What are some of the advantages of multinationals from emerging markets when compared to companies from developed markets?

Question

What will be an ideal response?

Answer 1

A major advantage of the EM firms both in their domestic markets and in similar international markets is their local know-how and deep understanding of the consumers. In fact, the ability of EM firms to meet the demands of the local customer more efficiently than the MNEs from developed markets has often been cited as a reason for the limited success of the MNEs in EMs. In competing with MNEs, many EM firms make the competition irrelevant by answering the local customer needs more effectively by using their knowledge of the market. Foreign firms in EMs often concentrate on high-end consumers because MNEs’ cost structure and the standardized nature of product offerings limit their target market.

Often EM firms have higher production efficiency than MNEs from developed markets, due to their ability to optimize the production processes in EM conditions (Ramamurti, 2008). Firms from EMs often use the availability of low-cost labour as an advantage and rely less on automation.

Institutional voids or the ability to work around the institutional voids can become an advantage for EM firms. Institutional intermediaries in developed markets provide a large base of services such as providing funds, analysing information, and providing services during transactions. Such services often require local know-how such as culture, language, or regulations. In contrast, in EMs, intermediaries which provide information, capital and supporting activities within the value chain, are either non-existent or are in the growth stage. EM firms, then, have established their operations in ways that minimize issues stemming from institutional inefficiencies. For example, local firms can also access local talent easily and select the highly skilled personnel, while foreign MNEs often experience problems in selecting and employing the right talent. Moreover, large EM firms and business groups have often established in-house training programs to build a talent pool and can overcome the challenges associated with finding skilled labour.

In EMs networks can provide access to resources in the presence of market imperfections. Networks can also constitute advantages for EM firms both in the domestic economy and in internationalization.

Many firms from EMs are latecomers. Latecomer advantages can be exploited via several strategies such as taking advantage of changing consumer preferences, benchmarking against established industry parameters, investing in new technology, and by utilizing improved information dissemination channels to buffer demand.