Emerging Markets Firms Internationalization Process - Literature review Example

ARTICLES REVIEW: EMERGING MARKETS FIRM’S INTERNATIONALIZATION PROCESS By Student’s Name Code + Course Name Professor’s Name University Cite, State Date The internationalization process in terms of business activities and operations refers to business and corporate strategies thatdifferent business organizations and companies/firms normally employ in the process of expanding their business operations and activities into the wider and expansive global market, making sure to incorporate a multicultural as well as a multiracial international dimension.Effective and efficient business organizations internationalization strategies usually ensure that a particular business organization, company or firm is able to venture into extensive international business and profit making operations with minimal industry-related constraints, thereby enabling that particular business enterprise to successfully entrench itself in the usually crowded and highly competitive global market place. The issue of internationalization was previously a reserve of business organizations, companies and firms that were based in the developed world, i.e. Europe, North America and some parts of Far East such as Japan and China. However, with time, business organizations, firms and different companies from merging market economies came to adopt this particular profitable and viable business strategy of internationalizing their operations beyond the national borders and territories in the countries where they are based. There are many different reasons why different business organizations, companies and firms that are based in various emerging world economies usually aspire to adopt the internationalization process for their operations and business activities.There has been a general assumption among many business organizations and companies that internationalization of their operations and activities is one of the sure ways of ensuring a marked improvement of their profitability levels (Luo & Tung 2007)). This assumption rests on the fact that internationalizing a particular business company, firm ororganization’sbusiness operations and activities will increase the size of the market share that the said business organization, company or firm enjoys in the market. An increased market share for a particular business organization or company, this assumption holds, will definitely lead to an increase in the number and/or units of the goods, products and services offered and sold by the particular business firm, organization or company. All these will finally result into the increased profitability levels of the business firm or organization or company in general, from the management, to the workforce and the products/services that they offer consumers(Cuervo-Cazurra, 2007). This is therefore most likely the biggest reason as to why different business firms, organizations and companies always seek to adopt the internationalization process of business, in a bid to improve and expand their numerous and essential business operations and activities. The important process of Internationalization for different business firms, organizations and companies, particularly in the economies of emerging market countries has become a major part of modern-day international business and marketing operations and activities, whether from business firms, organizations and companies in the developed world countries such as the US, Great Britain, France, Germany, Japan, China, Russia etc. or from business firms, companies and organizations that have their bases in countries with emerging market economies (Brenes et al., 2000). The two seminal articles that shall hereby be analyzed and critiqued in this essay paper are The Sequence of Value-Added Activities in the Multinationalization of Developing Country Firmsby Alvaro Cuervo-Cazurra, 2007 and the International Expansion of Emerging Market Enterprises: Springboard Perspective,by Luo, Y., & Tung, R. 2007. Thesetwo particular journal articles are highly regarded, as they are considered to explain the modern business process of an internationalization process of business firms, organizations and companies that emanate from emerging market economies.  1. The Sequence of Value-Added Activities in the Multinationalization of Developing Country Firmsby Alvaro Cuervo-Cazurra. This particular journal article by Alvaro Cuervo-Cazurra examines the sequence of value added activities in the multinationalization process of business firms, organizations and companies that are based and operate in developing/emerging market economy countries.Alvaro (2008)asserted that his journal article was preparedto examine the process of multinationalization/internationalization and the establishment of foreign direct investment initiatives of businessfirms, organizations and companies that come from developing/emerging market economy countries, and he further observedthat his journal article would focus on business organizations and entities from Latin America, commonly referred to as the “Multilatinas.” Alvaro notes that business organizations, firms and companies from different emerging market economies in Latin America, such as Brazil, Argentina and Venezuela have for a long time steered clear of any attempts to internationalize their business activities and operations beyond the national territorial borders of the Latin America countries they are based in (Aggarwal & Agmon, 1990). This particular journal article by Alvaro (2008) noted three major insights regarding the internationalization process of different business firms, organizations and companies that are based in Latin America’s emerging market economies over the past two decadesor so. The first major insight that the journal article observes is the fact that most business firms, companies and organizations from different Emerging market economy Latin American countries like Brazilian, Argentinian and Venezuelan firms have had the norm of taking a relatively long period of time to internationalize their business operations and activities in the process of becoming regional or even global multinational enterprises (MNEs). This shows the need tackle some of the challenges that usually face local business firms, organizations and companies that are based in different Latin American emerging market economies, particularly at the time when they wish to adopt various internationalization strategies so that they can multinationalize their business operations and activities (Bartlett & Ghoshal,1989). The second major insight that this particular journal article notes of is the fact that different business firms, organizations and companies that operate in the different emerging market economies in Latin American countries have become attracted to the modern international business and marketing trend of internationalizing their business operations and activities, and this attraction has been largely drawn from different structural reforms in the market economies of the different Latin American countries where these business firms and enterprises emanate from. The journal article notes that the inducement brought about by the economic structural reforms of the market economies of the different Latin American emerging economies has pushed the Multilatinas to upgrade their business operations and activities, to ensure that they are competitive enough to the point that they can successfully penetrate international markets and undergo the internationalization process with minimal systemic constraints (Dunning, 1977). The last major insight that this particular journal article notes is the fact that different business firms, organizations or companies based in the Latin American emerging market economies usually adopt four major internationalization strategies upon which they shall internationalize their business operations and activities. These four major internationalization strategies usually depends on a number of factors in deciding with foreign country a Multilatina enterprise/firm can start its internationalization process and operations in, which include how far the choice countries are from the base country of the Multilatina enterprise/firm, the difficulties and business constraints existing in a particular country where the Multilatina enterprise/firm wants to start its internationalization process among others (Cuervo-Cazurra & Genc 2008). Just having a quick overview of how Alvaro has developed his ideas of the internationalization process of business enterprises, organizations and companies based in Latin American emerging market economies reveals the depth of analysis that the writer employs in his case study of Multilatina enterprises seeking to internationalize their operations and business activities. This scholarly depth and insight is an early indication that the journal article written by Alvaro is still highly relevant in terms of explaining how different business organizations, firms and companies that are based and operate within the territories of emerging market economies, not only in Latin America as is with this particular case study but also all over the world do undertake their internationalization process, the different strategies that they adopt and the challenges or difficulties that they face in the process of internationalizing their business operations and activities (Mathews, 2006). A further analysis of the journal article written by Alvaro (2008) brings to the fore some of the systemic factors happening within the economic systems of emerging market economies all over Latin America that have provided the much needed impetus for Latin American business enterprises, firms and companies to undertake the internationalization process. One of the economic systemic factors rests with the fact that many emerging market economies, both in the case study region of Latin America as well as in other regions and continents of the world have a huge potential of becoming developed very quickly owing to the rapid levels of economic growth and expansion in their countries. These emerging market economies have experienced increased levels of Gross Domestic Product (GDP), increased levels of employment and also increased industrial production among others. For many of the emerging market economies, business firms, enterprises and companies based in their national territories have been induced into the internationalization processes of their business activities and operations as a result of the rapid economic growth and development experienced in these economies. With an increase in the production of quality goods and services, it has become of immense necessity for businessenterprises, firms and organizations to be able to sell the surplus goods, products and services to foreign markets so as to gain more profit. This desire to offload their surplus goods, products and services has been the driving cause leading to increased internationalization processes in the business organizations and companies that are part of emerging markets economies (Brenes & Dominguez 1997). Alvaro’s journal article also establishes different issues and parameters that he used in the case studies of Latin American emerging market economies business enterprises, firms and companies. In discussing the time to start the internationalization of business operations and activities, Alvaro notes that there existed a relatively big gap between the time that many Multilatina business enterprises and firms were established or incorporated and the time when they first ventured in foreign direct investment initiatives, signaling the start of their internationalization process. The average gap that Alvaro established was over 49 years, with a number of exceptions here and there such as Televisa from Mexico, which internationalized its operations and business activities seven years after it was incorporated, Techint which undergone the internationalization process only a year after it was incorporated and finally Embraer which commenced the internationalization process of its business activities and operations approximately eleven years after it began operations. This trend of a large gap of years between the incorporation and internationalization of a business firm or enterprise from an emerging market economy continues to be observed in the present day world, thereby making Alvaro’s journal article all the more relevant, for those people delving into internationalization issues and processes facing business firms and enterprises that are based in emerging market economies (Aulakh, 2007). The journal article also looks at the perfect location for Multilatina business enterprises seeking to internationalize their operations, and herein, the writer reviews his Latin America case studies using two internationalization theories that attempt to explain the location that newly internationalizing firms and business enterprises are likely to choose while starting the internationalization process. The article reviews the incremental internationalization model, which contends that firms and business