Global Business Operations Individual Assignment

Discussion Title: Over the next several decades multinationals from emerging economies
are likely to become a key force in the shaping of the global competitive landscape. Discuss
the validity of this statement using company examples from at least three emerging
economies.
Introduction
Global Business operations have become more competitive nowadays; the primary reason
which comes into mind is Globalization. If we have a look in the past several decades, we see
the footprints of some highly developed economies such as USA, western European Countries
and Japan in making the business operations truly global. These countries marketed their
national brands internationally; even the notion of multinationals was linked with their
respective national brands for example, Toyota and Sony (Japanese), McDonalds (American),
BMW and Mercedes (German) etc.
In the midst of this wave of globalisation, one thing is worth noticing, the rise of multinational
companies from emerging economies. If we look at the present scenario, multinationals from
emerging economies are not niche players but they work on some form of competitive
advantage (Goldstein, 2009). Another reason could be the liberalization in trade conditions of
domestic market which gives them a ground to explore and expand the export of goods. This
approach will allow to them to move in clusters of countries irrespective of their geographical
locations, if they offer them comparative advantages in their business (Bhattacharya, et al.,
2004).
In this discussion, we will be discussing the validity of the above mentioned statement by
discussing about some multinationals such as TATA from India, CEMEX from Mexico and LUKOIL
from Russia thus will try to validate the situation of their key involvement in global competitive
landscape and can be considered as important players in post-recession market.

Discussion and Arguments
Emerging Economy: India
Indian Economy is tenth largest economy internationally by nominal GDP and the purchasing
power parity is third-largest as per international monetary funds information. It is a member of
BRICS which is developing into an open market economy through economic liberalization.
Deregulation of industrial policies, transition to privatization of state owned enterprises and
reduced controls on foreign investments and trade are paving its way towards emergence and
allowing national multinationals to groom and influence the businesses globally (IndexMundi,
2013).
Multinational: TATA
Perceived as India Largest business group with its businesses enfolding in 7 sectors such as
automobile, telecommunication, information technology, retail, consumer goods, power and
financial services. Its operations are truly global, operating in over 80 countries with product
and services available in over 85 countries. It is impossible to cover whole groups business
operation in few words, as a result, through one of its flagship business i.e. Tata Motors, we will
try to gauge the scalability of its operations. Established in 1945 and considered as Indias
largest automobile industry, it became a motor of economic growth in this sector for country
promoting outward FDI in Europe, Africa, Latin America and Middle East. It is doing great not
only in India but also acquired some of the big automotive companies such as Daewoo in 2004
and Jaguar-Land Rover in 2008 and get involved in joint ventures with Spanish automotive giant
Hispano in 2005 and Latin American Bus Manufacturer Marcopolo in 2006, which is the
evidence of its robust business operations (Editor, 2013). The reason, why it can be considered
as a key force in global competitive landscape is its blend of Extender and contender approach
to expand its business. Tata Motors focuses on Upgrading capabilities and resources to match
multinationals globally, often by keeping niching markets through Joint Ventures and
Acquisitions. Its strategic process benchmarking, service management and cost competitivenes
through manufacturing high quality products at lower costs are its competitive advantages over
major competitors such as Ford motor company and General Motors. Moreover to it, it also
focuses on expanding into markets similar to those of the home base, using competencies
developed at home, expanding into Thailand, Africa, Brazil, Eastern Europe.
The consequence of becoming a key force stems from the fact, how are they positioning
themselves i.e. International Strategy Based on Competitive Advantage, Choosing countries with
highest market potential in customer segments conscious of overall value and Creating
products to be amongst the top 3 players in each chosen segment, for instance their new
product, Tata Nano Worlds Cheapest Car waved a new segment of cars where expansion
needs to be done in future which earlier almost seemed impossible to other market rivals.
Emerging Economy: Mexico
Mexico, a free market economy, is 13th largest in nominal GDP and the 11th by purchasing
power parity, according to the World Bank data. It is a blend of modern and outmoded industry
which is rapidly coping up with international industrialization with a dominance of private
sector. Its economy is export oriented and has free trade agreements with lots of countries
which promise its emergence. Policies such as modernizing labour laws, fostering investments
in sectors such as energy and upgradation of infrastructure are bringing it into global picture
with some of its companies impacting global competitive landscape. (IndexMundi, Mexico
economy Overview, 2013)
Multinational: CEMEX
CEMEX, founded in 1906, one of the worlds largest building material suppliers and third largest
cement producer company, after Lafarge (French) and Holcim (Swiss) and the largest in Latin
America (UNCTAD, 2005). Operating with production facilities in around 50 countries makes it
one of the prominent companies in capital intensive businesses. They started expanding
themselves from mid of 1970s through organic growth thereby encouraging foreign direct
investment (FDI) with a proper risk management (Internationalization Strategy). Earlier they
applied aggressive strategy during crisis of 1982 in Mexico by consolidating and acquiring
cement plants thus strengthening their position in national market through its efficient
manufacturing and focussed customer service by providing best value proposition (Vargas-
Hernndez & Noruzi, 2010). Trade liberalization policy in Mexico changed the business aptitude
of large Mexican firms thus encouraging them to internationalize their activities.

