November 1st, 2014
In this article, we see the comparisons and contrasts that are inside established multinational corporations, based in developed markets, with emerging MNC's, based in emerging markets. The authors segment the market in developing economies into three tiers: premium, economy and rural. In contrast, Khanna and Palepu, authors of Winning in Emerging Markets, divide the same markets into four segments: global, emerging middle class, local and bottom. Traditionally, established MNC's dominate competition in the premium, or global, consumer segment while domestic firms win in the economy segment (a combination of the middle and local segments of Khanna and Palepu).
The primary purpose of the article is to propose that the global marketplace is shifting and MNC's, both emerging and established, are beginning to break the paradigm. The authors cite examples of established MNC's beating out domestic competition for the middle market segments, for instance Otis Elevator, Proctor & Gamble, and Nokia, all in China.
They also provide cases of emerging MNC's defeating larger, established firms in the high-tech premium market segments, for example Baidu, Taobao and Dangdang gaining market share over Google, eBay, and Amazon, respectively.
The cases used to illustrate emerging MNC's winning over established companies are not convincing. The illustrations are all Chinese internet-based service firms: Baidu, Taobao and Dangdang. In this industry in China, the government and political structure play as significant a role in competitiveness as adaptation and responsiveness, the key competitive advantages the authors identify in favor of the Chinese firms.
The authors of this article divide companies and markets into two categories: established and emerging. Then, they provide an overview of traditional competition in developing markets between the two categories of companies. They conclude by discussing examples of companies that have succeeded in breaking...