Nestle: A Global Multinational company

Nestle A universal Multinational political partyBrief of alliance Nestl with headquarters in Vevey, Switzerland was founded in 1866 by Henri Nestl and is today the demesnes leading nutrition, wellness and wellness corporation. Its sales for 2009 were $ 112.3 unmatched thousand million, with a net pull ahead of $ 11.1 billion. They employ around 276,050 concourse and bring forth factories or operations in almost either coun filter out in the world.Reasons for selecting the company Nestl rotter trace bum its origins to 1867, from merchandising milk-based baby aliments and condensed milk as its primary overlaps to a intellectual nourishmentstuff attracter in todays forage Beverage manufacture with more than 6000 brands under its sing ranging from coffee and groundworkdy to hotdogs and pasta. Instead of ripe reaping the profits from the grocery, Nestl has given patronage to the community by adopting social responsibilities, showing above the bar good beha viour and in many cases raising the standards in the industry. Its founding ethos reflects the grassroots ideas of f airwaveness, honesty, and a popular concern for people.Main strategic issues facing the companyNestl has been facing Nestl boycott since 1977 due to its promotions of the use of artificial infant fodders. festering resistance of consumers a getst the use of genetically engineered foods in Nestls intersection points. out aimth competition.increase aw arness in the consumers with the demand of being socially and ethically responsible for(p) change magnitude day by day.Increasing control and regulations in the policies of the governments worldwide.Companys constituent to the National Economy Switzerlands gross domestic product for the year 2009 was estimated at $522.4 billion with GDP harvest rate of 2.8% (2010 estimate). Out of which Merchandise exports for 2009 were of $173 billion.*Companys contribution to the regional preservation Nestl employs around 280,00 0 people all over the world and cede factories or operations in almost every outlandish in the world. Nestls gross tax for the year 2009 was $ 112.3 billion and RD habilitatement was $ 2.11 billion. *Recent strategic dilemmaEnvironmental feign of palm oil and the role of multi-nationals much(prenominal)(prenominal) as Nestl in this.Recent strategic choiceIn work out 2010, Nestl purchased krafts wedlock Ameri butt end frozen pizza pie pie business for $3.7 billion.Nestl has been heavily investment funds in Africa.Source of Information on Companyhttp//www.nestle.com(334 words)Executive compendiousThis assignment analyzes Nestls current situation and strategies in context of Global nutriment Beverage Industry and then recommends the reveal strategies Nestl should use to be more successful and retain its status as the spherical commercialize attractor in future.To analyze the FB Industry on a elevated level and examine Nestls immaterial environment, the fol crushe ding business models ar used in this assignment Industry Life Cycle, Key procurer Factors and Porters Five Forces. And to analyze Nestls current status and its inhering environment the business models used ar SWOT analysis, strategical Factor Analysis, TOWS Matrix. afterward analyzing the information based on the above mentioned models, Nestl is currently facing issues the give c bes of product recalls, stagnant result, spicy logistical be, negative promotion and imitation allegations which atomic number 18 damaging its calculate and good pass on in the securities industry. To combat round of these issues Nestl has introduced innovative and wellnessier food products to cater the rising descend of health conscious consumers, started foc employ on the rising midriff grad consumers in offset and e meeting economies, which has helped Nestl to increase their growth a make water post the 2009 monetary Crisis.For further improvement in the marketplace sh atomic num ber 18 and company experience, discern strategies recommended to Nestl atomic number 18 Expansion strategy done strategically acquiring and meeting with its competitors and investing in production facilities in developing economies and increase through origination in health nutrition food segment. One theatre that Nestl has to c are of immediately is improvement in its Public Relations prudence to create a naughty level of loyalty and trust in its customers by building and reinforcing the notion that Nestl still fol belitt guides its founding ethos of fairness, honesty, and a general concern for people.