International Partnerships in Emerging Markets - Research Proposal Example

International partnerships in emerging markets Table of Contents Introduction 3 Aim and objectives 3 Literature review 4 Research strategy and methods 8 Timeframe of research 9 Reference List 10 Introduction Rapid changes in the structure of the global markets have led to easing of restrictions in international trade and business partnership. Globalization has paved way towards the rapid increase in foreign direct investments across different nations of the globe. Economic and technological development has further facilitated firms to expand into foreign nations. Not only does international expansion facilitate entering new markets but it also provides firms to attain the benefits which arise out of differences in location. Firms are able to share resources and thereby increase their productivity. The resource sharing may also take place in respect of lost cost factors of production. When an organization enters into the markets of another nation, it becomes essential to serve the market with novel products and services. In general, foreign investments are directed towards creating value through resource sharing where the interests of one nation and another are similar. Additionally obtaining investments from other nations facilitates the host nation in a diverse number of ways such as increase in employability and increase in the gross national product. Prior to globalization, it was considered that foreign direct investment is not favourable for the growth of the receiving nations. In many nations in order to protect domestic markets and resource depletion, foreign investments were restricted. However, as nations began reaping the benefits of globalization through foreign investments causing no harm to their indigenous markets, the fear of foreign investments began to disappear. At present almost all nations are seen to remain open towards obtaining investments from foreign nations. Emerging nations consistently try to make investments in their nations look attractive. Furthermore, the success of a large number of international business organizations is seen to generate greater confidence in respect of international investments. Aim and objectives The aim of the current study is to understand the impact of international business partnerships upon emerging nations. Emerging nation is seen to benefit immensely from international businesses in increasing their economic capabilities. The current paper critically analyses the importance of international partnerships in emerging nation and their diverse effects upon the economy and overall development of the nation. The primary objectives of the current research paper are: 1) To evaluate the literature associated with the impact of international partnership upon emerging nations. 2) The different ways in which emerging nations economic and business environment is effected through international business. 3) The disadvantages arising out of international partnerships. Setting suitable research objectives guides the researcher in respect of the type of data which requires being collected. Research objectives therefore provide a suitable direction to the study. In the current paper all necessary efforts were taken for obtaining correct and accurate data in respect to international partnership and its impact upon emerging nations. The research questions which are associated with the current paper are: 1) How does international partnership influence the economy of the emerging nation? 2) What are the advantages and disadvantages of international partnership faced by both parent and emerging nations? Literature review According to Hill and Jain (2007) developing international partnerships and conducting business across international boundaries are a complex set of activities. Before a firm considered investing in a foreign nation it becomes essential to analyse the environmental and industrial conditions which exists in the host nation. It is essential for the political and economic conditions existing in the host nation to remain positive of growth before business partnerships are developed. Critical analysis of the industry conditions are also required to be conducted. International partnerships with another nation are only developed if the host nation provides adequate scope of growth. Yiu, Lau and Bruton (2007) had stated that one of the potential reasons behind considering expansion in the emerging nations is to escape market saturation which exists in the developed nations of the world. The markets of the developed nations possess stiff competition. The scope of achieving competitive advantages in emerging markets is high. Moreover, the resources existing in emerging markets are considered to be less exploited. Tihanyi, Griffith and Russell (2005) have opined that international partnerships have caused a structural shift in the global economy. Developed firms at present are seen to invest more in emerging nations rather than the well developed nations of the U.S and Europe. The Brics nations (Brazil, Russia, India, China and South Africa) continue to be the leading nations which receive the maximum foreign investments from developed nations. The developed nations of the west are characterised with low yields and intense competition. As a result, developed firms located in the nations of the U.S and Europe considers increasing productivity and revenues through investments in the emerging nations and thereby taking advantage of the resources and growth opportunities existing in such nations (Hitt, et al., 2000). Moreover, increasing urbanization and lack of resource availability propel firms to shift from developed nation to the developing nations. Emerging nations provide attractive opportunities in manufacturing. Many firms also consider entering into partnerships with the emerging nations due to easy and abundant availability of power and also to reduce the disconnection between productions and consumption (Isobe, Makino, and Montgomery, 2000). According to the study conducted by Meyer and Nguyen, (2005), the needs of economic growth and infrastructure are prominent in the developing nations. This is one of the well-known reasons behind them to remain liberal towards foreign partnerships. The competition situation existing in the emerging nations are also significantly low due to lesser number of indigenous well developed firms. Well established organizations having adequate financial strength are in a position to invest at a large scale in developing nations and thereby achieve a strong position in the emerging markets. The capability of emerging nations to provide higher returns is the primary reason why majority of the organizations consider increasing foreign investments. However, international partnerships are a risk invested venture (Peng, Wang and Jiang, 2008). Changes in political and social settings may impact the business in a highly negative manner. It is also important to consider the pattern in which return on investments are generated in emerging nations as they are seen to remain fundamentally different from the manner in which returns are generated in developed nations. Hence, the risk elements which are associated with international investments are required to be thoroughly analyzed (Werner, 2002). Peng (2001) in his study has considered viewing the international business strategies from two important perspectives, which are namely; the resource based view and the industry based view. The industry based view suggests that the specific condition which exists within the industry of a particular nation determines whether a firm should consider investing in the same. If the industry condition is highly competitive, making an investment would be considered as a risky venture (Zahra and Hayton, 2008). The power of the dominant firms in the industry also required to be analysed. If the existing firms exert superior power over the industry and has been able to capture a high market share, entering such a market would require the foreign firm to engage in massive promotions and delivering unique products. The venture would therefore become cost inductive. The resource based view suggests that the existence of valuable resources leads to an increase in international investments and partnerships. The