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Asian Multinational Enterprises Essay


Introduction

Internationalisation and going global have become the primary tendency in the development of economic relations. The end of the twentieth and the beginning of the twenty-first century are marked with the growing role and influence of Asia Pacific multinational enterprises in the global economy (Jones 2010). The foundation of gaining economic might is the decision to initiate active foreign direct investment policies made during the 1980s and becoming involved in foreign economic affairs deriving from the transition of manufacturing facilities overseas.

The process was driven by the Japanese enterprises that have served as an example to other Asia Pacific countries such as Hong Kong, Korea, Taiwan, and China (Sim & Rajendran Pandian 2003). However, it is imperative to consider cultural and socio-economic phenomena typical of these countries in order to understand the success of Asian multinationals.

The major purpose of this paper is to identify the reasons for the growing role of Asia Pacific multinational enterprises in the global economy. The primary emphasis will be made on investment and business activities of companies originating from Japan, China, Taiwan, Hong Kong, and Korea. Moreover, the paper will focus on such determinants of business success as the ability to adapt to the changes in the global economic environment and governmental policies, control measures including domestic, regional, and global ones, variations of business strategies depending on the industry of operation, and competitive advantages of companies governed by the countries mentioned above.

The foundation of the assessment is the comparison of enterprises from different countries located in the Asia Pacific region and the review of global and domestic conditions of business operation.

Aims of Asia Pacific Multinationals Related to Business Strategies

The aims of becoming involved in international economic relations and growing into multinational enterprises differ across countries. Even though there are some purposes common for all Asian states mentioned above, it is paramount to bear in mind some specific differences related to business strategies. For example, Taiwanese enterprises focus on gaining economic power by falling upon advantages guaranteed by the location of production capacities and cost-based competencies supplementing them with ethnic networks and governmental support. Furthermore, they prefer involvement in international affairs with the purpose of exchanging skills and growing highly competitive by accumulating knowledge (Sim & Rajendran Pandian 2003).

China aims at becoming the most influential economy in the world by promoting governmental support of both foreign and host enterprises and active participation in international investment activities as well as making an emphasis on technological superiority, introducing innovations to manufacturing and other sectors of the domestic economy, and finding strategic assets (Deng 2007). Moreover, it focuses on cheap labour as the foundation of economic growth (Giuliani et al. 2014). The same can be said about Hong Kong, acknowledging the significance of seeking governmental support and attracting foreign capital (Jones 2010).

Following the model of economic development borrowed from the United States of America after the end of World War II, Japanese enterprises focused on becoming actively involved in the global economy. Their primary objective was to gain leading positions. However, because the country lacks natural resources, it had to adopt other than resource-based business strategies. Managers realised that the solution to the problem might be in making emphasis on the newest technologies and labour organisation. As for now, the most commonly used business strategies are those based on technologies and accumulation of knowledge (Black & Morrison 2010; Kim & Ruffini 2007).

Korean enterprises, for instance, were also interested in becoming more influential in the global economy. However, in the case of Korea, the stress was made on high volumes of low-priced products due to the lack of resources for introducing innovations to the manufacturing industry (Cherry 2013). That said, they have chosen a labour-based business strategy.

To sum up, there are both similarities and differences in the influence of the aims of business operation and their impact on the choice of business strategy. That said, even though the strategic objective of all enterprises is nearly the same and comes down to economic prosperity or, in case of China and Japan, achieving global leadership, the instrument for reaching it is universal – selecting appropriate business model based on available resources and peculiarities of the domestic economy.

That is why Taiwan has chosen a cost-based strategy, Japan gave preference to the technology-based approach, Korea and fell upon human resources, and China, together with Hong Kong, focused on governmental support.

Impact of Differences Between Industries on Business Strategies

When analysing the success related to the choice of business strategies, it is imperative to consider the differences between industries of enterprise operation motivated by the contrasts in resource requirements. For example, Chinese companies give preference to location and resource-based business strategies due to the prevalence of manufacturing enterprises demanding vast volumes of easily accessible resources (Nolan 2001). However, in some cases, managers choose to adapt business strategies or switch to new options, especially if the conditions of business environment change. For instance, those involved in China’s aerospace industry moved from resource-based strategies to technology-based ones recognising the significance of innovations and knowledge (Nolan 2001).