(277 words)Industry Life CycleIntroductionGrowth adulthoodDec disembowelTimeINDUSTRYSALESThe Global Food, Beverage and Tobacco Industrys growth has slowed down in recent years. But all this is set to miscellanea due to the recent technological advancements, rapid world(a)isation and granting up of the many restricted markets worldwide such as India, China, Afri sewer nati ons, and so forth With the technological advancements in food processing, handling and storing capacity and the rapid outgrowth of organized retailing in Asia, Africa, and otherwise third world countries, on with fast changing demographics and habits has win overd consumption the patterns and is fuelling the next growth trajectory for the orbicular food, deglutition and tobacco industry.The Global Food, Beverage and Tobacco Industry is in the High Growth stage of the growth phase as the increase in sales has slowed down in recent years. The global food, beverage tobacco industry generated total revenues of $6,319.2 billion in 2009, increase at a compound annual growth rate (CAGR) of 3.4% for the period spanning 2005-2009. Food sales generated total revenues of $4,235.4 billion, equivalent to 67.1% of the industrys overall value and sale of beverages generated revenues of $1,581.7 billion in 2009, equating to 25% of the industrys aggregate revenues. The industry is forecast ed to grow at CAGR of 3.8% for the five year period 2009-2014.Nestl recorded revenues of $99 billion in year ending December 2009, showing decrease of 2.1% compared to fiscal 2008. In 2009, Nestl renovated 7,252 products for nutrition or health reasons, as health wittingness among consumers is quick increasing and it wants net on the health conscious trend. Nestl has been active in Developing Emerging (DE) economies through its subsidiaries in Asia Pacific, Africa, the Middle East, Turkey and Latin America. Nestls sales in acclivitous countries accounted for almost 32.5% of total revenue and reached $32.32 billion in 2009. harmonize to IMF, the advanced economies are set to grow at 2.1% and 2.4%, singlely, in 2010 and 2011, speckle the DE economies are forecasted to grow at 6% and 6.3% in 2010 and 2011, respectively. Therefore in the future, Nestls growth leave be driven by high-growth DE economies.Key Factors for SuccessKey Success Factors clog grade charge S messagecardRa tingWeighted removecardRatingWeighted Scorecard shiting0.205.001.004.000.804.500.90 diversification0.154.500.674.000.604.500.67 production Quality0.154.000.604.000.604.000.60 set0.153.500.523.500.524.000.60Distribution Nedeucerk0.105.000.503.500.355.000.50Packaging0.104.000.403.500.354.500.45R D0.105.000.503.000.304.500.45 commercialise agency0.055.000.254.500.224.000.20Total1.004.443.744.37Key Factors for Success in the Food and Beverage IndustryBranding in FB industry is of utmost importance as people do not prefer to buy products that they are not familiar with also in this industry brand flesh is everything as it undersurface attract consumers to a companys new products if it is already reputable in the market. Diversification in FB industry are almost al bearings related as companies prefer to have a healthy portfolio of products while still maintaining their core arguencies and utilize them in their related products as by having a heavy(a) range of products a company forget be more militant and would not have to rely on a single product. crop tincture is very important in FB industry, as bad timber products bear will lead to consumer boycott of the companys products, health issues in consumers and lawsuits against the company. epoch quality of the products also have to justify their prices, such as recipe milk chocolates (Nestl, Cadbury, and so on) tailnot be priced high while specialty chocolates (Lindt, Godiva, and so forth) are high priced. A sanitary diffusion network is a must in FB industry as it gives the companies low be operations, fast delivery, and optimal ledge presence in retail stores. RD is vital for gaining market share for the companies as development of better tasting, more nutritional and new foods beverages is the fastest vogue of capitalizing on the fast changing trends of the consumers (like current healthy native food trend).Two of the many competitors that Nestl has, I have chosen kraft paper Foods and Unil ever for the equality of KFS. After analyzing the KFS it is clear that Nestls response to the current and expected key success factors is above the industry average, with Unilever quite an close behind and Kraft Foods just managing the industry average. So the analysis of KFS also reinforces Nestls echosink as the voluminousst FB Company in the world.Porters Five Forces ModelPotential EntrantsProduct DifferentiationSwitching CostsDistribution ChannelsCost DisadvantagesSuppliersfinancially anemicLarge no. of suppliersBuyers lavatory do Backward consolidationSubstitutesPrivate label productsNiche productsCheaper alternatives availableBuyersLarge RetailersFinancially weapons-gradeBackward IntegrationLow Profit marginOther Stakeholders health GroupsEnvironmental GroupsFair Trade OrganizationsRivalry among alive firmsLarge number of playersDominance of big playersHighly diversified marketsAnalysis of Porters Five ForcesThe dicker Power of Suppliers (Low)The bargaining channel ise of suppliers in FB Industry low as the in the unrefined materials for this industry includes fruits and vegetables, meat and fish, dairy products and grains, tobacco, cereals and grains, etc which could be purchased in the open markets around the world. And nearly FB producers have integrated transposeds into producing their own raw materials, negating the need for suppliers. besides suppliers tend to be financially quite weak giving market players upper hand.The Bargaining Power of Buyers (High)The bargaining power of suppliers on the other hand is quite high as characteristic buyers are large retailers such as Wal-Mart, Carrefour, etc. who are financially very strong and usually make large purchases and enter into retentive bound contracts with market players as the