resources may be natural, human or technological. Many western firms consider entering into business partnerships in Asia due to the existence of cheap human resource (Griffith, Cavusgil and Xu, 2008). As per London and Hart (2004) international partnership facilitates indigenous firms to obtain greater financial strength and carry out production activities in a more efficient manner. International partnership also facilitates an increase in the export import market conditions. Through contractual business agreements with the companies of the host nation, it becomes possible for many firms to reduce the costs of import. It is however important to consider international trade regulations and policies when partnerships are made to benefit import and export (Burgel and Murray, 2000). Therefore, the motive of such international partnerships becomes important to consider. Even though international partnership in majority nations is liberal, it is seen to remain restricted in certain sectors. In most types of international partnerships, the foreign investor is allowed to have only a minority share in the net stake holdings. The host nation’s investments in such a company are kept higher (Elango and Pattnaik, 2007). This is mainly done so as to prevent the foreign nation to misuse resource or exploit them on a large scale. However in certain sectors, the government may allow foreign investors to enter into partnerships by allowing a larger share in the net capital. This is done to increase efficiency and attract greater financial strength. Before entering into international partnerships, foreign investors are also required to essentially consider the prospects of future profitability. Investing in a foreign nation is a complex and a costly affair. Hence all necessary forecasts are required to be done before venturing into such business arrangements. The future profitability can be analyzed through analysis of the environmental conditions such as the demand condition, economic determinants, government stability and favourability. All factors with which the business is likely to interact must be adequately considered. Changes in these factors and how they might impact the business must also be strategically analysed. For instance, a sudden drop in the demand condition is likely to affect the business in a highly negative manner (Delios and Henisz, 2000). Consumers are also significantly benefitted from international partnerships. Such business arrangements brings in greater technological and resource capabilities as a result of which better quality goods and services can be produced. Consumers can therefore enjoy goods and services which are comparable with international standards. International partnership in the consumer retail goods sector has facilitated international goods to be made available even in the less developed markets of the world (Khanna and Palepu, 2000). International partnership also fosters cultural development and friendship amongst different nations. Through business relations, individuals get exposure to different cultural practices and values facilitating better understanding between nations. International partnerships also facilitate earning higher foreign currency and thereby improving the balance of trade position of a nation. International investments also occur when there is a requirement of achieving specialization of labour. Specialization of labour in this respect would mean manufacturing different components of the same product in different nations due to the existence of resource or labour differentials. Many at times even if a nation possesses adequate resources, lack of technology or skill hinders extraction of the full utility of different resources. Under such circumstances, additional strength for resource utilization can be obtained through international partnerships. It also facilitates achieving economies of large scale. International partnership is seen to induce stability of prices worldwide as the same products are sold at similar rates across different countries. Emerging nations are able to learn effective practices of international business and enhance their business acumen and knowledge (Jenkins, 2005). International partnerships is not carefully planned may cause a number of disadvantages to an organization. Through international partnerships, the adverse economic conditions existing in one nation may get filtered into another. It is frequently seen that when the economic conditions of one nation deteriorates, other nations also suffer losses. Apart from monetary losses, through international partnerships, unhealthy and socially undesirable goods and practices may filter into other nations (Gubbi, et al., 2010). If the international partnership policies are not well regulated, it leads to overexploitation of resources and causes firms nations to lose their strategic advantages in the market. Many emerging nations have blamed international business relations to give rise to the dumping policy whereby undesirable goods and services are sold in the emerging markets, which cause harmful consequences. Additionally international business expansion may cause a number of indigenous firms to close down as more competitive international firms develop in the industry. International partnerships are a complex procedure (Luo, 2001). If proper care and attention are not given to the manner in which international contracts are signed, it may cause host nations to lose their precious resources. It is important to understand all the technical complexities before signing international contracts. Also, international business relations may cause a shortage in goods and services in the emerging nation if a large portion of goods are exported to foreign nations (Tong, Reuer and Peng, 2008). Research strategy and methods The data collection technique includes collecting data from both primary and secondary sources. The primary data has been collected through questionnaire survey. The respondents for the questionnaire survey are essentially the managers from a few selected multinational companies which operate in emerging nations. A sample size of 25 has been selected for conducting the survey. The convenience sampling technique has been used for selecting the respondents for the survey. Since the nature of the research is largely explorative, the convenience sampling technique is deemed to be most suited. The convenience sampling technique facilitates the researcher to select respondents on the basis of the needs of the survey (Berg and Lune, 2004). Managers of multinational companies which operate in emerging nations are well aware of the advantages and disadvantages faced in international partnerships. Hence deeper knowledge can be gained in respect of the manner in which multinational companies operate and function in emerging nations. It also becomes possible to obtain ideas regarding the manner in which such organizations develop business relationships in emerging nations and how they overcome different barriers. Secondary sources were also referred to for constructing deeper ideas in respect of the subject matter of research. The secondary sources of information are mainly journals, books and scholarly publications published in respect of the area of research. Secondary sources of information provide the researcher with adequate idea in respect of what experts have opined in the subject of research. Often the researcher is not able to collect all necessary information through primary data collection technique alone. As a result, dependency gets created on secondary sources for fulfilling the research needs. The research is mainly qualitative in nature. Since the research includes collecting data through questionnaire survey, adequate importance is given towards fulfilling the ethical considerations (Kumar and Phrommathed, 2005; Patton, 2005). Timeframe of research The time plan for the current research paper is as follows: Topic Month 1 Month 2 Month 3 Month 4 Month 5 Introduction, research objectives, and aims. Literature review Data collection Findings and analysis Conclusion and recommendations Reference List Berg, B. L. and Lune, H., 2004. Qualitative research methods for the social sciences. Boston: Pearson. Burgel, O. and Murray, G. 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