Rise and Growth of Asia Pacific Multinational Enterprises in the Global Economy - Term Paper Example

Rise and growth of Asia Pacific multinational enterprises in the global economy Introduction The increased interconnection and interdependence of global economies, as a result of globalization, has inevitably resulted to the birth of the multinational corporation (Yang & Huang 2011, p.1); multinational enterprises have played a major role in international economic development and integration (Hunya 2012, p.1). These multinational companies have grown beyond their domestic corporate markets by establishing new subsidiaries in host countries, and by acquiring companies through mergers and acquisitions the world over. Asian corporations are growing in numbers and expanding into both emerging and developed markets in other regions, through a mixture of organic growth, mergers and acquisitions. Asian multinational corporations have largely been successful in the Asia Pacific region (Collinson & Rugman 2007a, p.5). However, breaking into the western markets, especially in Europe and the US, has not been easy due to the huge presence and domination of their western rivals in those markets (Collinson & Rugman 2005, p.25). Presently, Asia Pacific MNCs are capitalizing on their years of experience gained from intra-regional growth and expansion as well as from their working with international partners to reach out to global markets. Financial reform is a major driver for the rise of Asian multinational corporations in the global economy (Buckley et al., 2009:297). Nevertheless, Asia pacific corporations are largely driven by state support, cheap labor and cheap money (Collinson & Rugman 2007b, p.436). Global automobile industry Internationalization of the automobile industry has been rapid over the years, particularly over the last half of the 1990s, as a result of the establishment of essential overseas facilities and mergers between leading multinational automakers (Nag, Banerjee & Chatterjee 2007, p.1). Asia Pacific is a global automobile hub that plays a significant role in the global automobile industry, both as a consumer and a supplier of automobiles (Ernst 2006, p.2; Holweg, 2008:16). Asia Pacific multinational corporations are grappling with how to pursue global strategies while at the same time coordinating and connecting them with their strategies of localization (HO 1998, p.1; Amsden 2001, p.273). The US auto manufactures including GM, FORD and Chrysler have merged with the other European and Japanese automakers as a way of expanding into overseas markets. The Japanese and European automobile markets rely so much on foreign exports, unlike the US automobile market, which relies on the domestic market, and on the Canadian market. In terms of management, Japanese corporations also infuse western-style business management practices as in western corporations (Ableggen 2006, p.8). Nevertheless, Japanese corporations pursue longer term goals, unlike US corporations, which are often biased towards shorter term profits (Kono & Clegg 2001, p.4). Mitsubishi Case Study Headquartered in Minato, Tokyo, Japan, Mitsubishi Motors Corporation is a global manufacturer and distributor of automobiles, parts and powertrains; the company was found in 1917 with the introduction of the Mitsubishi Model A, the first Japanese series-production automobile. MMC was the brainchild of the automobile division of Mitsubishi Heavy Industries Ltd and was spun off from the parent company in 1970. Since then, the company has achieved massive growth to being ranked the 6th largest Japanese car manufacturer and the 16th biggest in the global car industry by production in the year 2011. MMC is guided by three basic principles namely corporate responsibility to society, integrity and fairness, as well as international expansion through trade and is committed to offering the highest driving pleasure and safety for its valued customers and community (MMC 2011, p.1). Mitsubishi is a very small automobile mobile manufacturer in the global car manufacturing industry, selling only about a million cars annually, in more than 160 countries around the world. The company has plants in Asia, Europe and the US and its key products include the Lancer, the Outlander and the Eclipse, among others. MMC has historically had higher engineering capability, not only in its engine technology, but also in its production technology; MMC’s major shortage has been in its marketing area, particularly to its domestic market segment. For that matter, MMC has sought many strategic alliances and business group support; the company aims to boost its global competitiveness by radically reforming its cost structure and lowering costs. The company aims to bring down spending on raw materials by expanding procurement from overseas suppliers, mainly from China, South Korea and Thailand. Through alliances, the company aims to supplement its products and technologies, to enhance its capacity by expanding operating ratios, to reduce research and development expenditures, fixed costs as well as capital expenditures. MMC is subject to policy regulations and it abides by all laws and regulations concerning the environment and product safety, among others in its various global markets; policy changes in global market environments inevitably affect its results, due to costs associated with implementing new policy changes. China’s Competitiveness Growth of the Chinese economy has been staggering, particularly in the last two decades; a vast proportion of this growth has resulted from production of labour-intensive, low-value-added goods. Nevertheless, China’s competitiveness is no longer dependent on lower-end production as the country’s policymakers are preoccupied with helping Chinese firms to move up the industrial value chain (Ahren 2013, p.1). Chinese policymakers are bent facilitating the international expansion of Chinese firms into global markets by aiding in the establishment of internationally recognized brands; numerous Chinese firms such as Huawei have emerged to rival established multinationals. Huawei Case Study Found in 1987 by Ren Zhengfei, Huawei Technologies Company Ltd is China’s multinational network and telecommunications company headquartered in Shenzhen, Guangdong. From manufacturing phone switches, the company has grown rapidly to a leading multinational enterprise in the global economy; Huawei overtook Ericsson to becoming the largest telecommunications equipment manufacturer in 2012 (Zhu & Jones 2014, p.1). In the fiscal year 2013, Huawei achieved CNY239.025 billion worth of sales revenue and its net profits were CNY21.003 billion (Huawei 2013, p.11); the company attributes its great performance to the improved macro economy. Its founder’s vision was principally to establish a domestic competitor to the multinational telecommunications equipment companies such as Alcatel, Ericsson, Motorola, Nortel and Nokia. Rather than taking the international joint-venture (IJV) route adopted by its competitors, Huawei focused on developing its own in house technology. Huawei sought to develop national industry, keep up with growing technological advancement, and to pioneer its own research