profit margins for the buyers is quite low. So deprivation of one retailer could signifi lavtly impact upon a manufacturers revenue. Buyers are frequently integrating backwards, with many retail handcuff s offering their own brand packaged food goods usually referred to as Private label products.The brat of Potential New Entrants (Present)The flagellum of new entrants is high for small players who nevertheless treat few products and few markets (regional or national players) but is low for passing diversified big market players such as Nestl, Unilever, etc. who operate globally. Since its a highly fragmented market small-scale enrapture by occupying a niche in the industry is possible and high these days. But new entrants have to bear switching comprises (which back tooth be quite high) as its very hard to convince consumers to try new brands/products. besides big players clear restrict the access to scattering channels for new players through their contacts and power in the market.The Threat of Substitutes (High)The substitutes are often cheaper and just as popular with consumers in FB Industry as most of the products in this industry are in a way a substitute of almost other products, like Tea for Coffee, light speed for Pepsi, NutraSweet for Sugar, etc. These days private label products, organic foods nutritional foods, etc. are also rapidly substituting the packaged foods. And in that respect are almost no switching costs for end consumers as they just pick any new products kind of of their regular ones if they want to experiment.The intent of Competitive Rivalry (High)The competitive rivalry among the firms is quite high in this industry as the enormous size of the industry creates endless opportunities for the players to grapple for. Large number of players, ready availability of substitutes, low entry barriers, low bargaining power of suppliers and fast changing customer tastes intensifies rivalry in the FB Industry. And also slow down of sales in the industry in 2009 will intensify the competition in the market, as everyone would try and gain market share presently by take sales aside from other competitors.Relative Power of Other St akeholders (High)SWOT Analysis inseparable Factors Analysis Summary (IFAS)Internal FactorsWeightRatingWeighted ScoreCommentsStrengthsS1 Finance0.155.000.75Low debt/asset ratioS2 Global Presence0.104.500.45Market LeaderS3 Brand0.104.500.45One of USAs most admiredS4 RD0.105.000.50Industry leaderS5 Diversified Portfolio0.054.500.22 much than 6000 brandsWeaknessesW1 Quality aver0.203.500.70 outgrowth in product recallsW2 Growth0.103.000.30Growth recovery slowW3 Emerging Markets0.103.200.32Less strainW4 Logistics Cost0.052.000.10Quite highW5 Perceived Image0.052.000.10Considered to put profit primaryTotal Score1.003.89StrengthsNestl apart from being the market leader in FB Industry is also financially very strong with highly diversified portfolio of more than 6000 brands, global presence, and strong RD capabilities and in the process has essential a very strong brand image which it uses as supplement to generate high sales. As it has global presence it has customized its products ac cording to consumer preferences in the local markets. Nestl is also the leading company to invest heavily in RD (annual invest of $ 1.8 billon approx.) as it considers innovation as one of its primary growth drivers.Weaknesses collectable to the sheer size and geographical diversity of Nestl, controlling quality in many of its factories and supply chains is becoming difficult for Nestl which in turn is resulting in product recalls, loss of goodwill, and effect to the brand image of the company, which can lead to low customer loyalty. rough other one boldness where Nestl is lagging behind is that it has not been focusing much on emerging markets as majority of its sales are from developed markets. Its logistical costs and scrutinize management costs are also quite high due to its geographical diversity. Its growth has been has slow after the economic downturn as compared the industry as a whole, which has been on the recovery bilk since. immaterial Factors Analysis Summary (EFA S)External FactorsWeightRatingWeighted ScoreCommentsOpportunitiesO1 Health food trend0.154.500.67Rise in health consciousnessO2 Developing Emerging economies0.103.500.35High growth rateO3 enterprise of Eastern europium0.053.000.15Can expand thereO4 Out-of- shoes consumption0.103.500.35More than 40% in AmericasO5 Premiumisation0.103.200.32Growing incomesThreatsT1 Rising prices of raw materials0.103.000.30Climate change food shortagesT2 alter competitors0.153.500.52 planetary Mills in yoghourt Mkt.T3 Increasing Regulations0.154.000.60Spats with FDAT4 Currency Fluctuations0.052.500.12Strong Swiss FrancT5 Negative Publicity0.053.000.15Due to supposed unethical business practicesTotal Score1.003.53OpportunitiesOne of the major opportunities which can be the future growth driver for Nestl is healthy and nutritional foods segment, as by 2014 the global organic food market is forecasted grow by 60.7% since 2009 and while the global functional drinks market is forecasted to grow by 3 2.9% since 2009. Also further penetrating the Asian, African and Eastern European markets by using merger, acquisition and common fortuity strategies can also be a major