The Role of MNCs from the Asia Pacific - Essay Example

THE RISE AND GROWING ROLE OF MNES FROM THE ASIA PACIFIC + As is thenorm with every business entity, profit-making is the main reason corporations have strategies which help in the achievement of goals and objectives. One of these strategies includes going multinational where firms operate in more than the country they started. With the globalization becoming an accepted phenomenon of the 21st century, it has made it somewhat easier for companies to be multinationals. Perhaps one region that has grown at an amazing rate is Asia Pacific with companies from Japan, Korea and Taiwan establishing themselves as major companies not just in Europe but elsewhere. Because of producing unique but sometimes similar products, these companies have dominated in almost every corner of the world. Also, the fact that these companies keeping growing each year makes it almost hard to account. In light of the above, the issue of accounting for their rise and subsequent growing of these Multinational Enterprises (MNEs) ought to be analysed, and this is the intention of paper. Globalisation is top of the list as to the reason the MNEs in the Asia Pacific have grown at such a tremendous rate. According to Palacios (2008), globalisation created a platform the thriving of the Asian companies because of the relaxed rules. Normally, globalisation allows companies to extend their trade to other countries without having rules that could stifle their capacity to do business. In return, this helps corporations to increase the output especially if the product or service produced has not encountered stiff competition. A case in point is Japan’s Toshiba firm, which specialises in computers and accessories. Similarly, Hyundai Group focuses on automobile, and both of these companies can be found in other countries and continents including in Europe. In addition, the advancement of technology has made it somewhat easier for the rise of the MNEs especially in the Asia Pacific. Recently, it was noted that countries like China and Japan spend a considerable amount of resources on Research and Development (R&D). Actually, the amount exceeded that of the US where the latter’s R&D increased. Between 2008 and 2012, China’s R&D spending doubled to $257 billion and $134 billion for Japan. Actually, China is expected to surpass the US R&D spending by the year 2022 meaning this could as well mean dominance by these firms (OECD, 2014). This heavy spending on the technology has greatly helped the companies in this sphere gain a competitive advantage. Embracing inward Foreign Direct Investment (FDI) has also accounted for the rise and the role of Asia Pacific’s MNEs. Inward FDI implies that a company acquires another business in another country other than the origin. A good example involves Japan’s Toyota group, which has a number of other entities in other countries including the US, India to name but a few. By ensuring they invest in other countries, these companies have not only won the hearts of the local people, but also helped in affecting the local economy. According to Buckley et al (2007), it is because of using inward FDI that the Asian MNEs have continued to cement their presence in other countries. Competitiveness of the Asian economies is an additional reason to account for the increased growth of these MNEs. According Chang (2007), the Asian economies tends to grow without as much hiccups as others elsewhere. Consequently, the MNEs originating from this area then find it somewhat easy to do business. While it is often argued that some restrictions are too stern for the business community, some indeed enable the local firms to thrive. For instance, there was a standoff recently on the of films export to China where the Chinese government sought to protect its industry. Innovation is a term that could perfectly be used to describe some of the products originating from this sphere. For instance, in the world of smartphones, South Korea’s Samsung is a household name competing with America’s best Apple Inc. In the recent years, the two companies have been involved in market share battle with each using innovation to gain an upper hand. It was noted that innovation has been the key driver of the success witnessed by a majority of these companies. Further, it was predicted that unless other companies improve on their innovation levels, the Asia Pacific MNEs operating elsewhere could surpass the once West-dominated market of electronics. The population size also favours the companies in these regions, which make it somewhat less hectic for a firm to be established. It has been reported that the Asia Pacific will make up “more than one-third of global wealth by year 2018” (Debroux, 2014 p.2). These assertions are informed by the recent trend of the wealth in the area where in 2013, Asia Pacific’s private wealth, including that of Japan, increased to $14.2 trillion, which was an 18% rise from 2011. These figures have resulted from the vast population that Asia Pacific has. When the firms in this region are started, the population has a significant impact on the rapid growth. Many of the Asia’s MNEs apply a different strategic in comparison to others, and this gives them an upper hand