Does the Internationalization Process of Emerging Market Multinationals Differ from Multinational - Case Study Example

Title: Does the internationalisation process of emerging market multinationals differ from multinational enterprises from developed economies? Name Institution Introduction Recent differences in emerging markets compared to business in developed economies have increased attention at the moment in the world economy (Hillestad, 2011). According to (Jones, 2012: 142), the global economic power currently is vested in multinational enterprises operating under universal set standards. The research by Accenture (2007) shows that, of the one hundred largest economies in the world, 59 are currently entrusted in global corporations while the remaining 41 are countries. This is a process that has taken course since second industrial revolution particularly of the 19th century. Other economic analysts assume that internationalization is driven by developed (west and United States) and later imposed by the rest (Belanger et al 2013). Apparently, there is a radical change particularly as the emerging market champions like Mexico Cement Production and India Steel Corporation competes with the enterprises in the developed economies (Western countries and United States). The very interesting part of the interplay between emerging markets and markets in developed countries is, are there any difference? And if they do exist, what are the implications? Who are emerging markets multinationals? These are enterprises that are based in global new markets and operate in more than one nation (Hillestad, 2011: 80). They have unique growth defined by intensity in scale and speed in market penetration compared to enterprises those in developed countries. Growth in emerging markets is driven by new markets, innovations, foundations of input as well as efficiencies. At times, the less impact from national prestige and state policies accelerates their growth. It is not only about growth that contrasts the two. However, timing is also an interesting element to focus on when studying the differences between globalization of emerging markets and enterprises in the developed countries. According to (Elg, 2012), the emergence of new-market multination is currently taking effect at the period of cheap labour, liberalization of the domestic policies as well as advanced information technology. Before second industrial revolution, local firms had limitations particularly during expansion beyond national borders. This is because reaching outside consumers was difficult and expensive. But what is the platform at the moment? Local enterprises can reach clients in more than one country with less marginal cost. There is a dramatic expansion and economic power of the emerging markets (Accenture, 2007). Key elements in multi-polar global markets; Capital The structure of investment for the emerging markets is more less the same as those enterprises in developed countries. For example, Natura in Brazil prospered due to direct investment in new markets both in the developed and developing economies. The standing ties between Natura and markets in western economies have created not only the opportunities in the market but also effective flow of information on the products. This implies that the capital structure of the emerging markets depends on the performance of enterprises in the global arena as well as the management on the local grounds. Resources An increase in completion particularly on energy and raw materials reveals how the power of emerging markets has impacted the global economy. Enterprises in the developed countries normally describe their growth in terms of the market share they own in the global economy. However, emerging firms in the globalized arena describes growth in terms of market value. Apple manufactures in United States filed a lawsuit against Samsung manufactures in August 2012 the reason being some of the Samsung products had violated Apple Patents. This simply implies the rivalry between the two companies in the global economy. The revenue of Apple manufactures had reduced dramatically since the entrance of Samsung to United States markets. Here there is interplay between market share and value. Consumers of smartphones realize the value in Samsung products thus shifting their interest. Apple on the other side drops market share due to content value created by Samsung products. New consumers Globalization process itself promotes income growth to the emerging enterprises. When the firm expands its business operations to the global market, it creates new consumers particularly in the emerging markets. There comes a difference when it comes to multinational enterprises in the developed countries in that the enterprises in these nations (developed) deal with identified consumers putting little concern on the new markets in the developing nations. Globalized firms in the emerging markets interplay with consumers both in developed and developing nations and there they grow by virtue of new consumers. Innovations Emerging markets have a cluster of new concepts and ideas since there is shared value of entrepreneurial culture. According to Jones (2012), competitive enterprises in the market should have unique and best market activities in order to attract emerging economies. The above four key elements expands the notion of globalization that is only viewed along the lines of western-centric prism to a standpoint where by the lenses are inverted to focus on the emerging markets. Apparently, these dimensions present the differences between the emerging market multinationals and developed-market multinationals. According to Goldstein and Pusterla (2010), internationalization of emerging market multinationals have noticeable advantages over multinational enterprises in developed countries. Unlike enterprises in developed multinational, EMMs (enterprises in emerging markets) are flexible and can change depending on the competition in the global market. This means that their exclusive structure in terms of marketing and other business activities can fit both western and emerging markets. This is because, First, internationalization means working together with other enterprises across national border. Due to interaction and exchange of ideas, a business can manage risks involved comfortably. Enterprises in emerging markets are normally regarded as newcomers with little experience especially in the global markets. However, they are politically knowledgeable with a relative high degree of nurturing their home markets even with poor economic conditions unlike enterprises in the developed nations. The business in this case is easy to navigate hazards in one market and invest in another market. This investment provides broader avenues for expansion thus allowing development of capabilities across the familiar markets within the global economy through social and geographical proximity. China National Offshore Oil Corporation (CNOOC) for example is secure in the global market by sourcing oil from different economies. The company serves primarily the domestic market (China) depending mainly on the global sources. However, the developed nations like United States are independent with limited options to choose in case of high demands. This is the reason why there is a high regulation on basic commodities in developed countries. Secondly, internationalization of EMMs enhances mastering the science of inventiveness. Local market conditions are always updated with required talents and skills. Globalization process incubates consumer demands under significant conditions required by the new markets. This means that with the shared ideas, EMMs is able to turn unpromising