Discuss the strategies of emerging market firms in the face of increased competition in their markets.
What will be an ideal response?
Faced with increased competition, local firms in EMs followed multiple strategies such as concentrating on local adaptation and protecting their market share, venturing into similar markets in order to sustain growth, focusing on niche products to create a competitive advantage or investing in their capabilities to be able to compete with MNEs.
An emerging market firm may sell out if the pressures in the industry to globalize are very high. The company may also be forced to enter a joint venture or focus on a different area within the value chain where the local advantages can be utilized.
In cases where the pressure to globalize are high but the EM firm has competitive advantages which can be transferred abroad, firms can choose to upgrade their capabilities in order to compete with MNEs globally. Such firms can also focus on a specific part of the process and specialize in that area.
Firms with competitive advantages which can be transferred to similar markets can internationalize even when the pressure to globalize in the industry is low. Firms with competitive advantages which can be transferred to similar markets can internationalize even when the pressure to globalize in the industry is low.
Firms operating in industries where the globalization pressures are relatively low and where the company’s competitive assets are customized for the home market can leverage their local advantages and focus on aspects where MNEs are weak. In many industries, local leaders are more successful than the MNEs because they are able to customize products according to the local demand, and customize business models, taking advantage of the local competitive advantages such as low cost labour.
Firms from EMs can also concentrate on niche markets and compete globally in such markets which aren’t saturated and in which the MNEs from developed markets do not possess major competitive advantages.
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