Competitive Capabilities of Multinational Organizations from Mainland China

Asia pacific Business 1
Asia pacific Business

Asia pacific Business 2
Introduction
Internationalization of the Chinese organizations is considered as important feature of this
contemporary world economy. These organizations are evolved from the local firms to the
multinational organizations. They show their strong presence in number of economies which
includes both developing and developed economies such as from the neighbouring developing
countries to the big markets of the western countries. Survey conducted by the American and
European companies ranked the Chinese organizations as the biggest competitive threat on
consistent basis. State organizations of this country get benefit from the low cost of capital and
strong relationships of the governments, but the private organizations of this country enjoy the
great flexibility from their government. This flexibility helps the companies in adopting the new
technologies and business models in quick manner (Bruche, 2009).
Privately owned organizations of China which are conducted their operations at the global are
known as Multinational organizations from the mainland China. These organizations get success
in each and every Part of the world, and this happens because of the competitive abilities of these
organizations. As these organizations, give tough competition to other organizations in both
developed and developing economies.
This essay mainly discusses the activities conducted by the multinationals from mainland China
in the developed and developing economies which reflect their competitive capabilities. This
essay is concluded with the short conclusion.
Discussion
The initiation of the 21st Century has been considered as the profitable era for the Chinese
economy, as in this era China shows the spectacular rise which reflects the two digit economic
growth in the country from last number of years. Globalization of the Chinese MNCs play most
important role in the rise of the economy of China. These organizations expand their
international activities, and these expansions are driven by number of motives such as seeking
for resources, seeking for markets. Global access of Chinese organizations and their immense
success in these markets clearly reflects the competitive abilities of these organizations. It must
be noted that, instead of the economic breakdown and the threat of the high competition, MNCs
of China flourish their business on consistent basis and grab new opportunities in the market.
Confidence of Chinese organizations mainly relies on the supportive nature and flexibility of
their governments. As 72% of the MNCs executives believe that they are able to handle the
challenges for the next three years. Almost 71% executives planned to expand their investments,
and almost 66% believe that their performance will improved in next three years (Joosten, 2015).
Competitive capabilities of these organizations mainly rely on the access of the low cost labour,
and in number of cases support given by their country. The main factor which needs to consider
here is whether innovation leads to the competitive advantage of the emerging Chinese
multinationals (Analytica, 2010). Some of these activities conducted by the Chinese MNCs
which reflect the competitive capabilities of these organizations are stated below-

Asia pacific Business 3
Innovation & Research and Development
There are number of evidences which stated that Chinese organizations mainly focus on boosting
their domestic innovative capabilities, especially for ensuring the success of internationalization.
As reflected by the INSEAD (Global Innovation Index 2011) put the China stands on the 29th
place, as it is deemed as the improvement in comparison of the previous years such as china
stands on 37th position in 2009 and 47th position in 2010. As stated by this practice, China beats
its straight contestants such as other BRIC countries which are graded in the 2011 report, Brazil
stands on the 47th position, India Stands on the 62th position, and Russia stands on the 56th
position (Dutta, 2011).
Social administrative region of the Hong Kong stands on the top of this rating list which means
on the 4th position. This index based on the different metrics and approaches for capturing the
richness of innovation in better manner in the society. These individuals Sub-indices clearly
show that China scores in well manner on ‘innovation output’ side, but it scores less on the
‘innovation input’ side. Innovation input includes number of factors such as institutions, human
capital and research, infrastructure, market sophistication, etc. On the other hand innovation
output includes creative output and scientific output (Filippov, 2012). The last component in this
context includes the elements of knowledge creation, impact of knowledge, and diffusion of
knowledge.
As defined by Yin & Williamson (2011), there are number of innovations which are pursued by
the Chinese firms. First innovation is defined as the cost innovation which mainly aims at
reengineering the cost structure for the purpose of offering the customers adequate quality or
similar quality or higher quality at the reasonable prices. This innovation is ambitious by the
cost-oriented innovation mind-set and also the flexible competency. Second type of innovation is
the application innovation, which means, finding innovative applications in context of existing
technologies and existing products. Third type of innovation is the business model innovation,
which defines the idea of changing one or four important components of the business model that
are customer value proposition, profit formula, key resources or knew processes. All these
adjustments are done on quick basis and at the minimum cost.
Fourth type of innovation is the process innovation, which means, there is reconfiguration of the
traditional value chain for achieving the high flexibility and agility. This type of innovation is
driven by the good enough mentality and also ensure simplification.
It must be noted that, competitive cost is the most important element of any innovation, and cost
innovation is defined as the key innovation model. Other types of models which are completely
apart from the genuine innovation are deemed as scopes in combination with “cost innovation
(Zeng and Williamson, 2007). Another observation in context of genuine innovation, maximum
MNCs of western countries adopting this innovation model and even they focus on the value.