Global Economy - Asia Pacific Business - Case Study Example

ASIA PACIFIC BUSINESS By Asia Pacific Business The global economy has for years continued to support multinationals and their survival in different environments far from their original countries of set up. In exchange for the survival, the multinationals have helped the economies of these countries grow through the revenues and different infrastructural involvements that they enrich to boost the different economies and through their huge tax abilities. One of the most growing fields in multinational corporations is the automotive industry in which many of the companies involved have opened subsidiaries in different countries to support the performance of their products or deal with the product development in that part of the world to ensure that they successfully control their industry and continue making sales (Jaussaud & Schaaper, 2007). The other industry that is much infested with many multinationals is the electronics field. The basic analysis reflects most of these companies with huge revenues and capital formations all over the world originate from the Asian community that has grown to control the world economy from the super powers of the past decades. The growth of the Asian community has much indicated from four major countries Japan, Korea, China and Taiwan. The study is going to involve an analysis from the two sectors of business that is electronics and automotives, which have taken a huge share of interest from the Asian community. To substantiate this view, the analysis of the multinationals will consider the different aspects of the businesses that make them unique and worth interest of the international community. The aspects of strength that allow them to dominate in their country of origin and further dominate in the world platform. One of the most successful multinational of all time from Japan Nissan has developed to become a global commodity that influences many economies. The company in the automobile sector has set up in many other countries all over the world with many working as assembly points while others running fully as the original company (Elger & Smith, 2005). The major strategy that the company has employed in its multinational approach has majorly focused on the strategic partnerships that have allowed it make alliances with other huge manufacturers in the field of automotives to create a clear competitive advantage. A good example is the alliance formed between Nissan and Renault of 2013 has created a storm in the automobile sector in France. The French automotive Renault has created an added advantage for Nissan in France that has seen it successfully survive within the country. They have helped it in the internationalization of its products and the development of a wider market (Gorzen & Makino, 2007). Through such initiatives, the Asian multinationals have gained recognition and grown over time. The performance of Nissan in the US was improved in the last year’s results 2014. Following these, a growth of sales with over 30200 LEAFs sold in the United States for the year compared to the performance of 2013. The company registered a 33.6% growth in sales, which represents a contribution to the US economy by the Japanese multinational. The success of the Asian community in the distribution of manufactured products to the world economy has played a massive role in building their contribution to the world economy. A thorough analysis of the performance posted by a number of countries indicates the rising need for manufactured products in the world economy that the Asian community is vehemently providing. Comparing manufactures, mining and agricultural products, manufactured products take the lead on the market (Committee on Trade Development, 1996). The graphs below indicate the performance of the different product sectors in value and in market share of each category of products. Sourced from https://www.wto.org/english/tratop_e/devel_e/w15.htm Considerably, these indicated the growth levels that the world has depended on over the years. Covering country or regional development and their contribution to these values and shares, the following graphs represent. Sourced from https://www.wto.org/english/tratop_e/devel_e/w15.htm The charts indicate the development of the market share of each region over the years as per the World Trade Organization. Looking at the graphs, the Asian community indicated an aggressive development into the exports market, which is also backed by their multinationals abilities in the manufacturing sectors. During these years, the different countries under study indicated possibilities of improvement once new tariffs on products were passed. According to this report, the improvement in merchandise imports would indicate a 40% raise from 10% in the US, 38% raise in the European Union from 24% and 71% rise from 35% was anticipated for Japan (Committee on Trade Development, 1996). These provided the signs of a fast growing Japan economy based on their positioned advantage in world trade. These trade aspects have propelled Japanese multinationals to a huge contribution to the worked economy. Japan, and other Asian communities continue to grace the import and export levels higher than most of the other countries. Considering a company like Nissan and Toyota one realizes the brands domination and circulation round the world. The constant bit about these companies is the growth in their home countries first before finally spreading across the globe. Considering like Toyota, the growth registered much more in Japan where it originates then followed by North America. Asia comes in third with Europe and others covering the small margins. These indicate the distribution of the products around the globe and the growth ability of Asian multinational companies giving them a good percentage I contribution to the world economy. Growth in Toyota graph: The data above as obtained from http://www.statista.com/statistics/279652/revenue-of-toyota-by-region/ indicates the absorption of Toyota products worldwide. This provides an indication of the development of the multinationals from Asia and their dominance in the automotive sector. Looking at the FDI factors, one of the countries that obtained the largest amount during the years of 1995 and continued growing were China with a 40% growth in these followed by the other developing countries. These influenced China’s development and its approach towards the development of products through their multinational companies. The imports on FDI provided a clear approach to Chinese companies to the international scale, which in turn propelled the