Indian Multinational Expansion Strategies

This assignment delves into the expansion strategies employed by Indian multinational corporations (MNCs). It examines key concepts like Linkage, Leverage, and Learning (LLL) perspective, determinants of FDI in BRICS countries, and resources utilized by emerging MNCs. The analysis includes real-world examples such as Havaianas' international success and the global impact of Indian and Chinese economic emergence.

International Business
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EXECUTIVE SUMMARY
All the organizations which carry out their operations among multiple countries of the globe
are called international businesses. It comprises exchange of goods, services, technologies,
technical know-how, capital sources etc. between distinct land of the world. It is also known as
global business which includes import and export operations. This assignment aims at examining
the contribution of global organization in the development of national as well as foreign economy.
Therefore, the report will reflect an analysis of various theories and models of the foreign trade
practices. For this purpose, Brazil's multinational enterprise, Alpagrates has been chosen to conduct
the study in an effective manner. Through this, various advantage and difficulties will be identified,
while carrying out their operations across nations in order to create a strong position in the global
marketplace.
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Table of Contents
EXECUTIVE SUMMARY..................................................................................................................2
INTRODUCTION ...............................................................................................................................4
Overview of the Brazil's MNC, Alpagrates.....................................................................................4
Internationalization of Alpagrates, challenges and its strategies.....................................................4
Contribution of Alpagrates expansion to home country's economy................................................6
Contribution of Alpagrates expansion to international economy....................................................7
Eclectic paradigm............................................................................................................................8
Internationalization theory...............................................................................................................8
Product life-cycle theory..................................................................................................................9
Impact of emergence of India and China (Sino-Indian relationship)on globalisation.....................9
CONCLUSION ..................................................................................................................................11
REFERENCES...................................................................................................................................12
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INTRODUCTION
International business refers to the trading operations that took place beyond the national
boundaries of the world. In other words, production and distribution of goods and services among
various nations are called foreign or multinational companies (MNCs). In the present era, it can be
seen that large number of corporations are engaging in cross border transactions to build a strong
position in the competitive market. Such global expansion can be done by various means such as
export through agent, sales agent, distributor, subsidiary, Foreign Direct Investment (FDI), licensing
system etc. (Dunning, 2012). BRICS is an acronym for five emerging countries that stands for
Brazil, Russia, India, China and South Africa. After the globalization, many of the corporations who
were operating in BRICS expanded their operations across nations and entered in the global
marketplace. Present report will demonstrate an in-depth evaluation of the contribution of MNCs
towards the development of domestic as well as foreign economy such as creation of job, wealth
and socio-economic development. Moreover, the assignment will discuss the difficulties and
problems which organization faced in international expansion. In the end, an extension of
globalization process will be examined by addressing the emergence of two nations, India and
China.
Overview of the Brazil's MNC, Alpagrates
Alpagrates is a Brazilian footwear company, which stems in the year 1907. It operates in
manufacturing industry and is headquartered in Sao Paulo, Brazil. J&F Investimentos is the parent
organization of it, while Alpagrates Argentina is the subsidiary firm. Its product portfolio comprises
footwear, retail, textile and canvas. However, Havaianas, Osklen, Dupe, Topper, Rainha, Mizuno,
Timberland, Sete Leguasm etc. are its top brand. It owns 13 manufacturing units in Brazil and
Argentina and operates at global level by exporting goods and services to more than 80 countries
across globe.
Internationalization of Alpagrates, challenges and its strategies
MNCs are an invaluable dynamic instrument, which can be referred to wider distribution of
goods, services, capital, technology, employment etc. across domestic boundaries (Young and
Ghoshal, 2016). No doubt, they conduct their business globally with the aim of getting maximum
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profit and achieve success. After the age of globalization, many of the firms enter into different
nations to capture a larger market share and reach goals. With regards to Alpagrates, its product
portfolio, particularly Havaianas has emerged as a global brand in the competitive market place. In
the initial period, company faced numerous challenges in their global expansion strategy. The main
reason behind this is, at that time, entrepreneurs of other countries like China, Russia, South Africa,
Argentina were also developing plans for making business international (Khapada and et.al., 2012).
For instance, Nike and IBM were the top most rivals of Alpagrates, which brought large difficulties
or issues in the effective implementation of its growth strategy.
In the inaugural period, Alpagrates was manufacturing shoe in limited colours but still, high
durability, comfort, effective prices etc. were the strength of it. As a result, within a shorter duration
of one year, company's products became so popular in the Brazil as firm was producing more than
13000 pairs of shoe each day. At the same time, tourists demand for unique and colourful sandals in
their suitcase and taking into home. However, in the time lag between 1980 and 1994, its turnover
has been decreased, due to which, Alpagrates top management authority decided to re-position the
brand name as a leading fashionable product manufacturing organization (Hay and Marsh, 2016).
