Strategic Options for MNEs Operating in Emerging Markets

Abstract

This chapter outlines some of the basic opportunities, conditions, and strategic options for firms operating in emerging markets. Increasing FDI figures show that emerging markets offer many opportunities for foreign investors, but also pose specific challenges for doing business. Some factors are more abundant and less expensive, especially low to medium-skilled labor and natural resources, while sophisticated services are more difficult to obtain. A specific characteristic of emerging markets is the lack of business-enabling intermediaries. Therefore, foreign MNEs frequently need to fulfill tasks that are not within their range of activities in their home countries. Additionally, many governments in emerging economies act slowly and erratically; and laws are often not enforced systematically. In this context, foreign MNEs can choose between acquiring a local company, partnering up, or going it alone. The chapter looks at the pros and cons of these modes of internationalization and presents some concluding comments on the flexibility required by working under such conditions.