International business has exited in some sense since prehistory. When flint blanks, ceramics, and other goods were traded across great distances. Even during the Roman Empire, traders carried goods to consumers around the world. However, multinational enterprises as we know them today were great rarities until the nineteenth century. By then, US companies like General Electric, International Telephone and Telegraph, and Singer Sewing Machine Company had started to invest in overseas manufacturing facilities as had West European companies like Ciba, Imperial Chemicals, Nestle, Siemens, and Unilever.
The Aftermath of World War II:
When World War II ended, the United States was the only major country that had not been devastated by war. The size of the US economy had almost doubled during the war, and the United States dominated the world economically, politically, and militarily. In this climate many US firms started making substantial direct investments foreign primary industries such as oil production and mining. Technological development and product design remained focused on the United States market at home; American owned multinationals generally viewed the rest of the world as a source of raw materials, cheap labor and supplemental markets.
In the mid 1950s US companies started to make substantial direct investments in foreign manufacturing facilities. In the 1960s, it was American service firms, banks, insurance companies, marketing consultants, and the like that expanded overseas. In time as purchasing power increased abroad especially in Europe and Japan, their domestic production prospered. Eventually overseas producers expanded beyond their national boundaries entering the international marketplace. Although these foreign competitors initially relied on US technology lower costs eventually gave them a competitive advantage. Today, they have taken the initiative in developing and improving technology and this has furthered their competitiveness.
Western Europe’s firms particularly in such industries as chemicals, electrical gear, pharmaceuticals, and tires – started to respond in the late 1960s by setting up and acquiring US affiliates. So did the gigantic Japanese trading companies particularly during the 1980s when they were trying to circumvent protectionist US legislation that would cut their access to the American market. To lower their manufacturing costs, Japanese and US companies also started to invest in facilities in newly developing nations
As a result, international trade and competition both have intensified in recent years. More than one quarter of all goods produced in the world now cross national boundaries, while nearly three quarters of the goods produced in the United States face foreign competition. In this global market organization must fight to capture overseas markets while defending their home markets from foreign competition.
One of the more recent markets to open up to US interest is Vietnam. In a move fraught with emotion and bitter memories more than two decades old, President CIinton lifted the 19 year embargo against Vietnam. This has created a rush among Americans firms anxious to do business with the 72 million people of Vietnam. Among more than 30 companies with established representative offices inn Vietnam are Digital, Bank of America, IBM, Caterpillar, General Electric, Motorola and Philips Morris, GM, Ford, and Chrysler are considering establishing assembly plants to tap into Vietnam’s educated workforce. The US companies have plenty of competition from other countries that have a selling head start, such as Australia, Taiwan, France, Hong Kong and Japan. But a hidden US advantage is the million or so Vietnamese who have settled in the United States and have already invested in small businesses in the south of Vietnam who are likely to do more that it is legal.
The role of the Multinational Enterprises (MNE):
Companies and individuals can own foreign assets in two fundamental ways. They can purchase shares in the companies that own those assets. Foreign portfolio investment of this sort gives those companies and individuals a claim on profits, but no right to participate in management. Or they can engage in direct investment, the buying and management of foreign assets.