International Strategy: Context, Concepts and Implications

Chapter 2 Why Do Firms Go International? The Justification for the Existence of the Multinational Corporation

MOTIVATION

Once upon a time there was a small but fast-growing furniture maker, based outside Barcelona, selling classical bedroom and dining room sets to the local Catalan market.¹ Part of its success came from offering a wide range of catalog designs to complement the very limited inventory carried in local retailers' tiny stores. Part of its advantage came from the short delivery times it offered, enabled by a combination of job lot craft production and a willingness to go over and above the call of duty to satisfy customers.

And then, when facing a fall in local demand, two things happened to disrupt the even flow of events in the company. First, an acquaintance introduced it to the relative of a minister in Uzbekistan who claimed to be interested in purchasing the equivalent of two months' output of a limited range of bedroom furniture. Second, rumors were heard that IKEA was looking at a site in Barcelona for its first Spanish furniture store. How should the company respond? Should it take the Uzbek order? Should it visit IKEA headquarters in Delft, Holland and try to become a supplier to IKEA stores in France as a precursor to supporting the Catalan entry? Should the firm now become a multinational?

This and many other similar stories are typical of the process by which firms confront the decision to step beyond their borders and become multinational. While ...