International Strategy of Emerging Market Firms

Absorbing Global Knowledge and Building Competitive Advantage

Andrei Panibratov

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781317447474
• Edition: 1
• Topic: Volkswirtschaftslehre
• Subtopic: Internationale Wirtschaftswissenschaften

Emerging economies are expected to be in the driver's seat of the global economy in the medium and long term. Large multinational corporations will account for much of this activity.

In this textbook, Andrei Panibratov explains how emerging market firms accumulate and exploit market knowledge to develop competitive advantages whilst operating globally. Chapters dedicated to the key emerging economies - Brazil, Russia, India and China (BRIC) - are enhanced by detailed case studies of large firms' activities. The book is divided into four parts, focusing on the following:

• An outline of the relevant terminology and the context of the international strategy of emerging market firms, providing an introductory foundation for the whole book.
• A guide to the evolution of perspectives regarding international strategy, designed to illustrate the changes and trends in the recent academic research on internationalization.
• A country-by-country illustration of the internationalization of BRIC economies and firms, providing an overall picture of each country's global integration, outward investments, and strategies.
• The concepts and practices behind the strategies employed by different firms.

Written by an established international business scholar, this book is essential reading for students of international strategy who wish to understand the importance of the emerging economies.

Part I
Contemporary meaning and context for international business

1
Four questions about international strategy

International business has mimicked international air travel. Fifty years ago, flying abroad was a private club, with a few gentleman operators, sophisticated service and a mostly elite clientele. Companies operating internationally were also a select few. As international business activity turned into its current maelstrom of frenetic activity over the past decades, the strategies for doing international business also became more complex.

This is reflected in the number of textbooks that cover topics such as emerging markets and emerging multinational enterprises, the volatility of economic conditions and distance between markets (both physical and institutional), the institutional voids to emerging multinational enterprises’ competitive advantages and the role of government in the internationalization of emerging market firms. These books vary in their definitions of international business (IB) and international strategy (IS), and more specifically in their recognition of the importance of emerging economies (EEs), and their perspective on emerging market firms (EMFs) or emerging multinational enterprises (EMNEs).

The basics of international business are well covered by two books. The first, Alain Verbeke’s International Business Strategy (2013), combines analytical rigor and practical managerial insight on the functioning of multinationals (MNEs). With a critical view of important theoretical articles, he shows how these can be applied by real companies engaged in international expansion, especially when entering unfamiliar, distant markets. For Verbeke, international strategy means effectively and efficiently matching company strengths with the opportunities and challenges found in geographically dispersed environments.

The second book, David Collis’s International Strategy: Context, Concepts and Implications (2014), examines how the heterogeneity of markets, the volatility of economic conditions, the increased scale of activities generated by global expansion and other phenomena create tensions and trade-offs for firms. Which product should be offered abroad? In which countries? Where should various activities be located? How can operations across the globe be organized best? For Collis, international strategy is how multinationals create value across countries and what principles and constraints guide their decisions.

The emerging market perspective is introduced in two books worth mentioning. The first, Yadong Luo’s Multinational Enterprises in Emerging Markets (2002), provides a series of lessons on how to reap maximum returns while mitigating related risks arising from the economic, socio-cultural and regulatory environments of emerging markets. The author covers critical issues for emerging markets: government policy, corruption and personal networking, liability of foreignness and more. The book is empirically grounded on case studies including Walmart in Mexico, Sony in Poland and Brazil and Philip Morris in Russia.

The second book, Tarun Khanna’s and Krishna Palepu’s Winning in Emerging Markets: A Road Map for Strategy and Execution (2010), advances the discussion about emerging markets themselves and how organizations can best leverage the potential of these countries. The authors argue that proper market evaluation is more than collecting data points related to size, population and growth potential. In fact, they suggest that firms should first assess the area’s lack of institutional infrastructure and then formulate strategies around what the authors call institutional voids that may benefit the firm. Such voids are the primary exploitable characteristic of emerging markets, and even though they mean challenges, they also provide major opportunities for both multinationals and local companies.

The environment for international business is reflected in three other books worth mentioning. Institutional Theory in International Business and Management (2012), edited by Laszlo Tihanyi, Timothy Michael Devinney and Torben Pedersen, assembles the most prominent journal articles from recent years. The main focus is on institutional theory, as opposed to transaction cost theory and neoclassical economics, leading to the suggestion of a new theoretical framework regarding the roles of institutions in international business.

Another collection of articles is gathered in International Business: New Challenges, New Forms, New Perspectives (2012) edited by Simon Harris, Olli Kuivalainen and Veselina Stoyanova (2012). The book combines existing studies with new in-depth knowledge about some recent challenges for international businesses. It also presents new perspectives from the experience of successful business experts in managing large international projects, the issues faced and the strategies used to confront them.

Leslie Hamilton and Philip Webster in The International Business Environment (2015) delve into the challenges of the international business environment. The authors define this environment as a heady mix of dynamic socio-cultural, technological, political, legal and ecological factors, and identify the core issues faced by firms. Case studies are sourced from many countries, including emerging markets in Africa, South America and Asia. Moreover, these case studies are updated to include recent events such as the Arab Spring, economic sanctions against Russia or changes in specific global market sectors.

Among these books, even those including emerging market perspectives, the emerging star remains China, with India, Brazil and other emerging economies of South Asia, Latin America and sub-Saharan Africa explored to a lesser extent. Russia and its new breed of multinationals remains largely behind the scenes, despite Russia’s huge size, substantial inbound foreign investment and active foreign investment and colorful institutional environment.

Unleashing Russia’s Business Potential: Lessons from the Regions for Building Market Institutions (2002), edited by Harry Broadman, analyzes the Russian market and its institutional environment. The book is based on in-depth case studies of more than seventy companies across Russia. It addresses four key areas marked by institutional influence: the policy structure governing corporate competition and market structure; the regulatory regime governing the price, supply and access to local infrastructure services; the access to corporate finance in regional markets; and the legal system for resolving commercial disputes.

One of my previous books, Russian Multinationals: From Regional Supremacy to Global Lead (2012) focuses on Russian multinationals and emphasizes the role they play in the world economy. The variety of strategies and policies is depicted with case studies from the oil & gas, metallurgy, banking and high-tech industries. The influence of institutions on these companies is examined, with particular attention paid to special treatment from the Russian government and the consequences of government involvement on international results.

This short bibliographical summary illustrates how scholars have switched their focus from international strategy to internationalization. The key argument behind this is that while strategy is mainly the process, internationalization covers both process and phenomenon. Sometimes it is easy to understand what emerging multinationals do (what their strategy is) but difficult to understand why they do it (the motivations and resources behind their international expansion). As a result, although both developed and emerging market firms may follow similar strategies, their internationalizations will differ.

In this book, international strategy is closely linked to emerging economies and multinational companies from emerging countries. Moreover, our empirical background extends to firms or...