Review of the selected journal article - Essay Example

Emerging Multinationals Growth Strategies: Article Review Introduction Upcoming multinationals in the developing and emerging economies are making huge growth steps. This has been made possible by the fact that the local economies are growing at a very first rate. Although multinationals from western firms have invaded the local markets, this has not stopped some of them from growing. Foreign firms have technological might and the right management structures which give them competitive advantage.

However, the local firms are able to work around local institutions and local regulatory environment better than these western multinationals which don’t have the experience of the local environment. Local firms have been able to develop mechanisms to create financial resources. They use their trusted brands to raise money in the local stock exchanges. At the same time, when they grow, they are able to further raise more capital from stock exchanges in the developed world. This is because the upcoming multinationals are highly favored by investors due to their high potential for growth and their ability to return huge profits, in capital gains.

These local multinationals have also developed unique methods of developing talent, by for instance deploying the experienced managers across a number of businesses. This saves them the cost of talent harvesting and development. They also understand the local markets better than the multinationals from developed nations. Unlike the foreign multinationals with management structures that prevent them from aligning their business strategy to meet local needs, these emerging multinationals understand the local market very well and are able to meet the needs of the customer.

This places them way ahead of the foreign multinationals that refuse to adapt their market strategy to the local needs. Three strategies The authors identify the following as the main aspect so emerging multinationals growth strategies Exploit understanding of local markets Build on Familiarity with Resource Markets Treat Institutional Voids as Business Opportunities Critique The article considers some of the most important facts about growth in emerging markets. The authors have discussed about the issues which affect growth and development for businesses in the emerging markets and why the local companies are outgrowing foreign multinationals in the local as well as the global market.

Content One of the most important issue that the authors have discussed in the article is the issue of understanding local market. Most multinationals from the developed world seem to fail in emerging markets due to this small issue. Most of them, as Khanna and Palepu (2006) say, are too rigid in their management and cost structures that they are not able to invest in market research in the local emerging markets. This leaves the local emerging multinationals to enjoy niche markets without competition from the foreign firms.

While this is a strong point to be discussed, the main issue is that it is now a common knowledge which should not be featured prominently in such paper. The authors should have chosen an issue which is not common knowledge as yet and give information about it. However, the other two issues, that is, building on familiarity with resource markets, and treating institutional voids as business opportunities, are important factors that bring a new light to the issue of growth in the emerging markets.

The authors should have focused more on this and refrain from focusing on the issue of exploiting the understanding of local markets because this is an issue that is not only too obvious, but also has been discussed by so many authors. Local or global growth The article has focused on the local growth and not global growth as indicated in the introduction. As the article starts, the authors have talked about the global growth of these emerging multinationals such as M&M. However, as the reader gets into the body of the article, the discussion changes to the issue of growth in the local market.

This creates a void in terms of what the reader may be looking for. The authors have focused too much on the local growth (growth at home) of multinationals and refrained from discussing how this relates to global growth. While these firms have managed to grow in the local markets, the question that should be answered is the question of how this growth can be translated into the global arena (Luo & Tung, 2007). Emerging firms may be able to use the three strategies illustrated in the article, but the big question is whether they will be able to compete with the already established giants in the global market.

The issue of long term growth How about the long term, will these strategies still be viable? The authors have refrained from discussing the issue of whether the growth boom being experienced by these firms will have a lasting effect or it is just a temporary thing. There is a reason why this issue of local growth must be addressed. This reason, as Luo and Zhao (2013) is the fact that although these firms are experiencing local growth, there is a risk that this growth will fade away with globalization.

As the authors have suggested, the main factor driving their growth and their ability to beat the foreign multinationals is the fact that the local markets favor them. The authors have segmented the market in developing countries such as China into four segments. Of these segments, only the smallest part at the top of the pyramid is a global market, the rest being local markets (Hoskisson et al, 2007). This enables the local multinationals to thrive because they are able to serve these local markets better than the foreign multinationals.

However, as time goes on and many people in these developing economies are economically empowered, the equation of the market in these markets will start shifting, favoring the global market. The authors have failed to discuss this important factor and how it might shift growth factors in the future. As Zahra (2011) points out, since growth for firms as big as the emerging multinationals is a long term issue, failing to discuss a factor that will be important in the next few decades is a major mistake for a paper that is dedicate to identifying he growth factors in these markets.

Standards and quality and how they will act in the future In the same issue of how these growth factors will be in the future, the issue of standards and quality also come up. The reason the emerging multinationals are able to tap into the local market is because the market at the local levels, especially the bottom of the pyramid, is willing to take lower quality products as long as the prices are right (Olsen, Pinto & Virji, 2005). This may not be so forever and any firm that builds it success on this factor may have to pay huge costs in the future.

The authors have failed to identify this factor. Institutional void and the globalization of information The Institutional void has also been identified as one of the main issues during growth for the emerging giants. The issue that may come up in this area is the issue of whether this is going to remain the same, especially in this age of globalization and information fluidity. Conclusion This article provides some very important issues for both the emerging multinationals as well as the foreign firms which expect to grow and establish themselves in the emerging markets.

This is important because big firms from the west have been seen to fail drastically in the emerging markets. For instance, Wal-Mart and BMW have been seen to fail in China while Coca Cola failed drastically in India. These firms can learn from the ideas referred in this article. Similarly, many local firms have been seen to be swallowed by these foreign multinationals, these firms can also learn about these strategies and apply them, for their own growth. References: Hoskisson, R. et al. (2007).

Strategy in Emerging Economies. Academy of Management Journal, vol. 43 (3) , 249-267. Khanna, T. & Palepu, G.K. (2006). Building World-Class Companies in Developing Countries. Harvard Business Review , Pp. 61-70. Luo, Y. & Zhao, H. (2013). Doing Business in a Transitional Society Economic Environment and Relational Political Strategy for Multinationals. Business Society September, 52 (3) , 515-549 . Luo, Y. & Tung, R.L. (2007). International expansion of emerging market enterprises: A springboard perspective.

Journal of International Business Studies, 38, 481–498. Olsen, S. P. (2005). Navigating growth in emerging markets: six rules for improving decision making between corporate and local leadership. Journal of Business Strategy, 26 (6), 37 - 44. Zahra, S. (2011 ). Emerging Multinationals Venturing Into Developed Economies: Implications for Learning, Unlearning, and Entrepreneurial Capability. Published online before print May 11, 2011, doi: 10.1Journal of Management Inquiry, 20 (3), 323-330 .