Asian world into a better advantage. From this time to date, China and the Asian community continues to dominate the FDI columns as per the graph below: Sourced from http://www.oecd.org/investment/fdiindex.htm China among other Asian countries has earned a controlling stake in the world markets with various products. The same graph indicates a rise of another important player on the multinationals platform that is Korea. With a position just behind Canada, the country has grown a place of its own on the international markets with their electronics business. The world appetite for electronic products continues to grow propelling Korea further on the world markets and economy. The needs that the electronic industry has created and the appetite the world has for electronics, the electronics industry has also proven easy to have the world embrace in its different angles based on the lack of the building capacity and the technical knowhow on how these products come to life. Through these eyes, the Korean multinationals have emerged and developed (Kim & Kim, 2006). One of the major multinationals the world embraced and strongly believes in its brand is Samsung. The company that has over 200000 employees and is spread in over 60 countries around the world is a good example of multinationals that have successfully covered the world from the Korean world in Asia. The company with different partnerships with sports providers and other local electronic companies in the different countries it sets in have aided in the creation of a market dominant brand in the information technology field of electronics. The growth of sales for the Korean market has an indication to the position it has on the world market. This position cements its multinational business on the world economy on the production and distribution of their electronic products. The table below indicates the spread of the products especially TVs and mobile phones. The table below indicates the growth in sales by region as obtained from the Samsung sustainability report. Samsung sales by region Region 2009 % 2010 % 2011 % America 33.8 24.79824 43.5 28.13713 47.5 28.78788 Europe 35.1 25.75202 36 23.2859 39.1 23.69697 Asia 21.7 15.92076 24.9 16.10608 28.8 17.45455 Korea 21.9 16.0675 25.9 16.75291 26.5 16.06061 China 23.8 17.46148 24.3 15.71798 23.1 14 Total 136.3 100 154.6 100 165 100 Sources: http://www.samsung.com/us/aboutsamsung/sustainability/sustainabilityreports/download/2012/2012_Facts_and_Figures_FINAL.pdf Graphical Representation of the table above: Considering the graphs, the American population has emerged as one of the greatest consumers of sum sang products. The wide spread with Asia the origin covering a small percentage of the market compared to the others. These indicate a growth in the company and its wide acceptance in the world giving it leverage for its contribution to the world economy. These improve the international relationships that play a major role in supporting the company (Hunter & Sugiyama, 2002). There exist a number of theories that play a major role the choices and decisions that the multinationals are subjected to in different countries. Considering the US, an Eclectic approach is among the different approaches towards the development of FDIs (Cleeve, 2007). The approach aims at the combination of the different theories of FDIs into one to provide an easy framework for the development of the FDIs (Sauvant & Maschek, 2010). In the theory, ownership advantage in both the trade aspects and production come to the fore of the relationship to emerge between multinationals as a decisive factor in allowing multinationals survive (Huang, 1997, p.11). The companies come to the market meet the different investors and discuss on their intentions and the investors have to make choices based on the advantages that they gain while the companies also aim at understanding the advantage that the market provides. The major aspect that they seek on the market is the resources to operate and the confidence from the investors that yields the other aspects of market growth and efficiencies. The theories have proven evident in different multinational companies with many of their investors looking at the advantage they gain before investing in different countries. The success of multinational enterprises depends entirely on the market approach and the different markets they approach. These give them a comparative advantage that they use for success in the market (Mason, 1997). The size of the market, the level of competition in these markets inclusive of the investment climate takes a major in building multinationals. Once a company is set to multinational-zed, the company starts by building the confidence in its investors that translates to the market confidence. This market confidence slowly translates to sales and customer loyalty that finally translates to successful multinational operations. Considering the Korean companies and the Japanese companies, the initial success of multinationals was based on the nature of markets they approached. Few countries were in position to produce cars and other automotives just like few countries could produce electronics. Based on this advantage, they provided the products and the market reacted positively. Slowly competition begins building up and affects the multinational’s ability to make profits. These have led to struggling of many multinational companies that have threatened their future in the market especially Japan multinationals (Black, 2010). Through competition, the productions decline affecting the quantity of products on the market and operations failure in the countries they set up fails the multinational. Considering the cheap labor available in most of the Asian countries, production costs range lower back home for these companies and the shift in environment affects their businesses. The transnational-based advantages have played a role in trying to support the multinationals in the different markets they venture into. The growth of Japanese multinationals in China relies on this factor (Cross& Horn, 2007). Nations that relate such as China and Japan both in the Asian sphere work together to support each other and the environment proves easy to maneuver based on advantages of culture among others. These form regional integration efforts that support the growth of the business (Kim, 2009). The integrations of the Asian community has played a major role in the development of the Korean market (Nicolas, 2007). The new markets open up the markets and widen the coverage. The involvement in research and development activities too plays a major role in influencing the development