IBUS4560 Fall 2018: EMMs vs. MNCs - Expansion and Internationalization

This essay provides a comparative analysis of Emerging Market Multinationals (EMMs) and Multinational Corporations (MNCs), focusing on their business strategies in emerging markets. The essay begins by exploring the relationship between Firm-Specific Assets (FSAs) and Country-Specific Assets (CSAs) and how these assets influence the expansion motives of both EMMs and MNCs. It then differentiates between the expansion motives of EMMs and MNCs, highlighting key distinctions such as technology acquisition, market positioning, quality standards, and approaches to developing countries. Finally, the essay examines how these varying motives affect the internationalization processes of EMMs and MNCs, including the stages of internationalization and their impact on business success. The analysis is based on the provided assignment brief which includes references to relevant literature, and offers a comprehensive overview of the key concepts and differences between EMMs and MNCs. The essay provides insights into the complexities of international business and the strategic choices that companies make in the global marketplace.

Running head: COMPARISON BETWEEN EMM AND MNC
Comparison between EMMs and MNCs
Name of the Student
Name of the University
Author’s Note:

1
COMPARISON BETWEEN EMM AND MNC
Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
1. Relation of FSAs and CSAs to the Motives of Multinational for Expansion....................2
2. Difference between Motives of EMMs and MNCs...........................................................5
3. Affect for Motives to Internationalization Processes of EMMs and MNCs......................7
Conclusion..................................................................................................................................8
References..................................................................................................................................9

2
COMPARISON BETWEEN EMM AND MNC
Introduction
The emerging market multinational or simply EMM is the type of enterprise, which is
being headquartered within any emerging market and hence is engaged in the outbound FDI
(Ramamurti, 2012). The globalized market is dominated by the multinationals from the
respective developed economies. The experienced multinationals have invested within the
foreign direct investments and even have contributed their experience sharing as well as
knowledge sharing within the several small and medium enterprises. The MNC or
multinational corporation is the corporate company that owns as well as controls production
of services and goods in at least one specified country other than the home country
(Claessens & Yurtoglu, 2013). The following essay outlines a brief comparison between
emerging market multinational and Multinational Corporation. A proper relation of FSA and
CSA to the motives of EMM and MNC will be described and the effect of these motives on
the internationalization processes will be provided in the essay.
Discussion
1. Relation of FSAs and CSAs to the Motives of Multinational for Expansion
The nationality of any organization could be eventually defined by the company
headquarters and by its ownership controls. There are various types of emerging marketing
multinationals (Eichengreen, 2013). This type of sub division is done on the basis of the
globalized orientation motives. The major sub divisions or types of emerging marketing
multinationals are as follows:
i) Market Seeking EMM: The first and the foremost type of the EMM or emerging
marketing multinational is the market seeking EMM. Any firm might substantially aim at the
expansion of the markets after significantly following the major success reports of the
exports. This type of expansion of the markets is completely dependent on several factors like

3
COMPARISON BETWEEN EMM AND MNC
the government regulations and hence there is a higher requirement of adapting the products
to the local conditions or requirements (Dana, 2013). This particular type of EMM is solely
responsible for the proper reduction of the transactional costs.
ii) Resources Seeking EMM: The second important and significant type of the
emerging marketing multinationals is resources seeking EMM. The respective foreign
economic activities of the resource seeking EMM are completely motivated by the significant
requirement to be safe and secured and to involve cheaper sources of raw materials or inputs.
iii) Efficiency Seeking EMM: This is third type of emerging marketing multinationals
(Korinek, 2018). These are the firms that eventually seek to primarily improvise the cost
efficiency by simply moving the respective production activities to the low cost markets. This
particular type hence is extremely efficient and important for the small and medium sized
enterprises.
iv) Strategic Asset Seeking EMM: The final type of this emerging marketing
multinational is the strategic asset seeking EMM. All of these firms utilize the overseas
investments as the major tools for the core purpose of acquiring the tangible or intangible
strategic assets, which are not available within the home markets.
Each and every above mentioned type of emerging marketing multinational is
extremely important and significant for their expansion of business (Aizenman, Binici &
Hutchison, 2014). There are several subsequent features of these multinationals and since
they are present in the emerging markets, it is quite vital for them to expand their business
properly and globally. Moreover, several marketing strategies and factors are also present to
make these emerging marketing multinationals successful in the developing market.
On the contrary, the multinational corporations or MNCs are substantially sub divided
into three major types, which are as follows:

4
COMPARISON BETWEEN EMM AND MNC
i) Transactional Corporation: The first and the foremost type of Multinational
Corporation is transactional corporation. These are the unincorporated or incorporated
enterprises that subsequently comprise of the parent enterprises as well as their foreign
affiliates (Cuervo-Cazurra & Ramamurti, 2014). This type of firms are extremely popular and
efficient in respect to the multinational companies and thus are spread over the world
globally.
ii) Parent Enterprises: The second important and significant type of multinational
corporations is the parent enterprise. This particular type of companies is majorly responsible
for controlling the assets of the other entities within the countries other than the home country
(Al-Najjar, 2013). The parent enterprises comprise of some of the most popular small and
medium enterprises and hence making them complete.
iii) Foreign Affiliates: The third type of the multinational corporations is the foreign
affiliate. This type of foreign affiliate is the unincorporated or incorporated enterprise, where
any investor, who is the subsequent resident in any other economy, could own any stake,
which provides permission of the lasting interests within the proper management of that
particular firm or enterprise (Mishra et al., 2014). This foreign affiliate comprises of three sub
divisions of subsidiary, associate and branch.
These above mentioned types of emerging marketing multinationals and multinational
corporations have a major relationship with the Firm specific Assets or FSA and Country
Specific Assets or CSA. The framework of the FSA and CSA is responsible for providing
assets to the international companies with a different relevance for these EMMs and MNCs.
The firm specific assets are those assets, which are specific to any firm and is the result of
contributions, which could be made by the organizational technology, equipment and
personnel (Blitz, Pang & Van Vliet, 2013). However, the country specific assets are those

