Business Strategy of MNC in Emerging Markets

The research aims to observe the different adaptive strategies employed by the multinational corporation’s (MNC) while it enters the emerging economies, analysing market potential, business growth, and the foreign direct investment in the country, with its effects on the (GDP) gross domestic product and corporate social responsibility of the emerging market.

Objectives

The objective of this research is to gauge in the success or failure of the difference in approach applied by the multinational corporation’s (MNC) to the emerging market how effective is the strategy and what scope and the way to enter the new market through a merger acquisition or its own subsidiary to function in those testing environment.

Introduction

Multinational enterprises (MNEs) need to adjust to the multifaceted business environment of each host country (Dunning and Lundan, 2008a) [2] . This challenge

Increases with the differences between the foreign and MNE’s home environment. The

More ‘distant’ is a host country from the organizational centre of the MNE, physically

And in terms of mutual understanding, the more the �rm has to bridge differences in

Culture, in laws and regulations, and in human resources (Ghemawat, 2007) [3] ; Shenkar,

2001) [5] . MNEs must adapt their business strategies and organizational forms to manage these differences (Kogut and Singh, 1988; Kostova and Roth,

2002) [6] .

With the development of the international business in the developed economies of the world, they faced saturation of their domestic markets which led them to search for alternate markets for their product and services. There was an immediate surge to cut down the cost of labour which was rising, forcing them to implement cost cutting strategy, which in turn led to the growth of international business, In the beginning the company would engage in export and import however with the change in the time, technology, availability of cheap labour and transport it has made it easier for these companies to target international shores for business

Literature review

This is research aims at formulating the scope of the international strategy in the emerging markets by analysing the current situation of the economy’s and the theories applied to the context of emerging nation in the past taking into consideration the degree of their effectiveness into account and postulating new perspective and dimension to it. The analysis of the early phase of the market emergence, Institutional theory helps in comprehending the impact on the enterprise strategies this is due to the strong influence of the government in the emerging economy’s to that of developed economies . The role of institutional theory is reviewed in context to the other theories and their interactions in understanding the emerged and the developed market economies. The International business strategy adopted by the MNC for the emerging markets has played a significant part for their market entry against the barriers to the host country.

THREE PERSPECTIVES ON STRATEGY IN EMERGING ECONOMIES

When we analyse the market in the emerging economies with respect to its earlier phase of emergence, it is the institutional theory which is the most significant in helping to explain the impacts on enterprise strategies. This is due to the influence exercised by the government and societal are stronger in these emerging economies as compared to the developed economies. As market matures, transaction cost economics and, subsequently, the resource-based view is more important. However, there is a fervent need to consider the importance of the interactions between institutional theory and other theories to increase our understandings of the emerging and developed market economies by drawing the differentiating between them.

An Institutional Theory Perspective

The role played by institutions in emerging economies.

Institutional theory emphasizes the influences of the systems surrounding organizations that shape social and organizational behaviour (Scott, 1995) [13] .

From a sociological orientation, Palmer, Jen-nings, and Zhou (1993) [21] discussed industrial reform in China and attributed its success to market-leaning institutional change, gradual relaxation of state owner-ship and control, and development of private prop-erty rights.

Research implications

The number of theoretical and empirical studies using an institutional perspective in emerging economies is limited, even though some theorists have argued that this perspective is the most applicable paradigm for explaining enterprise behaviour in emerging economies (Shenkar & von Glinow, 1994) [23] pointed out, the process of institutionalization should be of interest in future theoretical and empirical work.

A Transaction Cost Economics Perspective

Transaction cost economics studies the firm-environment-ronment interface through a contractual or ex-change-based approach (Williamson, 1975) [30] .

Limitation

The criticisms and recent development in the literature which is identified above are apt in comprehending the strategy of the enterprise in emerging economies, as the transaction cost economics has been applied primarily to the developed market economies which are characterized by their strong legal regimes and binding social norms, less is known about governance structures for transaction cost in emerging economies. Choi, Lee, & Kim (1999) [32] .

High transaction costs would refer to a preference for hierarchical governance structures over the private market. Opportunistic behaviour, normally reduced by contract law, trust, or reputation, is also much more likely under such circumstances. As per the scholars the most efficient governance structure in emerging economies is hybrid structures dominating both markets and hierarchies is the solution. For example, Peng and Heath (1996) [33] argued that it is difficult for emerging market firms to grow internally or through mergers and acquisitions owing to lack of property rights and unstable political structures. They suggested us-in networks as a hybrid strategy. By pooling and coordinating resources, firms can achieve economies of scale and scope, and organizational learning can occur.

