Sample: Implementation of International Business Strategy, Fundamental business problems
2.4.2 Fundamental business problems
It is to be noted that the market system of these emerging country markets is growth oriented, including strong and unevenly distributed local demand. But it is also uncertain, turbulent and messy (Jansson, 2007). This business environment is relationship oriented, embedded, holistic, social, and reforming and institution building. Relationships are always important in business, but they are even more so in emerging country markets, which therefore can be characterized as ‘network societies’. The situation of ‘everything influences everything else’ is of particular importance in international business as a major distinction between emerging country markets and mature markets in the EU or in North America (ibid.). In the latter markets, societal institutions are more established, making it possible to separate markets from society to a larger degree. This is characterized as ‘embeddedness’, which means that society is divided into various sections that are embedded into each other. The MNC, for example, is embedded into the market, which in turn is embedded into society at large. Another distinction is the faster change, which makes the business environment more complex, more turbulent, more uncertain and risky compared to the environment of mature Western markets (Ritchie, 2003). This uncertainty is often felt even more strongly by Western firms that usually have less experience of markets in emerging economies, both on a general basis and in terms of how they differ among themselves. Some major strategic business problems faced in emerging country markets are:
- How to analyze the different, varying, and changing markets, e.g. the product/service market, the financial market and the labor market.
- How to untangle the embedded markets.
- How to relate to the emerging and reformed formal institutions influencing business.
- How to relate to the influences from the emerging mixes of traditional local culture and modern global culture.
- What strategy to apply in different sections of the transforming society.
- How to deal with governments that play such an important role for business in these markets, and where the role is changing throughout the reform process.
- How to deal with the grave social and natural environmental problems in these countries that are represented by emerging social groups, e.g. various non-governmental organizations (NGOs).
An MNC’s ability to cope with such problems is critical in successfully managing business operations in these markets. MNCs have gained experience from operating in emerging country markets and solving problems of this type as demonstrated by the many studies (Schutte, 1999). However, research mainly indicates that MNCs still base their business in emerging country markets too much on their experience from Western markets, one reason being a lack of business models valid for emerging country markets. There is no shortage of article and books on how to do business in these markets, especially regarding initial marketing problems or more traditional problems faced in these countries (e.g. cooperation through joint venture). But there is a gap in literature as to provide these firms with some strategic business models for international business in emerging country markets, especially focusing on the specific business problems there as well as on the problems and strategies’ of already established forms rather than on initial establishment problems. There is also a lot of literature available on how to do business in specific emerging country markets, from simple business guides to international management books. But there are few attempts to develop general models that can be used in most of these markets.
This literature gap will be filled by the present research by getting first hand information from the international companies operating or planning to operate in Indian markets. These companies will provide an idea about the practical problems as well as the efficient and successful strategic models that have prove to be effective enough to manage operations in an emerging country market like India so as to ensure a sustainable future in the country. Certainly, MNCs operate in foreign environments, but most of these are not so foreign as to necessitate finding other ways to investigate and analyze environments in order to be able to adapt their strategy and organization. The fundamental dilemma of local adaptation versus global integration becomes different and more serious: How should the company act locally and think globally in market situations that are so different from each other and when situations are rapidly changing.
The discussion so far clearly demonstrates the critical importance of knowing about the environment of emerging country markets in order to be able to understand, analyze, form and execute business operations in this international context. The issue of local adaptation implies this; for example, how much the MNC should adapt operations to the different international environment or build global competitiveness from local sources. As discussed in above sections, this is particularly true for the business environment in emerging country markets, since the differences from Western economies are of such of magnitude to entail very different business situations. Thus main basic condition implies that the environment constitutes the basis of international business strategy, creating a need to develop this factor as a foundation for business operations in emerging country markets.
It has been discussed by Ger (2000) that the need of national responsiveness or local adaptation due to variation in global environments is the basic characteristic of international business strategy in emerging country markets. This is also true for the need to integrate various strategic activities globally, for example through standardization.
- 2.1 Introduction
- 2.2 International Business and strategy
- 2.2.1 Environment of international business and its significance
- 2.3 Linkage effect of international with local players
- 2.4 Internationalization in emerging country markets
- 2.4.1 Major strategic issues for multinational corporations
- 2.4.2 Fundamental business problems
- 2.5 MNC operations in Indian markets
- 2.6 Summary
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