already been updated with David Lilienthals new definition, Multinational Corporation that has become a recent standard definition" (Dunning 2008, cited in Jones 1996, p. 6). Academics see a multinational in greater depth and again the definitions are always slightly different, Dunning (2008, p. 3) defines a MNE as "...an enterprise that engages in Foreign Direct Investment (FDI) and owns or, in some way, controls value adding activities in more than one country. "Why" firms become Multinational Enterprise's? National firms become multinational to increase global sales, as Drucker (1994, p. 72) has argued we live in "the age of Social transformation" whereby be have more disposable income. Many minor national companies have turned multinational to expand production activities overseas, this can relate for a number or MNE's originating from developing areas like Hong Kong and South Korea. What has been solution
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to their success is the advancement in technology, communications, transportation and production processes. Firms may move across this threshold for various reasons as there is a little impulse to grow overseas business. Expand Sales. A firm may have reached a level where they have satisfied the national demand, which is not increasing or the product is coming to the end of its domestic life cycle. This creates a need for looking into new markets. "Overseas demand can help to offset seasonal or cyclical downturns in domestic demand. For e.g. Cigarette companies facing this situation in the developed world have exploited markets in newly developing countries where demand is on the increase" (Dawes 1995, p. 15). Foreign Direct Investment (FDI) is a way to bypassing defensive instruments in the importing country. For e.g. (A) European Community: imposed common external tariff against outsiders. US companies circumvented these barriers by setting up subsidiaries. (B) Japanese corporations located auto assembly plants in the US, to bypass VERs" (IOWA State University 2011, para. 14). Avoiding high transportations costs as transportation cost are like tariffs in that they are barriers which increase buyer prices. When transportation overheads are high, multinational firms want to construct production plants close to either the input source or to the market in order to save transportation costs. "Multinational firms (e.g. Toyota) that invest and construct production plants in the United States are better off selling products directly to American consumers than the exporting firms that utilize the New Orleans port to ship and distribute products through New Orleans" (IOWA State University 2011, para. 15). Avoiding Exchange Rate fluctuations is one very important reason as Japanese firms (e.g. Komatsu) invest in U.S. to produce machines to avoid excessive exchange rate fluctuations. Also, Japanese automobile firms have plants to produce automobile parts. For instance, "Toyota imports
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engines and transmissions from Japanese plants, and produce the rest in the U.S. Toyota is behind GM and Volkswagen in China, and plans to expand its production in China and has no plans to build more plants in North America. (China's auto parts are cheaper)" (IOWA State University 2011, para. 16). Minimize Competitive Risk & Acquire resources. Companies expand internationally to competitors home markets in order to maintain a competitive balance across markets. The most certain method of preventing actual or potential competition is to acquire foreign businesses and resources foreign capital, technology, labours, components all can help a firm become more competitive. GM purchased "Monarch (GM Canada)" (Old Cars Canada 2010) and "Opel (GM Germany)" (The German Way & More 2011). It did not buy Toyota, Datsun (Nissan) and Volkswagen. They later became competitors. Reduce Costs as a foreign country may have cheap labour or land. "Clothing companies, both in the U.K. and Germany have subcontracted some of their operations to the far East and Eastern Europe because of lower labour costs" (Dawes 1995, p. 15). Although internationalising business raises new problems, the provision of government support has convinced some firms that these problems are outweighed by the new opportunities. Foreign Entry Alternatives "A firm can go international in many ways, and certain common choices are called entry alternatives or entry strategies. The connotation of entry implies opening new markets. Every alternative has is own differences in resource demands for ownership and in management responsibility for foreign assets" (Holt and Wigginton 1998, p. 215). Exporting is the most fundamental foreign entry alternative; it involves selling domestically produced products in foreign markets through brokers
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or overseas distribution centres. "Companies that market through their own personnel rather than agents and brokers are called Direct Exporters. For e.g. Foreign agent such as Gilman sells Apple and HP equipment in Hong Kong, but in California it is a registered foreign agent of Inchcape. Foreign Retailers such as Ralph Lauren sells its sports accessories through airline catalogue, duty free airport shops etc. Direct sales to end users major firms such as Boeing sell aircraft directly to foreign airlines. Firms that rely on intermediaries are Indirect Exporters. Such intermediaries that support indirect exporters are: Commission Agents, Export Management Companies, Export Training Companies, Export Merchants and Remarketers" (Holt and Wigginton 1998, p. 216-218). Importing is a common strategy for many companies in both developed and less developed countries. Developing countries must often import resources, food, and services (i.e., contracting for people with certain skills or knowledge of advanced technologies). Consequently, exporting is primarily marketing while importing is primarily procurement or sourcing. Firms accomplish these activities in several ways. "Indirect Sourcing, Direct Sourcing is a purchasing process in which companies contract directly with foreign manufacturers. For e.g. American toy retailer Toy "R" Us buys toys from Hong Kong manufacturers. Sub Contracting For e.g. Franklin Mint a U.S. telemarketing firm contracts for production of its collector car series to Perfekta Toys, Ltd., of Macau, which in turn runs manufacturing facilities in China" (Holt and Wigginton 1998, p. 219-220). Licensing is usually first experience as it is a simple way to expand foreign business. Licensing does not require any capital expenditure. Financial risk is zero. The domestic licensor may do as little as grant the right to use a trade name is exchange for royalties that may me a fixed % of sales. The mother firm cannot exercise any managerial control over the licensee (it is independent). The licensee may transfer industrial secrets to other independent firms, thereby creating rivals. For e.g. "Disney
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Corporation licenses the rights to manufacture Mickey Mouse electric toothbrushes to Hasbro Toys, which makes the units in its manufacturing facilities in Europe and the Far East. In return Hasbro pays Disney royalty on its sales of the product" (Holt and Wigginton 1998, p. 221). Franchising is a special form of licensing in which a franchisor contracts to provide sets that comprise a complete business to a franchise in return for certain fees and royalties. "Franchise agreements vary widely, but the franchisor usually provides facilities, equipment, materials, services, patent or trademark rights, management systems, and standardized operating procedures. Taken together these elements constitute the business system for an outlet of the parent firm, such as McDonald's, Precision Tune, or 7-Eleven" (Holt and Wigginton 1998, p. 222). Joint Ventures Firms can also realize foreign expansion goals through JV. "A typical JV emerges from a contractual arrangement between a multinational company and a foreign host company, each contributing equity capital to a new, jointly managed enterprise. For e.g. MCI Communications and British Telecom desired to penetrate continental telecommunication markets, so they formed Concert Communications, which eventually became a part of MCI WorldCom merger" Wigginton 1998, p. 225). Foreign Direct Investment is the establishment or acquisition of income generating assets in a foreign country over which the investing firms has control. FDI usually involves either taking control of an established business in an overseas market or developing a 'green field' site there, creating a tailor-made business operation. For e.g., Japanese FDI in the European Union has increased substantially, both as a means of circumventing EU barriers and maximising opportunities within the single market (Dawes 1995, p. 35). Conclusion To conclude as Vernon (1996) argues companies become multinational as the advantages abroad meant, cheaper labour, cheaper raw material and
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(Holt and

