Types of Emerging Markets - Case Study Example

Emerging Economy Report Emerging Economy Report Emerging Market Multinational Companies those entering or entered into emerging markets to perform operational activities other countries are referred as emerging market multinationals. Emerging markets are observed by the investors to attain faster economic growth presented in the GDP of the country. Local firms have entered into international markets to expand their business by exports and Foreign Direct Investment (FDI). In 2007, the MNEs changed into Emerging Multinational Enterprise (EMNE). It is executed by the large organizations to expand their business in the international market after achieving the goal of the organization in the domestic market. Organizations those enter in the international market is the key drivers of globalization. Organization first analyse new markets, its efficiencies, and innovation before entering into international market. The reasons for entering are large number of supply, cheap capital, and huge investments. In addition, new IT advances are another reason for the multinational companies to enter into emerging markets (Luo, 2002). Type of Emerging Market Multinationals Following are some types of emerging markets of the world that are growing rapidly. Three common types of markets according to the research are India, China, Indonesia and South Korea. All these are the emerging markets of Asia those are growing to a high extent. European emerging markets are Poland and Turkey. BRIC contains four largest market from Brazil, Russia, India and China (Fan, 2008). These emerging markets have grown to a level to beat each other in the international market. The markets are strong due to the involvement of huge organizations. Potential firms those enters into the market and make the market competitive for new entrants as well maintain emerging markets. Introduction of Samsung Samsung is a company located in South Korea and produces diversified products including electrical appliances, mobile phones, and others. The market of South Korea is emerging markets that have created a big competition in the international market. The emerging market is known as the country market that is developed. South Korea was well developed in the past. The term developed refers to the development of economic conditions that was used by the World Bank for the emerging markets in past. Through the research of FTSE, it was proved that South Korea is a developed market but the classification is different from other emerging markets like China, Brazil, and India. It was observed that multinational markets have to target developed market so that the expansion could prove to be beneficial. The characteristics that support emerging market of South Korea are the quality of market, materiality, consistency and stability along with an increase in per capita income of the country (Woods, 2013). Internationalization of Samsung Samsung became internationalized in 1990. It was the time when the company was offered to build two towers in Malaysia. It was the first country where the company entered to do business. There was no limitation on the operations of the business. The company exceeds its limits by taking a contract of building towers in Taiwan, Burj Khalifa and UAE. The company faced many challenges while entering into emerging markets such as sold its ten subsidiaries that contracted the size of the company (Mikler, 2013). The company took a needful step in a short period so to capture the high potential market and generate large number of profits. Samsung Entering Into Markets The company put many efforts to enter into emerging markets of Asia. The company merged its three industries that are electronic, engineering and chemicals. The company was able to capture different emerging markets due to this strategy. The company further purchased Sungkyunnwhan University to expand their business in emerging markets. The strategy that was adopted by the company was to provide diversified products in the global market. In 1992, the company had enjoyed the second largest chipmaker in the world. The achievement proved to be successful in expanding the business and providing diversified products to the customer living in different parts of the world. The period of 1990-2000 proved to be the best period for the company because Samsung first introduced the product of liquid-crystal display. The strategy was viable because after that its rival Sony asked for cooperation with the company (Etemad, 2013). Strategies for Internationalization The company was unharmed from the financial crises in 1997 in Asia. The company entered in the new industry of aircraft in 1999. The aircraft manufacturing was started by merging with Daewoo Heavy Industries and Hyundai Space and Aircraft Company. Samsung started its internationalization by adopting strategies of merging with other companies that have potential in their respective products. Samsung did not depend on their few products that were manufactured by them, but they started to invest in other products like aircraft that represents its intention to capture a wide international market. The company contracted with other companies to enhance its position in the international market. The aim of the company was to capture global market customer and to become the king of emerging markets. The company did not stop their expansion of business in different countries (Luo & Tung, 2007). Investments in tangible assets by acquisitions of small firms in the country are done. In such cases, the company aims to enter the market. In 2010, the company adopted strategies rapidly for the fulfillment of their objective. The strategies and acquisitions of the company made it possible to invest in the business like biopharmaceuticals that are committed by the company to start in few years. Currently, Samsung is engaged in manufacturing smart phones for their worldwide customers. The company is updating the smart phones versions to ensure its customers that every version has some technological advancement with new applications and functions (Mathews, 2006). Role of Technology in Internationalization The company another strategy is to focus on technology as it is crucial in the modern era. The company could achieve success by adopting new technologies that are prevailing in the international market. The company acquired potential assets of the market before entering into emerging markets as it could be noticed in the case of Rollei. Rollie was a Camera maker company of Germany that was acquired by Samsung Techwin in 1995. It is the strategy of the company to acquire potential companies that are making products of their respective nature (Johanson & Vahlne, 1990). Speed of Internationalization The company had quickly changed their decision in the past by selling less potential assets and acquiring potential assets for the company. In the decade of 1990-2000 there were many changes occurred as mentioned above. There is an observation that the company would achieve much higher position in the emerging in few years due to the speed of its internationalization process and strategies that are adopted by them to capture wide market (Peng & Meyer, 2011). The process was speedy in past and will further speed up in 2015. The company aim is to enter into emerging market of China. The strategies and planning are maintained by the company to sell its product in new emerging market of Asia. Targeted Market Niches The company to target upper-middle-class professionals introduces the new product name Galaxy S-5. Smart Phones are manufactured by the company for the professionals to use in their day-to-day life and enjoy all the functions and applications in a small device. The company manufactures the product for its all customers in the international market. The strategy of the company is to provide advanced technological products to contract the size as well. The company adopted advanced technology and increased the quality of the product because it is trusted by its customers in the