Asian Pacific Multinationals - Case Study Example

This paper is an account for the growth and rise of Asian Pacific multinational companies in the global economy. Because of globalization and an increase in capitalism, there has been a rise in multi-national companies from the Asian-Pacific. A number of factors exists, contributing to the rise of the Asia-Pacific companies in the world. Some of these factors include an increase in capital, availability of cheap labor, and a robust economic growth. A country such as China has one of the fastest growing economies in the world, and it has a large market, and this is attractive to most business organization. An access to this market makes it possible for Chinese multi-national companies to raise capital that they can use for purposes of investing in other regions of the world. Au, Craig& Morris, (2011, p. 51) explains that because of an increase in the economic growth of most Asian countries, their multinational companies are able to invest heavily within the region and the world. Examples of these multi-national companies include, Fujitsu, Samsung, Toshiba, Singapore Airlines, Malaysian Airlines, etc. In his analysis of a multi-national company, Ramburuth, Stringer & Serapio (2013) explains that a multinational organization is an institution that has initiated productive operations in different countries of the world. A multi-national corporation would engage in business activities in its home country, as well as in a foreign country, which on most occasions is referred to as a host country. An organization becomes a multi-national company when it directly invests in a foreign country. When investing in these countries, the corporation must have a controlling stake, for it to be referred to as a multi-national corporation. This is an achievement that most companies in the Asia Pacific have managed to achieve. On an historical note, Asian-Pacific countries have always sought to achieve growth in an organic manner as opposed to the use of acquisitions and mergers. This is as opposed to North America and Europe, where companies used to achieve their growth potentials through the use of mergers and acquisitions (Yeung, 2007). One of the major reasons for the reluctance of these companies to use mergers and acquisitions is because of the rapid economic growth that was witnessed in the Asian-Pacific region. This economic growth was able to give these business organizations an opportunity to grow and maximize on their profits. Furthermore, most large scale corporations were owned and managed by a single family. A good example is Samsung Corporation. Samsung is a company from South Korea, and it was founded in 1938. The founder of this company was Lee Byung-chul. As a family company, Samsung took advantage of the liberalization of the South Korean economy for purposes of advancing its business operations. Furthermore, because of the enormous growth that the South Korean economy was experiencing, Samsung managed to diversify its services and production into five major areas, these areas are securities, retail, textiles, food processing and insurance (Ramburuth, Stringer & Serapio, 2013). During this period in time, companies in Asian Pacific faced a number of challenges. One challenge is on the different managerial styles that these companies had. An example is the relationship between Lee Byung-chull, the founder of Samsung and Cho Hong-jai, the founder of the Hyosung Group. The two tried to merge their companies but failed. Because of the desire of family organizations to control and manage their corporations, it was very difficult for companies in the Asian Pacific to invest in other regions, hence limiting their ability to have an influential role in the global business environment (Ramburuth, Stringer & Serapio, 2013). However, since the 1970s, mergers and acquisitions have become the norm for Asian Pacific multinational corporations. Asian Corporations have recognized a need to improve their operations, for purposes of achieving a competitive advantage over their rivals. This is because of the impacts of globalization, and the opening up of economies because of structural adjustments policies. For instance a company such as Toshiba was a direct competitor to Samsung. Samsung and Toshiba were both involved in the electronic market and in the 1970s; the company was involved in a number of acquisitions (Yeung, 2007). This was a threat to Samsung, mainly because a company that is huge normally enjoys the benefits of scale. This includes easy access to capital, discounted supplies, and the capability of competing efficiently with its competitors. Through an access to capital, it is possible for an organization to invest in other foreign countries, apart from its home country. In entering into foreign markets, Toshiba mostly used the strategy of acquisitions (Yeung, 2007). For instance, in 1977, in a bid of entering the South American market, Toshiba was able to acquire Semp, and it formed a company by the name of Semp Toshiba. The use of mergers and acquisitions is not only unique to Toshiba as an expansion strategy. Samsung also uses acquisition and mergers while entering into foreign markets. A good example is in 1995 when Samsung was able to acquire Rollei, a German camera maker. However, this was a controversial purchase, because of Rollex, a Swiss watch maker that was fighting the use of the name Rollei (Yeung, 2007). This name had a close resemblance of Rollex; hence the company feared that this might confuse customers while purchasing these products. Based on these facts, Rollex sought to fight off Samsung by using all means, and this includes a court case that the company won in 1995, prohibiting the sale of Rollei watches in Germany. This was a setback, for the bid of Samsung to enter into the German watch market. However, the company has continued to use the acquisition strategies for purposes of entering into new markets, or expanding its growth. For instance, in a bid to efficiently compete with Apples, Samsung has a policy of acquiring technological companies. Some of its acquisitions include NVELO a software storage company based in California, CSR PLC which is United Kingdom, and Wacom, a company that specializes in the production of graphic tablets, and it is based in Japan. Because of these acquisitions by Samsung, the company has managed to develop high quality and stylish tablets, and smart phones. Furthermore, because of these acquisitions, Samsung has managed to have an advanced wireless connectivity, and develop software that gives it the capability of retrieving data in a very faster method. It is important to explain that because of the use of these strategies, the company has been able to surpass Apples as one of the leading producers of Smart phones. Acquisitions and mergers is also a strategy that is used by Apples, one of the major competitors of Samsung and Toshiba. For instance, the company has managed to acquire companies such as Propel Software, Spot setter, Burstly, etc (Kee & Yoshimatsu, 2010). These are software companies that were acquired by Apples Inc, for purposes of helping the company develop innovative products that could help it break into the smart phone industry. Innovation is also one of the factors responsible for the rise of multinational companies from the Asian Pacific. A good example of a good that