growth driver for Nestl. The maturation level of incomes of the middle class around the world is also providing Nestl with opportunities for launching its exchange premium products such as Mvenpick, etc. in the developing economies.ThreatsTwo of the major factors gravid Nestl are specialized competitors and increasing regulations by government bodies. As Nestl is highly diversified it shows problems when it has to compete with competitors who are highly specialized in one product such General Mills in US Yogurt Market. Also any change or stricter enforcement of regulations by government bodies like FDA, tend to threaten Nestl as it would have to change its production process or may even face lawsuits gestate fines due to approximately violations of the regulations, which will also give rise negative publicit y slightly the company. Due to the economic downturn of 2009, currencies fluctuations have been hurting Nestl as Swiss Franc has strong against the most of the other currencies.Strategic Factors Analysis SummaryStrategic FactorsWeightRatingWeighted ScoreDurationCommentsSHORTINTERMEDIATELONGS1 Finance (S)S3 Brand (S)0.155.000.75XLarge sum of cash0.104.500.45XMajor global brandW1 Quality Control (W)W3 Emerging Markets (W+O)0.203.500.70XRecent product recalls0.103.200.32XGive more emphasisO1 Health Food impulsion (O+S)O5 Premiumisation (O)0.154.500.67XMajor growth area0.103.200.32XIncreasing incomesT2 Specialized Competitors (T+O)T5 Negative Publicity (T)0.153.500.52XPossibilities of JVs0.053.000.15XSignificant impact on customer loyaltyTotal1.003.88Short TermThe FB Industry can see short and explosive bursts of growth, so it is necessary for Nestl to ever so have few strategies ready for short periods or it might not be able to capitalize on important trends or fads. For short ter m Nestl should focus on Premiumisation in developing and emerging economies as the incomes of the middle classes is rising there, which is fuelling their want of premium products now. Since Nestl already has lot of products in the premium segment, so all it has to do is to launch them into developing and emerging economies now which will only take short time period to do and with minimum costs.Intermediate TermQuality Control, Emerging markets, health food trend and specialized competitors are factors which Nestl will have to address in the intermediate time period, as they can adversely its sales if leftfield unchecked. Nestl has to bring its quality in to control quickly otherwise it will be at encounter of losing its loyal customers and might even face lawsuits. By expanding and capitalizing in emerging markets like India, China, etc. and current health food trend Nestl will be able to compete with its competitors and peradventure also gain market share in the process. Collabo rating with its competitors or get them out in the segments which require specialized skills will take some time but is a necessary step or in long term they might manufacture a long threat to it.Long TermNestls long term scenario is quite fit as it is financially very strong with a brand cite that is counted among the top 25 brands in the world, but it also has repair its deteriorating image in customers minds. Being the market leader in the industry and with worldwide renowned brand Nestls sales revenue is far greater than that of its competitors which gives it high leverage capabilities while direct in the market. It has been coming under attacks from various social groups in recent years, which has been damaging its goodwill among its customers. Nestl has to power full moony address this issue slowly and carefully so that it is come back to haunt it, and do that it has to invest heavily in very effectual and efficient Public Relations management team.TOWS MatrixInternal F actors(IFAS)External Factors(EFAS)Strengths (S)FinanceGlobal PresenceBrandRDDiversified PortfolioWeaknesses (W)Quality ControlGrowthEmerging MarketsLogistics CostPerceived ImageOpportunities (O)Health Food TrendDeveloping and Emerging EconomiesOpening up of Eastern EuropeOut-of- shoes consumptionPremiumisationSO StrategiesDevelop products for health nutrition segment.Find go venture partners in Eastern Europe.WO StrategiesExpand Nestls presence in Eastern Europe Asia.Change Nestls perceived image.Threats (T)Rising prices of raw materialsSpecialized CompetitorsIncreasing RegulationsCurrency FluctuationsNegative PublicityST StrategiesDo backward consolidation.Either use joint venture acquisition strategies or RD to gain market share.WT StrategiesInvest in PR management to improve the image of Nestl.Emphasize on developing emerging markets to gain market share.SO Strategies (Maxi-Maxi)SO strategies are formed so that the strengths of a company can be used to capitalize on its ext ernal opportunities. So by analyzing Nestls strengths and opportunities available to it I have decided to use two strategies for Nestls future growth. As the demand of healthy nutritional foods is increasing Nestl can use its strong RD capabilities to develop products for this segment. Another strategy that Nestl can use is to find partners for joint ventures in Eastern European market as it being relatively new, it might not be aware of how things happen there so it should first do joint ventures there to study the market