international market (Cherry, 2001). The trust of the international consumers of the product of the company made it possible to increase the efficiency of production for Smartphones. OLI Model The OLI Model is also known as the electric Paradigm, the theory is related to the states that the companies that adopt the model focus on minimizing the internal costs (Cantwell & Narula, 2003; Buckley, 2012). The transaction costs in international markets are higher, and the competitive advantage is gained by the reduction in the internal costs. The process is known as the adoption of internalization. John H. Dunning proposed the theory in the year 1993. The organizational structure is one of the most important parts of the theory, but there are other factors that must be concentrated on the organization/ company. The factors to be considered include the ownership advantages, location advantages and the internalization advantages. The Ownership advantages include the competitive advantage achieved through the foreign direct investments. The advantage can be gained by focusing on the production facilities, costs and other factors that may influence the investments. The higher the advantage, the greater are the possibilities that the company will invest in the market. The other basic and fundamental factor is the advantage gained by the organization with respect to the location of the production facility. The multinational enterprises (MNEs) concentrate on investing in those regions where the cost of production and transaction costs are lower. The organizations can earn above average returns by investing in such locations. In the recent times the lowest costs can be observed in China, this is the reason that most of the large organizations are opening their production units in China. The organization will also be able to gain the ownership advantages by focusing their investments in the regions where investments are fruitful (Brakman, et al., 2001). The final factor that can help the organization to grow quickly is the Internalization advantage. The focus must be given to the production units owned by the multinational enterprise. The organizations that focus on self-owned production units can apply more time in focusing on their core competencies. The firms have a better chance of exploiting their capabilities and work on improving these capabilities. The organizations can also gain the economies to scale by improvising more on their core competencies (Hart & Spero, 2013; Twomey, 2002). Peng (2012) in his study illustrated the multinational enterprises (MNEs) strategic alignment. He said that this global strategy had emerged from China in the recent time. The Chinese corporations are focused on mostly the same strategies that are followed globally. The Chinese corporations also use some additional MNEs strategies that are focused on three distinct but effective aspects. The companies seek the help of the prevailing governments so that the processes are run in a smooth and efficient manner. The government’s role is referred to as the institutional force of the MNEs. The Chinese companies have been financially very strong that is the advantage that they utilize in foreign investments and gain above average returns for their production processes. The Chinese MNEs focus on acquisitions and mergers; this strategy helps them to create better and rapid growth. The companies build their brands in quick succession and, therefore, can easily grab the market. The costs of production are obtained by following the lean practices that result in specialization and most effective production facilities. The article highlighted the importance of the Chinese EMNE strategies and the effects these strategies will have on the future of EMNE. The Chinese MNEs have flourished very rapidly with the use of these strategies and have marketed their presence in the global world. According to statistics, no Chinese company was ranked as a Fortune 500 company in 1990, but after the effective use and implementation of these strategies the results changed drastically. In the year 2010 61 Chinese based companies are ranked in the Fortune 500 companies. The author of the study suggested that the companies especially the MNEs operating in different parts of the world can use the Chinese strategies for better and rapid expansion and higher profits. The author also addressed that the strategies are relatively more unique than those followed by MNEs in the world, researchers can be done with taking Chinese economy and MNEs as the basis as these MNEs have contributed to the improvement of the theories related to the MNEs and their efforts. The Chinese businesses have established their name as the most significant and rapid contributors in the outward foreign investments (Peng, 2012). The OLI Theory/ Model is focused on the advantages that an emerging multinational enterprise (EMNE) can gain through internalization. The company chosen for the study is Samsung and the company focus on the OLI Model and has achieved tremendous growth throughout the world. Uppsala Model Uppsala Model explains the way in which a company can get its access and increase its operating activities in the foreign markets. According to this model, a firm must have adequate experience in the domestic market before entering the foreign market. Before commencing the business in the foreign market, they must thoroughly analyze the market and make sure that the foreign market they chose is culturally similar to their domestic market. Direct entry in the market can be harmful to the company, so this model gives an approach to doing trade in the foreign market then increase the intensity of the business. When the demand for the product increases then the company must start its operational activities in the foreign market (Costa e Silva, et al., 2012). According to the Uppsala model the company before entering a foreign market must take the following steps that will secure its business in that market as the consumers of the product of that company are already there. It can also be considered as making a need in the market then entering the market. Uppsala model is very helpful for internationalization, and many organizations have used this model to successfully enter into foreign markets. These models give organizations an opportunity to enter one foreign market at a time and then explore as many markets they want (Childs & Jin, 2014; Ocampo Figueroa, et al., 2014). Various studies have been conducted to observe the use of this model. Uppsala model is considered to be more helpful for the organizations for internationalization process with the changes in the practices of the business. The model is considered to be very helpful for globalization and help the organizations to grow and diversify their products. Trust building and creation of a network are easily done through this model that is beneficial to the modern world (Johanson & Vahlne, 2009). Conclusion It can be concluded that internationalization of an organization is very important. The organizations must enter into the emerging markets in order to grow on a larger scale. From the report of emerging market economy, it is observed that internationalization is very necessary for the organizations to grow their market share. There are several models through which organizations enter the emerging markets. Samsung is a conglomerate, and its products are used worldwide. Samsung also plans to enter in one of the most emerging markets that is that of China. Samsung can operate over a substantial part of the world through several acquisitions and mergers. For internationalization, Samsung uses OLI model that is has helped the organization in operating in several parts of the world.   List of References Brakman, S., Garretsen, H. & Marrewijk, C. V., 2001. An Introduction to Geographical Economics: Trade, Location and Growth. Cambridge: Cambridge University Press. Buckley, P. J., 2012. Formalizing Internationalization. Basingstoke: Palgrave Macmillan. 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