Bodawala Priyanka Manish Business and its Environment Dr. Racz Matron and Dr. Marta Szabados August 25, 2009. Factors influencing the multinationals and local companies for the market position. INTRODUCTION Couple of years before the policy maker decided to lower down the tariff barriers and to give permission for foreign investment. Multinational companies have started rushing into countries where they wanted to achieve the market position (Arindam K. Bhattacharya and David C.
Michael) The entry of multinationals is good for the country as they bring with them newly products, advanced technology, reduce unemployment, and increase in GDP and many more. But it is not as easy as they think to achieve the market position because their entry is threat for the local companies. As local players and competitors started applying their own policies which multinationals cant copy and they keep their market position stable and to fail the multinational companies from achieving the success.
But there are some cities where multinationals are successful and that place and cities have become the starting point for commencement of business (Rosabeth Moss kanter). Multinationals and local firms for the first time are squaring off in China’s rapidly growing middle market, a critical staging ground for global expansion and the segment from which world beating companies will emerge (Orit Gadiesh, philip Levng and Till Vestring 2008).
In 2008, the Orit Gadiesh, philip Levng and Till Vestring says that the world leader Caterpillar in constructing equipment who started selling its equipment to china market as the Chinese government invested highly in the infrastructure, Caterpillar helped the pave for the growth and modernization in the worlds fastest growing market for construction equipment. But now a Caterpillar is having trouble in making deeper tracks in china.
This is because of the other competitors from Japan and Korea was in the middle market with tool and equipment that cost less. The other side the tranche of the local a tranche of local manufacturers that had previously been focused only on the low end of the market were burrowing up to battle the established players, designing and releasing their own products targeted squarely at middle-market consumers. (Orit Gadiesh, Philip Levng and Till Vestring 2008 p. 82)
A critical new battleground is emerging for companies seeking to establish, sustain, or expand their presence in China: It’s the “good-enough” market segment, home of reliable-enough products at low-enough prices to attract the cream of China’s fast-growing cohort of midlevel consumers (Orit Gadiesh, Philip Levng and Till Vestring 2008 p. 82). The newly start-up companies developing and releasing new products and services should not necessarily need to aim for perfection to make advanced against established players and the phrase suggested for them is “good enough”.
These forward-thinking companies (multinational and domestic firms alike) are doing more than just secure the share of wallet and share of mind in China’s rapidly expanding middle market – in and of itself a major achievement. They are sharpening themselves for worldwide competition tomorrow: They’re building the scale, expertise, and business capabilities they’ll need to export their China offerings to other large emerging markets (India and Brazil, for instance) and ultimately, to the developed markets (Orit Gadiesh, philip Levng and Till Vestring 2008).
Local Chinese competitors are becoming the biggest challenge to the multinationals searching to profit their business ventures in china (Orit Gadiesh, Philip Levng and Till Vestring 2008 p. 83). It also says that multinationals and Chinese companies should enter the platform for growth and that how to compete effectively in the good enough market. Colgate and Palmolive made similar moves on the China as it entered in early 1990s with largest toothpaste producer of China and a decade later he achieved leader for toothbrush and want to scale it up and then increase its production process in other parts of the world.
As a result the revenue was doubled than revenue in china between 1998 and 2005 and now exports the China’s product to 70 countries (Orit Gadiesh, Philip Levng and Till Vestring 2008 p. 82). Foreign companies dealing with good enough decision in china will need to consider the factors like are companies still achieving high returns or returns eroding? Another is company’s market position – Are you a leader or niche player? (Orit Gadiesh, Philip Levng and Till Vestring p. 83). Than perform through out the market and competitor analysis.
For company to expand into middle market this knowledge will have important decision about it, as to land as an existing player in that space or should come up with a good-enough partner. Managers of multinationals to understand between the china’s premium and good enough market segments should carefully conduct the market analysis. Arindam K. Bhattacharya and David C. Michael (2008) says that tariff barriers have been lowered and foreign investment have been permitted, multinationals have rushed into countries and it appeared like they would quickly defeat the local rival and capture the market for every product or services.
Poor nations like Brazil, Mexico, India, and Russia were assuring that local enterprise would be washed out by global goliaths in one shoot dive. But the smart domestic enterprises are holding more than there own in the appearance of foreign competition. They have become the market leaders or taking up with them by restricting off challenges from Multinational Corporation in the middle of the business, and before foreign players they have captured new opportunities. Today many of them have control over the market because of their strategies and performance.
