GLOBAL STRATEGIES

MNE's, Emerging Markets and Total Global Strategies

Abstract

This paper is an attempt to explore, critically, whether or not western MNEs can tap into the gigantic emerging markets with their “total global strategies”. Customers from the emerging markets are radically “distant” from customers of western markets. Unwillingness of western MNEs to tailor their strategies to local markets has limited them as high-end niche players, and has allowed various local companies to emerge as threatening rivals. Examples include but are not limited to Grupo Elektra, Marico, Natura and Mahindra Tractors. The failure of Wal Mart in Germany and Starbucks in France also highlights the importance of placing more importance local traditions and norms. It was through gaining and capitalising on the local market knowledge that Baidu and Taobao, in China, were able to beat global giants, Google and eBay, respectively. Nevertheless, research reveals that companies with high intensities of advertising and research and development allow MNEs to pursue global strategies and still succeed in different local markets.

INTRODUCTION3

DISCUSSION4

Four Dimensions of Distance4

Local Companies threathening MNCs in Emerging Markets5

American MNCs failing in Europe: Case of Wal-Mart in Germany and Starbucks in France6

Using Knowledge of Local Markets to beat Google and eBay8

Global Strategies or Regional/Local Strategies: Evidence from China based on Industry based differences9

Global Companies with Regional/Local Strategies11

CONCLUSION12

MNE's, Emerging Markets and Total Global Strategies

Introduction

During the late 1970s and early 1980s, when many MNCs from the developing countries were entering the emerging markets, they had distorted perceptions of these markets. They viewed China, India, Brazil and other developing countries as markets for their old products, and believed that entering these markets would allow them to earn incremental sales from their existing products and squeeze the last bit of profit from the sunset technologies (London & Hart, 2004, p. 15). Therefore, their goal remained to provide “western products and services” to a relatively small group of buyers, who shared similar characteristics with that of a typical consumer from the Western markets. Most MNCs from US and Europe were guided by this narrow and arrogant perspective of imperialism, which reflected in their marketing, operations and distribution strategies. However, as Prahalad & Lieberthal (1998) had proclaimed, rightly so, that this world will soon witness the end of, what they term, “corporate imperialism” (p. 71). Western MNCs can no longer afford to impose western models in these emerging markets, if they want to tap into the real potential of these markets. Despite all the difficulties of operating in the emerging markets, experts agree that in order to maintain their status if not survive, as global companies, they would have no choice but to enter these markets (Beyer & Fening, 2012, p. 35).

There is a wealth of literature concerning MNEs or MNCs, which argues that it is advantageous for these companies to come up with “total global strategies”. When MNCs were targeting customers from different developed countries for growth and expansion, they reaped significant advantages of global strategies since the consumers, more or less, shared the same fundamental ...