enterprises will normally start internationalization in countries that are in close proximity with their home country, with a view of diminishing unfamiliar market environment operational constraints. The article also looks at the eclectic internationalization school of thought, which asserts that business firms and enterprises will usually start the process of internationalization in countries where they can benefit from their core competencies regardless of the proximity to their home countries (Anand et al. 2006).This two internationalization schools of thought still inform the way in which various firms and business enterprises act in the internationalization processes of their business operations and activities, particularly those from emerging market economies and this proves all the more that this seminal article by Alvaro (2008) is still highly relevant in present times. This journal article finally examines the challenges and constraints that usually face different business organizations, firms and business enterprises coming from emerging market economies such as those from Latin America and from other regions and parts of the world. One of the reasons fronted by the article is that these business firms and enterprises were in need of sophisticated ownership advantages that would enable them to successfully internationalize, lack of knowledge of foreign market patterns and operations, which supports the paradigm of incremental internationalization, transfer of productive resources among others (Bevan et al., 2004). In general, this journal article:The Sequence of Value-Added Activities in the Multinationalization of Developing Country Firms by Alvaro Cuervo-Cazurra, has through the different ideas fronted, theories examined and internationalization issues explained proved to be still highly relevant in today’s world and research techniques on the internationalization process of emerging markets MNES have not basically changed so much as to render the parameters used by the writer in this article irrelevant. 2. International Expansion of Emerging Market Enterprises: Springboard Perspective by Luo, Y., & Tung, R. 2007. This particular journal article by Luo, Y., & Tung, R. (2007) examines the international expansion of business firms and enterprises that come from different emerging market economies and focuses on the Springboard perspective. In this article, the writer front the springboard perspective in the internationalization process of the firms and business enterprises from emerging market economies, observing that many Multinational Enterprises from emerging market economies usually utilize the business and marketing process of international expansion as a springboard that enables them to acquire certain strategic business resources needed for successful firm/company growth and development., hence the name – the Springboard Perspective (Luo, 1998). The journal article further argues that Multinational Enterprises from emerging market economies also use international expansion to be able to mitigate market as well as systemic difficulties in their home economies that are affecting their profitability and viability levels. In accomplishing international expansion of their business activities and operations, the writers contend that Multinational Enterprises from emerging market economies will be able to overcome some international market disadvantages that usually face firms and business enterprises that venture into a particular market segment as latecomers.The writers discuss the unique characteristics as well as the unique motivating factors that normally mark the internationalization process of Multinational Enterprises from emerging market economies all over the world (Tallman & Shenkar, 1990). The journal article observes the growing trend by different Multinational Enterprises and business firms based in emerging market economies to follow a pattern somewhat related to the Uppsala model of internationalization of multinational corporations ad business enterprises, which is a school of thought thattries to explain the gradual manner in which business firms, companies or organizations and corporations increase the intensity of their international operations and activities in foreign markets and economies, akin to incremental internationalization (Young, Huang & McDermott, 1995). This particular paradigm within the concept of the internationalization of Multinational Enterprises and business firms notes that various business firms, organizations and companies regularly delay their international entry into a particular market segment the6international market for a particular reason, with the reason being that the business enterprises, organizations and companies usually desire to attain adequate and substantial experience in business operations and activities from their respective domestic market economies (Young, Huang & McDermott, 1995).This particular business thinking is still observed in today’s international market operations, thereby lending credence to the relevance of this journal article penned by Luo, Y., & Tung, R. 2007. The writers further assert that after attaining sustainable and sufficient economy and market experience from the respective domestic economic systems, the specific Multinational Enterprises and business firms are successfully able to venture into international business activities and operations with minimal systemic constraints. This Internationalization process of Multinational Enterprisesand businessfirms’ paradigmfurther argues that business firms that have already achieved substantial domestic business experience normally commence their internationalization process by going into business operations and activitiesin countries that neighbor their home countries, hence underscoring the immense importance of cultural and geographical disposition for Multinational Enterprises that come from emerging market economies (Davidson, 1980). Indeed, for many business firms and enterprises seeking to internationalize their business operations and activities, the issue of geographical proximity to their first foreign base is still an important consideration even today. Moreover, different researchers working on the same topic of trying to understand the internationalization process of Multinational Enterprises and business firms from emerging market economies don’t rule out the aspect of geographical distance that business firms and Multinational Enterprises undergoing internationalization. This underlines the fact that the findings of this