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Implications For International Firms In Emerging And Developing Markets:

1939 words - 8 pages

Comprising a significant section of the global economy, including approximately 4.8 billion people Emerging markets I are seen in recent times as being an particularly important growth source for multinational corporations (Akbar and Samii, 2005). Emerging market expansions are attractive strategies for multinational corporations due to the lure of potential capital gain and further expansion, however there are several risks associated with the entry into these emerging markets in which there are several implications for multinational corporations. Environmental market characteristics are important factors of firms looking to internationalise, as they pose many significant threats and opportunities on business activity (O'Cass and Julian, 2003). Legal, political, cultural and economic factors are key elements of risk in which impose implications on firms conducting multinational business. These external environment factors may significantly disrupt the strategic direction of the business (Witold and Zelner, 2010), highlighting the importance of international business firms to analyse the influences and potential implications of these market factors.

An important factor in which, there are many implications for international business firms is that of cultural differences between nations. Culture may been seen as an all encompassing system of value, normalities and beliefs that are shared among a group, organisation or institution that forms a basis for living or work (Linge, 2011). Cultural differences pose many implications for international firms doing business within foreign nations, ranging from language barriers to differences in education (Taylor, 2014). The cultural dimensions as proposed by Hofstede highlight the significant cultural variants when analysing and comparing emerging and developing economies with the advanced economic markets. Hofstede proposed that the differences in culture across markets might be compared through the dimensions of: power distance, individualism, masculinity, uncertainty avoidance and later long term orientation (Soares, Farhangmehr and Shoham, 2007) ((Hofstede and Bond, 1984) (Rafiee and Sarabdeen, 2012). Power distance reflects the authority relations within an economy in which, we look at the extent to which the influences of hierarchy and power inequalities in societies as well as institutions or organisations (Hofstede and Bond, 1984) (Soares, Farhangmehr and Shoham, 2007). Evidence from previous studies suggest that emerging and developing markets have higher power distance scores then those of advanced economies, in which, the BRIC countries of Brazil, India, Russia and China all received power distance scores above those of the united states and the world average (Taylor, 2014) (Mishra, 2008). Uncertainty avoidance is the next key cultural dimension particularly relevant to emerging market studies and the particular cultural difference evident when comparing advanced and emerging market economies,...

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