An enterprise operating in more than one country is known to be a Multinational Enterprise or an MNE. The foremost aim of all MNE’s is to globalize their operations. Top managers of large organisations argues that globalization is one of the most critical challenge they face today. Economic globalization refers to the fast increase in the international markets for goods and services and cross border interdependence and integration of production. (Dunning, 1997a).
There exists differences in each countries environment and an MNE needs to understand the business environment in the host country in order to enter the market and do successful business in that economy. Many MNE’s struggle to develop successful strategies for entering the foreign market because of the absence of specialized intermediaries, contract enforcing mechanisms and regulatory systems that have a direct impact on the implementation of strategies used by MNE’s.
Emerging market MNE’s
Developing countries have been the fastest growing market in the world in terms of goods and services. Several MNE’s from the emerging markets have entered and successfully running business in North America and Europe. For example: Tata group of India and China’s Haier group.
The international activity of emerging market firm has undergone a drastic change in the past few years and has seen a phenomenal growth (Guillen and Garcia- canal, 2009; Ramamurti and Singh, 2009) For example: the Aditya Birla group of India started its first international operation from Thailand in 1969, today the company’s value has raised to $32 billion and is operating in 42 nationalities.
The internationalization of emerging market firms is different from that of developed country’s firms and as emerging market firms are gaining importance in the global economy, globalization of these firms have a direct impact on the firms in the developed economy (Khanna and Palepu, 2006). For example: since 2000, the Tata group of India has acquired more than 28 firms of India and abroad including $12 billion acquisition of the European steel manufacturer Corus (Gaur, 2007)
According to The Economist (2006) Emerging market’s exports already accounts for arround 45 % of the worlds total FDI outflow. Therefore, emerging market firms are not only poising threat to home countries but to global markets as well. This aggressive push abroad is motivated by a desire to tap resources, skills markets brand names and increasing global competitiveness (Gaur, Kumar and Singh, 2009)
Because of institutional voids many MNE’s have performed poorly in emerging markets. According to a study, since the 1990’s American corporations have performed better in their home countries than the emerging markets so, they now do most of their business in the home country itself.
Perspectives of strategy
A firm must formulate and implement some strategies in order to globalize its business and enter the foreign market. There are three leading perspectives...