Accelerated internationalization by

emerging markets’ multinationals: The

case of the white goods sector
Bonaglia, Andrew Goldstein, Jonh A. Mathrews, 2007

Presenter: Nguyen Thi Minh Hien

Ph.D 8

1
 Highlights
1 Keywords of the article

2 Author background and contribution

3 Major issues and problems addressed

4 Structure of the article

5 Literature review

6 Contextualization of the article

4 Methodology

5 Key findings

6 Contribution of the article

 Keywords
- White goods sector: including washing machine, fridges, dishwashers, ovens
and cookers.
- Emerging market- multinational enterprise (EM-MNEs): Multinational enterprise
from emerging market are considered to be latecomer firms in global market,
the so-called second-wave MNEs
 Author’s background and contribution
Professional profile
• Mr. Federico Bonaglia, Italian economist, Deputy Director of the OECD Development Centre (DEV)
– supports the Director in establishing the strategic directions, ensuring that the Centre’s analysis and advice remain at the
forefront of policy thinking and produce results.
– provides leadership to strengthen the Development Centre’s engagement and impact with Africa, Latin America and
global governance processes.
• Prior to this, Mr. Bonaglia was Senior Counsellor to the Director and led the Centre’s Policy Dialogue
Division.
– responsible for strengthening the Development Centre’s engagement with governments and non-state actors, to raise its
impact on policy making
• Mr. Bonaglia’s career at the OECD started in 1999 as an economist.
– led several projects on the economic and institutional consequences of globalisation for developing countries in Africa,
South-East Asia, Central America, the Black Sea and Central Asia regions.
 Research interests
International trade and investment, structural reforms, private sector development and agriculture.
Education background
– Master with honours in economics and social sciences (1997)
– Master in Economics (1999) from Bocconi University.
 Major issues and problems
• How EM-MNEs utilize multiple connections of the globalized economy to gain
distinctive advantage compared to incumbents?
• What are the factors explaining their success?
• To what extent is the experience of the few companies from the developing world
that have become MNEs useful to replicate?
=> The study designed to provide some answer to those question

