emerging market
A Look into The Advancement Of Emerging Firms Into New Markets: A Case Of Oppo
Instructions:-
In 2500 words, students are required to critically discuss the following topic:
Using an example of an MNC from an emerging market, present an analysis of the opportunities and threats that globalisation creates for decision-makers. What are the main lessons international business managers can learn about the interplay between home and host country differences in achieving success?
At a minimum, this essay will reference 10-15 reliable academic sources (including journal articles and textbooks) identified by the student, in addition to the textbook. Please use the Harvard Referencing style.
Solution
A Look into The Advancement Of Emerging Firms Into New Markets: A Case Of Oppo
Majority of the great nations in terms of industrial dominations have reached a saturation point whereby majority of the industries within have expanded to a point that they cannot grow any further within the boundaries of these nations. As some authors have highlighted, the economic gains within these particular nations is hinged almost entirely on the demand for products and services within these nations and therefore can be greatly affected by other factors such as unemployment and insecurity. Firms from much smaller and emerging nations are however growing, and are trying their best to expand into different nations in a bid to take their place in the fortune 500. A great number of these firms are based in South American and African countries such as Chile, Venezuela and South Africa just to name a few (Hamel & Prahalad, 1994, pp. 14-17).
In order for these smaller firms to gain the proper mileage to take on the bigger giants in the financial world, and also for the larger giants to keep up their positions in the Fortune 500 and other famed ranking systems, expansion into new markets is important (Guillen, 2000, p. 364; Stiglitz, 2003). To gain the relevant investment acumen, it is important for the different firms to be able to take up the risk of entering new markets and being able to mitigate any causes of failure on them.
This essay aims to look at the aspects of globalization that may bring up problems for firms in emerging nations seeking to grow and expand into new uncharted territories. The fact that globalization exists provides a light at the end of a very dark tunnel of information and resource gaps caused by the fact that the capital markets were not as united in the past as they are now and the use of email and other online means was not available to aid the quick transmission of ideas and information from one area to another.
In order for any company to consider that it is going to grow globally, it is fundamental for the said company and its management to understand the elements of globalization. The said elements include trade, investment, both foreign and local, knowledge of the nation and the laws of the new territory, availability of labor and capital flows (Stiglitz, 2004, p. 516; Rodrik & Velasco, 1999, p. 2). The availability of information and ideas is vital in the growth of any firm seeking to enter into a new market. This flow can be easily provided for and enhanced in this day and age where online communication is continuously advancing and growing exponentially. If information and the ease to obtain the said information is enhanced and provided for by the institution or company, it becomes a formidable force that would play a large role in the growth and expansion of the company within the new market (Dawar & Frost, 1999, p. 122).
The sharing of information and ideas can also be a double-edged sword, as the more secure and faster the transfer of any form of information is, the higher the risk of illegal actions by the firms in order to get a competitive edge over the competition they face. In this light, it I important for the said foreign market to provide rules and regulations that helps combat the use of such illegal and underhand methods in order to grow financially. Certain international institutions such as the IMF have tried to place certain restrictions and frameworks on institutions. These frameworks however have been criticized by many to be a bit shortsighted and not well designed to fit within the territories social norms and territories (Stiglitz, 2004, p. 509).
Another aspect of growth in companies that have decided and are willing to grow is trade. It has been argued that the host country would always experience positive effects in the growth of its economy with the removal of all trade barriers, regardless of whether its partners do the same or disregard the removal of the said barriers and instead decide to leave their policies as is. However, this is not always the case as a great number of nations are not willing to change their policies unless their trade partners do the same. A good example of a nation that does this is the United States.
The flow of labor, as important as it is in the progression of trade and the growth of any institutions is arguably the item that receives the least amount of attention among all the different aspects of globalization. The efficiency of any economical institution in a particular territory is impacted by the movement and availability of labor within the area (The Economist, 2002, p. 1). Variety in terms of labor also plays a great role in the increased growth of any nation and company alike. The movement of labor, if uncontrolled, can be a cause of concern as it adversely affects a nations capability to provide for itself and grow. If the economy of the nation is not growing, then the nation would not be able to progress as well and foreign investments would be quite rare (Amsden, 1991, p. 282).
The liberalization of the money markets also plays a large role in the growth and advancement of emerging firms in a particular nation (Greenwald & Stiglitz, 1993, pp. 82,85). The liberalization provides the opportunity for such companies to obtain more short term capital and thus be able to grow much faster and become more powerful. Liberalization, however, has been viewed as a controversial aspect of the economy. The East Asia financial crisis is one of the scenarios that may have shed negative light on the idea of liberalization (Furman & Stiglitz, 1998, pp. 35-38; Balassa, 1991, p. 44). The IMF had held a meeting in Hong Kong seeking to gain the relevant backing to be able to liberalize the financial markets even though there was no prior evidence of success in the same. Majority of the evidence, in fact, pointed towards the possibility of economic stability, and furthermore, the effects of it would definitely affect certain companies that do not have the financial power or market presence to withstand an economic meltdown. It is now well known that market liberalization may not exactly be ideal for a lot of companies and markets in the end, and even the IMF recognize the risks involved when it comes to market liberalization (Demirgüç-Kunt & Detragiache, 1998).
With these in mind, it is important for firms in emerging markets to be very judicious before deciding to enter into a new market. The competitive strengths of these firms may be present locally, but not as strong as would be required to be able to advance into a new market. However, the emerging firms have a single advantage over the more established companies; the smaller firms are able to produce products at a much lower cost in comparison to the more established firms, therefore making the products and services cheaper in the long run. In this way, the emerging firms have an opportunity to gain fame and become favorable to the consumer bases with lower spending power in comparison to the more established names in the business.