first as opposed to moving with full force in the market.ST Strategies (Maxi-Mini)A company applies ST strategies to avoid its external threats using its strengths. As Nestl is financially very string it has the capabilities to do backward integration with its suppliers, which will in turn in for sure Nestl of a secure tranquillize supply chain and quality of its raw materials. Another strategy that Nestl can also use is that through its financial strength, bra nd image and global presence it can either acquire or enter into joint ventures with its competitors who are highly specialized or it can use its strong RD to also develop specialized products for that segment.WO Strategies (Mini-Maxi)WO strategies are aimed to improve a companys internal weaknesses by capitalizing on its external opportunities. Nestl can veer its logistical and inventory management costs by expanding its presence to Eastern Europe and Asia. Another strategy that Nestl can use is to change its Perceived image (of set profit first) by developing and introducing more healthy nutritional products.WT Strategies (Mini-Mini)WT strategies are defensive tactics employed by a company to reduce its weaknesses and avoiding its external threats. As the image of Nestl is being tarnished by negative publicity arising out of recent product recalls, compliance issues for violating regulations, etc. it should heavily invest in its PR management so that such negative publicity cou ld be avoided next time. Nestl should put more emphasis on selling in developing and emerging markets to continue steady growth while increasing market share and also for purchasing and producing there to counter the rising prices of raw materials and labor costs.Assessment of Current Company carrying outEfficiencyNestls recently been hobby the strategically expanding through acquisitions and investments. It has been quite successful in expand its nisus of frozen foods in North America through the acquisition of Kraft Foods frozen pizza line for $ 3.7 billion in cash. Nestl also had several other small acquisitions in the first quarter of 2010 which did not have a significant impact on the Groups sales and profit for the period. Nestls acquisition related costs in the first quarter of 2010 were about $ 13.4 million.EffectivenessNestl was effective in carrying out its expansion strategy through acquiring frozen pizza line from Kraft Foods as where the company had only a nonaged p resence until now it is the market leader in frozen food segment in North America. It successfully integrated Kraft Foods pizza business into the Nestl Group as well as its 3,620 employees, with their valuable genius and expertise in Nestl. The frozen pizza line showed 14% organic growth in the first quarter of 2010. Sales and profit of Kraft Foods frozen pizza business in the first quarter of 2010 amount respectively to $ 6.11 billion and $ 65.2 million.Return to InvestorsNestl paid dividend of $ 5.632 billion in the first quarter of 2010 which showed an increase of 7.8% when compared to the dividend payment of $ 5.223 billion in 2009 for the same period. Increase in dividend shows that Nestl is starting to recover from the financial crisis of 2009. The share value of Nestl went up by $ 0.91 per share for 2010.Review of Options for Future DirectionIn straddle to address its weaknesses and external threats Nestl has to critically use its strengths and capitalize on its external o pportunities by using some of the strategies mentioned in the TOWS matrix earlier.One of the strategies that Nestl can use is expansion strategy through strategically acquiring and merging with its competitors and investing in production facilities in developing economies. It should acquire or start joint ventures with firms in developing markets like India, China, Russia, etc. to capitalize on their booming economies and gain market share quickly forrader other global players enter the markets as it has the financial backing to brave out such expensive ventures. Also it should start investing in developing markets to develop its own production and distribution facilities so as to occur dependency on local players.Another strategy that Nestl should undertake is Growth through Innovation in health nutrition food segment. Due to the rising education levels and general awareness around the world consumers are becoming more more health conscious, which is an important opportunity a nd will be a future growth driver for Nestl. It should use its highly developed RD capabilities to develop more healthy and nutritional foods to cater to this growing group of consumers.Implementation of New StrategiesStructureNestl has a decentralized organizational anatomical structure which has been very beneficial to it as far flung divisions could take decisions in real time to exploit the opportunities present to them but due the ample technological advancements in the past few years this autonomy has led to conflicting practices within the company making it a nightmare to unionise activities amongst divisions in varied geographical zones. It has to centralize its operations to gain a tighter control over its far flung divisions and businesses, so that Nestl can (with a unified centralized system) leverage its products in real time on a worldwide scale to generate