uses innovation for purposes of conducting business in an international market is Singapore airlines. For instance in 2003, the management of the Singapore airlines came up with the lie-flat seats in their business class. The installation of these seats was to cost the company approximately 100 million dollars, and the target was its international market. This strategy aimed at ensuring that its consumers are able to fly comfortably (Jarvis, 2003). Furthermore, the intention of this strategy was to ensure that the organization manages to build and create a positive brand name. Most customers would only engage in business, with a company that has a reputable brand name. Another innovative method that Singapore airlines manage to use is by using the concept of Singapore Girls, as its marketing strategy. The Singapore Girls is a concept used to market its cabin crews as people who are honest, trustworthy, hospitable, and generous. This type of marketing strategy has enabled the company to be one of the most profitable airline companies in the world. When comparing this company to Malaysian airlines, it is important to explain that Malaysian airlines have failed to break into the international market and make some profits. This is because of an inefficient marketing strategy, lack of innovation, and it faces stiff completion from other multinational companies such as Singapore Airlines, Cathay Pacific, British Airways, Air Asia, etc (Jensen, 2010). Furthermore, the company has failed to compete efficiently because of low cost carriers that have emerged. An example includes Air Asia. However, a company such as Singapore Airlines has managed to brush off competition from low cost carriers by focusing on a niche European and American markets. However, it is important to explain that companies from the Asia Pacific are functioning well in only certain industries, and in other industries, they are not effective. Take for instance in the software industry where Fujitsu, a Japanese software company operates in. Fujitsu is not a market leader in the provision of IT services, and this is mainly because it faces stiff competition from IBM and HP. The major reason Fujitsu failed to be a market leader in the provision of IT services is because of its failure to take advantage of the fast growing soft ware industry, and invest in it. This is during the periods of the 1990s (Heinecke, 2011). However, companies such as IBM, and HP took advantage of this emerging opportunity, and invested heavily in them. The result is that IBM and HP are now the current market leaders in the soft ware industry. In a bid to revamp itself, the company initiated a series of restructuring methods aimed at providing a distinction between its consulting parts of business, with that of the provision of its IT services. Through this strategy, coupled with an aggressive marketing campaign, Fujitsu aims at becoming a global market leader in the provision of IT services. However, Fujitsu failed to achieve this objective, because of the inability of its managers to risk, and initiate innovative ideas in the management of its operations. This is despite the reputation of the company being considered as a leader in the development of innovative software and solutions. In explaining the emergence of Asian Pacific Multinational Corporation, Au, Craig& Morris, (2011, p. 51) identifies two major factors that shaped the strategies which managers of these corporations were able to adapt. One factor that shaped these strategies was the rapid economic growth that was experienced in the Asian Pacific region. The Pacific Asia was able to experience a high level of economic growth, which was because of the efforts of the Asian entrepreneurs who had a mindset of achieving success in business. The mindset of these investors and entrepreneurs was on investing, acquisition, expansion, and diversification. This is seen on companies such as Huawei technologies, which is involved in a series of acquisitions and investments all over the world. Because of the principles of diversification, expansion and acquisition, Huawei technologies has managed to constantly take risks, as a result, developing innovative solutions that have played a role in helping the organization to surpass Ericsson, as the largest company that develops telecommunications equipments in the world (Endres, Fuest, Spengel & Bartholmess, 2010). Another important factor that shapes the growth of Asian multi-national companies is their desire to increase their revenue base and market share. This is very important to Asian Pacific companies, that they are willing to take risks and invest in other regions of the world. These strategies contrast greatly with multi-national companies from Europe. These companies are guided by the principles of re-engineering, restructuring, concentration on core businesses, cutting of costs, and getting rid of excess members of staff. A good example is Wal-Mart Corporation. This is an American multinational corporation whose major business strategies are cost reduction. It is involved in cutting of costs, and this includes laying off of excess workers, and initiating strategies aimed at reducing its overall administrative costs (Endres, Fuest, Spengel & Bartholmess, 2010). This strategy adopted by Wal-Mart is similar to the strategies that are used by most Chinese companies. These companies are constantly accused of underpaying their workers, in a bid to achieving some cost leadership advantages. The second important factor that has contributed to the growth of Asian Pacific region is because the regional integration that is witnessed in the region. Intra-Asian trade, investment and culture is on the increase. In the Asian Pacific, the major driving forces towards this trend are the large corporations that are operating in the region. On a particular note, multi-national corporations from Japan, and overseas companies belonging to Chinese people (Fobete, 2005). These companies have managed to become important regional players, dominating the Asian Pacific markets, as opposed to their European counterparts. In regard to regional integration, European Union is influenced by governments, as opposed to companies. This means that European companies play minimal role in regional policy formulation, in comparison to the Asian Pacific countries (Rimmer, 2014). Furthermore, European companies normally find it hard to break into the Asian Pacific market. This is because of the closed culture that characterizes this market, and difficulty in finding a loyal work force. In conclusion, Asian Pacific multinational companies are on the rise. This is attributed to the high economic growth experienced in the region, and the desire by the managers of these institutions to take risks. Furthermore, Asian Pacific multinational companies are very innovative, and this is a strategy that they have used for purposes of achieving a competitive advantage over their rivals. Companies such as Huawei technologies, Samsung, Singapore Airlines have managed to break into the global economy because of their innovative tendencies. Another strategy is based on diversification and expansionist strategies. Ever since the 1990s, Asian Pacific multi-national companies have pursued a policy of expansionism, and this is through mergers and acquisitions. 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