when it comes to success even in other countries. Song et al (2014) reported that one contrast that seems to set apart the Western firms from the Asian’s is the strategy. It has been argued that many of the Asia’s MNEs normally do not apply regional but global strategies. Many of the Asia pacific MNEs are able to apply Firm-Specific Advantages (FSA) strategies and Country-Specific advantages (CSAs). That is to say, the companies from the said region rely on their regions largely for the profitability as well as establish the firm to remain competitive abroad. This can be seen in the case where Japan’s automobile firm, Toyota, has gone on to remain on top even in the US. It was reported that Toyota’s earnings both in the US and worldwide surpassed General Motors’ (GM) in 2014 (Chowdhury, 2014). In addition to employing the above strategies, Asia’s MNEs have also been seen to apply a different strategy when it comes to regions of doing business. In comparison to a number of the Western-based firms, this region’s companies tend to employ different tactics. For instance, Wal-Mart’s deteriorated performance and subsequent closure in Germany was greatly attributed to the firm’s approach one of which included the chanting of the organisation’s name and founder. Apparently, the employees in that region found it rather awkward, and this had adverse effects on the business. Quite conversely, the Asians approach is synonymous with little or no complexities. In other words, there is no universal way of handling the local business, and this makes it flexible for them firms to thrive even abroad. Little or no politics by the respective governments have also helped in the companies’ success abroad. Debroux (2014) argued that hardly do the Asia pacific countries engage in the world politics, which make their firms seem unbiased. The number of companies operating in almost every continent can cement this notion even further. Besides, Toyota and Samsung, one is likely to see an American driving a Suzuki or a Mazda or even using a LG electronics appliance. This is made possible by the countries’ leadership to avoid the issues affecting the world. Geographical features, coupled with cultures in the Asia pacific give the firms yet an added advantage. For instance, Japan’s three largest metropolitan areas, Nagoya, Tokyo and Osaka are not far away from each other. Due to this distance, firms can interact without much spending of resources. Still, when the distance is close it means each firm has to be committed to innovation to ensure the other competitors affect its market share. When this innovation starts from home, it is extended to other regions, which, as noted earlier, seem not committed to the same. Cultures help because many tend to favour the business community as evidenced by the number of Chinese and Japanese perception toward TVs. Chinese and the Pacific region residents at large rely heavily on the TVs as the source of both entertainment and information. As a result, TVs firms like South Korea’s LG and other Chinese firms are able to avail the products to the masses, and despite the competition, none of the companies has been affected (Debroux, 2014). In this case, these firms have thrived because the region’s culture favours the product and the population is somewhat large. Large populations minimize the impact of competition, and this makes it easy for the firms to have products at a lower cost. For instance, Debroux (2014) noted that the regions of Greater Tokyo, Osaka and Nagoya had populations of 34.6 million, 18.6 million and 8.7 million respectively. When a firm has such populations whose culture is in line with the products being produced, profitability becomes inevitable. Furthermore, the cost can be adjusted to ensure that one capitalises on the large population. Usually, this trend is evidenced even abroad where the firms originating from this region are known to sell their products at a lower price compared to others. Besides reducing the effects of competition, large populations make it possible for firms to test a product before exporting it. When this happens, a firm is able to understand the areas that require improvement, which then makes it easier to prevent the image. This can be clearly seen in the UK’s Smartphone market where a majority of the people preferred Samsung’s brands to Apple’s. Many responded that though they liked the Apple products, they felt they unnecessarily overpriced in comparison to Samsung’s products. Moreover, it is not in UK alone that Samsung’s dominant is evident; it was noted, “Almost half of smartphones sold in Europe are Samsung” (Goldhill, 2013 p.7). Therefore, one can clearly see that the origin of a firm play a significant role in the pricing, which ultimately affects the market share globally. Because of this growth rate, the Asia pacific MNEs could be accredited for a couple of things, mainly success, in the other parts of the world. As mentioned twice in the paper, Samsung and Apple Inc have been in an intense competition. This has resulted in innovation since none of the two want to lose the market battle. Every now and then, each comes up with a product to make sure their clients have a reason to continue their loyalty. Therefore, one could conclude