Strategies emerging market MNEs employ - Essay Example

?Word Count: 2,717, excluding references 2,5000) Introduction Many emerging firms try to compete to generate a competitive advantage and become the leader in the industry where they belong. This is a common trend today and new entrants challenge old, existing and leading firms so that they can establish a remarkable market share. Their point is to achieve a certain level of competitive advantage, but such kind of advantage can hardly be generated if some essential strategies or strategic actions will not be employed. Concerning this point, it is important to create an illustration on how exactly some firms create strategies in order to generate their portion in the pie. Knowing how some firms established their market especially those new entrants is as good as finding how they initiate strategies in order to make a difference. Regarding this, the work at hand covers the points elucidating the unique strategies that the emerging market multinational enterprises (MNEs) employ in pursuing globalization or international expansion in comparison to the moves of MNEs from developed countries. The traditional MNE is characterised by foreign direct investment (FDI), which generally is all about firm-specific capabilities created at home country and momentarily expanded towards country-by-country way of internationalisation (Guillen and Canal, 2009). According to Guillen and Canal, this model was most popular much of the post-World War II. However, today, new existing MNEs from emerging markets are trying to make a difference in order to go for an international expansion. Knowing what these strategies are is the main focus of the work at hand. Prior to this, it is also important to understand the traditional model of MNE first to provide the essential foundation of comparison to its new MNE counterparts comprising new emerging MNEs and those from developed economies. Understanding traditional model of MNE Strengths pertaining to technology, marketing and managerial capability were important common features of the old model of MNE during the post-World War II (Guillen and Canal, 2009). According to Guillen and Canal, advanced multinational firms in Japan, North America and Europe participated in this activity and eventually created their market share and initiated international expansion. First, one can spot the point that multinational companies rely on their ability to employ advanced technologies. The implementation of technology is important in the issue of globalisation or international expansion (Alvarez and Marin, 2013; Holm and Sharma, 2006). The transfer of technology was viewed a significant component of global expansion because that will have to ensure operation and formulation of product or service offerings sustained at the most convenient and fast-paced approach. On the other hand, the idea of initiating marketing strategy is founded by the ability of the firm to understand the needs in the market. However, the idea might be eventually confined within the basic consideration of subsidiary marketing knowledge as this can be the essential foundation on how to go for international expansion (Holm and Sharma, 2006). Finally, the traditional model of MNE has to include the concept of managerial capability, as this has significant impact on the resource profile of the subsidiaries (Manev, 2003). This will have to fuel the right decision-making process in order to sustain survival of the firm in the international setting where there are other potential factors to keep constantly in mind such as culture, politics, social concerns and other considerations. In addition to all of these, Guillen and Canal added that the traditional model of MNE employed traditional product differentiation strategies and vertically integrated structures. All of these have specific advantages as integrated along with the existing practices of the emerging market MNEs, but at some point they may also provide a significant explanation as to why the emerging market and developed economy MNEs may have outsmarted the traditional MNEs. According to Guillen and Canal, there are important dimensions to consider in order know why new MNEs may have outweighed the traditional MNEs at some point. To understand this point means to find for the unique strategies that emerging market MNEs employ in order to compete with those coming from developed economies. Speed of Internationalization The first dimension that Guillen and Canal specify concerning the difference between new MNEs and traditional MNEs is the speed of Internationalisation. This could imply that new emerging market and developed market MNEs have accelerated speed of Internationalisation compared to the gradual speed of Internationalisation of the traditional MNEs. Consider for instance how some new existing multinational firms today like International call center companies outsourced the human resource outside their territory. Today, there are various call centers situated in the developing countries like the Philippines and India where the labour is quite cheaper. However, the ultimate point of this illustration is not to present the actual profit-making activity of the concerned firms, but on how they eventually expanded their market share and market potential. The speed of their Internationalisation is quite faster because of their ability to consider a new innovative approach in order to sustain their business and gain even more in the midst of existing tough competition. In other words, they are not afraid to employ a new business model and explore further any necessary actions just for them to achieve a high speed of internationalisation. On the other hand, the traditional MNEs are quite conservative in their approach concerning this point because of its traditional vertical integrated structure. This structure prevents