journal article are still very relevant to our times (Li, 1994). The journal articlefurther continues to contend that after a specific Multinational Enterprise or business firms has entrenched its business operations and activities in foreign countries that are in a closer geographical area, they are then able to venture and expand into other foreign markets that are not closer to its home country. Moreover, this particular Uppsala model of internationalization of Multinational Enterprises and business firms argues that at the beginning of international expansion, a Multinational Enterprise or a business firm in the process of internationalizing its business activities and operations will engage itself in sporadic and occasional sale of goods, products and services as exports (Kalotay, 2004). The Multinational Enterprise or firm will then commence with the exportation of its goods, products and services through the utilization of independent subsidiaries and later on in the internationalization and expansion process, the given Multinational Enterprise/business firm will commence the undertaking of itscarrying out its international business operations and activities through the use of foreign sales subsidiaries based in the different countries where they have started their international expansion operations (Child & Rodrigues, 2005). This journal article also highlights some of the challenges that usually face Multinational Enterprises from emerging market economies that are in the process of internationalizing theirbusiness operations and activities (Cai, 1999).The writers observe that some emerging market economies in different parts of the world have domestic economic and structural systems marked by negative business processes such as market failures and such implications usually greatly impact on how Emerging market’s Multinational Enterprises and business firms internationalize their business activities and operations. For instance, as the journal article notes, in an effort to cut down on physical technological requirements and costs incurred from management, many Multinational Enterprises emanating from emerging market economies usually undergo organization into diverse business groups that are not even related. The article further observes that due to the nature of the domestic economy as well as the market systems that dominate many emerging market economies, the Multinational Enterprises coming from these very countries will most possibly involve themselves in the manufacture of cost-competitive goods, products and services. Luo & Tung (2007)contend that the main intention of Multinational Enterprises and businessfirm’s from emerging market economies is to be able to achieve competitive advantage over the Multinational Enterprises that are already entrenched in the international markets, most of which come from industrialized countries. All these assertions made in the journal article are still highly applicable to the internationalization process of Multinational Enterprises or business firms from emerging market economies today. This particular journal article also assesses the behaviors as well as the motives that drive the springboard of international expansion, such as the motive of seeking to counter the market hold of already established first world Multinational Enterprises and business firms in the international/foreign market place. Another motive that the two writers make note of is the desire to bypass stringent trade tariffs and barriers that usually face Multinational Enterprises and business firms seeking to internationalize their operations from merging market economies through the use of outward investments.Moreover, some emerging market Multinational Enterprises and business firms utilize the process of international expansion to obtain preferential treatment that are usually provided by some governments in emerging market economies. The last major motive that the two writers observe to be the driving force for international expansion of merging markets Multinational Enterprises and business firms is the need to exploit the different competitive advantages that may be existing in the economies where they are setting up their internationalization process (Buckley & Casson, 1981).All theseaforementioned motives reflect the modern motivating factors that drive most Multinational Enterprises and business firms fromemerging markets to internationalize their business activities and operations today. Finally, this particular journal article makes note of theinternal and external forces, challenges and remedies, different strategies as well as the activities that different Multinational Enterprises and business firm that emanate from emerging market economies usually use in the internationalization processes of their business operations and activities. These international expansion strategies, the two writers note, comprise of competing with different global players, cumulative benefits that derive from domestic inward investments before the specific Multinational Enterprise or business firm from an emerging market economy launches an foreign direct investment initiative, and finally utilizing the leap frog trajectory technique to assist the internationalization process of their different business activities and operations(Andersen, 1993). All these factors are currently in play in the internationalization of present day Multinational Enterprises from emerging market economies, thereby indicating the relevance of this particular journal article. In conclusion, an in-depth analysis and survey of The Sequence of Value-Added Activities in the Multinationalization of Developing Country Firmsby Alvaro Cuervo-Cazurra, 2007 and the International Expansion of Emerging Market Enterprises: Springboard Perspective,by Luo, Y., & Tung, R. 2007 has revealed a lot of issues that Multinational Enterprises or business firms that emanate from emerging market economies all over the world usually face in the internationalization process of their different business activities and operations. Most of the internationalization issues examined by these two seminal journal articles are still replicated today when present day business firms and Multinational Enterprises undertake international expansion and internationalization processes; furthermore, present day researchers on the issue of emerging markets Multinational Enterprises internationalization still use most of the techniques and parameters used in these two journal articles. 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