Internationalization initiatives

Strategies adopted by Indian EMNCs to facilitate competitive

internationalization

ultinational corporations (MNCs) largely fall into one of two categories: developed

M country multinational corporations (DMNCs); and emerging market multinational

corporations (EMNCs). The difference between these two is fairly apparent, those
coming from developed economies such as the USA, UK, Japan, or the EU classed as
DMNCs, with those from emerging economies such as India, China, and Brazil classed as
EMNCs. It was the global economic surge of the 1980s that first brought about MNCs, with
DMNCs finding emerging markets the ideal place to conduct outward foreign direct
investment (OFDI) in order to find new sources of revenue and profit. The emerging markets
chosen by DMNCs to use the OFDI route into expansion profited heavily, and eagerly
sought to entice more DMNCs to invest in their national markets. India and China were
substantial winners from this period of global economic expansion of the western
developed economies. Yet by the early 2000s, these emerging markets saw an opportunity
to challenge the hegemony of the DMNCs, and seek to further profit from an ever-
expanding global economy.
EMNCs began as domestic enterprises, having spotted opportunities to challenge the
dominance of DMNCs in their own domestic markets. These enterprises were able to
identify resources and adopt agile practices in order to pose strong challenges to DMNCs.
Eventually, these domestic enterprises expanded, challenging the DMNCs in international
markets, many times winning the fight. This is, in simple terms, what caused the downfall of
economic dominance of the USA, UK, EU, and Japan (amongst others) in markets such as
China and India, and what led to these emerging economic nations reconfiguring the global
economy to reflect their growing economic power.

EMNC strategies
Singh (2021) has identified six ways in which EMNCs diverge from DMNCs when
progressing a strategy of internationalization. These are:

1. EMNCs adopt a more aggressive approach to internationalization, moving at speed,

contrasted to the gradual process favored by DMNCs;

2. EMNCs are typically more willing to take risks, moving to internationalize even when
their competitive advantage is not well established;

3. EMNCs tend to have strong political capabilities, due to their formation in typically weak
institutional environments, which grants a competitive advantage when entering other
markets with a weak institutional environment;
4. EMNC entry modes tend to favor alliances and acquisitions over DMNCs preference for
wholly owned subsidiaries;

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5. EMNCs exhibit higher organizational adaptability, largely due to their limited
international presence compared to DMNCs; and
6. EMNCs are equally happy entering developed and developing markets, compared
to DMNCs that follow a standard pattern of entering progressively more distant
markets.
These have highlighted further practices favored by EMNCs when looking to
internationalize, such as their preference to sell innovations in advanced economies in order
to benefit from higher incomes, seeking location advantage, whilst not moving production
abroad. EMNCs also internalize operations due to the higher cost of transactions at home.
Further work by Singh (2021) has identified the following theoretical perspectives on EMNC
internationalization:
䊏 springboard perspectives – EMNCs use international expansions to acquire strategic
resources;
䊏 competitive advantage exploitation – EMNCs utilize low home costs of production to
benefit from high value cost ratios in other markets;
䊏 institutional perspectives – political and institutional factors govern whether an EMNCs
seeks to internationalize or stay local;
䊏 bundling model – all sales of products of services require the bundling of intangible
assets such as technology and brand names with complementary local resources.
EMNCs monopolize these to leverage market power;
䊏 firm specific advantages (FSA) – EMNCs develops FSA through developing superior
HR processes, training, and promotion and compensation initiatives that overcome
labor market voids.

Indian internationalization
Indian EMNCs, despite the typical pathways outlines above, have been found to take
divergent routes to internationalization. The primary focus of Indian EMNCs is to build FSAs
in the home market first, using them as a key stone for outward progression. Upon
standardizing these competitive capabilities, they look to new markets in which to leverage
these superiorities. Indian EMNCs also adopt strategic alliances, joint ventures, and
acquisitions to gain market entry points, yet they typically strongly favor strategic alliances
with non-market leaders in their target market. They do this in order to better understand
their target market, and gain insights before fully committing to carving out a share for
themselves. Furthermore, Indian EMNCs typically have a combination of focuses when
entering a market: asset, technology, and market seeking motives. They do this by adopting
a niche market strategy, retailing a few select products that are produced for each
geographic market especially.
Through aggressive corporate parenting, Indian EMNCs adopt an innovative product
development strategy, with R&D forming a lynchpin to all internationalization efforts. By

It was the global economic surge of the 1980s that first

brought about MNCs.

VOL. 37 NO. 6 2021 j STRATEGIC DIRECTION j PAGE 15

 EMNCs use international expansions to acquire strategic
resources.

doing this, Indian EMNCs are able to gain a competitive advantage in home markets, and
then transfer this advantage to international markets. This is coupled with key account
management, where key customers are effectively mined for maximum value, before
moving on. Understanding these baseline differences will aid any organizations looking to
Keywords: better anticipate Indian EMNCs in their own marketplaces.
Emerging market
multinational corporations,
Internationalization Comment
strategy,
Emerging economies, The review is based on ‘The rise of emerging Indian multinationals: strategic learning for
International market entry, EMNC foreign market entry and internationalization’ by Nitya P. Singh, published in the
India International Journal of Emerging Markets.

Reference
Singh, N.P. (2021), “The rise of emerging Indian multinationals: strategic learning for EMNC foreign
market entry and internationalization”, International Journal of Emerging Markets, Vol. ahead-of-print No.
ahead-of-print.

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