This decisions has been implemented by launching an effective advertisement campaign through
showing celebrities wearing shoe such as Jennifer Aniston, Kelly Slater et. Moreover, it also started
manufacturing shoes in wide range of colours as well to take business to global level. Currently,
Alpagrates produces 80 models in 60000 colours.
Word of mouth expansion, international stars adoption, aspirational advertisement program
etc. were the most important component in the expansion strategy of Alpagrates. In the year 1998,
firm exported many items to France, particularity, FIFA World Cup, but still, leading domestic
designers such as Lacoste, Gaultier, Dior etc. brought challenges in the global expansion (Cuervo.
2012). Thus, it can be said that stiff competition is one of the main difficulties, which has been
faced by Alpagrates in taking business into international level. Moreover, in initiating operations in
Europe, it faced issues regarding expansion of existing production process in range of colours to
appeal sophisticated consumers, huge investment in manufacturing process, sales and marketing,
rival firms like Crocs, Quicksilver and Rip Curl and lack of precedents etc. (Onkelinx, Manolova
and Edelman 2016).
In order to overcome these issues, company used a formula of dedicated, persistent and
highly committed workforce to manufacture innovative products to serve customer beyond
expectations. Along with this, they also exploited their competitive strength to make it harder for
the rivalries to gain a foothold. Besides this, different needs, preferences, likes and dislikes of the
consumers also were an issue in its overseas expansion (Turpin, 2013). It has been effectively
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managed by the introduction of new and best quality products to enlarge the existing portfolio.
Through this, it was able to survive better in the intense competitive age. Its strategic focus on
designer shoes, consistent global advertisement and other promotional tools, effective
communication and faster responses to the customer taste are the main elements through which it
was able to expand operations in overseas market. Its innovative and aspirational marketing strategy
made an effective contribution in the development of positive image across boundaries by providing
colourful shoe products. It entered into new countries by local importers and distributors, whereas,
in Europe, it established five office premises (Carvalho, 2013). Besides this, it also opened a new
manufacturing plant in the Southeast region of the world and opened retail stores in the countries
like Rome, Paris, New York and London. Selling premium goods to abroad helped firm to enhance
sales from $1.7bn from $2.6bn, which proved as an exceptional contribution in the business
development, growth and success.
Furthermore, less production cost of Chinese manufacturers as compared to Brazilian
footwear manufacturing also was a great challenge in carrying out operations beyond the home
country. In this, cultural branding (integrate other countries culture in their own marketing practice
or campaign) and identification of vibrant colours, youth, sense of humour, joyfulness and
sensuality etc. enable Alpagrates to gain global existence (Adekola and Sergi, 2016). Moreover, at
the initial stage, it used penetration pricing strategy, in which, it decided very low prices to attract
more and more global consumers and grab larger market share, however, after the time, offering
rates has been increased. Its first price for Havaianas was $16, which has been extended up to $200.
Thus, from the above discussion, it has been identified that good product technology, innovation,
cultural branding, exceptional marketing etc. are the main factors which develop a strong position
of Alpagrates in the heart of each and every consumer whether domestic or foreign (Rugman and
Collinson, 2009). This strategic focus also provides huge assistance to the other developing
economies such as China and India to become a leading organization.
Contribution of Alpagrates expansion to home country's economy
The global expansion of Alpagrates, provided numerous advantages to the domestic country,
Brazil which is enumerated here as under:
 It facilitates development of Brazilian economy by providing opportunities to market their
homemade footwear products and services across the globe. For instance, emerging market
in Europe, London, NY. Columbus, Lisgon, Bologone, Natal, Chaco, Argentina, Montes
Claros, San Luis. USA etc. enable firm to start production and distribution of its footwear
across nations.
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 It also created number of jobs in the domestic as well as foreign country by providing
employment opportunity to the people (Soni, 2014). Through this, unemployment rate can
be declined which contributes towards national economic development and growth.
 Operating overseas also boost activities and functions of the domestic footwear
manufacturing industry at global level (De Wit and Meyer, 2010). Through this, Alpagrates
will be able to take advantage of economies of scale and decline there per unit cost. With the
help of this, it can generate large return or yield on their revenues.
 Large number of MNC provides assistance to the home region to improve their balance of
payment (BOP) (Moosa, 2016). It is because, higher the export and less import facilitates
firm to generate foreign exchange earnings and convert adverse BOP to favourable position.
 Home country can also can take advantage of understanding cross-country culture and align
and integrate such in the organizational marketing strategy to build a strong global position.
