According to Santos and Williamson (2015), many multinationals based in advanced

economies have failed in competition with local firms in emerging economies. Why did
these multinationals fail? If you were hired as the CEO of one of such multinationals,
what would you do to address the challenges you face in emerging economies?

Reasons for Failure**

1. **Inadequate Understanding of Local Market Dynamics**

MNCs often underestimate the complexity of emerging markets, including cultural

nuances, consumer preferences, regulatory environments, and distribution channels.
Without a deep understanding of these factors, they may struggle to adapt their
products and strategies to local conditions.

*Example: Walmart in Germany*

Despite its global success, Walmart faced challenges in Germany due to difficulties in
adapting its low-cost, high-volume business model to German consumers' preference
for smaller, neighborhood stores, high-quality products, and personalized service. This
mismatch between Walmart's strategy and local market dynamics led to its eventual
withdrawal from the market in 2006.

2. **Poor Adaptation to Local Tastes and Preferences**

Successful penetration of emerging markets requires customization of products and

services to meet the unique needs and preferences of local consumers. Failure to adapt
offerings accordingly can lead to low demand and market share loss.

*Example: McDonald's in Bolivia*

McDonald's struggled to resonate with Bolivian consumers, who preferred traditional

local cuisine over fast food. Cultural differences, economic factors, and health-
conscious consumer preferences contributed to McDonald's inability to thrive in Bolivia,
leading to the closure of all its restaurants in the country in 2002.