that these MNEs have been pivotal in the advancement of technology and the inevitable innovation. Then, this growth has created other opportunities for other firms to access the products at a lower price as well as gain the much-needed exposure. As noted elsewhere, globalisation could be said to be the main reason for all businesses to thrive globally as it allows this trend. Asia Pacific companies have had positive impact on other firms, which has proved to be vital. For instance, Japan’s previous dominance in the electric car market has catalysed the US firms to engage in the market too. In 2012, the US trailed Japan by 2% where the latter’s global sales stood at 28% against the former’s 26%. China had 16%, Norway 7% while another European country, France had 11% (Orbach and Frchter, 2012). In the future, this market is expected to be tightly contested with each firm from various countries seeking to outdo the other. Evidently, the two Asian Pacific countries prove that invention benefits others as well. The majority of other firm in Europe thus transforming the market has since embraced regional strategies. Earlier, it was noted that some firms tend to employ what is commonly known as global strategy in its worldwide operations. This strategy, which simply implies uniformity, does encounter challenges as earlier indicated in the case of Wal-Mart. However, the Pacific Asian firms have been very consistent with the regional strategy, which applies strategy as per the demands and conditions of a given region. For instance, it was reported that Samsung’s tendency to embrace regional strategy as opposed to global has been the major reason for its dominance (Ghemawat, 2005). Economic status has been improving and many of these countries have withstood financial crisis. Recently, China and India’s economy were predicted to be the fastest growing in the next five years (Ramamurti, 2011). Most likely, this growth will significantly affect the business world especially given the population of these countries as well as the amount of money spent on R&D. That is to say, the Asia Pacific’s influence could as well be important to other countries especially with a majority of these firms operating as MNEs. It remains an important role whose impact has already been witnessed in the recent times. The US has been involved in a trade pact with China, and it is not the only one; BRICS is a bloc comprising of Brazil, Russia, India, China and South Africa. These pacts and formations imply that the Pacific Asia will play an integral role in the future as far as world economy is concerned Fragmentation gives the MNEs in the mentioned region a strong base both locally and internationally. Worth noting here is that many companies in these regions do prefer assembling, the products locally but still engage other firms beyond the borders. While the majority of MNEs in this part of Asia seldom engage others, Samsung’s fragmentation is evident (Goldhill, 2013). Normally, when these firm allow fragmentation, other countries benefit as well, and this makes their presence in other countries vital to the economy. Therefore, this is an important role MNEs from this Asian sphere play, and for that reason, their existence might remain unperturbed by competition. Firms avoids saturation because of innovation and low competition in comparison to the demand. One example that solidifies this assertion is the dominance of Samsung’s android share where despite having other manufacturers, its profitability is 65%. Others like LG, Motorola, Sony and HTC share the remaining part, 4.5%, 5.4%, 2.4% and 6.1% respectively, thus confirming that the emergence of the Asia Pacific MNEs has not been detrimental to their fellow firms (Jones, 2013). From these figures, it is clear that despite having at least six android developers, there is no saturation manly because the demand exceeds the supply. In conclusion, the Asia Pacific MNEs have been instrumental in transforming not just the region’s economic outlook, but also other parts around the globe. As evidenced by the data provided, this region has shown great enthusiasm concerning innovation. This is confirmed by the amount of money spent on the R&D plans. Additionally, this region happens to have a larger population whose cultures tend to support the development compared to other parts. Consequently, any negative impact of competition is almost absorbed fully because the people buy the products. The population determine prices set by the MNEs because of the competition, which eventually is replicated for the international market. When this happens, the dominance of these MNEs internationally becomes almost unavoidable. Bibliography Buckley, P., Crossb, A., Forsansc, N. and Hornd, S. (2010). The rise of the Asian multinational firm. Asian Business & Management, 9(4), pp.293–295. Chang, J. (2007). International Expansion Path, Speed, Product Diversification and Performance Among Emerging-Market MNEs: Evidence from Asia-Pacific Multinational Companies. Asian Bus Manage, 6(4), pp.331-333. Chowdhury, S. (2014). Strategic roads that diverge or converge: GM and Toyota in the battle for the top. Business Horizons, 57(1), pp.127-130 Debroux, P. 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