EMERGING MARKETS: How Firms from Emerging Economies Fight Back
Market opening throughout emerging economies often means the arrival of multinational
enterprises (MNEs) from developed economies. While MNEs put an enormous amount of
pressure on local firms, MNEs also serve a useful purpose of demonstrating what is possible and
motivating local firms to try harder. Since the best defense is offense, trying harder-in addition
mounting a rigorous defense- usually means to get out of local firms' increasingly crowded
home markets. How do firms from emerging economies fight back? Specifically, how do they
enter foreign markets?
At least four strategic patterns have emerged. The first is to follow the well-known Japanese and
Korean strategies of first establishing a beachhead by exporting something good enough and
then raising quality, perception, and price. By following these steps, Pearl River of China has
dethroned Yamaha to become the largest piano maker in the world. It has also significantly
improved quality so that the market leader Steinway, after first rejecting Pearl River for an
alliance proposal, more recently approached Pearl River to become Steinway's original
equipment manufacturer for its low-end models. Likewise, Mahindra & Mahindra of India solidly
established itself in the American heartland and ended up becoming the world's largest tractor
maker by volume.
A second path is to follow diasporas. To bring Bollywood hits to the diaspora, Reliance Media of
India launched the BIG Cinemas chain in the United States. King of fast food in the Philippines,
Jollibee chased the diaspora by expanding to Hong Kong, Dubai, and southern California. But
joining the mainstream has been hard for companies focusing on the diaspora. More interesting
is a "reverse diaspora" strategy: Corona beer of Mexico, after giving American customers a
happy time when visiting Mexico, successfully chased such customers back to their home
country. Corona is now one of the most frequently served beers in American bars and
restaurants that do not have anything to do with Mexico or Mexican food. In short, Corona has
"gone native" to become a local beer in the US.
Third, some emerging multinationals simply buy Western companies or brands off the shelf.
Before Lenovo purchased the PC division from IBM in 2004, most people in the world, including
a lot of gurus, asked: "IBM PC was purchased by whom?" Now most readers of this book already
knew Lenovo before opening the book. Likewise, Tata Motors of India bought Jaguar Land/nthe US Congress, which labeled Huawei a "national security threat" in the absence of hard
evidence. Undeterred, Huawei became an emerging contender in smartphones, in addition to
strengthening its excellence in telecom equipment. In addition to formal barriers, how to
overcome informal consumer perceptions that typically associate emerging economies with
poor quality is another challenge. For example, cosmetics users in the world do not think of
Brazil highly-or do not think of Brazil at all. Natura of Brazil has no precedents to follow,
because no Brazilian consumer products brands have succeeded outside Latin America.
Highlighting its natural ingredients from the Amazon rainforest, Natura endeavored to tap into
Brazil's positive country-of-origin image of biodiversity. This reigning queen of cosmetics in
Brazil was trying hard to show its charm overseas. Sometimes, governments helped. In an effort
to help their firms climb mountains, in the Western media the Indian government ran the
"Incredible India" campaign and the Taiwanese government the "innovalue" campaign.
In summary, facing an onslaught of MNEs from developed economies, many firms from
emerging economies are determined to fight back by turning up the competitive heat in
developed economies as well as numerous other markets. Many will fail, but some will succeed.
How rivals from developed economies interact with them by competing with, collaborating with,
and/or ignoring them will shape a large part of the future of global competition.
Critical Thinking Questions:
1. Why are firms from emerging economies so eager to expand from their home markets?
2. What distinguishes firm-specific resources and capabilities of some of the winning firms from
emerging economies?
3. ON ETHICS: Are the institution-based barriers in some developed economies fair or unfair?
Your submission should be a minimum of one age of content in length. Please type the
question as well as your answer. Properly cite any references utilized in APA format./n