higher sales.SystemsNestl has its production and logistical systems under control to meet any unexpected gr owth mass in a short period of time and to fuel growth for expanding in developing markets. But Nestl has to take care of its supply chains as they can virtually leave Nestl hanging in the air if any change in natural political environment takes place with the possibility of disruption in supply of raw materials or a drop in thewhy do Multinational Companies Exist?Why do Multinational Companies Exist?According to Needle (2010), Multinational enterprises are those enterprises which carry its production activities in more than one rural. These companies make sure of the supply of raw material to the other rural they are operating in. As per Buckley and Casson (2009) many of the contrary operate in divers(prenominal) expanse because of many reasons such as low labour costs, lot a huge market, cutting of their taxes and production costs, innovation in engineering science and development of resources.According to Dickens (2011), today we are living in b separateless world as there are no boundaries that exist between the countries or nations. Globalisation is the new trend changing the political and cultural order of the world (Buckley and Ghauri,2004). Every operation that has been carried out by companies goes around the world. Innovation is growing very fast and so do competitiveness.Globalisation can be define as the increase in the frequency and distance of linkages between countries leading to similarities in activities of individuals, practices of companies, and policies of governments (Czinkota 2005). From the statement we can say that companies go global because of many reasons as now the countries are linking to each other to share the information and wealth.As said by Rugman and Verbeke (2005), Firms become multinational because they want to grow, expand and diversify their operations. Operating in their home country wont satisfy them so they go global. Using the resources of their home country make it obsolete or bound them in a coif to no t to go further. Then firm decides to go global by making investment on their further growth.As argued by Madura (2008) following are the theories which a firm follows when it globalises such asTheory of comparative AdvantageThe rickety Markets TheoryThe Product Cycle TheoryAs explained by Madura (2008), Comparative advantage theory says that when countries specializes or have expertise intimacy in one field than they dont waste their resources or zip on research of other field, they share or handicraft with other countries to share their expertise field. They take advantage of their expertise knowledge and become a head in comparison with others. Labour force is competent and lower in cost in India and China as compared to Hesperian countries. They can be transported or hired for the operations for other companies. Companies such as Intel, IBM, Wipro operate in different countries because to utilise their efficient resources. These companies are operating in India, having th eir call centres outsource sacramental manduction the expertise knowledge in the field of Information Technology as India produces a large amount of IT experts.Imperfect market theory says that if the markets of a country restrain trading with other countries than there will be no international trade. As per Dewey (1969), if the markets of the countries were perfect then there would be an easy transferee of resources from one country to other. Factors of production like labour, raw material, machines and capital can be transferred wherever they are demanded. This temperament of deal between the countries creates a similarity in costs and removes the relative cost of advantage, global trade and investment. In todays world there are situation when imperfect market conditions arises, where transfer of labour and other factors of production is restricted at some level. For example, MNEs such as Gap and Nike take advantage of the resources related countries. Imperfect market offers t hese companies to exploit their market and cross the trade barriers of import and export.According to Madura (2008), in Product Cycle theory, firms establish first in their home country by utilising all the resources available in the market. In home market they have an advantage over competitors. After operating in home market firm feels to expand their operations by introduction into foreign market and producing their products overseas, reducing their transportation cost and other cost of production. There are existing competitors in the global market and to compete with them they introduces new technology and products in the market. For example, Dell, Lenovo, Toshiba are the companies who spent lot of their resources in their research and development for the latest technology.As argued by Kapoor and Grub (1973), firms cause themselves to become multinational enterprises because of the foreign direct investment that helps in traverse the trade barriers to other countries. They a lso explore different cultures and management structure followed in different countries. Firms become multinationals in order to reduce the risk of foreign trade and become politically and economically well established. By going global they create a