Abstract
The MNC Expansion uses a global strategy to enable firms to expand their operations to overseas. The MNC strategy will enable the access of new markets due to the application of specialized skills and new channels of information. The opportunity enables a worldwide presence to enable competitive advantage of firms. The launch of MNC requires a right strategy to build organizational capability in the management of diverse operations in the diverse and complex international market. Researchers of the MNC expansion cite of dissimilar strategies for one to understand the model. For example, the European MNC follows a multinational strategy that focuses on the national differences in the achievement of strategic objectives. Conversely, the revenue from the European MNC comes from the differentiating strategy to respond to the preference of customers and other government regulations. The subsidiaries in the market depend on local innovations so as to identify and respond to need in this level. A local response will lead to low cost on the consumable products related to the culture. The strategy applies a stand alone with no chances of innovation and interaction with other strategies. The article discusses the expansion of MNC in the products and services on offer by the businesses. The paper will construct a matrix to compare three different emerging markets this include the India, China, and Japan markets on the basis of economic, political, environmental, legal, and technological environment. The last section of the paper will perform an evaluation of the emerging market for expansion.
Expanding an MNC
Introduction
American and other developed nations follow an international strategy in the application of MNC expansion. Companies in the West strive to leverage high technologies and innovations to obtain high-tech products and dispatch them to other regions (Web, 2009). Headquarter of a firm retains the decision making objective to the subsidiaries that have no autonomy.
China has the ability of attracting the best multinationals that seek to establish their presence in the world economy. Multinationals play an instrumental role in the evolution of Chinese domestic industry. The country’s domestic players provide a competitive environment to raise stakes in the global aspiration of the brands.
Most of the multinationals move in the inland cities and encounter the challenges of extensive investment options. The country has a new generation of executives in the business industry to enable domestic consumption that focuses on innovation of all sectors in the production of sophisticated goods and services. The business in the nation has grown originally with the focus of economy rebalances that emphasize on domestic consumption since the firms seek outbound opportunities. The use of Mandarin language and other languages to enable the firms in the nation to enable firms extend in the domestic and the international market. The expansion of the firms is a key enabler of growth that provides an employment opportunity to Chinese workforce.
The Chinese market has been able to withstand the global financial crisis. Consequently, the country has economic reform initiatives that are fundamental to end all the global issues. The Chinese policymakers have the capability of carrying out reforms in the country while encountering a larger economy since it has other players such as Brazil, Russia and India. World’s multinationals provide insights in the economic development to provide a reliable source in the country. Other parts of the world are positive towards the economics of the country. Countries recognize the potential of the Chinese potential in entrepreneurship. The next five years will provide the country an economic challenge of tapping to the opportunities while maintaining a strong rate of growth. The country’s foreign multinationals and the domestic firms have the trend of setting up joint ventures. The trends enable the foreign firms to penetrate the interior markets in the third and the fourth ties. The Chinese local industry will also benefit from the assistance to expand overseas. Development will encourage all the parties to produce new products in light of the global crisis.
The availability of new ground for cooperation will enable the multinationals to grow amidst a global economic crisis. The Chinese market has close connections to the multinationals. In the past, firms have delivered economic growth to allow trade and investment. Multinationals have enabled the country to have a rise in the economic share globally from a mere 4 percent to fourteen percent in the GDP. The country’s sales accumulate to USD 32 trillion as the global economy reaches 25 percent (Lindgreen & Maon, 2013). The recent financial meltdown has led to the country rethinking its economic strategy.
The country adopts the open-door policy as an economic stimulus initiative. The policy permits foreign firms to invest in the country by the introduction of new requirements such as licensing and the transfer of technology. Some of the multinationals do not have the conviction that the policy will be the ultimate solution as similar startups enjoy a similar expansion in the economic fronts. In this case, China has to consider the evolution of the multinationals in the view of globalization. The Chinese inland economy indicates that the multinationals rank high in the source product to enable them build additional retail stores. All the inland territories have a GDP of USD 150 billion with a population base of 720 million (Lindgreen & Maon, 2013). The biggest driver of growth in the country appears due to the development of the inland economy. The inland coastal region illustrates a low-cost, high-yield, and fewer fragments trend that will likely challenge the small multinationals to sustain the effort. () assert that multinationals have optio0ns in the China’s inland region. Some of the Asian economies realize their dependence on the Chinese market. The nation depicts a high fiscal stimulus as a source of growth in the early stages of the financial crisis. Growth has recently slowed in the manufacturing sector as the country considers the possibility of diversifying due to rising cost of the trade disagreements. It is possible for the market to emerge quickly since the industry is always ready for change. The slow growth in the economy that can reach 8 percent will still be adequate for the country to provide at least 30 percent of the world’s growth continually until 2017 (Lindgreen & Maon, 2013). The economy of the country boasts of a compelling outlook to compete with the American and the European producers. The relationship between China and the world’s multinationals will grow amidst complexities.