 Internationalization of the trading practices also provide wider choice of products and
services to the domestic people (Buckley, 2016). For instance, entering strategy of
Alpagrates into distinct lands enlarge its existed portfolio by offering footwear products in
different colours and prices.
Contribution of Alpagrates expansion to international economy
 One of the most important contribution of the foreign organizations is they make huge
investment in research and development (R&D) activities. With regards to Alpagrates, it
invested large money in advanced R&D operations to meet target customer requirement and
survive in the newly market segments effectively (Bae, Joardar and Sarkis, 2016).
 Expansion strategy also provides technological superiority to the MNCs. It is because, as a
global enterprise, Alpagrates can adopt latest technological equipment’s and machinery for
the production of goods and services. Thus, use of foreign country's technologies is also an
advantage to the host country (Hwang and et. al., 2016).
 Starting operations of Alpagrates in various regions provides benefits to the host country by
higher level of employment, investment and income as well. The reason behind this is if an
organization carries out their operations in different regions, then it will definitely increase
job opportunities, which inturn enhance people’s income, their life standard and create
wealth as well. For instance, establishing new production plants in Southern region, Europe
and other nations increase wealth (Marten and et.al., 2014).
 Conducting operations in different countries across the globe break protectionism, local
monopolies and enhance competitive strength by global existence.
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 Host country can develop their economy by improving BOP through declining their imports
and increasing their exports. It might be possible by high level of production due to the
international operations of Alpagrates and other MNCs.
 Expansion program also assists country or industry to produce goods at lower cost. It is
because, cheaper availability of raw material, skilled personnel at affordable wages rates,
less overhead etc, contributes in the company's success by declining their manufacturing
cost. As a result, business can maximize their yield percentage on their turnover and enhance
their performance to a greater extent.
 MNCs will be able to generate required capital resources from the external capital markets
instead of collecting funds only from the domestic country. Thus, it helps to meet their
capital necessity effectively, where in turn, companies can run their operations successfully.
Eclectic paradigm
It is an internationalization approach,h which has been introduced by John. H, Dunning.
This concept has been developed to identify the reasons for existence of MNCs and FDI over the
world. According to this theory, there are three major elements that are discussed below:
Ownership-specific advantage: In this regards, Alpagrates took benefits through high competitive
strength and intangible assets like brand name, patent, trademark etc. (Boddewyn, 2015). Moreover,
good reputation, technological advancement, better managerial skills etc. are also the other
advantages which entrepreneur can gain by making investment in numerous countries of the world.
Location-specific advantage: This component reveals geographical benefits or position of the firm.
It states that by starting operation overseas, Alpagrates will be able to take benefits such as
reasonable price of material, less labour's wages rate , favourable rules and regulations of host
country's government and political stability as well (Jain, Kothari and Kumar, 2016).
Internationalization-specific advantage: It demonstrates that when Alpagrates extended its market
operations in abroad, it received globalization advantage by having a new market, decline its
manufacturing cost of footwear and also manage their personnel skills, capabilities and
competencies to meet customer demand effectively (Thite and et.al., 2016).
Internationalization theory
This concept has been invented by Buckley and Casson, which exhibit that firms carry out
their routine activities and functions at global level only due to market imperfection. It reflects that
enterprises can use their monopolistic advantage across worldwide so as to get competitive
advantages. In accordance with this theory, entity can make FDI in other nations to create their own
market and overcome imperfection in domestic marketplace. By this, they can become a global
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business and compete effectively with the rival firms. With regards to Alpagrates, it has been
discussed hereunder: Resource seeking: This approach tells that Alpagrates entered into new market segment like
Europe, USA, London etc. to seek and secure resources like material, human resources and
capital etc. so as to reduce their material, labour and production cost as well (Du, Boateng
and Newton, 2016). Market seeking: It states that Alpagrates emerged and exploited new market for their
existed product portfolio so as to remove their domestic trade barriers and decline their
transportation cost (Cahen, Lahiri and Borini, 2016). Efficiency seeking: This reflects that by carrying operations globally, Alpagrates generated
greater efficiency, skills, talent and highly committed workforce at less cost.
 Capabilities seeking: In this, enterprises can acquire the existing corporations or assets
situated in abroad. It demonstrates that firms can gain adequacy so as to sustain and improve
its competitive strength at the international level (Xie and et.al., 2016).
Product life-cycle theory
Another theory of international trade practices has been developed by Raymond Vernon.
According to this theory, at the initial stage, companies like Alpagrates are engaged in production
and distribution of their goods and services in the home country, Brazil only. However, with the
passage of time, when its products build a strong reputation in the local market, then owners will
take step to serve further nations (Thite and et.al., 2016). In such regards, production facilities can
be relocated in abroad by lowering the labour cost, getting cheaper material and other benefits
which are available in host nation. For instance, in the case of Alpagrates, it established
manufacturing plant and recruited sales agents as well as distributors to sale their footwear cross
border.
