1.

What are the challenges for the multi-national corporations on account of intensification of the
divide between pro-globalists and anti-globalists?
In the course of recent years, the world has experienced an exceptional time of globalization. Individuals,
capital, products, and thoughts have moved the world over with opportunity unheard of since the late
nineteenth century. MNCs have been instrumental in this procedure. The beginnings of this change
concentrated on improving expenses, as MNCs moved generation to nations with less expensive work
and spread propelled creation methods and the board rehearses the world over. Subsequently, both
MNC and worldwide profitability have improved drastically.

Worldwide joint effort and worldwide exchange accords have likewise enormously profited Asian
economies in the most recent decade, with this locale turning into a significant platform for a portion of
the world's biggest MNCs. Investors of MNCs have profited by this tailwind as well, as greater markets,
lower creation expenses, and sensible utilization of head office houses to decrease duty bills have all
improved the primary concern. One examination demonstrates that somewhere in the range of 1990
and 2015, the market capitalization of the main 50 MNCs developed multiple occasions quicker than the
normal traded on an open market organization.

In any case, this profitable position is currently under risk. Political talk, to some degree driven by
progressively significant moves in open feeling and rising residential imbalance, is addressing
globalization and the political and monetary strategies that advanced it. Lately, this dynamic has
happened through a developing number of political initiative changes far and wide, towards gatherings
that harbor more populist and nationalistic propensities.

The Global Financial Crisis of 2008 demonstrated to be the flashpoint that impelled numerous to rethink
the advantages and exchange offs achieved by an all inclusive incorporated monetary framework. In
numerous nations, the monetary accord has moved back towards an inclination for a more grounded job
for the state in the oversight of business sectors and of corporate conduct. As national approaches are
veering far from an accentuation on worldwide organized commerce, there has been a reasonable
ascent in the presentation of protectionist measures by the world's driving economies. With force
behind "de-globalization" expanding, some market condition suspicions of late decades might be
switched.

In spite of the fact that the present move is unambiguously towards more noteworthy protectionism,
how much it will endure isn't clear. A couple of the liberal vote based systems in the West that supported
unhindered commerce are beginning to push back against the free development of capital, merchandise
and work, with a crucial move in their politico-financial plans. Then again, in spite of comparable
developing populist conclusion in parts of Asia, endeavors are as yet being made towards more
prominent territorial banding (intra-Asian or intra ASEAN), activated to some degree by the ongoing
withdrawal of the United States from the TPP (Trans-Pacific Partnership).
Besides, with financial powerhouses China, Japan and India closer home, creating economies in Asia
have elective wellsprings of remote direct venture (FDI) at appealing terms (the most eminent being
China's $900 Billion Belt and Road Initiative) and are less reluctant to guide far from Western FDI and
MNCs. For instance, while US FDI into ASEAN fell by 50 percent in 2016, Chinese FDI into the locale
expanded by 44 percent that year. One can't limit the likelihood of an arrival to some new form of
globalization with progressively great terms for MNCs, or an inversion in the pattern towards expanded
populism. Our suppositions in this article are: (a) Protectionism will ascend in any event for the time
being, and MNCs must notice and plan for the results; and (b) We can't reject a potential fast speeding
up into populism which ought to be viewed as an emergency situation for most worldwide
administrators.

The effect on MNCs:

MNCs have increasingly become targets of attention and criticism by this new wave of nationalism.
Specific events linked to tax avoidance, executive compensation, local market infractions (such as
environmental standards, health safety, and labor laws), accounting scandals, and government bailouts
have been cited by the populists as examples of MNCs’ abuse of the system. However, not all bearings
have been idiosyncratic. Trade barriers directly impacting MNCs businesses and products are being
raised at a record rate – in 2017 alone, 376 discriminatory trade interventions were implemented as
compared to 111 liberalizing measures.
Further, as developing economies mature, governments are getting smarter in supporting the local
economy and businesses, and pressurizing MNCs to commit more towards the local economy and
broader society. MNCs thus face a new operating environment and set of constraints – business models
that delivered superior performance by tapping into multiple growth opportunities while keeping costs
and financial resources lean and geographically mobile may no longer be efficient. Unattended to, MNCs
will face depressed business growth and profitability. This is already being seen: The FTSE has found that
the profits of the top 700 MNCs have dropped by about 25 percent in the past five years, as has the rate
of return on FDI.
Mitigating risk factors
MNCs’ strategic planning and risk analyses thus need to explore many different contingent scenarios,
including adverse geopolitical events. MNCs need to better understand the specific drivers and
transmission mechanisms by which political shifts trickle down to impact business models and
profitability. The impact of each of these drivers on MNCs will differ by country of incorporation, industry
of operation, and geographic footprint. Next, we highlight the transmission mechanisms and likely
impact of each of the drivers.
Building robust Supply chain
MNCs need to build ecosystems which are resilient to changes. They have to innovate and create supply
chains that can work at the lowest cost in a globalized world. However, these supply chains must be
capable of adapting in no time if affected by geopolitical changes. At the present moment, the
multinationals seem to have no answer. But then they have never been under so much pressure earlier.
Necessity being the mother of all invention, some innovation is likely to make its way into the global
supply chains of these manufacturing behemoths .
The problem with relocating operations is that multinationals are not self-sufficient. Their operations are
reliant on a wide variety of suppliers. Over the past two decades, companies have spent a lot of time and
built the local eco system in Asian countries. Now, they may have to relocate the entire eco system at the
drop of a hat. Not only is this going to be very expensive but also very challenging to execute.