The few local companies that have defend the foreign competition during past five years. In India Bharti Airtel has taken on Hutchison telecom, which sold its Indian operation to Vodafone in 2007, and emerged as a leader in cellular telephone market. The Group Elektra, one of the country’s biggest retail networks has taken battle to wal-mart. The biggest producer of the dairy products Wimm-Bill-Dann of Russia has defeats the DANONE and Coca-Cola. The world’s largest software provider SAR has been left behind by the enterprise resource planning (EPR) from Brazil (Arindam K.
Bhattacharya and David C. Michael p. 2). The local companies success in the developed world figures out well for the many those seeking for the growth and profit in emerging markets. Multinational companies cant deal with the strategies they applied in their home market to developing countries market because of the expansive of the emerging markets. Multinationals assumes that before existing their business model and starts delivering results in developing countries it’s just a matter of time. For several reasons these misconception is deadly.
Developing economies are neither behind nor show the sign of assembling with the developed ones. The emerging markets are different in some ways and advanced in others. The unique market is created by developing countries say it the telecommunication infrastructure of China is newer and far better than that in most part of the United States. An upper class educated in India who command international wages increase in a nation with rates of illiteracy. Emerging markets creates an obstacles and opportunities with identical strategies.
A simple example like in India online customer service is useless due to lack of Internet access but due to wireless telecommunication networks and common use of mobiles has allowed companies to help the customers in rural areas also through text message and handset based on Internet portals. Those companies are likely to be succeed that are unfazed by such contradiction. The six common strands were found about successful of emerging are- the existing products do not force local leaders.
They modify the products and services as per the requirement of different consumers and they goes after scope of economies. Two, their business model have stopped affecting and yield a competitive advantage in the process. Three, they started Utilizing the latest technologies by developing or buying them. Four, the innovative ways to benefit from low cost labor pools and to conquer shortages of skilled talent is found by homegrown. Five they go national as soon as possible to prevent regional rivals from challenging them.
Finally, the domestic dynamos possess management skills and talent that multinational companies often underestimate (Arindam K. Bhattacharya and David C. Michael p. 4). It also says that multinationals can also beat locals at their own game to succeed on local champions by overlooking two fronts. First that they must copy some strategies of local companies and second they must develop other strategies which local companies cant copy easily (Arindam K. Bhattacharya and David C. Michael p. 19). As per Steven Prokesh (2009) the story behind the success of GE in developing countries is different.
The program as training for development of leadership, innovation and growth (LIG) was held with a great intention and focusing on expanding business and creating new ones than on making an achievement. The effectiveness of LIG training admit five reasons (Steven Prokesh 2009 p. 98): ( An opportunity is given to manager to reach the unity on the barriers and how to best to attack on it. ( To change hard barriers (organizational structure, capabilities and resources) and soft (how the members of leadership team of individual and group should behave and spend their time) were encourage to participants. To balance the short term and long term or managing simultaneously the present and future was addressed explicitly by the challenge of eternal management. (The new concept of that would make people look at their businesses and themselves differently; the change of common vocabulary has been created for the daily communication inside and across GE’s business. ( For drafting an action plan for institution change in its business and would feel committed to deliver on it was structured as a team emerge.
After this LIG program it was discovered that revenue was increased by 9% in 2007. The goal of growing organically twice or thrice initiatives like eco-imagination (developing solution to clean water and energy issues) and imaginations breakthroughs (stretch ideas to become $1 billion business). They were producing billions of dollars in revenues and rapidly emerging markets generates $33. 4 billion in revenue in 2007, which help the sales to push outside the United States to more than half of GE’s total for the first time (Steven Prokesh 2009 p. 9) Spending more and more on focusing on research and development and had greatly increased the flow of technology from GE’s laboratories For external focus thousands of the marketers have been hired. The main value of team training is to approach address the internal individual focused by traditional management education programs. To identify the growth the process of HR helps value in needs of individual improvement, but it fails to recognize that other members can have differing notation.
For example, someone who needs to become more inclusive might be on a team that doesn’t really value a collective style or not interested in sharing information broadly. In this kind of environment the individual may find it difficult to change his or her ways. The same is true for new ideas or techniques For example. To make company more focused on customers they have method of teaching its marketing and sales folks customer segmentation. But the managers who didn’t attend the training will not understand the value of the effort will returning to their businesses, having been frustration in implementing what they have learned.
