MNE's from developed and developing companies

Introduction

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...

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...under this concept and strategy of establishing a wholly owned subsidiary in the host country to enter into that market an MNE conducts its business operations in the foreign market in the same way as it operates in home country. Although some environmental factors governing in the host country like culture, society, etc. that may sometimes make it difficult to transfer the same practices that a company do in home country to the host country.

For example: Apple Inc. is a company based in the United States with its subsidiaries located in other countries.

4. Low cost strategies

MNE’s in developed economies do not face financial problems for entering into emerging markets due to availability of low cost of manufacturing equipments, materials, skilled labours and trained managers whereas the opposite applies to the emerging markets entering into developed economies.