One of the main reasons why such institutions would want to enter into a new market would be to increase its already growing market presence within the host nation. The prospects of achieving the same popularity in a foreign nation is often enticing to any emerging firm that is looking to increase its net profit. However, an issue arises as to how the said emerging firm would be able to expand its market share within the new market. In order to do this in the most cost effective and financially viable manner, most of these firm’s partner with other firms in the new market that have experience in the said market. In order to reach more markets at once, emerging firms can partner with multi-nationals with presence in the particular target nations.
The emerging firm supplies the firm with the goods, and in turn the contracted firm in the new market is responsible for the sales of the goods in the new market. In this business to business model, the emerging firm is able to make more sales in new markets without having to have physical presence in the particular nation. A great number of tech startups and companies use this model, having different companies that act as suppliers of their products in the emerging markets (Collier & Gunning, 1999, p. 75). Examples of these companies include Huawei in the mobile devices sector and Lenovo and Hewlett Packard in the computer technologies field. Other rather unknown brands use the same technique, such as Oppo, which does not have the same financial power or prowess as the bigger and better established brands in the technology industry.
Having amazing products that appeal to the consumer base is one aspect of success in the new market. However, it is not the only aspect, as the more established brands in the new market may have a similarly impressive portfolio of products. In addition to this, the more established firms have a greater consumer base in the new country than the emerging brands, and therefore it could prove an uphill task for new brands and products to penetrate the market. One way for the new firms to be able to grow and extend their growth into the new market, partnerships with already established companies in the new market to help advertise and market their product is fundamental. In the case of Oppo, it proves vital for the company to gain some form of partnerships with technology providers within the new market. These partnerships should be with relevant market players in the new market such as mobile service providers. The mobile service providers already have the relevant channels and influence to be able to convince the market to purchase the products in a fast and efficient way.
The business-to-business strategy has proven to be an important and vital way to be able to increase the market share and customer presence of any brand in a new market. To make it even more successful, the company can easily use the already existing ethnic connections between the target market and the existing market. The quality and initial fame of the product can easily be used in favor of the product sales and influences in a particular market. A good example of this is the sales of Indian car maker, Mahindra, in Africa. Majority of the people who purchase the said vehicles are of Indian heritage in the target markets. Since the company is not as powerful as the more established firms such as Toyota, it is left to have to use the ethnic ties. Majority of the consumers purchase these vehicles so as to relate to their home nation and the vehicles achieve this objective for the particular group.
The ethnic connections do not necessarily relate only to persons from the initial market and residing in the target market. The idea of quality and prominence may also affect the sales of particular products by particular manufacturers. Still using the example of auto manufacturers, a lot of German manufacturers gain their sales from prior notions and fame for being built to the highest standards possible. This notion was created in the 1980s, with many people stating that the cars were built like tanks and could survive all different forms of abuse and conditions. Regardless of the bad publicity that these companies have been receiving of late, in particular Volkswagen with the Diesel engines scandal, they still are selling a large number of vehicles based on the initial fame that they garnered in the 1980s and 1990s. It has been proven by different surveys that Japanese cars are more reliable than the German luxury automobiles, but still the German automobiles hold the majority in majority of western markets.
In the same way, large brands such as Apple and Samsung still hold the lead in terms of the sale and manufacture of smartphones, majorly due to their prior ‘reputation of producing quality devices over the years. However, competition has grown stiff and a great number of Asian manufacturers are entering the mobile devices industry and are gaining traction by providing quality devices at very affordable prices. Among these companies is Oppo. In entering into new markets, it is important for Oppo to take up and ride on the notion of the masses that they can spend less and still get equally great and powerful devices without spending as much money as the competition would like them to spend on their devices. With time, the product shall gain its own reputation and be able to sell more devices without having to ride on the reputation of other Chinese manufacturers.
The emerging firm’s management should also take into consideration that there could be governmental regulations that may prevent the firm from doing business as expected. In turn, the firm should find a way to create a harmonious relationship between itself and the governments in which it is expected to operate within. In certain countries, for example, all mobile phones to be sold within the nation have to be approved by the necessary authorities to ensure that it is safe to use by the masses. Compliance to these regulations is paramount for any company to successfully sell and supply any form of mobile devices in the said market.
In
conclusion, creating a new market presence in a rather new market for any brand
is a difficult task. Majority of emerging firms do not have the necessary brand
presence necessary to be able to build a successful market presence on
introduction into the target market. In addition to this, financial constraints
may greatly affect the productivity and ability to market and sell the company’s
products within the new market. These barriers can greatly affect the growth of
the said companies greatly and therefore cause a lot of problems for the new
company in the market. In addition to this, the costs to launch a product or
service in a new market can be overwhelming for most of the new companies in
any market. In order to combat these issues, it is vital for the said company
to be able to partner with other companies that are more established within the
market to be able to properly and adequately market themselves in the said
target market without any issues. In the case of Oppo, teaming up with more
established mobile sales companies can easily solve the brand name issue and
provide it with a more level playing field to be able to sell the products and
market them efficiently. Success for such firms is still possible and viable
despite the many hurdles and barriers that they face.
References
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Collier, P. & Gunning, J. W., 1999. Explaining African economic performance. Journal of Economic Literature, 37(1), pp. 64-111.
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Demirgüç-Kunt, A. & Detragiache, E., 1998. Financial liberalization and financial fragility. Washington D.C, s.n.
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