so on which reduces unit costs. Thus you become more competitive and are able to increase sales. This view though is becoming increasingly archaic as Dicken (2003, p.198) would argue in the Global Shift; this is no longer the sole reason for becoming multinational, it does not take into account "the intricate ways in which firms engage in international operations through various collaborative ventures". On the other side we can also add that home firm must have an advantage above its host firms" to become international. In deciding if the reasons for becoming transnational have transformed, taking into consideration the buzz word has only been around for the highest part of 40 years it is true enough to say that it hasn't.

Bibliography Dawes, B. 1995. International Business - A European Perspective. Stanley Thornes Publishers Ltd. Dicken, P. 2003. Global shift: reshaping the global economic map in the 21st century. 4th Edition. Sage Publishers. Drucker, P. F. 1994. The Atlantic Monthly, "The Age of Social Transformation". Dunning, J. H. and Lundan, S. M. 2008. Multinational Entreprises and the Global Economy. 2nd Edition. Edward Elgar Publishing.
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Holt, D. H. and Wigginton, K. W. 1998. International Management. 2nd Edition. Harcourt College Publishers. IOWA State University. 2011. Multinational Corporation [Online]. Available at: http://www2.econ.iastate.edu/classes/econ355/choi/mul.htm. [Accessed: 28th March 2011] Jones, G. 1996. The Evolution of International Business. London: Routledge. Old Cars Canada. 2010. 1957-58 Meteor Ranchero [Online]. Available at: http://oldcarscanada.blogspot .com/2010_04_01_archive.html. [Accessed: 28th March 2011] The German Way & More. 2011. Adam Opel - Biography & Timeline [Online]. Available at: http://www.german-way.com/famous-adamopel.html. [Accessed: 28th March 2011] Vernon, R. et al. 1996. The manager in the international economy. 7th Edition. Prentice Hall Publishing.

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