it from exploring the possibility of employment of a new business model that is employed in the international context, as far as culture and other relevant components are concerned. However, MNEs from developed countries are trying to globalize their R&D activities, making those coming from emerging economies secondary at this point (Li and Kozhikode, 2009; Noya et al., 2012). Taking the case of emerging market MNEs will lead to the point of how the prevailing advancement in technology and research activities lead to some firm’s high speed of internationalisation. Recently, some emerging market MNEs have to allow customers on their websites to place order on their various product or service offerings. This eventually was a product of research advancements and technology. This specific move is an illustration how they have introduced themselves in the modern business world and was able to ensure the recognition of their brands or products across the world through the aid of advancing technology within the communication media. As a result to this, there is an easy way or opportunity for convenient access to their products wherever their potential target customers might be in the world. However, what is clear is the point that emerging market MNEs are able to combine strategic and organizational innovation (Bonaglia et al., 2007). They have freely explored these areas, a move that is or might have been missing on the part of the traditional MNEs or those in the developed countries. In other words, emerging market MNEs are dynamic in their approach, they are willing to try something new and challenge existing ideas, which in the end will have to result to a high speed of Internationalization based on as observed today. Competitive advantages Another dimension as stated by Guillen and Canal is the issue of competitive advantages. According to them, the traditional MNEs have strong competitive advantages because they required their resources available in-house, while the new MNEs have to upgrade their resources. Resources are quite limited, and this is the reason why some new MNEs have to employ strategic alliances (Sun et al., 2012). One important advantage in strategic alliances as far as International expansion is concerned is the opportunity to have access to resources. This is a significant advantage on the part of the new MNEs if implemented well, but the major drawback is that if they do not employ partnership, they need to upgrade their resources too in order to sustain in the prevailing competition. The good thing about traditional MNEs in this concern is that they have easy access to resources known as their comparative ownership advantage, whereas the emerging market MNEs will have to risk moving to aggressive cross-border mergers and acquisitions (Sun et al., 2012). Foreign firms will have to consider the resources used by the domestic firms as international mobility barriers (Carpano et al., 2003). This means that whenever such domestic firms expand employing a traditional model for MNEs, they already have a shield of protection for themselves and that is the mobility barriers they created against any competing international firms. This is the trend that MNEs from developed economies employ. In other words, the ultimate advantage of MNEs from developed countries against emerging market MNEs is their international mobility barrier through the employment of their own resources. However, such opportunity will have to be outweighed by the ultimate strategy of emerging market MNEs to go for unique strategic domestic alliances in order to get hold of the resources. In fact, one sheer advantage in strategic alliance aside from the opportunity for expansion is the ultimate benefit generated by a certain firm in terms of having the chance to experience additional acquiring of skills and resources held by the other party (Preble, 2000). After all, emerging market MNEs have the strong capability to acquire resources and absorb them to build their own competitive advantage, as they are motivated to perform offensive and defensive considerations and local subsidiaries have strong control in the value chain model (Kothari et al., 2013; Klein and Wocke, 2007; Pananond, 2013). Political capabilities According to Guillen and Canal, new MNEs might have strong political capabilities because they are used to unstable political environments, while traditional MNEs have weak traditional capabilities because they are used to stable political environments. This is evident in the case of the implementation of the corporate social responsibility of the new MNEs. The local governments and employees are the ones to initiate a higher standard in the working environment and the development of the local community (Reimann et al., 2012; Luo, 2005). Thus, this creates a significant political force that will have to push firms to do what is necessary and relevant. This also implies that along the way, emerging-market MNEs have to consider the implementation of corporate social responsibility because this is found to be an effective means for them to address the political tension that is brought by the local government and employees towards them. The implementation of corporate social responsibility allows the emerging market MNEs to build a remarkable relationship with their local stakeholders in respective countries (Reimann et al., 2012). This means that the opportunity for them to create political resistance against any issues can be remarkably observed within their ability to insert themselves into policy networks. However, this must be integrated further in their system at the deeper level. Emerging market MNEs must employ prevailing business-government relations in all aspects (Rizopoulos and Sergakis, 2010). MNES such as those from emerging market are used to unstable political environments, which means they must