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TRANSCRIPT
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Role of the Multinational Enterprise (MNE) firm in the
process of Globalisation and critically evaluating issues
influencing the performance of retail and it
internationalisation agenda
1. IntroductionGlobalisation today has become a topic of serious discussion in the
academics. The key outcome of regressive theories has developed
isolation, and provincial views regarding globalisation. The terms and its
phrases of globalisation have become a ubiquitous and potential symbol
of the age, (Clark and Knowels 2003). Globalisation in the 21st century
has changed the visage of organizational values and performances.
Business environment today are facing dramatic transformations in terms
of their swiftness and the scale of operations. Every company today
visualizes itself as active runner in marathon of success finding,
competitiveness, and productivity. (Czinkota, 2002) defines Globalisation
in Czinkota and Ronakainen (2005) as, the increase in the frequency and
duration of linkages between countries leading to similarities in activities
of individuals, practices of companies, and policies of governments . This
report tries to identify and evaluate the role of the Multinational
Enterprise (MNE) firm in the process of Globalisation. The report on its
second half critically evaluating issues like socio -culture, technological,
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political, economic influencing the performance of retail firms and it
internationalisation agenda
2. Understanding Globalisation:Levy (2007) cites in this work that, Globalisation, widely cited as the
dominant international economic trend of the post-World War II era, that
is deeply connected with the opening of the world economy. Globalisation
today has promised success to many companies and business that are
acting multinational throughout the globe. At the same time with
increasing technological standards and with ease of getting connected
across the globe, companies are being deeply challenged to think
according to the geographical locations and impact on their va lues and
purpose. Czinkota and Ronakainen (2005) comments in their work for
globalisation that, Executives rank Globalisation always high amongst all
strategic agendas as they seek to utilize commonalities and influencing
resources across the border.
In context , (Kwok and Arpan, 2002) cites in Czinkota and Ronakainen
(2005) that, Its not only the executives but also the governments and
legislatures are also dramatically increasing their debate and involvement
in the international trade and investment issues and universities have
adjusted their business curricula and research to address international
business issues. At the same time International Business has combined
numerous factors to obstruct the emergence of wide-ranging views of
globalisation. (Levy, 2007) in his work has explained globalisation as a
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macro-level phenomenon which is of major importance to many others
like firms, governments and civil society. He supports these comments by
addressing that, government are initiating major global concerns like
poverty and their interface between globalisation, trade, social
development and the role of MNE cannot be put aside any longer.
3. Understanding Multinational Enterprise:
MNEs today play a major role in developing world economy. Since last
20 years an unexpected increasing number has been noted in firms
expanding globally. According to researchers, multinationals play an
optimistic role for countrys development. (Jennifer and Jonathan 2009)
cites (Caves, 1974; Lowe & Kenney, 1999; Teece, 1977; Rugman, 1981)
that, MNEs are important agents, they argue, for promoting economic
growth since they complement domestic savings, transfer technology and
management skills, increase competition, and stimulate
entrepreneurship. This in turn has resulted in offering a broad range of
products in all geographical operations allowing Multinational enterprises
to achieve competitive advantage with exploration of internationali sation
of market activities, (Harveston, Kedia, Francis 1999). At the same
customers at all geographical locations share the same benefits by these
MNEs with their products and services. Having wine from France, fruits
from Amsterdam etc are all result of globalisation with MNEs acting as
the media. Using laptop, iPods, cell phones and other electronic products
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are all result of globalisation, where MNEs identify the best resources
throughout the globe like, technology from Japan, workforce from India
and china and many more which helps in developing excellent product or
services at commendable prices. Also (Ghoshal 1987) comments that,
MNEs obtain subsequent synergies through their coordination of the
activities at different geographical locations and also help in sharing the
benefits of economical scale, scope and learning.
