Mnc Course


As the globalisation intensifying, the world is becoming a single market place for many Multinational Corporations (MNCs). This forces many domestic firms to reassess their positions. Restricting themselves to domestic trade will mean that they may be eventually “crowded out” by the more powerful and aggressive MNCs. Therefore, the need to expand internationally becomes fundamental to survival and growth for firms today. For example, McDonald’s after three decades of rapid growth in U.S. fast food market, faced slowdown in 1980’s and as result expanded abroad rapidly. Since then McDonald’s foreign revenues and profits have growth at 22 percent per year (Hill, 1998).

Steps involved in developing a global expansion strategy for MNCs

For global expansion, MNCs may need to have a global strategic planning which consist of four steps (Hott, 1998) (i) A clearly define purpose of the firm, mission and philosophy for strategic intent and define major objectives. (ii) Environmental analysis; conduct SWOT(Strength, Weaknesses, Opportunities and Threats) analysis, to evaluate its industry and competitors and environmental scanning for global opportunities. (iii) Formulation of strategy from the result of environmental analysis. (iv) Strategy implementation. By having the global strategic planning, the firm could sufficiently identify its standing globally. This global strategic planning may also identify the ability of the firm in selecting various mode of entry to foreign markets.

According to Shapiro 1999, there are five interrelated elements in developing a global expansion strategy; (i) Awareness of profitable investment, (ii) selecting a mode of entry, (iii) auditing the effectiveness of entry modes, (iv) using appropriate criteria and (v) estimating the longevity of a competitive advantage.

(i) Awareness of profitable investments

It suggests that the MNC needs to identify potential profitability project for investments. The basic technique...