An important ground of international business activities of multinational corporations is the emerging country markets (Reddy, 2008). The phenomenon of internationalization of firms is following a new phenomenon where new markets of China, India, Russia and central and Eastern Europe are seen as an attractive destination for firms operating in Western matured markets to set up their business. The opening up of China and India has resulted in this new wave of internationalization (ibid.). The MNCs have taken advantage of the lucrative opportunities created by this growth by investing in emerging country markets. For instance the rise of China as a major economic power in Asia is a major world event which is now turning the country into one big factory for the world, influencing trade and FDI flows, and inert alia, giving multiplier effects in Asia (Pangarkar and Wu, 2006)). Emerging country markets became the biggest destination for FDI form the mid-1990s to 2002, mainly being concentrated in East Asia but also with major increases in Eastern Europe and India in recent years (ibid.). For the Western MNCs this meant a drastic and rapid change in their international business environment and new conditions for their global strategies and organization. They changed their priorities, investing heavily in these countries by setting up new businesses or expanding existing businesses, increasing their engagement in these emerging markets considerably (Ritchie, 2003). From their main activities being mainly concentrated in their ‘home bases’ in Western Europe, Japan and North America, they now became much more global and spread throughout the world. Although many MNCs have some previous experience of doing business in emerging country markets, the magnitude of the shift meant this was a new strategic situation for them (Ger, 2000). They were now operating on a much larger scale in countries that are different from a business point of view compared to what they were used to do at ‘home’. And here for the first time, they competed head on with new and fairly unknown competitors, for example many Japanese, Korean, Indian and Chinese firms or newly restructured and privatized domestic companies (Moon, 2009). Thus they were now operating in another business environment, of which they had less experience, learning that business systems in emerging country markets work in a different way from Western business systems.
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