On the other hand contradictors lay an negative impression by stating
that, MNEs more likely to congest out local firms, incorporate technology
inappropriate to local practitioners, actively constrain potential
technology spillovers, and reduce (rather than complement) the domestic
capital stock and tax basis due to transfer price manipulation and
excessive profit repatriation, (De Backer & Sleuwagen, 2003; Go rg &
Greenaway, 2002; Haddad & Harrison, 1993) cites in (Ghoshal 1987).
Also in an another research, (Clapp and Dauvergne 2005) comments
that, MNEs functioning in developing countries may suffer with
inadequate safety standards, child labour employment as in India, tan,
China and many others, Polluting the developing countries environment
and creating sweatshop conditions in their factories.
Many academic researchers define the role of MNEs in globalisation as
an increasing interdependence relationship between developed and
developing countries, which contributes to common or individual interest,
(Ghauri & Buckley, 2006; Ghauri & Cao, 2006, Stiglitz, 2002; Dalgic,
2005, Eden & Lenway, 2001). At the same time MNCs are built upon
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diverse and geographically disseminated subunits, that encounter
problems on language, culture, economical confronts when interacting
with the local business community, (Triandis, 1982; Adler, 1983; Herbert,
1984; Ronen and Shenkar, 1985; Hofstede, 2001; Brannen, 2004). Also
according to some research trails, in spite of different barriers posed by
geographical constrains, MNEs act as an diagnose for up building
globalisation and developing low developed countries into a stringer
echelons b providing subsequent resources, training and development of
employees, pan-demising the language barriers and strengthening global
relationships.
4.Role of MNE in globalisation:Over the last few decades, countries or so called the rulers of
international economic game are working enormously to develop these
economic relations. With help of rapid developing Information Technology
and other communication technology at the global echelon are changing
the worlds economic nature and has tuned the globalisation processes. In
this context, (Baldwin and Gu, 2004) cites in (levy, 2007) that,
Globalisation and the spread of new technology appear to be correlated;
exporting leads to greater use of more advanced technologies and
increased process innovation through the acquisition and transfer of
foreign technologies. In a wide view, the facilitators of the globalisation
are politics, economics and technology where the major actors are
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governments, MNEs and international organizations. Here in this report
we mainly focus on the role of MNEs in the process of Globalisation
Multinational Enterprises along with the technological advancements
have been the key for global activities. Where of technology identifies the
centres and the extent to which technological activity becomes
geographically, the international industries practice these technologies
where there is competition between MNCs operating in different centres,
(Cantwell and Janne 1999). (Cantwell and Dunning, 1991) suggest that,
there exists a strong inclination for technological capacity to interlink
geographically for MNEs to establish network linkage between all. This has
pushed the MNEs to far much globalize the operations. In this context,
other researchers like Luo (2005), comments that, in the recent decade
Multinational Enterprises have extended their operations all around the
globe. They are incorporating multitude of activities for a multitude of
purposes. With this extensions in operations MNEs have managed a
range of geographic-forces, markets, products and far more technological
differences which are very complex in global scale. Also with the proper
mix usage of all three important channels if economic globalisation,
foreign direct investment (FDI) and trading modes, MNEs have effectively
benefited by knowledge transfer. With these performances that require a
suitable equilibrium of transparency and efficiency in connecting all the
geographical locations are carried on by MNEs.
Connecting the globe in one strong relationship needs an excellent
balance between al multiple forces like product, language, technology,
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geography, markets etc. Has been a matter of concern for the MNEs. In
this connection, (Nobel and Bikinshaw, 1998; Govindrajan and Gupta,
2001) share a common view that, Accelerated globalisation as well as
attempts to capture higher synergies form far-flung operations has called
attention to the communication network and internal knowledge flow
within the MNC . At the same time MNE emerge from diverse and
geographically scattered subnets that face language barriers in their
communication with local business community as well as inside their
network (Triandis, 1982; Adler, 1983; Herbert, 1984; Ronen and
Shenkar, 1985; Hofstede, 2001; Brannen, 2004)
5.Retail Industry profile:Retailing is one amongst the worlds largest industries. With globalizing
of the retail sectors, firms in this area have witnessed an increased
competition. To add worse, the gob economic downturn, has forced the
retailers to interface increasing challenges which also includes i ndustry
consolidation and even business continuity. Over past few years, few
parts of world have experienced retail businesses dominated by family -
run or regionally targeted stores thereby taking over billion -dollar from
multinations like Wal-Mart etc. Also according to the Global Retail Trend
(2010) reports key finding, decline has been noticed in the US and UK
markets while China witnessing emerging market growth. At the same
time Asia is viewed as the best growth for retailers. According to Global
Economy Report 2009, retail has faced some worst year for economic
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performances but as for the worlds retailers, economic recovery will
return the industry to a growth path- but the nature and geographic
distribution of that growth will be quite different than the recent path.