The senior manger of GE also creates a supportive climate before attending the LIG program for creating interest for the team’s success. The manager of having 21 years of experience tells that as program starts and time pass the number of questions starts clicking in the mind if teams asking themselves were- how do we hype up? Are we really as good as we can be? Are we following the way we think? Are we heading the way we think it should be convert in order to achieve growth? And this is because of the quality of innovative organization (Steven Prokesh 2009 p. 102)
The team members were pleasantly surprised to find themselves largely line up with the innovative organizations than 10 innovative and 5 stagnant organizations. They learned from the presentation of John Dineen In order to increase the rate of organic growth they have to rethink about how and where the individual and collectively they should spent their time and this is the other vision of leaders. If we do things in the same way we were doing than we will get the same result we are getting now but if we really want to do the way we are thinking than we have to operate in a different way.
So for that everything should be restructure like organization, look for different talents change roles. And the biggest change did was that gave more responsibility to the core business to the layer below. They reorganized the functions such as sales and engineering and gave local teams more authority so leadership could bring out themselves from the present problem and spend more time on how to overcome it so that we can have better future. The growth initiatives made them see that they have to qualify the people and encourage them to do something new and help to develop new skills.
For the leadership they focused mainly on external means to define success through customer’s eyes. Next, the clear thinkers who find the solution to the complex problem and communicate it clear with consistent priorities. Than comes the imagination who generates new and creative ideas, who takes risk on people as well as ideas. Than comes the inclusiveness in team player by respecting others thinking and builds loyalty and commitment and finally should have depth knowledge and experience as expertise have (Steven Prokesh 2009 p. 103).
This is the success path of GE in developed as well as developed countries. Rosa Beth Moss Kanter (2003) wondered that global forces could be collect to support and develop communities rather than break them down. The focus was on five American communities Boston, Cleveland, Miami, Seattle and Spartanburg. Concept, competence and connection are three ways to success and greatest assets to any business. The world-class center of thinkers, makers and traders can boom any region. The success of world class manufacturing of Spartanburg-Greenville was a big example.
The four critical factors for success are visionary leadership, a friendly business climate, a commitment of training and spirit collaboration between business and local government and among businesses (Rosa Beth Moss Kanter 2003 p. 1) The presence of foreign competitors in domestic markets has Complete change competitive outlook and businesses to rethink about the strategies and structure to reach beyond traditional boundaries. To exploit international growth market or to become the world-class even only if to retain local customers the small and mid size companies are joining the corporate giants.
Businesses must know how to response to needs of communities to avoid the clash between global economies interest and local political interest. And how to connect the man of the world and locals and how to create a culture to attract easygoing companies. Globalization is not the biggest danger but isolationism and protectionism is. The best way to preserve the control for communities is to become more globally competitive. The five local communities were in trouble everyday to make and sell goods and services.
Than the Rosabeth found the new way of success that in industrial economy place plays an important role as it gives the control over the production, capital, labor, materials. The command over an intangible asset makes the customers loyal and these assets are competence, concepts and connections. Today place can provide at least one of these resources to company. For deriving 3cs there are several ways from the place they are located. Regions can be superior development for sites foe concept because of innovators can flourish there came into new contacts with new way of thinking and find good support for the best business.
For the production competences by maintaining high standard quality with trained workforce is distinguish by the regions. They can provide global business connection with partners link with market. Places can connect the local population to the global economy in three ways as thinkers specialize in concept, markers are especially competent in execution and traders specialize in connection. Spartanburg-Greenville has meets it ability for world –class manufacturers through combination of local and foreign leadership.
Their success comes from the second tangible assets competence. Globally this cites have derived benefits as makers by superiority in producing goods. The region has diversified economic base in automobiles, metalworking, textiles and high technology. For more than 215 companies from 18 countries in home of upstate, 74 US head quarters here ((Rosa Beth Moss Kanter 2003 pp. 3-4) Te largest manufacturing employer is Michelin North America, which is subsidiary France Michelin. The first manufacturing facility of BMW was announced outside Germany in Spartanburg country.
Turkey after long time Turkey brings him to a bank and introduced to community leaders. Turkey was sometimes criticized for paying more attention to investors outside the local companies, but his steady paid off in job growth that ultimately benefited to local suppliers from retailers to crews ((Rosa Beth Moss Kanter 2003 p. 4) Spartanburg was the first of the two cities to catch the foreign wave with the set of midsize companies too established and the climate of upstate was beneficent to long term outside investment and to attract the innovative companies.
