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1.
Introduction..................................................................................................... 1
1. Introduction
According to Maheswari (1997), multinational corporations can be defined as
enterprises which allocate company resources without regard to national frontiers, but is
nationally based I terms of ownership and top management. In the other words, multinational
corporations are the companies that base in a country but their management groups and
factories spread out to some other countries. The trend of multinational corporations is
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responsible of the economic globalisation (Stwr.org, n.d.). According to Needle (2004), the
characteristics of multinational corporations are:
a. Multinational corporations have main offices and business operations in one or
more countries.
b. A true multinational corporation has direct investment in other countries, or also
called Foreign Direct Investment (FDI), along with the operations and
management team in foreign countries.
c. Most of the time, multinational corporations utilize a large amount of shared
resources.
d. Numerous operations are always linked with overall strategic plan.
e. A lot of multinational corporations are large and conduct their businesses in
oligopolistic industry structures.
Multinational corporations have existed since 17th century where the overseas trade
started. The main trading areas for multinational companies are in North America, European
Union, South-East Asia and Australia (Businesscasesstudies.co.uk, 2015).
Some of the
reasons why a company wants to have the assembly and factories in multiple countries are
discussed below:
a. Ultimate aim of any multinational corporation would be to increase the market
share of the company. When the company meets the domestic goals the company
would want to expand and export their products overseas which in turn will
increase the productivity.
b. The labour and capital costs in the developing countries tend to be lower and it
helps the multinational corporations to increase the efficiency by outsourcing t
developing countries.
c. Another reason for MNCs to establish is to avoid trade barriers and tax problems.
The corporate tax and trade barriers are different in different countries.
The smartphones market rapidly began to experience the sense of globalization in the
recent years due to external triggers like social (life style) changes and technological
developments (Ellis & Williams, 1995). Undoubtedly, life styles of people are much
different from the past. Customer requirements convergence is dissolving traditions
and cultures, as almost everyone nowadays need to frequently check emails, browse
internet and use social networking platforms. Moreover, the technological
developments that are taking place everywhere foster this industry to be more global.
Advancements in information technology and computers provide a solid base to
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Transaction exposure
ii)
Translation exposure
iii)
Economic exposure
In a MNC, the value of its future cash flow is dependent on foreign exchange currency
value. In case of HTC, since the market is bassd throughout the world, the economy is
exposed to foreign exchange. The exchange rates tend to fluctuate with time. It has the
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According to Ellis & Williams (1995) the distribution channel of a product plays an
important role in making a product truly global but its often underestimated. To make the
distribution channel of the product stronger, companies have to forecast the demand and
supply of their products in a region. Apple and Samsung both have very good distribution
channels around the world.
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From the above figure, the distribution strategy Samsung could be easily understood.
Samsung is using online selling procedure and distribution or wholesale network to make
their product easily accessible to their customers. Samsung is using Samsung Shops which
are available around every region of the earth. They are using these facilities to make their
products distinct from other brands by making it easily approachable to the people. As a
result, the distribution strategies of both companies make them truly global.
3.1.3 Uniform Marketing
To distribute the standardized product effectively and acquire the market, the most
important thing is the uniform marketing strategy. Ellis & Williams (1995) states that there
should be uniformity in marketing strategy of a company for different countries or regions to
become truly global. For instance Samsung and Apple are both marketing their products in
different regions in almost the same style. Like when they introduce a new product in the
market they try to advertise by showing what new features they have in their product, the
benefits of it in their daily life and try to make their product more familiar to the people using
same strategies. One of these marketing strategies is using some local mobile network
providers to make the product more approachable and more attractive. For example according
to Low (2014) Apple is using Maxis and DiGi to promote their new product iPhone 6 and 6
Plus by offering new price plans for their network Samsung is also using DiGi, Maxis,
Celcom & U Mobile to promote their new product Galaxy Note 4 by offering new price plans
(Chan, 2014).
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just could not meet such pressure. Hence, it is important for firms to become larger to meet
these challenges. (Ellis & Williams, 1995).
Apple Company is always considered as a main forerunner in the telecom industry
and employed the greatest engineers and designers of our time. Along with it the company
acquired some other companies to access to the latest know-hows to sophisticate its products.
Particularly, gaining NeXT Company made it possible for the operating systems IOS and OS
X to be developed. By acquiring other companies, Apple not only achieved more improved
products and patents, but also managed to attract competent specialists.
Four years ago in 2011 Apple managed to acquire C3Technologies, a company
developing 3D maps for almost $240 million to be able to compete with Google Maps.