To sum it up, the heydays of multinational corporations seem to be over. The geopolitical climate all over
the world appears to be moving in a direction that will spark a trade war, and this war will create an
uneven playing field wherein smaller national players will have a considerable advantage over these 800
pound multinational gorillas.

2. What are the challenges for the traditional or classical MNCs on account of internationalization of
businesses in the emerging economies?
Majority of the world population lives in emerging markets which means that the world population is
moving from basic need era to a more consumption oriented era. This tendency has created an
environment for more new consumers of products and services across these emerging markets
transforming them into huge consumption hubs for MNEs. Therefore, MNEs are looking at such
developments as an opportunity to capitalize on and moving their business operations to these markets
which traditionally used to be considered as low production or assembly centers. There are several
examples of MNEs from developed markets moving into emerging markets such Brazil, China, India and
Mexico to take advantage of the growing demands for a variety quality services and products from newly
rich consumers. These markets are also experiencing a number of other positive developments in the
field of institutional reforms, democracies, infrastructure improvement, information and communication
technologies and international business agreements. Since, MNEs operating in the global markets
influence and are influenced by the political, economical, social and cultural environment of the host
countries, for the last several years the emerging markets have been experiencing positive development
in these areas too. Other positive influence of MNEs on host emerging markets is the overall
contribution to the international trade balance of the host developing country by producing goods that
used to be imported from developed nations. Authors suggest that MNEs have international experience
and advanced technology and that is why they can be more productive than their local counterparts.
They can offer better salaries to their employees and thus attracting quality local staff. Furthermore,
MNEs have a positive influence on the other national firms such as making them more competitive,
forcing them to implement modern LV14045 Challenges for MNEs methods and technologies, and to hire
trained labor force. Emerging markets receive a number of other benefits from MNEs: improved balance
of payments, increased exports; improved foreign currency reserves; reduced imports; reduced
unemployment; improved fiscal position and access to higher technologies. To a greater extent both the
host emerging market and MNEs can benefit from each other, but such benefits do not come without
costs and challenges. Therefore, this paper is dedicated to study diverse challenges facing MNEs in
emerging markets and propose some strategic actions for MNEs to overcome those challenges.

A firm that internationalizes possesses an intrinsic advantage over firms in the host country (Dunning,
1988). In foreign countries, a MNC is particularly incited to secure its knowledge, management and
information assets due to the fact that its competitive advantage is directly linked to its capacity to limit
diffusion to local competitors. But at the same time, a foreign investor is not able to, or necessarily
interested in, totally hindering its advantages from leaking out to the local environment as spillovers.
Hence, spillovers take place when multinationals are unable to, or uninterested in, extracting the full
value of the resulting productivity increase of their activity in the host economy. Since a MNC often is
profoundly different from a (non-internationalized) local firm in terms of technology, capital,
organizational and managerial capabilities, and international market access, there is a potential for
significant spillovers on the local economy and local firms.
Markets are full of imperfections of the structural type – proprietary technology, privileged access to
inputs, economies of scale, control of distribution systems and product differentiation (Bain, 1956) – that
can be used by firms to increase their monopoly power and to internationalize. The main idea of this
school of thought is that the characteristics of the industry fundamentally affect the strategy and
performance of firms, and indeed, the effects that MNCs may have on host countries. Thus, industry
characteristics may impact whether or not MNCs crowd in or crowd out local firms; whether they
transfer technology and knowledge from parents to affiliates; whether they foster linkages to local firms;
and whether they suppress or foster competition in the host country.

