The rise and growing role of multinational enterprises from the Asia Pacific in the global economy - Essay Example

? How can we account for the rise and growing role of multinational enterprises from the Asia Pacific in the global economy? Specify your reasons using corporate cases of multinationals from different industries and different countries of origin. Contents Contents 2 Introduction 3 Japan 5 Case study on Japan’s multinational company 5 China 6 Case Study on Haier Group 7 Korea 8 Case Study on Hyundai Motors 8 Reference 10 Bibliography 11 Introduction The business world is changing and it is witnessing the beginning of the end of the old economic order which for over the years have dominated the economy such as US, UK and Japan. The most important change is the rise of the emerging market multinationals whereas the influence and share of multinationals from the developed countries is on the verge of declining trend (Fan, 2008, p. 2). Emerging economies are the key in the process of globalization. They tend to evolve as a new set of companies with objectives of internationalization. Thus these emerging multinationals have changed the configuration of the global industries. The globalizations of the market have resulted in some of the dramatic changes with relation to supply and demand globally. One example of such change is the FDI (Foreign Direct Investment). FDI has increased at a rapid rate even faster than the global GDP. The growth in FDI is due to many various factors and one of the portions of money comes from the developed countries but the emerging countries such as Brazil, Russia, India and China have also increased a huge number of FDIs (Capgemini, n.d, p.3). According to a research conducted by PricewaterhouseCoopers, companies which are based on South are considered to put an impact on the global economy in the post recession. Firms from China, Korea India accounts for nearly half of the emerging and new multinationals among which China has produced the most number of new companies (PwC, 2010, p. 3). The following graph shows the emerging multinationals in the global economy. Figure 1: New Multinationals (Source: PwC, 2010) From the above figure it can be understood that apart from India, China and Korea are the emerging countries for new multinationals. Over the years they have managed to produce new multinationals. South Korea has been a new industrialisation market and has emerged during the years and has ranked third and is expected to produce a large number of multinationals. The emerging multinationals no longer are interested in being perceived as Korean, Chinese, Japanese or Mexican companies because they tend o be global in each and every respect. They aspire to act global, operate globally, think globally, grow globally and also manage globally. Most of the emerging multinationals are owned by shareholders globally such as about 52% of Samsung is owned by international shareholders, 71% of CEMEX, 57% of Hon Hai and nearly 545 of Infosys and 50% for the multinationals as a group (Agtmael, 2007, p.26). This paper takes into consideration three emerging countries which include Japan, China and Korea. Japan The MNCs in China, Japan and Korea utilises its resources irrespective of its location against it competitors and for its customers. It is not only moving the production facilities to benefit but also breaking down the internal barriers, in order to benefit from the economies of scope. Japanese consumer electronics companies like Sony and Panasonic announced that in order to grow globally, cultural diversity is a must in the top management. Sony was the first MNC in Japan to appoint a non Japanese director and aims to provide the top job to the managers (Horn & Faulkner, 2010, p. 162). The Japanese firms benefited from the home market as they were protected from the home market as they expanded internationally. The Japanese firms followed organic growth in the process of internationalisation as compared to other emerging multinationals which has adopted different option from strategic alliance to exporting. The Japanese companies had a strategy which was very much different from that of Porters version (Fan, 2008, p.5). Case study on Japan’s multinational company The company chosen for discussion is Toyota. The case deals with the globalization strategies of the Japan based Toyota Motors Corporation also known as Toyota which is one of the leading automobile companies globally. This case aims to examine the evolution from being Japan’s number one automobile maker to one of the topmost competitor in the global automobile market by 2003. It talks about the rational decision taken by Toyota to concentrate on the global market. In 2004, Toyota replaced Ford to take the number one position by selling off 6.78million vehicles as compared to Ford’s 6.72million. According to reports the market share of Toyota in US increased from 10.4% to 11.2% in 2003 which helped the company to acquire the second position. The company announced a 23% increase in the net income accounting to $4.4 billion revenues of about 69.7billion. The market capitalization of Toyota was $110million which was more than the three market leader Ford, GM and Daimler Chrysler. Toyota has emerged as a remarkable player in the global automobile market. One of the strong markets was US followed by Europe with 4.4% of market share. In Japan, Toyota enjoyed a market share of 43%. The company ensured that each of its market segment generated one third of annual sales. Toyota’s Business plan aimed at localization and increasing imports for three year period. Thus Toyota focused on localization and increased overseas production by establishing new plants. Thus as a part of the globalization strategy Toyota focused mainly on increasing the production of automobiles in areas where it sold. The global strategy adopted by Toyota paid off as the global vehicle production increased by 38times and as a result of localisation initiative the firm has about 45 manufacturing plants in 26 countries and sold vehicles in 160 countries (ICMR, 2003). China The Chinese’s enterprise is making high forays into the international market. Chinese’s multinationals are mostly state owned and the top three investors comprises of CNPC, CNOOC and SINOPEC. The main aim of Chinese multinationals is to invest globally, they are mostly market seeking, strategic asset seeking, resource seeking and are efficiency seekers. They deal with the traditional theory in analysing the activities. The most evident difference between Chinese and other MNEs going global are because of the special characteristic of the home ground in terms of resources and cultural context (Gugler, 2008). Also the role of the top executive and rank also plays an important role. Chinese organisation is usually run by powerful CEO. The Chinese do not trust the western system of performance (Holstein, 2009). A case