have essentially gained the best trend involved within the prevailing political trends for them to employ differentiation of their political leverage in various domains. It is expected that the emerging-market MNEs must lead in this idea, as their nature of being used to unstable political environments cannot be overlooked. This at some point will allow them to come up with a unique approach just to be able to survive in the competition, create their market share, and ensure continuation of their operation. Expansion path Guillen and Canal added that new MNEs are traversing dual path because of the fact that they have simultaneous entry into developed and developing countries. The traditional MNEs on the other hand are following a simple path because they go from less to more distant countries. Due to the motivation and behaviours of emerging market MNEs to expand both in the developed and developing countries, it is clear that this move must certainly create strategic implications (Yaprak and Karademir, 2011). One clear strategy deals more on ownership structure particularly ownership orientation, which was found to lead to various strategic orientations (Liu et al., 2011). When MNEs in emerging market consider ownership orientation, they are free to choose different strategic orientations, allowing them the opportunity to choose whichever is best to be employed among the markets in developing and developed countries. This leads them to implement a combined effort for strategic and organizational innovation (Bonaglia et al., 2007). This approach does not only result to a fast speed of Internationalisation, but the opportunity to optimize strategic orientations. The presence of strategic orientations is necessary especially in the expansion strategy. With the ability of the firm to initiate relevant strategies for expansion, it is not impossible to obtain a high market share in the long run. Thus, it is not impossible for emerging market MNEs to venture into the markets in developing and developed countries because they have strategic insights and at their best, they have combined strategic and organizational innovation prior to their goal for a wide level of expansion against those MNEs from developed economies. Default entry modes New MNEs are into alliances and acquisitions allowing them to acquire external growth, while the traditional ones are into wholly owned subsidiaries leading to only internal growth (Guillen and Canal, 2009). This holds true for both emerging market and developed economies MNEs. In this case, it is evident that the emerging market MNEs are after of total expansion with the hope of achieving more meaningful results and advantages in the process. The reason why they go for alliances and acquisitions strategies is for them to go for expansion in the International setting, but this is just the most common observation that can be depicted in this strategic insight. The ultimate reason is that emerging market MNEs rely so deeply on external sources in order to survive and this evidence can be observed in the case of emerging multinational companies in China (Kotabe et al., 2011). This is the reason that the ultimate result of this strategic move is external growth in the long run, which might surpass MNEs from developed markets. Organisational adaptability New MNEs have high organizational adaptability because of their meager international presence, while the traditional MNEs have low organizational adaptability due to their ingrained structure and culture (Guillen and Canal, 2009). As already stated, traditional MNEs are strongly tied up to their vertically-integrated structure. This means that they have to stick to a more traditional way of setting the entire international firm under the traditional bureaucracy for the hope of achieving a common working structure and culture. However, it is a bit different in the case of emerging market MNEs compared to those in developed economies because of their ability to ensure creative means on how to go beyond national cultures, and dynamic interactions under intra-national, regional and organizational level. A study reveals though not yet conclusive that intra-national regional cultures and organizational culture affect firm performance (Sashaki and Yoshikawa, 2013). This can be positive in the case of emerging market MNEs. Conclusion It is evident that emerging market MNEs are new variants of multinational companies from developed countries that go beyond the traditional path of the concept of Internationalisation. For them to make a difference they have substantially employed unique strategic inputs that go beyond the traditional business model of MNEs. One important reason that they go for this is for them to break a certain barrier created by the MNEs in developed countries that potentially hinders them to go for expansion and market penetration at the International scope. Therefore, the ultimate reason why they must have to employ a mirror but unique strategic inputs is for them to create a remarkable competitive advantage, setting them at the cutting edge and allowing them to expand their operations in the long run. The work at hand just presented the important dimensions by which one can identify the unique strategies that new emerging market MNEs employed in order to make a difference. Although not in all of these dimensions that new MNEs excel, it is a sheer observation that they have become dynamic in their expansion because they have exploited strategic inputs that go beyond the traditional path, which reflects how emerging market MNEs do it. It is something of an innovation that they have created, allowing them to formulate strategies that are new, open for further exploration, but challenging MNEs established from developed economies. References Alvarez, I., and Marin, R. 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