Another suitable example of the impact of industry on the choice of business strategy in Korea. Korean enterprises operate in labour-intensive sectors such as textile industries or technological sectors such as electronics. Based on the specific requirements, they choose either labour or technology-based strategies (Amsden 2001). However, it should be noted that more attention is paid to the focus on labour because of the initial desire to become competitive due to high volumes of low-priced products.

Furthermore, it is appropriate to recall the experience of Japanese enterprises. Because the initial emphasis was made on technology and labour-intensive production, managers have chosen to invest in introducing the newest technologies and fostering innovative production focusing on consumer electronics industries of the economy (Kim 2006). This business strategy is backed up by active involvement in R&D projects (Vogel 2006).

To sum up, there is one overall tendency common for all Asian countries mentioned above – they choose a business strategy in order to satisfy the needs of enterprises related to the availability of resources either human or natural and change them if necessary. In most cases, the stress is made on labour and technology-bases strategies. However, managers recognise the criticality of accumulating knowledge and exchanging experience. For example, China has moved to innovation-intensive production, while Taiwanese and Korean enterprises are conservative giving preference to deploying labour for high economic outcomes.

Global and Regional Policies and Their Influence on Multinationals’ Policies

The significance of domestic and global economic policies for the growing role of Asia Pacific multinational enterprises should not be underestimated. The issue can be viewed from two perspectives – policies themselves and the differences between global and regional approaches to regulating activities of globalised companies. For example, all Asian countries under consideration recognise the criticality of governmental support when it comes to investment and business operations (Giuliani et al. 2014; Jones 2010; Sim & Rajendran Pandian 2003).

However, it can become an instrument for benefiting domestic enterprises and restricting host ones. This leverage is commonly used by the Chinese authorities that are especially thorough when letting foreign economic actors inject funds into the economy. Even though the Central Bank of China offers low-interest loans to foreign enterprises, the process of contracting them is troublesome and long-lasting (Liu & Li 2002). The same loans are provided by the banks operating in Japan. However, Japanese authorities are less strict if compared to China (Peng 2012).

Nevertheless, some countries ignore the importance of low-interest rates. For instance, Korea is known for high-interest rates if compared to international standards (Sachwalds 2001). It means that there are some conflicting points between local and global policies, which affect attractiveness for foreign direct investment. Still, it has no influence on the competitive advantages of multinational enterprises even though it is harder for foreign companies to adapt.

To sum up, granting low-interest loans is the globally recognised initiative for attracting foreign enterprises. However, countries are free to alter and adapt it in order to achieve strategic objectives of the domestic economy and guarantee its security. Furthermore, to conclude, it is paramount to mention the operation of export-import banks in all countries under consideration. They are responsible for issuing recommendations on establishing a comfortable and opportune economic environment in order to attract foreign enterprises (Amsden 2001).

Competitive Advantages of Asia Pacific Multinational Enterprises and its Influence on Business Strategies

When identifying determinants of economic power, it is paramount to keep in mind the significance of competitive advantages, as they are the basis of the country and enterprise’s potential fulfilment and guarantee of success. The list of competitive advantages is usually made up of geographic position, natural and human resources, international ties, etc. (Sachwald 2001). However, it should be noted that without regard to the nature of advantages, they affect the choice of business strategies, thus having a robust influence on the future of a company.

Speaking of China, some significant competitive advantages of its multinational enterprises include highly professional labour quickly absorbing new knowledge and skills as well as vast resources of the country and readiness to invest in promising projects both within the domestic economy and abroad (Liu, Buck & Shu 2005). Cheap but qualified labour is also a secret of Taiwanese and Korean multinational enterprises such as Acer and Samsung.

They made the primary emphasis on people instead of resources recognising that employees and organisation drive the progress (Mathews 2006). It should be noted that there is a difference between labour as a competitive advantage. Japanese also focus on labour-intensive production. However, unlike Taiwan and Korea, the capital/labour ratio is higher because of the expensiveness of manpower resources deriving from competence and expertise (Kim & Ruffini 2007). Another significant competitive advantage of Japanese companies is high level of innovation involvement in manufacturing process.