Acquisition of Southdown in USA and RMC in UK made its operations more profound, globally,
having a reach in Europe, America and Asia, though still they have to position themselves in
India and China. According to sources, they have completed around 40 overseas acquisitions in
all continents. They have a strong cash flow in United States and Europe (Economist, 2004).
If we compare CEMEX with its main competitor, LaFarge, its low cost production and IT
processes which match all the processes with consumer demand and their multicultural
adaptability across the organisation is pretty strong whereas, Lafarge has personalized products
according to the region though low cost (an added advantage over CEMEX) and research is
based on sustainable development.

Being a global player, CEMEX is becoming key force in global competitive landscape which is
evident from the strategies followed in past. The present strategies in focus as presented in a
research paper are:
To concentrate investments in developing countries where the profits are higher because the
small levels of purchase of bags for self-construction and small-scale building. Also, the strategy
of CEMEX relies heavily on a just in time delivery system of distributing concrete. CEMEX is
implementing the franchise Construrama, a strategy of low prices for low quantities to cater
and provide access to the lower economic segments by selling inexpensive bags of cement for
the self-construction market (Vargas-Hernndez & Noruzi, 2010).
Apart from this they believe in acquiring bungling cement companies in other markets and
educating them with their business, production and IT skills which, without any doubt bolster
their position as a key player globally from Mexico.

Emerging Economy: Russia
Russia, member of BRICS, is 8
th
largest economy by nominal GDP and purchasing power parity is
sixth largest in world according to CIA World fact book. Since the breakdown of Soviet Union, it
has progressed to market based and globally integrated economy. With abundance of Fossil
fuels (natural gas, coal and oil) and metals they are moving towards privatization with
exceptions to energy and defence related sectors. It has started cementing economic ties with
different countries and joined WTO in 2012 in order to decrease trade barriers and enter into
foreign markets thus encouraging some of its big companies to expand and share the profit pie
in this rapidly evolving global business scenario.
Multinational: LUKOIL
LUKOIL, Established in 1993, is Russia's leading oil company and the second largest oil and gas
company worldwide with proven reserves of oil and gas. Global operations in oil and gas
exploration, refining, production and end-user sales accounts for over 1.5% of global reserves,
2% of production globally and 1/5
th
of Russian production (Euromoney, 2004) with and annual
turnover of $ 139.2 billion. Its production and refining units and assets are spread over Western
Siberia and Perm Region. Global empire of company comprises of 12 international exploration
and production projects in Kazakhstan, Azerbaijan, Egypt, the Middle East, North Africa,
Columbia, Ukraine, Bulgaria and Romania.
Like the companies discussed above, in order to expand, LUKOIL also followed a policy of
acquisitions e.g. Refineries (Neftohim, Bulgaria), fuel distribution company (Getty Petroleum
Marketing Inc., USA), oil company (KomiTEK) etc. It also entered in joint stakeholdership with
PETROTEL.
Their strategy of modernizing production units, enhancing the existing infrastructure thus
exploiting resources optimally gave them a competitive edge in the fluctuating market (Ciopi,
2010).
Establishment LITASCO Company (LUKOIL International Trading and Supply Company) in 2000,
led to the operation and expansion of international businesses and its strategic alliance with
ConocoPhillips led to integration of oil and companies with a broad base strategic investment
motive.
Its Major competitor is Gazprom Neft and LUKOIL has to depend on it only for selling gas; since
gas produced by LUKOIL is sold mainly to Gazprom since it has a monopoly and owns most
efficient Russias gas transport system. But application and innovation of latest know-how,
research & development and technologies are its competitive strengths.
Conceptualisation of LUKOIL as a key force in global competitive landscape is evident from the
fact that for expanding their market they are following Offensive strategy and fascinate new
customer base. Heavy investment in production facilities, upgrading refineries, increment in the
number of gas stations, enhancing fuel quality , implementing efficient production of lubricants
are some of the major plans in coming years which will not only improve the product quality
but also competitiveness as per International Standards.
Another important strategy is to invest in improvement of IT infrastructure and data centres so
that control over commercial operations and finances can be monitored strictly which is an
important factor for the expansion of operations globally and sustainable growth.

Conclusion

Although most of the industrial giants are domiciled in developed countries, but since last two
decades, it has been observed that multinationals from developing companies are rising thus
supplying a substantial share of worlds GDP. Establishment of foreign subsidiaries or affiliates
by organic growth and mergers and acquisitions through FDI outflows. It is also worth noticing
that there present and future is highly subjective to political and economic reforms flagged by
their respective home governments (SALEHIZADEH, 2007).
According to Buckely and Cassen (Buckley & Casson, 1976) OLI paradigm, Oowner-specific
advantages in a MNCs home market, Llocation-specificcharacteristics abroad and I
internalisation, by which the firm controls the value chain in its industry seems to be prevalent
in this scenario.
The companies we discussed here and the other emerging MNCs from emerging economies
have embraced the unique management style and international corporate practices thus
differentiating products and services by becoming market and efficiency seeking and gaining
more global status in terms of assets, resources, sales and business development at a
competitive rate than their developed economies counterparts with a positive impact on global
competitive landscape (SALEHIZADEH, 2007). As a result, the above mentioned discussions and
arguments validates our discussion title, with an upcoming trends of more mergers and
acquisition, more FDI outflows, bigger share of products and services from companies which
are not only growing exponentially but also performing at a similar rate with developed world
contenders.

References:
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Economist. (2004, September). Cement: One gigant leap for Mexico. Retrieved April 2013, from
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