Another acquisition of Apples is Anobi, the key component of flash memory for i-devices
purchased for $390 million the same year. In February of 2012 Apple acquired Chomp for
$50 million to use it to improve app store.
Year
Company
Derived
Value (million
Business
product
USD)
3D mapping
Maps
2671
C3
Technologie
1
2011
iPod, iPhone,
2
2011
Anobit
Flash memory
iPad
390
2012
Chomp
App Store
50
2012
AuthenTec
products
Touch ID
356
2013
WiFiSlam
Indoor location
Maps
20
2013
Cue
Personal assistant
50
2013
PrimeSense
Semiconductors
345
2013
Topsy
Analytics
200
2014
Swell
Music streaming
iTunes
30
Beats
Headphones, music
iPhone,
Electronics
iTunes
1
0
2014
3000
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Economies of scale are the cost benefits earned in long term by expanding the volume
of production. Ellis & Williams (1995) regards with new product development, the existence
of scale economies motivates firms to have lower cost per unit by increasing volume of sales;
thereby forcing towards globalisation. There can be cost benefits from both external and
internal scale economies. External scale economies are the benefits enjoyed by the whole
mobile telecommunication industry while internal scale economies are benefits enjoyed by
the individual company on better productivity.
Apple benefits from scale economies as they maximize the production of iPhones and
iPads. They both share some common components like processing chips and display screens,
which are purchased in bulk at lower prices. Moreover, most of their components are produce
by themselves lowering per unit costs. Their branding enables them to advertise all their
products through promoting only one product, helping them to reduce a high margin of
advertisement costs. Their extended after sales support, encourages more and more customers
to purchase their products.
3.2.3 Transportation
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environmental rules. Moreover, transporting goods from Asia to the rest of the world makes
much economic sense. (R. A. (2012).
Trade policies
Technical standards
Some countries have a complete ban on trade and commerce with a particular region
or group of regions. USA prohibits sale or supply, export or re-export, directly or indirectly of
any Apple products by any citizens to Cuba, North Korea, Sudan, and Syria without prior
approval by the U.S. government. Samsung Company is denied to import some specific
models of smartphones and tablet computers after President Barack Obama decided not to
overturn a ban won by Apple Company in a patent-infringement case.
3.3.2 Technical Standards
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Similarly, iPhone 5 was the first device to use nano-Sim card in September 2012.
Samsung was the first company to introduce larger screen mobile phones, which forced
Apple to enter this segment. (Reagle, D.2012)
3.3.3 Cultural and Institutional Barriers
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companies are trying to attract smartphone customers towards them. Like Apple has pulled
about 20% of Android customers towards IOS but Samsung has succeed to get only about 7%
of IOS customers. (John, C.2013) Hence, in order to survive in the telecom sector Samsung
is now trying to pull IOS customer or attract new customers towards them.
In the competition between different companies especially in the telecom sector, the
main criteria companies focusing are on their R&D department, thereby achieving the first
mover advantage over their rivals in the national as well as international market. For instance,
when Samsung or Apple Launch new products in the international market, the demand of
their previous product start decreasing from the local markets and people tend to purchase the
latest product. Hence, when the demand of older product reduces from the local market then
they are forced to reduce its price.
3.4.2 Entry of New Competitors
According to Ellis, J. & Williams, D. (1995) when new competitor enters in some
industry it has a high influence on localization and globalisation of that industry. For example
in telecom industries when some new competitor enters the market with some distinguished
functionalities or services it makes the others compete in such way so that they survive. In
telecom industry, companies succeed who gained the first mover advantage. Like in the
competition between Samsung and Apple who introduce some new technology or
functionality gain the first mover advantage.
Apple and Samsung both are trying to make their product different from each other
and also from other brands. Apple has an advantage of completely different Operating System
and on the other hand Samsung has the advantage of compatibility because Samsung devices
are compatible with most of the common Operating Systems like Windows. Nielson, S.
(2014) in Market Realist News states that on December 2013 Apple launched a new
technology for its customers named iBeacon which uses wireless Bluetooth technology to
find the exact position of the users at the Apple store. This technology is completely different
and new, so Apple gains the first mover advantage by this launch.
Reuters (2014) states in an IT related news website NDTV GADGETS that now
Samsung has introduced a new technology of curved screen smartphone to compete with the
Apple. Now it is difficult for its rivals to adopt this technology. So in the perspective of entry
of new competitors every mobile telecom company keeps on introducing new product in the
global market to survive.
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