Nevertheless, resources are not necessarily the key to success. To support this statement, it might be useful to recall the experience of Hong Kong. Even though it lacks resources, multinational enterprises such as Li Fung originating from this Asian region are highly competitive and influential. The primary determinant of Hong Kong’s success is the recognition of significance of supplier networks across continents (Mathews 2006). The fact that enterprises do not feel the lack of resources due to the proximity of suppliers is their major competitive advantage.

Finally, there are internationalisation competitive advantages that can be measured either by calculating the volumes of exports or determining the number of overseas enterprises. This type of advantages is common for all Asia Pacific countries under consideration because they are actively involved in the global economy. However, it should be noted that the size of enterprises is not what matters in this case. For example, Korea is known for small overseas companies, while China and Japan are popular with bigger ones. Nevertheless, all of them are highly competitive from the perspective of internationalisation advantage (Sachwald 2001).

That said, Asia Pacific enterprises possess numerous competitive advantages without regard to the factors defining them. Even though the central determinant of their competitiveness is the availability of natural and human resources, well-considered organisational policies and business strategies, like those aimed at developing network of suppliers in case of Hong Kong and remaining conservative in case of Taiwan and Korea, are also of significant importance. The rationale behind this statement is the fact that they are useful and productive for reaching strategic objectives of the enterprises.

Reaction to the Changes in Economic Environment and the Ability to Adapt to Alterations of Governmental Policies

Reaction to the changes in the global economic environment is another significant determinant of the growing role of Asia Pacific enterprises in the international economy. For instance, Korean enterprises are easily adaptable to the changes in both economic environment and governmental policies. It can be proven by supporting the tendency of labour-intensive production (Cherry 2013). However, when it comes to analysing the changes in governmental policies, there are still some difficulties and toughness in adaptation because interest rates are high and introduction of innovations is rare (Amsden 2001).

When analysing factors leading to business success of Chinese multinational enterprises, as well as the Chinese economy as the whole, it is imperative to point to their highly adaptive nature. First of all, institutional transition is worthy of attention, as the country has witnessed several waves of significant policy changes influenced by the overall tendency toward openness covering the global economy. In fact, willingness to accept changes and readiness to adapt are the foundation of Chinese productivity (Deng 2004; Child & Tse 2001). Nevertheless, not all Asian countries were open to the influence of global tendencies.

For example, Korea ignores some initiatives such as the focus on technologies and lowering interest rates for foreign investors. However, local authorities support the operation of export-import banks (Amsden 2001; Cherry 2013).

Finally, it is of significant importance to draw the line between global and local policies. In most cases, it is influenced by regional instead of global integration processes. The rationale behind this assumption is the fact the regional integration centres on region-specific needs and the objective of such organisations is to guarantee welfare and security of countries belonging to it. In case of Asia Pacific countries, one cannot but mention ASEAN and the promotion of indigenisation economic policies.

The primary idea behind this approach to organising business activities is to satisfy resource requirements using domestic or regional sources (Elger & Smith 2005; Horaguchi & Shimokawa 2002). This policy has been widely supported by all countries under consideration, which leads to stronger ties between them and clustering to gain more robust impact on the global economy.

Conclusion

In conclusion, it is paramount to state that there are some critical factors adding to the growing influence of Asia Pacific countries on the global economy. First of all, regardless of regional crises and the lack of resources, all of them were strongly motivated to become a part of the global economic environment. That is why governments assessed their economic environments and clearly determined business strategies that would benefit them in reaching the desired result.

Moreover, managers acknowledge the peculiarities and requirements of companies and see them as the foundation of the future success. In addition, all enterprises are highly competitive whether it comes from advantages related to geographical position, labour expertise or arranging suppliers and manufacturing networks. Finally, Asian enterprises, as well as local authorities, are, for the most part, flexible and easily adaptable.

Their reactions to the changes and challenges of the global economic environment are adequate and swift. Still, the key factor leading to the growing role of Asia Pacific multinational enterprises in the international economy is the diversity of approaches to running business and the desire to become an active participant of international economic relations, ignoring difficulties and crises (Mathews 2006). It is what turned Asian Dragons into real drivers of the twenty-first century globalisation.

References

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