FedEx is one of the world largest firms with operations in many countries in the world. The global presence of the firm in the global manufacturing chain leaves it with a position to observe the role of China in the economy. China has been able to run operation with the firm for 27 years with an office in Shanghai to observe the steady growth of the company. The company remains optimistic of the economic outlook in the long term. China has a dynamic market and has the capacity of fueling development in the global industry. The Go West policies and an increase of migration will benefit the country.
Additionally, the government has been able to improve infrastructure in the third and the fourth tiers. The issue in the country lies in the desire and the ability of continual reform (Lindgreen & Maon, 2013). Some critics resist continual reform to ensure a momentum growth of the economy. A global crisis affects the country’s foreign investment and slows down reforms. An efficient logistic relies on infrastructures such as the highways and the software so as to influence performance in the industry. The country has to provide clarity on the issue surrounding the licensing regimes and the implementation of the policies since they frequently shift. In order to ensure a streamlined growth, the industry needs an efficient regulation. The ability to have fair competition in all the market participants will enable the continual growth of the industry. The liberalization of the aviation market will increase the Chinese airspace for public use. The rapid growth of the country’s infrastructure creates a huge challenge to the business in the local industry. Some of the airports in the remote areas are not utilized maximally. The country has a misalignment of the infrastructural resources. One of the greatest opportunities lies in electronic commerce that has more than 500 million internet users. The middle-class depicts a continual demand of domestic development. The domestic demand of the luxurious goods will lead to the drastic development of fashion products that enter the Chinese market. A high value of goods allows a wider selection to provide reliable transportation.
Tesco is a global Non-Food Sourcing and Logistics Company with its headquartering in United Kingdom. The multinational has annual sales of USD 110 billion (Ekmekci & Ansal, 2009). The company has over 100 outlets in China due to its outlook as a source of demand and supply. The company experiences the challenge of labor costs since the factories run below capacity. Factories respond by looking for other ways to cut costs by introducing lean techniques of manufacturing and the investment of capital equipment. The company is optimistic that the government will cut the export subsidies to develop the domestic economy by establishing long term plans.
The company plans to teach its techniques of innovation to the engineering students in the country to enable the production of innovative products (Ekmekci & Ansal, 2009). The governments will launch efforts to assist the manufacturers to move inland. Multinational factories have the ability of opening new retail outlets in the inland amidst rising production costs. The company focuses on the coastal regions since the places have high demand for the products and have the opportunity of accessing the third tier. Multinationals face the challenge of a tough operating environment due to the production of cheap goods in the Chinese market. In essence, the world views China as low cost export podium. Currently, the costs are rising in the nation so as to provide an expensive business environment. In the light of this, multinationals grapple with the challenge of wage inflation and labor shortages among other issues (Ekmekci & Ansal, 2009). The ageing population changes the cost equation and the offer of cheap-labor as a cost advantage. The Chinese manufacturers face the challenge of investing in capital equipment and the production of new techniques to cut on costs. The manufacturers have to maintain steady prices or cut prices to enable maximum production. In order to ensure continual success, government regulation will assist in the relocation of outlets in the interior parts and spending more in R&D to foster innovation. The government can encourage multinationals by advising them on energy conservation and the configuration of the factories.
Helmth Henning is a trading company with its headquarters in Hong Kong so as to market and distribute high-end products in China. The company benefits from the rapid growth of the super rich in the country. The company has the opportunity of the potential middle class in the demand of their products. The firm employs design, innovation, and sophistication to increase the desire of the Chinese-Middle-Class. The company faces the challenge of frequently replacing the staff that leads to a huge loss in productivity.
References
Ekmekci, U., & Ansal, H. (2009). Determinants of knowledge transfer from foreign direct investment to local supplier firms: the case of turkish automotive industry. Upper Saddle River, N.J.: Routledge.
Lindgreen, A., & Maon, F. (2013). Sustainable Value Chain Management a Research Anthology.. Farnham: Ashgate Publishing Ltd.
Webb, S. E. (2009). Expanding corporate responsibility the role of business in creating sustainable peace and security. Houston, Tex.: Greystone Books ;.
