The Business Models and Strategies of Emerging Giants - Essay Example

Review of the Journal Article Table of Contents Introduction 3 Summary of Khanna & Palepu (2006) 3 Edge on multinationals 3 Exploiting the knowledge of local product markets 3 Building knowledge on resource markets 4 Institutional void is a business opportunity 4 Critique 4 Comment on Edge on multinational 4 Comment on exploiting the knowledge of local product markets 5 Comment on Building knowledge on resource markets 5 Comment on Institutional void is a business opportunity 6 Conclusion 6 References 7 Introduction The article “Emerging Giants” describes the building of world class renowned companies in the developed countries. The authors of “Emerging Giants” studied the business models and strategies of major companies in emerging markets for six years. China, Brazil and India are the large emerging markets that are playing a pivotal role in the world economy. The main aim of these “emerging giants” is to capitalize on globalization opportunities and to be competitive in the global market. The structure of the essay consists of summary, critique and conclusion. The main key points are highlighted in the summary segment. Then the essay is evaluated in details in the critique segment. Finally in conclusion segment; important points of entire report have been summarized. Summary of Khanna & Palepu (2006) This part of the essay will summarize some major points of this assignment. Edge on multinationals Many MNCs of the developed companies have many advantages like brand-value, sophisticated technologies, innovation of products and services and efficient management systems. They also have vast pool of talent and finance. Emerging companies also have many advantages over well-known MNCs. If these advantages are applied efficiently then it can prove fruitful for emerging companies. Example is India’s Tata Group have created a plan and implemented it to develop talent and raise capital. Exploiting the knowledge of local product markets Emerging companies have the advantage to exploit on the knowledge of local product markets. They can capitalize on the advantage at home by adapting on the knowledge of the customers. To grow across the borders, emerging giants exploited the similarities on the countries that are geographically nearer. Local companies have the advantage to realize the customers’ needs and taste. Building knowledge on resource markets Emerging markets have the advantage to capitalize on local capital markets and local talents. Therefore this can help in a cost effective manner to serve customers in local and abroad. Major example is Indian IT companies such as Wipro, Tata consultancy services, Infosys and Satyam. Institutional void is a business opportunity Institutional void should be treated as a business opportunity as it helps to enhance the credibility of the claims that are made by the sellers and facilitate the flow of information. It also enables to facilitate transaction by creating forum or by distributing goods and services. But MNCs has an edge on intermediaries business. Critique Despite facing bureaucratic and financial issue in the local markets companies used strategies to be successful in global market. Some of the companies exploited their advantage of knowing local talents and capital markets. Some of the companies capitalized on the advantage of having knowledge on local product market. Tarun Khanna and Krishna G. Palepu studied six years ago about companies of developed countries and their development on the global stage. Comment on Edge on multinational Renowned MNCs from all over the world are gaining potential competitive advantages due to their high brand name, efficient management system and innovation (Porter, 2011, p.191). Emerging companies have advantage in the local market. Managers of the local companies have the advantage of knowing to work around institutional void. And this is difficult for the MNCs of the develop countries. Many large MNCs companies are hesitant to implement their strategies, services and products on the developing market. Implementing their strategies, products and service can prove risky and costly. It becomes difficult for MNCs to sell products and services at ideal prices because due to their huge cost structure and organizational processes. Due to degree of success, some countries are listed on NYSE which makes them easy to sell equity shares or bonds (Brigham and Ehrhardt, 2011, p.97). To fill the gaps some intermediaries from developed countries invest on the local businesses to make them more competitive. There are many possibilities that can be helpful. But there also some negative aspects. Some major companies from developed countries have the revenue and funds to buy small local emerging companies. Emerging companies might be new and destined to be successful company. But Global major companies can buy these companies and can be more successful in local and global market. Comment on exploiting the knowledge of local product markets This is the first strategy that can be implemented by emerging giants to gain edge over foreign competitors. Emerging local companies have an advantage of having knowledge on local product markets and customer needs. Therefore, products markets are often defined as unique because of idiosyncratic customer taste and needs. Kotler (2008) reported that the local companies can use their knowledge and modify their products according to the customer need (Kotler, 2008, p.289). Best example is during the humid condition, people of Chinese cities such as Shenzhen and Shanghai needed to change their clothes frequently. Haier Company created a new small washing machine. This washing machine requires less water and electricity. This washing machine became instant hit in the China’s coastal cities. Emerging markets can be huge successful in the local market but there is always a threat of substitute. The article only describes about the positive aspects. There is huge competition in every sector of market. According to Nigel (2009), knowledge of local market and knowing customer needs is not enough to be successful (Nigel, 2009, p.219). Every company needs to innovate continuously and change the products or service according to the customer. There is always a threat of new entrants. The article describes about the positive aspects of following the strategies. Comment on Building knowledge on resource markets This is the second strategy. Emerging markets have advantage of having knowledge of local talent and capital markets (Frazzon, 2009, p.49). Indian IT companies have excelled in recent years. These companies have excelled which is partly due to the knowledge of talent market. This can be also due to the educational system of India. Therefore it makes more difficult for foreign companies of developed countries to capitalize on same human resource. India produces some emerging markets companies capitalize on their knowledge about the supply chain. Some of the companies build on the advantage of having knowledge of production and supply chain to become world class businesses one of the best example is the Taiwan based company Inventec. This Taiwan based company is now one of the leading manufacturers of PCs, notebook and servers. Many of the products are manufactured in China and then it is supplied to Toshiba and Hewlett-Packard. Comment on Institutional void is a business opportunity The third strategy is to take institutional void as one of the main business opportunity. Treating institutional void as opportunity can not only help to enhance the credibility of claims made by seller but also facilitate the flow of information. It also helps to advise sellers and buyers. Liebscher (2007) reported that the MNCs have the advantage on intermediaries business because due to their expertise and experience (Liebscher, 2007, p.194). Emerging markets can overcome this because intermediaries are people intensive. They require people to communicate in local language. Intermediaries are also information intensive. This means they require the help of local people who are expertise in analyzing the data of variable quantity. Conclusion The article describes about the companies in the emerging markets to be successful must choose three strategies. Strategies can be implemented both at home and abroad. Many corporate CEOs and entrepreneurs of these emerging markets are aiming to form world class companies. Developed countries are needed to open up to foreign competition due to the liberalization. Liberalization has helped developed countries to brush away their protectionist barriers. The article describes various ways for emerging companies to be successful. Governance and Execution is as important as selecting right strategy for the success of company. Tarun Khanna and Krishna G. Palepu concluded that some of the emerging companies compete globally but some compete in the local markets but emerging giants can benefit and be successful without having global footprints. References Brigham, E., and Ehrhardt, M., 2011. Financial Management: Theory and Practice. Stamford: Cengage Learning. Frazzon, E., 2009. Sustainability and Effectiveness in Global Logistics Systems. London: Routledge. Kotler, P., 2008. Marketing for Hospitality and Tourism. New Jersey: Pearson. Libscher, K., 2007. Foreign Direct Investment in Europe: A Changing Landscape. London: Edward Elgar. Nigel, S., 2009. Operations Strategy. New Jersey: Pearson. Porter, M., 2011. Competitive Advantage of Nations: Creating and Sustaining Superior Performance. New York: Simon and Schuster. Read More