Impact of emergence of India and China (Sino-Indian relationship)on globalisation
Globalization is regarded as the process whereby national economy integrates its trading
practices into foreign countries by the means of foreign trade, FDI, migration, cross capital flow,
spreader of technology etc (Vijayakumar, Sridharan and Rao, 2010). It provided tremendous
opportunities to the domestic manufacturers or developers who are carrying out their operations in
only one nation. In the recent times, emerging countries significantly outward FDI in various
nations and make them fastest growing economies (Paul, 2016). For instance, India and China have
been emerged as two rapidly developing nations in the world only due to the internationalization.
Both the countries took large amount of benefits from the globalization and increase the economic
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growth rate as well. However, on the other hand, the political climate, in which both the countries
implemented their reforms were quite different from each other. For instance, China paid particular
focus on the production of durable products and FDI whilst India focused on outsourcing the
services (O'brien and Williams, 2016).
Foreign trade practices pushed both the nations to the centre of the stage by offering
numerous opportunities. With regards to Indian economy, it had experienced a new economic
reform policy, called LPG model acronym for Liberlization, Privatization and Globalization. The
aim of this model is to grow home economy and make it globally competitive as well. In the year
1991, India faced wide range of challenges in its economic development due to fiscal crisis, high
rate of inflation, lost of confidence of foreign investors etc (Khan, 2013). As a result, international
capital providers forfeited their invested money. Moreover, it became very difficult for the nation to
take loan from global banks. At the same time, unforeseeable changes in the economies like Europe,
Asia, Latin America, South East etc. have been addressed. Therefore, in order to overcome this
effect, in the early 1990s, Indian economy undertook major steps such as devaluation of domestic
currency against foreign exchange, disinvestment and liberalized the provisions of licensing and
FDI regime (Schniederjans, Schniederjans and Schniederjans, 2015). Moreover, NRI schemes also
have been introduced, in which, government provided concessions to the foreign investors or NRIs
who have more than 60% stake. Further, huge reduction of high customer tariffs from 300% to
30%, reforms of financial sectors like banking, insurance and capital markets by deregulating the
interest rate and introducing competition of private sector had been done. After the globalization,
high FDI enabled Indian economy to access capital, technology and new market.
Along with this, growth in economic as well as diplomatic influence due to emergence of
India and China enhanced the bilateral relationship between both the nations (Hair, 2015). However,
before the times, both the economies have been characterised as military conflicts and border
disputes. But after the emergence, countries rebuilt their relationship and grown economic and
strategic ties as well. By this, China became the top leading partner of India. On the contrary to this,
there are several issues or hurdles exists in the countries development. For instance, while trading
with China, India addressed heavy trade imbalance due to not resolving their military conflicts and
boarder disputes with People's Republic of China (PRC) (Enloe, 2016). Therefore, both countries
have established their military infrastructure along the areas of the border and thereby built a strong
relationship. Over the 2 decades, unmatchable development has been addressed in India and China
as their annual growth rate is 10% and 6.7% respectively. Both the emerged nations represent 19%
of the universal GDP in the terms of buying power whilst, growth in GDP is 32%. Along with this,
both the economies accounted for 25% of annual graduation of engineers and scientists across the
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globe. Besides this, China's export to India grown at a rate of 17.6% per annum whereas exports of
latter country staggeringly grown at 14.9% p.a (Paul, 2016). Different in growth rate of the
countries have been witnessed due to difference in trade policy and barriers. However, on the other
hand, high growth in China is because of cheaper availability of labour, huge infrastructural
investment and high rate of investment. Moreover, capital-intensive exports created number of jobs
in the manufacturing industry. Opposed to this, India is not seen as attractive locations as China for
FDI, due to which, its annual rate of growth in exports is comparatively lower than China. But still,
over the 2 decades, India's GDP and its increasing rate is higher than other emerging countries of
BRICS such as Brazil and Russia. Thus, it can be seen that improvements in GDP, increasing
production, more jobs, high growth rate in GDP, less production cost etc. are the benefits of both the
economic emergence which became possible due to globalization.
CONCLUSION
Above report concluded that trading overseas provides huge benefits to the home as well as
host countries such as reduction of manufacturing cost, better use of technology, flow of capital
across boundaries, improving BOP etc. Moreover, from the discussion of various theories and
concepts, it have been inferred that domestic organizations expanded their operations across
national boundaries so as to improve their competitive strength by the means of global presence. In
the end, report clearly identified that after the emergence, China increased its GDP and annual
growth rate much quicker than India.
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