So when local place is very helpful and giving a large profit with large business than why to go to another countries to merge with them instead let them come to local community and join. Pankaj Ghemwat And Thomas Hovt (2009) says that western companies are interested in emerging markets especially in China and India. But the companies of developing countries are beating those companies that think of themselves as next multinationals and pushing out from their home bases to establish global presence if not important. Than what kind of multinationals emerging is going to prevail globally?
Industry characters will sort the winners from the losers at least in china as established MNCs continues to dominate the knowledge and brand intensive business whereas companies of Chinese keep advantage of production in industries with logistic matter and are moving out of home market successful. Local players make their own game and some challengers of emerging market go beyond their supposedly more practically competitors in knowledge, and brand intensive industries. From this the lesson is being learned to make right decision for the company.
Being close to the market can make product level weak especially if consumption habit of local customers is unique. Google and eBay were early leaders in china but overtaken by baidu and toabao. Knowledge of customers helps you spot opportunities to collect additional services and product in which one has an advantage (Pankaj Ghemawat and Thomas Havt 2009 p. 83). Like in India demand for wind energy is growing rapidly putting power generators under pressure to produce it fast. Local companies are not always favored by market evolution. P has been successful because of its uniqueness, which Chinese competitors can’t do.
But Chinese companies are strongest at industries where high proportion of cost structure and capital goes to production and logistic where product functionality, customer needs and design needs less frequently. With low cost in labor and material with ability to manage the large scale production facilities as well as political power area (Pankaj Ghemwat and Thomas Havt 2009 p. 87). According to (Steven prokesh 2009 p. 102) The growth culture is being created to keep building the future by the program of LIG to make them capable for – ( Involvement to feel connected. Freedom so team members feels free to try a new approach to their work. ( Trust so members feel safe about sharing the ideas. ( Idea time to think about and develop new ideas. ( Playfulness so team members feel workplace as easygoing, fun and relaxed. ( Team members encourage one another’s idea. ( Team members constructively discuss and challenge one another’s idea and approaches. ( Teams members can take make decision and take action in face of uncertainty. This way the members are trained to create a new idea, which brings a future benefit in home and host countries, which is beneficial to consumers also.
So that they create new business ideas with innovation and expanding in a new markets. (Orit Gadiesh, Philip Leveng and Till Vestring September 2008 p. 85) suggest that should we enter the middle market? This is because multinationals thinks that before entering the middle market of china one need to consider the attractiveness of premium segment and their current market position. Chinese consumers like individual, companies, business and government are less interested in selling the premium international products. As they think that brand, innovation and quality stands no difference than the products of Chinese industries.
There is no differentiation done between these products by the customers CONCLUSION According to me the place plays an important role in the commencement of business as it is said that the some cites were facing the problem to make and sell the products in their community and that place was successful for multinational companies and for the same city also as we saw for the Spartanburg and Grenville as a good example for the world class manufacturing. But the place only doesn’t play an important role with place there should be good innovative ideas with good trained members for the success.
So the program of the LIG is very successful as GE increased its revenue by 9% as the members of GE took it seriously. The factor like thinkers, makers and traders also plays the good path for the success. As there are some local companies that are not allowing the multinational companies at success due to the factors and strategies applied by them so in this type of case the multinational companies should think one step ahead of the local companies and should make strategies which local companies cant copy it.
And should try to beat them by applying their own game like they should find the strategies of locals and than should apply the different strategy that brings the consumers and success in their way. Before entering the one should have good and dept knowledge of the of the market they going to enter with careful analysis about the market condition and strategies applied by the local competitors. Reverences: Arindam K. Bhattacharya and David C. Michael (2008). How local companies keep multinational companies at bay? : Harvard Business Review, p. 85-95.
Orit Gadiesh, Philip levng and Till vestring (2008). The battle for china’s good- enough market: Harvard Business Review, p. 80-91. Pankaj Ghemawat and Thomas Hovt (2008). Tomorrow’s global giant? Not the usual suspect: Harvard Business Review. P. 80-89 Rosabeth Moss Kanter (2003). Thriving locally in the global economy: Harvard Business Review, p. 10-16 Steven Prokesh (2009). How GE teaches the team to lead change: Transforming leaders- Harvard Business Review, urn Public Problems to Private Account (Classic), , Turn Public Problems to Private Account (Classic), pp. 99-106.