Resource-Based Perspective

The resource based view regarding the emerging economies, the central questions addressed by the re-source-based view concern why firms differ and how they achieve and sustain competitive advantage? Penrose (1959) [41] , who found that the Hollywood film industry pro-vided a context that changed over time and created different strategic assets as changes were made. To this point, little research using a resource-based-view framework has examined strategy differences in the social context of emerging economies.

Adapting theses theories in the research for the thesis with a new perspective and dimensions the research on the international strategy of MNC in emerging market is further investigated to find the answers to certain question during the course of the research.

A) What are the effects of strategy on the Mnc in respect to the modern times?

b) How difficult is the task of MNC easy to settle down in a new country?

c) What are the real barriers to the entry of these MNc?

d) Does the strategy adopted really help with respect to CSR?

e) Do the theories by scholar on emerging market have any positive inference on the MNC

f) The role of govt in the smooth transition and policies

g) Are the MNC a success or Failure with their normal global strategy

h) How do the cultural differences is an obstacle in the way of MNC

Challenges /Difficulties

The MNC entering for the first time, may benefit from a relatively low informal distance which is most likely to increase their co-operation between with the local firms with respect to their understanding the barriers to communication, however with the difference of geographical distance there is a burden for the MNC to bear the cost involved in communication and co-ordination as cultural differences are most likely to hinder the smooth functionality and the firm may find it difficult to incorporate the existing operations with the local firm or they may establish a co-owner relationship with the local firm rather than functioning on their own, however to ease their functioning it has to co-operate with the local firms to resolve differences pertaining to the cross culture issues. Institutional differences may be reduced over a period of time by experimental learning, moreover it may benefit from the local firms contacts in the market like the local supplier distributor and the local authorities, hence it reduces the investors direct contact with the unknown local environment which is an added advantage and it gets the existing information of the market through the local firm

The Research Methodology

In this research would aim to use both primary and secondary method to go in-depth to have an insight of the emerging market what are the strategy barriers for foreign investors like an MNC’s how could it be made smoother the support from the government,

Primary source

This method is applied to retrieve information by the researcher for the first time for a specific purpose of their field of studies. It constitutes Questionnaire Direct observation, Interviews and surveys, in this particular research the application of questionnaire and survey does exist however with the diverse field like a MNC which is in an emerging market hence it is too broad not required.

Secondary Sources

This method states the information is already compiled by someone who did a research prior to the current one in a similar field for some other objective, the secondary data is classified into two internal and external data, the information in the form of data compiled within the company is Internal and the information which may be retrieved from external sources like libraries, journals, websites, business magazines, articles. The main components of secondary data are

Book review

The books which are relevant to the thesis along with the articles and journals would be reviewed for data and theories for the research.

Internet research

This would give an insight to the markets past history and provide comprehensive data source for the research along with the articles that are available to browse useful for the research.

Documents

The documents published by the MNC in the emerging market would be used a useful literature for the research to draw a comparison from past performance and the transition into the new country in regards to the financial statements and distinguish it with other MNC on success and failure

The advantages of secondary source of research is its availability and accessibility with the low cost involved to retrieve the information and another aspect of secondary data could be observed closely for a longer duration it is not time bound, although it does have its own share of demerits as the information pertaining to the current research may not have been collected or the other dimension or area or research could be extremely different with aim and objective contrasting each other with the region directed a specific population that may not be the researchers sphere of interest.

Data collection

The strategy employed for assembling data need to a multi-dimensional with a modern approach as data pertaining to market of emerging economies keep on changing on a day to day hence the conventional sampling approach can be difficult to implement for example the various sources of data like telephone directory, government data could become rapidly outdated. The data which may be collected from a company may not necessarily be consistent in comparison to the data possessed by the government authority hence it thus become a significant factor to collaborate the different studies to analyse and find the right method for data collection with questionnaire, surveys being dependent on the postal service. Hence Collaborative projects with local researchers using face-to-face interviews may be a key means of gaining access to data sources (Lee & Miller, 1999) [43] used quantitative questionnaires, qualitative interviews, and multiple informants to increase the validity and reliability of their measures of organizational competence, variable measurement do pose a number of problems that present a difficulty in strategy research in emerging economies. The data collection is further classified into primary and secondary data source.

Primary data source

The data collected for the first time by the researcher applicable for the research purpose through a direct interview or questionnaire constitutes the primary data; however in the research we do employ the use of a questionnaire technique for the purpose of primary data collection.

Questionnaire

It is one of the most reliable means of credibly collecting data which has a reasonably low cost associated hence making it more adoptive for the research, the questionnaire is designed with multiple objective question for the managers of the MNC, to gauge the strategy which were adapted from their general course of business to meet the emerging markets.