According to Journal of Retailing (2010), modelling the retail
phenomenon need perspective thinkings on many facts as of political,
technological, economical and social factors. Retailing on some definition
is a very complex field that requires sophisticated organization of
phenomena which includes pricing, promotions, customer loyalty
programmes, fair-trade, merchandising, price matching and return
policies, private labels, products categories, e-tailing, retail manufacturer
reactions, product assortment, stock outs and globalizing of all these
policies. A conceptual thinking and pre-designing for the above
mentioned area are vital and beneficial for retail firms in
internationalizing. At the same time, with upgraded technological factors
at cheap cost like computers usage, internet and data storage systems,
retail has opened great opportunities for firms in this industry to operated
globally rather than locally.
Relating to the financial turmoil and credit churches that forced the
entire global economy into threat, retail has been one amongst that still
sustained without huge losses and downfalls. Focusing on the UK retail
market, in spite of the financial turmoil and credit crunches, UK retail
sales have crossed over 285 billion in 2009 and by now have created
12.750 full time jobs alone in the UK. Moreover in 2010, the retail units
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have crossed over 286,000 in the UK, making it as UKs largest private
sector employer, (Prospects Report, 2011). Today large supermarkets and
Convenience stores have dominated the UK retail market. Supermarkets
account to three-fourth of the sales while convenience stores taking rest
of the pie. Convenience markets have been on rise in terms of numbers
and the revenue generated, in past few year s, due to which the mass
Produces today are focusing the Convenience stores. (RNCOS, Industry
Research Report 2010). The UK retailing today has developed a relatively
large and compact market which closes proximity of the major urban
centres. Whilst, larger firms have not felt too constrained and
development have occurred in many towns and cities (Guy 2010 cites in
Schnedlitz 2010).
6. Evaluating issues influencing the performance of retail and itinternationalisation agenda:
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The internationalisation agendas of retail have been debated from
variety of perspectives. There has been more focuses on the entry modes
of the market and subsequent development of the operations in the
nondomestic markets. Academic researchers have debated in all aspects
of internationalisation, its direction of investment, motivation and the
barriers to internationalisation, (Hollander 1970, Hamill and Crosbie,
1990, Myers and Alexander, 1997, Williams, 1991, Quinn, 1999, Muniz-
Martinez, 1998, Burt, 1991, 1993; Alexander, 1990, 1995, Williams,
1991, Quinn, 1999, Simpson and Thorpe, 1995, Helferich et al., 1997,
Alexander and Myers, 2000). In the case of retail internationalisation, all
most every well established retailer, competing with strong retailing offers
and customer franchisee often tend to move to expand their business by
conjugating across the national borders.