and development, so as to capture China’s market, to expand to overseas markets and to compete favourably with its foreign rivals. In China, Huawei initially took advantage of the underserved and marginalized rural market segments that its rivals considered impenetrable and poor, following Mao Zedong’s approach of enclosing the city with the countryside. Since the Chinese leadership noticed Huawei in the 1990s, government support has played a significant role in ensuring survival of the company; with support of the Chinese government, Huawei made significant progress in terms of development and sales. Government policies in China, including the by local campaign, protects domestic companies like Huawei and cushions them against international competition. Although Huawei was technically stable, it was not spared the stigma of poor quality associated with Chinese products, in its push for global expansion; nevertheless, it has successfully expanded into markets in Russia, Thailand, Brazil and South Africa through aggressive pricing that undercuts its rivals by nearly 30%. Huawei has also made major sales in developed markets such as Europe, the Netherlands and Germany; for instance, the Dutch purchased Huawei’s wireless station while the Germans bought optical network (SDH) products. Huawei presently employs nearly 110,000 people worldwide and nearly two-thirds of its revenues are from global markets; the company has pioneered standards development both at home and abroad. Huawei insists that it is an employee-owned company, to distance itself from the government control and influence accusations, though its shareholding system remains a big mystery even to its employees. As opposed to its global competitors, Huawei survived the 2008 financial crisis and continues to experience massive growth in revenues; the company overtook Alcatel-Lucent and competed fiercely with Ericsson in 2010, which it eventually overtook in its 2012 half year sales. Huawei has made research and development a core of its business, unlike its peers; the company’s low-cost China-based centre gives it a competitive advantage against its global competitors. Nevertheless, Huawei’s greatest source of competitive advantage is in the company’s decision to pioneer its technology in house, as opposed to relying on the dominant route of JVs with foreign counterparts as its competitors often do. Huawei is a world recognized technology leader, with nearly 51,000 research and design employees worldwide and joint innovation centers with leading telecom operators; Huawei’s competitors have very limited co-allocated research and development teams. Most MNCs keep their research and technology teams out of China in fear of intellectual property leakage and this separation from marketing teams seriously harms their development. Huawei’s most consistent domestic and foreign strategy has been its ability to respond to its customers’ needs promptly; Huawei’s breakthrough in the European market was through its cutting-edge, low-cost innovation through product offerings that are compatible with existing protocols and are upgradable through software rather than equipment. Samsung Case Study Samsung Electronics Company limited was found in 1969 in South Korea; ever since, the company has experienced many ups and downs that have come to define its present legendary character in the global electronics industry. From an ordinary electrical appliance corporation, Samsung has grown to engineer core technology thereby achieving massive productivity; Samsung is presently leading global markets with 7 different kinds of products. The company became the world’s leading manufacturer in EMS memory chip, LCD and colour TV, and the 3rd world’s largest mobile phone maker in 2002 (Sun, Sun & Xu n.d, p.2); it is now one of the leading manufacturers of digital high-tech products. Samsung’s electronics revenue rose to USD 36 billion in 2003, making it position 59th in Fortune’s top 500 list of world corporations; the previous year, 2002, Samsung had been ranked on top of US’s Business Weekly world top 100 IT companies. Samsung’s sales in 2011 were over C$ 150 billion and it is committed to remaining a leader in all segments of mobile and media technologies. Samsung’s global presence has increased significantly, with a vast proportion of its manufacturing, sales as well as research and development efforts being undertaken outside Korea; Samsung’s production is increasingly taking place overseas. Samsung’s competitive leadership is in memory chip design, in LCD technologies, and then in mobile telephony (SEC 2013, p.22); the company is continuously pioneering new frontiers in product design and integrated technology at all levels. Even Apple’s family of I-products recognizes Samsung’s unbeatable technology innovation, that it purchases its components and targets its international legal campaign against the company. Samsung’s procurement differs significantly from its global competitors such as Apple and Dell; principally, Samsung’s procurement process seeks to duplicate its intra-firm system instead of the external one, which the North American suppliers are more familiar with. Since manufacturing of Samsung’s components is scattered around the world, predominantly in Korea, China, Vietnam, and Indonesia, each of the company’s foreign divisions is responsible for its own factories and assembly plants. In terms of management, Samsung’s hybrid management style incorporates American style strategy and HR while retaining Japanese style of operations management. Samsung has adopted an open management that seeks to promote the autonomy and creativity of employees while eliminating obstacles in systems and practices to enhance its efficiency and competitiveness (Jung 2014, p.134). Samsung’s open management also promotes transparent management that fosters harmony with its customers, besides promoting equal opportunity and achievement of human potential. Samsung’s marketing and design is based on a strong customer focus, product design, a strong design philosophy, strong brand, and international expansion. The company successfully combines its traditional low-cost manufacturing practices with western business practices to deliver high-quality, high-margin branded products to its global markets. The Korean government has also taken very deliberate policy measures to promote the establishment of a supportive environment that encourages growth of domestic companies like Samsung (Jwa & Lee 2004, p.10). As a result, Korean firms enjoy more monopolistic powers in their domestic market than their counterparts in more advanced economies in Europe and the US (Byun, Lee & Park, 2012). Overall, MNCs from the Asia Pacific region are increasingly playing a significant role in the global economy; these enterprises are utilizing their years of experience gained from intra-regional growth and expansion as well as from their working with international partners to reach out to global markets. Asia Pacific MNCs have expanded into markets beyond their region, both in developing and advanced markets around the world, thereby competing successfully with major western rivals. 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