Secondary data

The data collected by the prior researchers for their research in the similar field, are the alternate source for the current researcher to fall back on as it provides an insight to the data required, due to the difficulty in collecting data by means of primary sources secondary sources prove to be very useful. There are three secondary sources employed in the research.

Book review

The data collected through the literary sources like articles, newspaper, business magazines, and journals, regarding the strategy of MNC on emerging market, with the availability of most of the literary sources at the university library, business journals , electronic journals accessed through the university portal like Business source premier, Jstor, Emerald, and Google scholar helps in collecting data for the research.

Internet Research

Information retrieved from browsing the website of the MNC’s which would give an insight to the existing market as well as the earlier market data for the past 5 to 10 years providing a new dimension to distinguish and collate data, the information in these website gets updated on regular intervals hence access date is mentioned along with the reference.

Documents

The data compiled from the company’s published documents over the years do provide a fresh perspective to the research

The problems of Data collections

The topic of the research is broad and hence it expands in volume due to the vast field of emerging market and international business strategy employed by different MNC, hence collating data on the emerging market is primarily available in a secondary form of data is voluminous turning out to be a little difficult to narrow down, as the research aims to narrow its parameter of data collection and concentrate on the specific set of goals to imbibe a good quality. The secondary source of data available might not be applicable to research in a larger context and might not provide the answers to the objectives of the research, the other difficulty that might arise would be the response of the questionnaire as it is an uncontrolled variable hence the low response might pose a question on the reliability of the collected data through it and the quality as well, these are a few challenges that pose a formidable threat in the success of the research.

Data Analysis

The collected data through the above means would be aligned in a logical, synchronized and sequential, organizational frame to analyse it and evaluate the data so that the applicable information could be take out from the data, the data analysis would undertake both quantitative and qualitative approaches.

Quantitative method

This approach centres on numbers which are employed as characteristics to quantify data the outcome is numerical form of a recoded data which is further used for statistical analysis, this proves to be a reliable tools providing the numerical data for the empirical study and statistical analysis, this is further classifies into descriptive and inferential.

Descriptive statistics

It constitutes a measure of central tendency which are required in the research like mean median and mode and the measure of variability like standard deviation which would provide a numerical analysis of the research

Inferential statistics

This statistical tool helps to test the hypothesis and the similar findings of the data sample and eliminates unwanted data by means of deduction

With the statistical inference which are drawn out of the questionnaires survey and interviews of the research; the data could be presented in a graphical form, histograms and pie chart, during the course of the research Microsoft word excel and spread sheet could be used for the purpose of diagram representation and these tools will help to evaluate the research.

Qualitative Approach

Qualitative research is explores the meaning rather drawing an inference based on the numerical statistical analysis, hence its approaches include case study interviews focus groups.

Literary criticism – The way the data has to be drafted for the research aiming at the content applicable for the research purpose taking the theory and literature into account and critically evaluating them.

Thematic coding –The data collected is coded or labelled which is to classify data to gather relevant data making it more easily accessible and easy to understand as similar data is grouped in a thematic idea which makes comparison of different cases in respect to the research simpler for the researcher.

Time scale and plan

The research is planned in an organised framework, the planning and scientific collection of data using qualitative and quantitative method and evaluating it, filtering the required content and theories analysing the applicable data to the research, hence the time span is estimated to be 11 weeks , that is broadly classified as 1 weeks for data collection primary as well as 1 week for secondary data and then 1 week to evaluate the relevance then move on to the important part of literature review in the next 2 weeks , methodology of research would be aimed to completed in another 2 weeks data analysis 2 weeks and conclusion and 1 week to review and get peer review to get the better understanding the next week amend changes if required and finally submit within the week hence the research is completed in time and submitted in a effective and efficient manner.

Conclusion

The research topic gives food for thought, as the market is evolving hence it would highlight the changes undertaken by the MNC’s over the period of time in their strategy as in the earlier years Corporate Social Responsibility was not a significant part of the policies and strategy however with the change in time it has been realised the crucial role it plays for every multinational entity and provide comprehensive insight in the functionality and approach, this research will be conducted evaluating the secondary data due to its high authenticity and availability drawing inferences from the different theory applied by the prior researchers and finding new dimensions that is applicable to the times of today as we are pulling out of recession, hence low income countries are the lucrative market and cheap labour source presents an opportunity for the MNC to reap profit and the share knowledge and the country too benefits with the inward Foreign Direct Investment bringing more employment and capital hence the topic of the thesis is dealt with a contemporary approach to provide a fresh perspective.