good relationship between the nations and create a name and goodwill to the firm. For example, many of the American companies are going global as they now operating their activities in the growing economy of different countries such as Brazil, China, India, Russia etc. Many of the emerging market companies such as HTC, Samsung, Nokia etc. are also spending on their research and development and sharing the information on technology sector.According to Markusen (1995), as he explains the Dunnings OLI framework that there are triplet advantages in which a company can have direct investment. Firstly, self-possession advantage is when a company has trademarks and copyrights of producing a product line and no other company can duplicate the ir product. Secondly, Location advantage is there when a firm creates his monopoly in a particular region serving a large amount of society. It is done as the foreign market offers the low cost of production to firms which make it profitable for the firm to serve that region. Thirdly, worldwideisation advantage says that if there is a market to cater than instead of going out there and start a new production unit, its better to license and sell your technology to a company and they will produce units for you.As stated by Madura (2008), there are some ways by which firms become multinational enterprises.International TradeLicensingFranchising adjunction VenturesAcquisitions of existing operationsEstablishing new foreign subsidiariesAccording to Hill (1994), International trade government agency exporting and importing of goods and services between different nations and different companies. If a company start facing losses that it can reduce or stop exporting or importing from diffe rent countries as there is no huge investment problematic in it. For example, many of the U.S. firms such as Microsoft, IBM, General Electric generates there huge amount of revenue from import export.As argued by Needle (2010), Licensing federal agency that a firm uses several modes such as copyrights, trademarks, patents etc. to lodge their process of operations or the technology they use. They can transfer or share their technology with others according to their wish with low capital involved in it. For example, in India all the parts of telephone communications are manufacture by ATT and Verizon Communications as they have a commissioned agreement. All the drugs that are produced and exported to Hungary and other countries are made by Eli Lilly Company.It has been argued (Spinelli et al. 2004) that Franchising means when a company authorizes its residents of the same country or other country to open an outlet using the brand of the company. Its market policies, product line and the franchisee have to follow the protocol of the farm company. In return to this the franchisee has to pay a royalty fee to the company periodically. For example, McDonald, Pizza Hut, Subway sandwiches have many outlets in many countries that are operated by the local residents of the respective countries.As per Yan and Luo (2007), in Joint Ventures two firms come together to achieve their common goal in the competitive market. In ventures risk sharing ratio is equally divided for the defined project and there should be a mutually understanding between them. These enterprises are also politically acceptable in different nations. For example, Nestle has a wide distribution of its home products throughout the world. So there has been a joint venture between General Mills Inc. and Nestle to apportion the cereals produced by the General Mills by using the distribution channel of the Nestle.It has been argued (Reed et al. 2007) that acquisition of existing operations means that th e company acquires the existing competitors in the local market or in the foreign market. A company takes over another organisation as they incur heavy losses and cannot operate in the competitive market and also to vertically or horizontally integrate. A company explores the resources of another company and take advantage of the already setup done by that company. For example, Procter and Gamble acquired a bleach company fit(p) in Panama.According to Rugman and Verbeke (2005), another way of entering in global world is by establishing new subsidiaries. The large organisations create or distribute its departments into different companies and are wholly or partially controlled by the parent company. The main organisations are called the parent company and the other is known as holding companies. If the company is totally owned by the parent company that their stock is also owned by the parent company. There is always a protection of technology as the information is not leaked out. At the same time it also involves high costs and risks in the foreign market. For example, a truck company called Overnite Transportation is a totally purchased appurtenant of Union Pacific Corporation.ConclusionAt last it can be said that, the role of MNC in developing itself and the nations are very important. It in one way helps to build and economy by various advantages. At the same time it can have different repercussions if not right strategized.The above description gives all the major points in making of an MNC. Also the essay describes the various parameters needed in making of an MNC.