7. Economic Agenda in Retail Internationalisation:Foreign direct investments on the other hand play major role in MNEs
globalisation. With increasing word wide economic integration the
parameters of FDI flows have widened give more room to investments on
global relations. The change or increase in the worlds FDIs and real
industrial productions by 60% is shown in figure 1. Also with an increase
of 2% in annual growth, a drastic increase for international trade is an
impressive
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Figure 1. World Industrial Production, World Trade and Foreign Direct (Source: Siebert
1999)
Kleinert (1995), in his book, claims that, since mid-1980s, the
world witnessed a new era of economic integration. Since then, the
perceived economic distances between countries are diminished and as
international reactions have drastic affected the economic and national
policies. Globalisation as defined earlier in this report as a practice of
mounting economic relations is also defined by (Siebert and Klodt 1999),
as the process of converting separate national economies into a world
economy. Thus globalisation is the process that converts the individual
economies around the world into an integrated world economy. This is
mainly with the deepening of economic integration where of MNEs acts as
the transducer in linking all factors. With proper utilization of the three
main channels by MNEs of foreign direct investment, technological
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advancement, and trading channels have introduced new era of
globalisation. MNEs act as source in driving internationalised economic
activity. According to Kleinert (2001), At least 80% of all international
trade is related to at least one MNE. A third takes place within MNEs. A
large share of it is intra-industry trade between developed countries. That
includes a large share of trade in intermediate goods . Also with
increasing intra-industry investment and strategic alliances multinational
enterprises have turned individual focus into one which helped all around
geographic locations with products, services, employments, knowledge
etc. With appropriate utilization of technological flows, MNEs have
contributed towards internationalisation of knowledge, thereby uplifting al
geographical areas up to one standard. Kleinert (2001) comments that,
The dominant role of large players in the globalisation process calls for
an explicit modelling of MNEs in the globalisation process. Academic
researchers also support that; the role of MNEs in Globalisation is
incomparable. MNE have rolled off all barriers around the globe, thereby
increasing relations between all cultures with different language, believes
and knowledge into a single insight which shows a common goal and
incentive.
8. Socio-Cultural Agenda in Retail Internationalisation:Facing the histories noted financial turmoil; firms in all industry types
have notices a remarkable shift in the consumer/customer behaviours.
According to the retail industry analysis, consumers have become more
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value conscious, expecting for more product details for value, less
expected to purchase discretionary products on large scale. In some retail
worlds customers are now very value for money cautious. These prime
concerns of consumers have forced retail firms reformulate themselves to
a world class emerging retailers. Firms in these sectors are getting well
equipped to contend the global giants in their own home markets. With
major retailer moving to global market retailers have obtained successive
amount of profit in all regions. The detailed report of profit and sales
growth can be seen in the figure below.
Figure 2 Saes Growth by Country/Region 2008
At the same time with internationalizing, some firms have
experienced great successes in markets like East-Asia, Africa, and South
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America. In context to internationalisation of retail, Global Power of
Retailing report (2010) says that, The global playing field of retailing is
becoming more level. Many emerging markets now have sufficiently large
middle classes to support the efficient operations of a rage, sophisticated
home-based retailer. Such retailers are now able to tap into global
expertise, often hiring reverse expats who have spent time in affluent
markets gaining valuable knowledge and experience. To add up this
retailing strategy, the retailers licensing or franchising the retail chains
have benefit of easy access of domestic and global market capitals. The
top 10 internationalized retailer and their economic standards are shown
below.
Figure 3. Economic Concentration of top 10 retailers
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On geographically analysing the retail industry, firms not only
convert 100% of sales from their home country but also contribute a
major segment from the outside region. The internationalisation of retail
firms can be supported by the figures shown below.
Figure 4 Share of Top 250 retailers by region/country, 2008 (Source: Global Power of
Retailing 2010)
Thus with the increasing globalisation of retail firms, this industry
has witnessed an increasing scope of international investments. With
internationalisation, foreign operations have continued to aggregate a
large share of sales. The average number of countries operating also
increased slightly to 6.9 from 6.9 in just one year which has presented a
truest global scope.
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Figure 5. Shares of Top 250 saes by region/country, 2008 (Source: Global Power of
Retailing 2010)
According to Huang and Sternquist (2007), retailers have to face
different aspects when compared other firms while expanding globally.
Its mandatory for the retailers to have a physical presence in the foreign
market while other firms can even operate from home country. Also
retailers need to build up direct relationship with the foreign customers
which require a highly cultural inclination for every geographic customer.
