Asian Multinational Enterprises in the Global Economy - Essay Example

The Role of Asian Multinational Enterprises in the Global Economy Introduction The rapid growth of multinationals in the Asia Pacific has had a great impact on the world economy in various ways. Most Asian economies have received investments from the West as a result of growing multinational enterprises in these economies. China, for instance, has been a beneficiary of foreign investments coming from the west. These investments come in a number of ways. First, the foreign direct investment comes from the West as people from these regions buy shares from firms in Asian Pacific region. As competition has mounted, firms from the West have contemplated that, it is impossible to battle with the firms from these regions unless they take advantage of the same resources that these firms have (Dunning & Mucchielli, 2003). One of these resources is cheap, but quality labor. This has led to most firms offering their labour to these nations and exporting it from their local countries. Investment and China China has received benefited from foreign investments from firms such as Apple, Inc. which has moved its production units to China in order to take advantage of the cheaper and high quality labor. This has both favourable and unfavourable impacts on the global economy. On one side, it means that these firms have increased employment in these countries such as China, thus improving the economic conditions for so many people who in any other case would not be able to get those jobs (Dunning & Lundan, 2008). However, in the Western economies where these jobs are exported from, many people have lost their jobs because of this fact. In this regard, due to the continual growth of these firms, hundreds of thousands of people have lost their jobs in the Western nations, directly or indirectly (Dunning, 2002). Thus, the contributions of these economies to the world economy are both positive and negative. As Markusen (2004) noted, this is expected to happen whenever there is a major economic shift. The other way in which these firms have led to the local economies getting investments from outside their region is by stock market investments. As these firms have grown, they have created an investment interests in their respective countries (Dunning & Narula, 2005). Most of these firms have listed their shares in world-class stock exchanges such as the London and the New York stock exchange. This has a fundamental impact on the global economy. First of all, it means that wealth is flowing from the developed economies to the developing economies. As Beamish, Delios and Makino (2001) argued, this has been seen to create a balance in the world’s economy as opposed to the earlier situation when the greater part of the world’s wealth was found in the western nations. These firms have made the world of investment completely flat and now investors can invest in any geographical location. Competition in the global market, leading to better products These firms have brought competition to the global market, thus leading to the competition for better products. Consumers around the world now can enjoy better goods and services because the increased competition in the market has led to a competition to build better products. Affordable products for third world markets As Yeung (2007) denoted, one of the most important issues about Asian firms is the fact that they have perfected the strategy of making sure that they serve everyone. For instance, as Richter (2007) points out, Asian firms such as Toyota from Japan were the first to address the issue of cost management in order to deliver affordable products to everyone. Firms such as Huawei which is a Chinese firm and Samsung from South Korea for instance are able to provide low profile customers with products which they can afford. These firms have a market strategy that targets not only the richer people in the society, but also those in the lower socioeconomic classes. Huawei is especially very good in this area and is able to provide the market with all types of products to make sure that everyone is well taken care of. For instance, as compared to a western firm such as Apple, Huawei produces products are meant for low income earners in the developing and underdeveloped countries. Huawei, unlike Apple, Inc. is able to give the market products which are revolutionary. This, however, does not prevent it from producing goods that are fit for the upper class market. Interaction of global economies integration of the world economy A crucial way in which Asian multinationals can be said to contribute in the global economy in a significant way is that they have led to the integration of the world economy. Without the growth of these firms, globalization would be futile. For the global network to be useful and effective, these firms had to come to light in order to guarantee that there is good balance of trade in the global economy (Lara, 2008). In a scenario where these firms would not as great as they are today, it would mean that the main producers of the world economy would be the western nations such as western European nations and North America. The whole of Asia which now constitutes over seventy percent of the global economy would only be a consumer region. With the emergence of these firms, however, Asia Pacific is now not just a massive consumer, but a massive producer of the world’s gross production (Haak & Tachiki, 2004). Goods produced in China for instance, are exported all over the globe including in USA and Europe where these goods compete fairly with the goods produced in these areas. This is an indication of how useful these firms are in the global economy. According to Palacios (2008), for instance, there is a great correlation between the stability of the world economy and the success of these multinationals from the Asia pacific nations. This was reverberated by Huang and Yu (2013), who pointed out that although the economies from these nations have started to decline in growth, their growth will remain as high as 40% of the total increase in the world economy. This is a very big growth when compared to most western economies, which have for a long time dominated the world economy by their massive production capabilities and using the rest of the world as a market for their products and as a source of raw materials for use in their production. Korea Korea has been known due to its world-class electronics. These electronics range from television sets, refrigerators, home entertainment and other consumer electronics. One of the most popular firms in Korea which is now a global firm is Samsung. Samsung is such an important firm in the global economy that it is now partnering with other global giants. For instance, Samsung is the major sponsor for one of the English Premier League clubs, Chelsea FC. These contributions to the global economy by one firm are a major importance in the global economy. The Japan Auto Industry Japan has also some of most successful global multinationals which have caused a roar in the global economy (Fu, 2012). The Japan auto industry has its roots in the mid 1950s. However, in these early times, Japan’s auto industry did not do so well in the global economy. With time, the industry, led by Toyota Inc. started a journey that was meant to help the industry to do small, but steady improvements until it was able to compete with the western auto industry. The discovery of new markets Samsung Samsung has been in the forefront of discovering new markets. This firm from South Korea has been very good identifying markets in places that have been neglected in the past. A good example is its strategy to develop a refrigerator that is specifically designed to be used in Africa. In designing this product, the firm considered the fact that most African nations face the issue of frequent power outrages. Given the use of a refrigerator, it serves no purpose for a person if most of the time there is no electricity to power it. In this regard, Samsung developed a refrigerator meant for African environment. This product has power storage, which provides power to make it useful during power outages. This product was highly marketed. In this regard, these firms have brought up a paradigm change in the world’s economy and the way multinationals do business in this environment. As they continue to do this, they have changed the face of the world economy as well as the global business environment. Most of these multinationals such as Huawei and Samsung proved that even underdeveloped markets were useful and could be use for business (Florence & Defraigne, 2012). Conclusion According to the above consideration, there are numerous ways in which Asian multinationals have contributed to the world economy. It is not doubt that without these firms, the world economy would be worse off. These firms have played an important role in keeping the world’s economy in check. For instance, firms such as Toyota from Japan tamed the western capitalism. Reference list: Beamish, P. D. (2001). Japanese Subsidiaries in the New Global Economy. Cambrige, MA: Elgar Publishers. Dunning, J. & Lundan. (2008). Multinational Enterprises and the Global Economy. New York, NY: Edward Elgar Publishing. Dunning, J. & Mucchielli, J.L. (2003). Multinational Firms: The Global-Local Dilemma. London, UK: Routledge. Dunning, J.H. Narula, R,. (2005). Multinationals and Industrial Competitiveness: A New Agenda. 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The Asian Economic Catharsis: How Asian Firms Bounce Back from Crisis. London, UK: Greenwood Publishing Group. Yeung, H. (2007). Handbook of Research on Asian Business. Cambrige, MA: Edward Elgar Publishing. Read More