study on Haier Group would explain the internationalisation process of Chinese companies. Case Study on Haier Group The case study is based on one of the most successful companies in China, Haier Group and its initiative in the US market in order to establish itself as a big brand globally. The case discuss about the strategies adopted by Haier Group in the high end market in US. Haier Group was the leader in Chinese consumer appliances market with a market share of 50%, 39.7%, and 37% respectively for air conditioners, refrigerators and washing machines. But due to deflation in the Chinese economy the sale slowed down in China and thus it was then Haier Group decided to enter the US market because of the high demand in consumer appliances. In 2000 Haier entered the US market and by 2002, the products were sold in 9 out of 10 top retails outlets. It occupied 2% of the market share in the US refrigerator market and aimed for 10% by 2005. The US white appliance market was dominated by American companies such as GE appliances, Maytag and Whirlpool which together comprised of about 98% of sale of refrigerator. Haier entered the US market on the basis of quality and not price. Thus Haier adopted the localisation strategy. It thus opened a design center in Los Angeles and employed US designer to design the products for the US market. Similar strategy was adopted in New York. Haier focused on promoting awareness about the company and its product. It tried to identify the customers need and thus satisfy them. According to analyst it was predicted that the real competition would be felt by Haier when it enters the high end market. The lack of brand image would make it difficult for Haier to remain competitive in the US market. But due to its strong performance in the US market it was believed that Haier would achieve the sales target of 1billion by 2005 (ICMR-a, 2003). Korea Korea is one of the emerging countries in the development of new multinational companies. It has emerged as one of the countries which has invested globally and has achieved the desired result. Korea is the 11 largest economies in the world and one of the leading investors abroad. Samsung Electronics tops the list when it comes to setting up its operation globally followed by LG Electronics (VCC, 2010, p. 2). Case Study on Hyundai Motors The case study on Hyundai Motors is one of the examples of global strategy adopted by Hyundai to enter the Indian market and the marketing strategies applied by the company to gain the market share and presence in the Indian market. The case aims to discuss the marketing strategies adopted by Korea based Hyundai Motor Company. Hyundai entered the Indian market by wholly owned subsidiary in way back in 1996. With the first production of Santro the company emerged as the second largest car company in India. The case explains the strategies used by the Korean company as well as the challenges which were faced by the company. Hyundai Motors in order to gain the market presence decided to cut down the price of its flagship car Santro by about INR 40000 in response to the price war by the market leader Maruti Limited which has also reduced the price of its brand Alto by almost 58000 INR. Santro was the most successful product of Hyundai and also the largest selling car in the financial year 2003 to 2004. Hyundai acquired about 19% of the market share with number of models introduced such as Sonata, Elantra etc. The success was due to the ability of the company o launch technologically superior products and also due to the innovative marketing strategies adopted by the company. By late 200, the competition in the car segment has increased drastically, Alto received a good response but Santro remained the largest selling car. The financial year 2003-2004 ended in a positive note for Hyundai Limited. The company had received revenue which amounted to about 50 billion and Profit after Tax of 1.90billion. This explains by innovation strategy companies can gain the market share in the international markets (ICMR-b, 2003). Therefore analysing the case studies of different countries and different industries it can be said that due to globalisation the global economy has been affected greatly in appositive way and at the same time the emerging countries are heading the lead and it is expected that in the near future countries like China, Korea and Japan would top the list in new emerging multinationals. Reference Agtmael, A. W., 2007. The emerging markets century: how a new breed of world-class companies is overtaking the world. New York: Simon and Schuster. Capgemini, No Date. Emerging Multinationals: Manufacturing In a Rapidly Changing Global Landscape. [Pdf]. Available at: http://www.capgemini.com/m/en/tl/tl_Emerging_Multinationals__Manufacturing_in_a_Rapidly_Changing_Global_Landscape.pdf. [Accessed March 22, 2012]. Fan, Y., 2008. The Rise of Emerging Market Multinationals and Its Impact on Marketing. [Pdf]. Available at: http://v-scheiner.brunel.ac.uk/bitstream/2438/1783/3/MIP%2BEMM.pdf. [Acceessed March 22, 2012]. Gugler, P, 2008. Chinese companies worldwide. [Online]. Available at: http://www.voxeu.org/index.php?q=node/1565. [Accessed March 22, 2012]. Holstein, W. J., 2009. China’s Multinational Quandary. [Online]. Available at: http://www.strategy-business.com/article/li00126?gko=a2988. [Accessed March 22, 2012]. Horn, S. S. and Faulkner, D., 2010. Understanding Global Strategy. UK: Cengage Learning EMEA. ICMR, 2003. Toyota's Globalization Strategies. [Online]. Available at: http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy2/Toyota%20Globalization%20Business%20Strategy.htm. [Accessed March 22, 2012]. ICMR-a, 2003. Haier Group's Strategy in the US Market. [Online]. Available at: http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy1/BSTR072.htm. [Accessed March 22, 2012]. ICMR-b, 2003. Hyundai's Marketing Strategies in India. [Online]. Available at: http://www.icmrindia.org/casestudies/catalogue/Marketing/MKTG095.htm. [Accessed March 22, 2012]. PwC, 2010. Emerging Multinationals. [Pdf]. Available at: http://kc3.pwc.es/local/es/kc3/publicaciones.nsf/V1/153A71BAD7E4F7D7C125771F002E4EB9/$FILE/Emerging%20Multinationals.pdf. [Accessed March 22, 2012]. VCC, 2010. Korean multinationals show solid recovery after global crisis. [Pdf]. Available at: http://www.vcc.columbia.edu/files/vale/documents/EMGP-Korea-Report-Final-20101116.pdf. [Accessed March 22, 2012]. Bibliography Bigman, D., 2002. Globalization and the developing countries: emerging strategies for rural development and poverty alleviation. USA: CABI. Campbel, N. and Burton, F., 1994. Japanese multinationals: strategies and management in the global Kaisha. New York: Routledge. Falola, T. and Soremekum, B. H., 2011. Globalization and Sustainable Development in Africa. University Rochester Press. Gu, G. Z. and Ratliff, W., 2006. 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