For example the Playboy magazine in late 80s did launch its editions in
Thailand which caused massive problems to the company as it resembled
some anti cultural impact on the market. With some other incidences, it
has been cited by the researchers that, social behaviour and culture are
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the major matter of concern for every retailer when expanding across the
national border (Scott 1995). It needs a great understanding of the
religious believers and does and dont of the geographic region for the
retailers. At the same time, to survive and prosper in the social
environment, retailers need a great understanding of social credibility and
look for legitimacy and acceptance confirming the rules of every
geographical region. DiMaggio and Powell (1983), cites in Huang and
Sternquist (2007) that, the three main pillars on which a successive
internationalisation of retail stands are, legal, social and psychological
elements. Retailers operating in every geographical location need to
show great amount of social responsibility into its marketing activities. At
the same time international expansion of retail leads to the transfer of
retail management technology or establishment of international trading
relationships across regulatory, economic, social and cultural boundaries ,
(Alexander 1995 cites in Huang and Sternquist 2007). According to this,
the external environment combines with all factors like cultural, legal,
political and economic factors that affect the decisions made by the
retailers as of how, when and where to expand in foreign market.
9. Political Agenda in Retail Internationalisation:While focusing on the legal issues in internationalisation of the retail
firms, companies have to face far more complicated issues when
comparing to any other agendas. Its only the legal agenda of
internationalisation which fall outside the controlling bon of the retailers
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and they accordingly need to adjust and reframe their operations in every
foreign market. Both legal and political factors are different and specific
for every country. In this context, (Scott, 1995 cites in Huang and
Sternquist 2007), that Legal regulations in the home and host country
represent the strongest environmental pressure faced by retail
organizations. Every government formulates the laws and foreign policies
according to the goodwill of its citizens for which the retailers have to
subsidise their profits. For example, European government has different
rules for retail pricing, opening times and plannings when compared to
that of UK. Even in the home country persists a different law for
operations for a retailer which becomes mandatory for the firm to operate
at. For example, the Scottish Government follows under 25? Policy for age
restricted products where as England follows Under 21? Policy. Also two
regions have different operating times of the age restricted products like,
Scotland follows 10 AM to 10PM where as England follows 8 AM to
Midnight. Retailers also face different import and export charges and also
subsidies depending upon the countrys economic factors and the cartel
membership. Like for companies with origin of Europe feel easy to expand
business amongst the European cartel countries rather than expanding
into middle east or in south-east.
Contrarily, countries with weak governance systems strive to attract
international retailers for foreign investments. In this context Tse et al
(1997) cites in Huang and Sternquist (2007) that, In the past two
decades, China has introduced dozens of laws and regulations that reduce
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the level of risk and Uncertainty for foreign firms. These rules increase the
confidence level of foreign firms Investing in China. In context to foreign
laws, (Grewal and Dharwadkar 2002) comments that, for every retailers
there are two types of primary regulation forces, that is imposition and
inducement. Imposition in its context is coercive in a way as it forces
retailers to follow the law. For example (Evans & Mavondo, 2002) cites,
the Large-scale Retail Store Law (LSRS) in Japan significantly impeded
the expansion of Toys R US. Germany on one side follows four major
laws then India on the other hand Restricts foreign retail direct
investments thereby instructing Wal-Mart, Tesco and many others. These
factors give low governance or control on the operations of retailers in
global norms of businesses.
10. Conclusion:The purpose of this report is to provide an insight to the role of
Multinational Enterprise firms in the globalisation process. To far extent
the report draws the facts that, retailer today have some major
advantages like technology to expand across the borders which over time
provide economic benefits to stakeholders. Though retail
internationalisation is not an easy process still firms and stakeholders
have identified the benefits of connecting the geographical area through
retail expansions. On the other hand this report also critically analyze the
major issues of political, economic, socio-cultural and technological issues
that influence the performance of internationalized retailers. Though some
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of these factors like economic and technological can be controlled by the
retails, factors like culture and political constrain the operations of these
firms in globalizing. To conclude, academic researchers like Hyman
Minsky and Keller have made major predictions on future of retail, which
certainly has provided a strong support to internationalisation processes
and also attracting firms to enter every corner of the global market.
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