Successes, problems of multinational enterprises emerging markets.

Solution Preview

Multinational Enterprises (MNEs)

Successes of MNEs

There are various success factors those assist MNEs to grab the opportunities of emerging markets. These success factors are as follow:

Growing economy of emerging markets: Growing economy of developing countries is a key success factor for MNEs to utilize the opportunities of emerging market. In current scenario, GDP of several developing countries is more than $14 trillion that is as big as US economy (Kuil, 2008). As the GDP and economic potion of developing countries is continuously growing, the MNEs have huge opportunities in developing countries to become successful and earn good profit.

Availability of excellently educated workers at low pay: Education system of developing nations is growing rapidly. Availability of excellently educated workers at low pay provides an advantageous impact on the success of MNEs (Kuil, 2008). MNEs can attract local labour by offering high salary in comparison to local players. It is necessary for the MNEs to maintain the ration of operational expenses and earning to maintain the profitability, thus the proposed salary for local labour would be less than of developed countries' workers.

Opportunity for low-cost production in emerging markets: In emerging markets, MNEs have an opportunity of low-cost production (Luo, 2003). Low pay production process and talented workers allow MNEs to reduce the operation expenses and increase profit margin. This way, MNEs can save organizational cost that leads to competitive advantage in global arena (Fernández, & Underwood, 2006). In contrast, in developed countries, there is high pay to workers, high transportation cost and increase in other expenses.

Financial and technological soundness of MNEs: The key success factor of MNEs is that they are financial and technological competent in comparison to local players of emerging or developing countries (Kuil, 2008). It assists to MNEs for capturing opportunities of emerging market.

Similarly, technological advancement leads to MNEs for effective supply chain management among its subsidiaries and also assists for effective relationship management (Luo, 2000).

Availability of larger resources: MNEs have larger resources to compete with local and international players (Fernández, & Underwood, 2006). It has availability of resources from domestic and international market for continuing operations of the organization.

Use of Joint venture for market expansion: To grab the opportunities of emerging market such as China, India, Brazil, Mexico etc., most of MNEs use joint venture as a tool of expansion (Luo, 2003). For example, ...