Internationalization per se reinforces the multinational’s advantages by providing opportunities to divide

marketing risks, by slicing up the value chain on the base of the territories’ comparative advantages, and
by providing access to new resources and assets. The multinationals’ ownership advantage is often
reinforced by the ability they have to access finance, internationally and in the host economy, compared
to local firms which are most of the time financially constrained. Later, the International Business theory
of MNCs directed more attention to advantages related to the ability to organize cross-border
transactions in the face of market imperfections, the ability to leverage resources across borders or the
advantages related to coordinating knowledge diffusion and development across borders. Dunning
sought to integrate many of these understandings of MNCs in his ‘eclectic’ OLI framework, which has
become a dominant framework for understanding MNCs within the International Business literature.
International Business is essentially about understanding the existence, conduct and performance of
firms involved in cross-border business transactions and therefore the efficiency or welfare effects of
these transactions received little attention. Basically, welfare issues remained the domain of trade
economists and industrial economists and to some extent political scientists analyzing the role played by
MNCs in policy formulation at the national and international level (see for example Spar and Yoffie, 1999;
Moran, 2002). Insofar as International Business analyzed spillovers, it was mainly in the context of
finding effectively controlled strategies avoiding spillovers; indeed, to many International Business
theorists, the very purpose of the MNC was to avoid knowledge and technology being spilled over to
other firms.
Much of the spillover literature focuses on the effects of manufacturing MNCs. However, as pointed out
by UNCTAD, services are increasingly being internationalized, both service industries proper and service-
value-chain activities within manufacturing firms. The internationalization of information technology (IT)
and other business services offers new opportunities for the integration of firms in emerging economies
into the global economy as evidenced by the successful growth of Indian IT and business process
outsourcing (BPO) firms. The empirical material focusing on spillovers in services is still very poor and
inconclusive. Alfaro (2003) for example, finds that FDI has exerted an ambiguous effect on economic
growth in the service sector of a sample of 47 countries (including developed and developing countries)
over the 1985-1999 period. So too does the academic research differentiating the FDI impact on the
basis of technology intensity of the foreign investor. Bosco (2001) for example, suggests that the
Hungarian firms did not benefit from the presence of foreign firms in high-technology industries. On the
one hand, foreign high-technology industries have a higher spillover potential than low-technology
companies, but on the other hand, they particularly want to prevent their technology from leaking over
to local firms (especially in countries with weak intellectual property rights), and local firms in less
developed countries might fail to absorb advanced technologies and information.

Overview of theories on the internationalization process of emerging market:

MNCs Luo & Tung (2007) outline seven steps of the springboard perspective to describe how and why
firms internationalize in order to grow. While these firms tend to have limited ownership-specific
advantages, country-specific advantages have been internalized to be used outside their country of
origin. It is important to remember that MNCs from developed countries are also affected by
globalization, technological progress and learning experiences (Dunning et al., 2008). Mathews (2002)
proposes the LLL theory where latecomer firms are engaged in global production networks in which they
can leverage knowledge and technology through their partners in a learning process. Consequently, their
motive and patterns of FDI are also changing. Dunning, et al. (2008) also suggest that the success of
MNCs from emerging countries lies in the ability to link firm-specific and country-specific institutional 23
distance, such as environmental and social responsibility. FDI from emerging markets with regard to
localization choice might eventually in the future resemble MNCs of developed countries (Dunning et al.,
2008).
Conclusion:
The new MNCs are the result of both imitation of established MNCs from the rich countries—which they
have tried to emulate strategically and organizationally—and innovation in response to the peculiar
characteristics of emerging and developing countries. The new MNCs have emerged from countries with
weak institutional environments and they are used to operating in countries with weak property-rights
regimes, legal systems, and so on. Experience in the home country became especially valuable for the
new MNCs because many countries with weak institutions are growing fast and they had developed the
capabilities to compete in such challenging environments.
It is also important to note that the established MNCs from the rich countries have adopted some of the
patterns of behavior of the new multinationals. Increased competitive pressure from the from MNCs
from developing countries has prompted many American and European firms to become much less
reliant on their traditional strategies of product-differentiation and vertical integration. To a certain
extent, the rise of networked organizations64 and the extensive shift towards outsourcing represent
competitive responses to the challenges faced by established MNCs. Finally, a special type of new MNC is
the so-called born-global firm, which resembles the new MNC in many ways but has emerged from
developed countries.
Taking all of these developments into account, it is clear that the traditional model of MNC is fading. In
effect, globalization, technical change, and the coming of age of the emerging countries have facilitated
the rise of a new type of MNC in which foreign direct investment is driven both by the exploitation of
firm-specific competences as well as the exploration of new patterns of innovation and ways of accessing
markets.
Our analysis of the new MNCs has shown that their international expansion was possible due to some
valuable capabilities developed in the home country, including project-execution, political, and
networking skills, among other non-conventional ones. The lack of technological or marketing
capabilities does not necessarily imply the absence of other valuable capabilities that may provide the
foundations for international expansion. It is precisely for this reason that the new MNCs are here to
stay.