Hypothesis: While predecessor MNEs from North America, Europe, or Japan delayed
their internationalization until they were large, a number of firms from developing
world grow large as they internationalize. Did EM-MNEs pursued distinctive approach
to internationalization?
 Structure of the article
• The study focuses on EM-MNEs in the white goods industry – a mature industry
where latecomer MNEs make their mark through initial original equipment
manufacturer (OEM) contracts leading to internationalization through various
kinds of partnerships.
– The article documents three cases Mabe, Arcelik, Haier from Mexico, Turkey
and China as successful examples of latecomer firms.
– The framework for EM-MNEs’ internalization process
– Main characteristics of the global white goods sector
– A case study approach to explore factors explaining the success of the three
firms and link such features to the theoretical framework
– Some managerial implications on the extent to which the experience of these
firms is replicable for other firms
 Literature Review
− The ownership/ location/ internalization theory of large,
predominant international firms (those easily find resources and
capabilities to expand internationally)
− Ownership advantage: Extend their proprietary assets (brands, technologies)
to bring greater fire power to bear on their domestic competitors in host
markets
− Location advantage: Integrate activities across regions of the world with very
different factor costs and resources costs
− Internationalization advantage: Build economies of scale and scope through
internationalizing activities spread across borders
− In general, the path of expansion is slow and incremental, with
frequent loops of experiment learning
 Contextualization – The striking feature
of EM-MNEs
• Striking features of latecomer MNEs from emerging market: They do not have
OLI advantages to start with. Instead, they have to internationalize in order to
capture the resources needed, a reversal of the traditional perspective.
• Many EM-MNEs make their mark first in their own markets, where they can
exploit their local knowledge of product markets (Jollibee in South East Asia)
• EM-MNEs build their familiarity with local resource market (Indian IT firms
build their strategies around the deployment of local IT human resource)
• EM-MNEs treat institutional void as business opportunities ( China’s Emerge
Logistics)
 Contextualization - The global white
goods sector
• The industry has undergone significant restructuring since the late 1980s, associated
with a wave of M&A
• High market concentration is observed at regional level (top 5 of U.S, and EU), of the
world’s top ten manufacturers, only a few are present in all key markets. Others have
strong regional position or are leaders in specific product niches (often of high quality)
 Contextualization - The global white
goods sector
• Leading white goods manufacturers’ success hinges on internal resources as well as
collective efficiency of the cluster in which they operate. The choice of off-spring location
is driven not only by demand and costs considerations, but also by the presence of
suppliers of specialized components, sometimes they bring with them their suppliers to
fill critical gaps
• OEMs in developing countries are also producing on behalf Western Original Branded
Manufacturers (OBMs)
• The search for efficiency has allow the development of production platforms (using
standard engineering frameworks to which parts can be added or subtracted. Latecomers
can take advantage of all such technological and organizational innovations to drive their
successful internationalization.
 Research methodology
• A case study approach in order to generate a depth of findings
that would be unavailable in larger quantitative study.
• Strength: likelihood of generating novel theory
• Weakness: result can be theory which is rich in detail but lacks
the simplicity of overall perspective and is narrow and
idiosyncratic
• Data: face-to-face interview with the companies’ executives,
their consulting firms. Secondary data: other published case
studies, company brochures, financial newspapers, trade
magazines, and other media reports
 Mabe
Founded in Mexico in 1947, make kitchen cabinet, today one of leading
manufacturers in Central and South America, sales in 70 countries, ranked 146 th in
2004 in terms of revenue among the top 500 in Latin America.
 Arcelik
Founded in 1955 in Turkey. The first one to manufacture washing machine in 1959
and first refrigerator in 1960.
Haier
 General features of the cases
• How well do Mabe, Arcelik, and Haier fit into the framework of
‘second wave’ MNEs advanced by Khanna (2006), or Barlett (2002)?
• Do they exhibit features that distinguish them from the patterns of
internationalization found among established MNEs?
 General features of the cases
• Accelerated internationalization through linkages
– Mabe: Starting with JV with GE in 1986, it took Mabe 12 years to expand
to seven countries in Central and South America, a good example of
regional MNEs
– Arcelik: begin it OEM phase in 1988 and have its full-blown globalization
in 2001-2002 with a series of targeted acquisition and new openings in
Europe and Russia.
– Haier: fastest to internationalize, leapfrogged beyond OEM to
internationalize through acquisitions and greenfield investments in all
regions, starting in Asia 1995, in U.S 1999 and Europe 2001, in 5 years
active in 5 countries, within 10 years, active in 22 countries
 General features of the cases
• Strategic and organization innovation: knowledge leverage: The latecomer’s
critical starting point is its focus on securing access to unavailable resources
– Mabe leverage its knowledge of GE management’s core competencies, behave like
GE’s South American subsidiaries. Sanyo is Mabe’s other strategic partner in
compressors
– Arcelik has license agreement with Bosch, Sanyo, GE, LG and compressor supplier
Tecumseh, strategic partner with Ubicom (digital living smart appliances)
– Haier leverage its strategic partner with Liebherr, Merloni, GK Design and
Mitsubishi, alliances with leading providers of wireless technologies (Helicom,
Ericsson, Metalink) and Sanyo, Samsung to co-develop wireless appliances
• Invested heavily in R&D and innovation (through awards, registered
patents). As of 2006
– Mabe: 3 in U.S
– Arcelik: 8 in U.S, 51 in Europe, research center in Italy, refrigerator won European
Energy+ Award
– Haier: 30 in US, 3 in Europe, the first Chinese brand to win iF Product Design
Award, local product development team in Tokyo, Germany and US
 General features of the cases
• Adopted numerous organizational innovations to accelerate globalization
– Mabe: implementing a “learning by doing” strategy in searching and chasing
opportunities. Instead of incremental pattern, Mabe form a group of managers
( to identify appropriate targets, buy them and manage them), adopt modern
ICT and personnel training, focuses on after-sale service with Serviplus, contract
US leading provider (i2 techonologies) to optimize supply chain management
– Arcelik: display higher degree of vertical integration, the Cayirova serve all
other plants, pioneer in quality improvement program, and self-evaluation
following Malcolm model
– Haier: employ a strong and unifying geocentric perspective to capture
advantage, the CEO with great vison and able to unleash entrepreneurial
energies of the work force, make every employee a strategic business unit, its
prominent approach to live with its customer proved great success in many
different markets
 General features of the cases
• Building global brand
– First, acquisition of Western brand ( Arcelik/ Bloomberg, Haier/Maytag
– Second, supporting this brand-building endeacour through long-term
relationship with OECD-based specialists, Arcelik adopted new logo
designed by US studio to signal transformation into serious player in
global industry, Mabe turn into its Madrid of Wolff Olins to express
fresher, stronger brand presence, Haier choose Japanese GK Design
– Third, choose sport as global marketing effort, proved to be quicker
and more effective channel in overcoming cultural barriers and
company image, Haier with US National Basket Ball Association and
soccer team in Europe, Arcelik with Enropean Champion League Men
 Contribution of the article
• Features to show that three firms have internationalized
distinctively and differently from earlier MNEs: treat global
competition as opportunity to build capability, adopt strategies
and turn latecomer status into competitive advantage
• These features are worth follow-up to discover to what extent
they can be generalized. With other cases of EM-MNEs, whether a
new big question of IB will be established
• The model can be replicated as countries and firms from the
periphery are increasingly involved in production of appliances
and demand growth is much higher in emerging market