Lesson 3 - Page 2 - Why do firms "go global"?

The rise to dominance of the multi-national or global corporation was recognized in the 1960s when the economist J K Galbraith first suggested that they were becoming a "strategic economic unit of great significance" (Haggett, 2001: 595). Their strength has not diminished, and in the 21st century, MNCs continue to grow.

Consider the cases of McDonald's and Starbucks, two multinational corporations with global name recognition. McDonald's is a multi-national food company. One of its main products is the Big Mac burger, which can be purchased in countries as diverse as the United States, Russia, Argentina, and China. Starbuck's, a coffee beverage company, was first established as a small store in Seattle in 1971. As of 2004, the company has over 6,500 coffee shops in 31 different countries.

What factors compel a company to expand globally? For some answers, click here to view an interactive presentation describing the business history of an electronics manufacturing company, SCI Systems Inc. SCI started by setting up a manufacturing plant in Huntsville, Alabama USA where it made parts for the American space program in the 1950s. Over the next forty years, SCI expanded and built plants in 20 different countries. In 2001, SCI was acquired by the Sanmina corporation - the company is now known as Sanmina-SCI. Today, Sanmina-SCI makes parts used by many well-known high-tech companies, such as Nokia, Dell Computer, and Hewlett-Packard.