of these companies in different worlds (Urata, 2003). The technological advancement of the world has created a need for companies to constantly provide innovative products to the market that allows their ability to beat competition. To fulfill these needs, many multinationals invest heavily in research aspects that allow them to come up with innovative products that fit their market needs hence the ability to revamp their operations and performance (Roehl, & Bird, 2005). Through these efforts, companies rebound and their future opens up more promising hence the confidence in the improved performance for Japanese companies. Confidence from their local governments too plays a role in helping them reshape for competition (Vogel, 2006). The adjustment of the governments to support the Japanese multinationals in their different locations provides them with more grip on the market and hence success (Witt, 2008). One of the major market research needs that the companies employ is constant innovations in product designs. The development of a brand that keeps up with the market changes and product needs leads to a sustained market. The provision of an able human resource that provides much skills and management practices that fits the global economy and the regulatory environment of the countries within which they operate provides an added advantage to the companies. The growth of employment opportunities offered by multinationals is evident all over the world. A consideration of the US reveals that the US has also considered a high level of multinationals in its operations and provision of employment to its employees (Bureau of economic Analysis, 2013). Sources: http://www.bea.gov/newsreleases/international/mnc/mncnewsrelease.htm The graph indicates statistics for selected years that the surveys indicate the US companies and other multinationals have provided employment. The companies normally have part of their experienced teams start with the company in the different countries that they launch to provide the human resource support needed. This trend is much evident in Chinese multinationals (Shen & Edwards, 2006). The need to decide the management style and the nature of operations whether centralized or decentralized plays a role in the management decisions. The companies may decide to isolate them in regions, or have the different countries categorized to provide for the ease in management. In these, the decisions on employees feature in relation on hiring expatriates or using local skilled employees (Belderbos, & Heijtjes, 2005). Based on the decision, many use expatriates from their original companies to provide knowledge through a knowledge transfer system or hire exceptionally skilled employees and take them to the parent companies for training and development. The considerations of the operational environment put into consideration the political environment among other environmental factors. The macroeconomic perspectives play a role in developing the market too. They determine the FDI theories that the company will embrace and hence the nature of operations and level of alliances to approach. Through these, the advantages and different agreements develop that become the basis of the relationship between the investors and the companies. These determine the funding through FDIs. Different characteristics feature in the multinationals that make them similar despite their differences in operations and approach to the markets. These include their considerations of the level of market that their products are on, the nature of capital ranging from human resource and investment capital available in these countries that all consider the characteristics following the growth level of the company, the level of resources they have and their position in the local markets. The demand for their products on the local market and international too characterize the decisions to engage at a multinational level. The companies to consider their abilities to cushion the economic status or level of the country they target and the policies and procedures of their businesses. The nature of raw materials needed in the companies and their availability in the countries they target too feature as considerable characteristics for companies seeking to join the global platform. References List Belderbos, R. A. & Heijtjes, M. L. G. (2005) The Determinants of Expatriate Staffing by Japanese Multinationals in Asia: Control, Learning and Vertical Business Groups, Journal of International Business Studies. Black, J. S. (2010) Sunset in the Land of the Rising Sun: Why Japan’s Multinational Corporations Will Struggle in the Global Economy. Bureau of Economic Analysis, (2013). Summary Estimates for Multinational Companies: Employment, Sales, and Capital Expenditures for 2011. Viewed on March 18, 2015 from http://www.bea.gov/newsreleases/international/mnc/mncnewsrelease.htm Cleeve, E. (2007) Japanese Foreign Direct Investment in the UK Electronic Industry: The Eclectic Approach, Asia Pacific Business Review, Vol. 13 Issue 2. Pp. 183-200 Committee on Trade Development, (1996). Participation of Developing Countries in World Trade: Overview of Major Trends and Underlying Factors. World Trade Organization. https://www.wto.org/english/tratop_e/devel_e/w15.htm Cross, A. & Horn, S. A. (2007). Japanese Multinationals in China. Routledge. Elger, T & Smith, C. (2005) Assembling Work: Remaking Factory Regimes in Japanese Multinationals in Britain. Gorzen, A. & Makino, S. (2007). Multinational Corporation Internationalization in the Service Sector: A Study of Japanese Trading Companies, Journal of International Business Studies. http://www.statista.com/statistics/279652/revenue-of-toyota-by-region/ Huang, G. (1997). Determinants of United States-Japanese Foreign Direct Investments. Taylor & Francis US. Hunter, J. E. & Sugiyama, S. (2002). Japan’s International Relations 1600-2000, Vol. 4, Economic and Business Relations. Jaussaud, J. & Schaaper, J. (2007). European and Japanese Multinational Companies in China: Organization and Control of Subsidiaries, Journal of Asian Business & Management, Vol. 6 Issue 3, pp.223-245. Kim, D J & Kim, Y C. (2006). Newly Industrializing Economies and International Competitiveness: Market Power and Korean Electronics Multinationals. Palgrave Macmillan. Kim, N. K. (2009). 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Vogel, S. K. (2006). Japan Remodeled: How Government and Industry are Reforming Japanese Capitalism. Useful Survey of Implications of Recent Trends in the Japanese Economy. Witt, M. A. (2008). Changing Japanese Capitalism: Societal Coordination and Institutional Adjustment. Read More