Internationalisation of Emerging Market Firms Flashcards
Why are domestic firms typically more successful than MNEs in EMs?
- Local knowledge
- Customisation of products and business models
- Government protection of small business
How have EMCs grown
in different economies (1999-2008)?
- EMCs grew 18% domestically compared to MNEs 8% in EMs
- 22% in advanced economies compared to 12%
- 31% in foreign EMs compared to 13%
E.g Positivo holds greatest market share (Brazilian company) in PC market
What are the strengths of EM firms?
- Void/chaotic environment experience
- Political knowledge and expertise
- Strong networking capabilities
- Early movers on home turf
- Strategic and organisational flexibility
What are the weaknesses of EM firms?
- Limited technological and managerial capabilities
- Inefficiency - weak competition
- Low scale economies
- Limited access to market intelligence
What are the types of emerging market MNEs?
World stage aspirant (international diversification broad, private ownership)
Niche entrepreneur (international diversification narrow, private owned)
Commissioned specialist (narrow international diversification, state owned)
Transnational agent (broad international diversification, state owned)
How have emerging market firms grown?
- Gov capital and financing e.g One Belt One Road - fdi help from Chinese gov
- Economic growth
- Globalisation: market access, competition
- Exporting into neighbouring countries: new skills
- Offshoring of production: JVs with developed firms
Why do EM firms internationalise?
- Profit
- Market seeking: population, sales growth
- Reverse innovation: take products to advanced markets
- Outgrown domestic market
- Resources - cheaper inputs
- Market protection
- Bypass restrictions: avoid tariffs, quotas
- Escape domestic voids and constraints, diversification
What is the LLL framework in terms of EM firm internationalisation?
Linkage - ability to build network relationships, possibilities for resource linkages, JVs
Leverage - unique capabilities, creative packaging, business models to overcome voids, skills to serve BOP
Learning - learn knew skills
What are some examples of EM firms and where do they come from?
Nandos, Huawei, Petrobras, Alibaba
61/88 EM fortune global 500 firms (2011) Chinese
How do EM firms fights MNEs?
Strategies depend on:
- Globalisation pressure in the industry - to compete at global level or to localise products
- Transferability of company’s assets abroad: knowledge and capabilities
What are the distinctive capabilities of EM firms?
- Ability to customise products and services - capability of modifying performance to price relationships
- Capability of developing business models that overcome bottlenecks - process innovation capabilities
What are the four strategies to compete with MNEs?
Dodge - sell off, enter a JV, complements or niche products (avoid head on collision)
Defend - use local advantage to focus on aspects where MNEs are weak
Contenders - upgrade capabilities to compete with MNEs
Extend - internationalise into similar markets
What are the different entry strategies for EMs in advanced markets and why is it difficult to replicate business models?
- Easier to expand to EMs as can replicate business model e.g acquisition
- Greenfield typically needed for advanced markets, adaptation
- Low price an advantage when competing against MNEs
How is Tata a good example of a high growth EMC?
- Ability to identify and manage talent amid IVs
- Exploits high quality and low cost Indian technical talent
- Replicated model in other developing markets
- Trained local employees in India or brought in employees from India
What are the pros and cons of greenfield?
Pros - fresh start, cheaper
Cons - slow, retaliatory behaviour, liability of foreignness