conditions in the market to their benefit. For example, MDS Holdings is a technology firm specialized in 3-D displays. It originates from Lebanon but operates through Europe, Middle East, Central Asia and Africa and thus regarded as small global company offering technological processes (Hillestad, 2011). Thirdly, globalized enterprises in emerging markets recognize the importance of cultural difference as well as localization (Jones, 2012). Most of the globalizers have deepened the roots in their economies recognizing the local culture of origin. Sourcing skills from diaspora is an absolute truth when it to globalization process. This is significant since the local talent will be cultivated to produce customized products to the diverse local consumers in the global markets at the same time nurturing home markets. For instance, Samsung operate most of the local business activities in South Korea like insurance and textile. However, when it comes to international grounds, it mainly deals with electronics. The skills from diaspora perhaps are used to foster local investment as sustenance to the enterprise as it globalizes. Globalization of emerging markets drives economy through entrepreneurship and new inventions (Gorodnichenko and Terrell, 2008). This is not the case with multinational enterprises in developed nations where creation of entrepreneurial culture is very slow. EMMs ownership is very dramatic particularly in the 21st century. There are a lot of new brands every day in the market that reflect the value of EMMs existence. Their ownership in the market is predominant both in the developed and developing world. Tetley is a well-known tea brand across United Kingdom and is now owned by Tata Group which originates from India. This is an example of acquisition trail made by enterprises from the emerging markets snapping up assets belonging to enterprises in the developed nations. Globalization of emerging markets has seen more than 1,900 mergers and acquisitions made (Hillestad, 2011). For, instance Vale is a Brazilian mining company that engaged in acquisition of Inco-Canada-based Company. Vale’s origin is from emerging market while Inco origin is from developed nation. The difference noted here in not only how EMMs gain value in global economy but also, and most important, how they capitalize on both grounds of operations (global and local operations). This explains the key dimension of capital in the multi-polar where a successful multinational enterprise from the emerging markets ought to stick with the local business operations as the priority in order to guide efficient internationalization process (Jones, 2012). Hillestad (2011) states that, ownership perhaps may influence the mode of expansion when it comes to global market. For example, individual owned enterprises usually prefer making acquisition to avoid conceding its operation control as they internationalize. On the other side diverse ownership structures can hinder EMMs expansion especially in the western countries where their governments are very watchful of the global investors. Direct intervention of either government or owners of the business perhaps may misalign the strategy of EMMs that would have otherwise created an economic value. Multinational enterprises in developed nations are very secure since their markets are protected by regional framework. For example, in order to venture into western market, an enterprise must meet the standards of European Union (EU). Multinational enterprises in emerging markets have to face .several contingencies unlike multinational enterprises in developed countries. These contingencies can be either business or institutional. Elg (2012: 116) states that economies with late direct investor are likely to be affected by limited resources to take part in international competition. The reasoning behind this is that there will be low commitment to international business activities for example, export of its products. Also, the scale of country’s endowment for enterprises in emerging markets is relatively low when it comes to opening up avenues in developed nations. This would change the strategic direction of EMMs to focus on emerging economies who will act the primary recipient of direct investment as well as the process of globalization. The level of capabilities and how to deal with distance constrains expresses the difference of the two multinational enterprises. Multinational enterprises in developed nations lack a specific pattern of relationship that explains risk involved by a country during international operations. The mode of entry is of great concern. For instance, Portugal was a risky country in the west when involved in direct investment until the rise of strategic management from colonial association-a concept of psychic distance. This allowed the formulation of adaptable policies of human resources. Indeed, multinational from developed nations would accept the importance of outsourcing from coloniser countries in order to stabilize the existence in the international markets (South America Business information, 2001). This ideology points out a unique business character only present in multinational enterprises in developed nations where the foundation of success in the global market is based on the effect from colonies (exceptional cases in developed nations of the 21st century). In conclusion, the essay approves that internationalization process of multinational enterprises in emerging markets differ from multinational enterprises in developed nations. While diversity is one of the key concern in the contemporary market, multinationals in emerging markets and enterprises in developed countries however seems to share common feature. Each multinational at different set up play a different game but the future growth prospects are in one direction, ‘success.’ The difference as discussed focuses around three essential elements; one, is the market focus where adaptation to the international markets differ, two is the distinctive capabilities where managing risk as well as uncertainty between the two multinationals differ. EMMs use the local markets build existence in international trade, and three, performance anatomy. Globalized enterprises in the emerging markets have global mind set with an objective of multiplying talents as well as incorporating entrepreneurship culture. Reference Accenture, (2007) ‘The Rise of the Emerging-Market Multinational. High performance. Belanger, J., Levesque, C., Jalette, P., & Murray, G. (2013) ‘Discretion in employment relations policy among foreign-controlled multinationals in Canada.’ Human Relations, 66(3), 307-332. Brazil: Portugal Telecom forms alliances and considers new acquisitions.. (2001, March 20). South American Business Information , p. 32. Chapter 14. (n.d.) ‘International Entrepreneurship in an Emerging Economy.’ Retrieved April 4, 2014, from http://www.intechopen.com/books/entrepreneurship-gender-geographies-and-social-context/international-entrepreneurship-in-an-emerging-economy Company Overview of China National Offshore Oil Corporation. (n.d.).Businessweek.com. Retrieved April 4, 2014, from http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=7828203 Elg, U. (2012) ‘Business, society and politics multinationals in emerging markets.’ Bingley, U.K.: Emerald. Emerging Markets and the Economics of Internationalization. (n.d.). - Technorati IT. Retrieved April 4, 2014, from http://technorati.com/technology/it/article/emerging-markets-and-the-economics-of/ Goldstein, A., & Pusterla, F. 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(2013) ‘The internationalization of the emerging market firms: Context-Specific Study. Copenhagen Business School. Read More