5
COMPARISON BETWEEN EMM AND MNC
assets, which are specific to any particular country and could result from the competitive
environment, labour forces, industrial clusters and natural resources. After the proper
combination of CSAs and FSAs, the EMMs and MNCs could easily investigate the various
issues. It is being checked that the CSAs of the home country of multinational corporations
are dominant in respect to the FSAs, which are weak globally. The comparative advantages
of any country eventually lead to exports of that country and hence comprising of the major
characteristics of the MNCs (Marquis & Raynard, 2015). When the FSAs are strong and the
CSAs are weak, major focus is provided to the international strategy of exploiting the
organizational resources and not having a stronger influence on the location. Hence, there is a
significant relation of FSAs and CSAs with the motives of EMMs and MNCs for their
expansions.
2. Difference between Motives of EMMs and MNCs
The emerging market multinationals from the various developed countries are
eventually shaping the emerging market, in which the companies are present and significant
and noteworthy opportunities are being created (Soedarmono, Machrouh & Tarazi, 2013).
Moreover, acquisitions are also made and thus the foreign direct investments or FDI are made
and expanded for each and every developing market. The multinational corporations or the
MNCs have their branch offices or factories in several countries and also have a specific
centralized head office, in which they could easily coordinate the globalized management.
The budgets of these multinational corporations eventually exceed the respective budgets of
the smaller companies (Menkhoff, 2013). Both EMMs and MNCs are extremely important
and noteworthy for the international markets and hence are used globally. However, there are
some of the major differences between the motives of these EMMs and MNCs and these
various differences are provided below:

6
COMPARISON BETWEEN EMM AND MNC
i) Technology: The first and the foremost difference between the motives of EMMs
and MNCs is that the emerging marketing multinationals did not expand their business for
gaining access to the inexpensive resources like inexpensive labour and even by gaining
access to the additional markets for selling products or goods, instead of acquiring the brands
or modern technology (Chen, Griffoli & Sahay, 2014). MNCs, on the contrary, have
expanded their business for gaining access to the cheaper resources and also taking benefits
from modern technology.
ii) Market Position: The EMMs usually internationalize for improving the position
within their home market and not in the other markets. However, MNCs not only want to
improve the positions in home markets but also have proper access to the other markets.
iii) Quality: Being players in the emerging or developing market, the EMMs give a
strong focus on the quality and have often gained international quality certificates for using in
the useful methodology (Williams, Alsakka & Ap Gwilym, 2013). However, sometimes
MNCs could not provide higher quality to each and every product and hence issues arise.
iv) Business in Developing Countries: EMMs have the core motive of doing
businesses in the developing or emerging countries. This is mainly because they have the
better capability of dealing with the challenging environments than the MNCs from the
advanced economies. The MNCs do business in the developed countries since they want to
obtain higher profit and efficiency within their business.
v) International Experience as well as Foreign Language Skills: The next
significant difference between the emerging marketing multinationals and the multinational
corporations is that amongst the EMMs, there is owing to the extreme lacking of international
experiences as well as foreign language skills (Koepke, 2015). As most of the companies
belong to the home country, the employees of these firms usually are comfortable with the

7
COMPARISON BETWEEN EMM AND MNC
native language skills and hence do not have any international experiences. However, being
the major players in international business, the MNCs have employees from all over the
world and hence comprise of language and cultural diversity. Moreover, international
experiences are also present for them.
3. Affect for Motives to Internationalization Processes of EMMs and MNCs
The internationalization is the significant procedure for the purpose of incrementing
the core involvement of enterprises within the international markets. The organizations, who
want to have internationalization within their business, subsequently require possessing the
ability of thinking globally and hence having the major understanding of several international
cultures (Al-Najjar, 2013). The significant appreciation as well as understanding of the
various beliefs, business strategies, values and behaviours is vital for the successful
implementation of internationalization within the business. This particular process of
internationalization comprises of five distinct steps, which are as follows:
i) Indirect Exports: The first and the most significant step is indirect exports. It
eventually refers to the selling to any intermediary, who would sell the products either
directly to the customers or by importing to the wholesalers.
ii) Direct Exports: In this particular situation, the specific organization sells the
products directly to the customers within any other company by not utilizing any other
organization for making the arrangements for them.
iii) Licensing or Franchising: After the direct exporting, the third step is licensing or
franchising (Claessens & Yurtoglu, 2013). In this particular step, the organization gets its
license and has permission for international trade.
iv) Shared Ownership Mode: In the fourth step, the ownership of the company is
being shared with an existing organization.

8
COMPARISON BETWEEN EMM AND MNC
v) Full Ownership Mode: Finally, in this step, the organization gets complete
ownership and becomes an independent organization with internationalization.
The major motives of the EMMs or MNCs are strongly affected by the
internationalization process. The main motive of the EMM is to acquire several international
resources and expand their businesses globally. Since, internationalization is a sequential
process, EMMs would not be facing severe complexities regarding their motives and hence
would be able to expand their business internationally (Ramamurti, 2012). For the
multinational corporations, they have the motives of bringing more success in the business by
simply involving more and more creativity and innovation. This is possible with
internationalization process and hence MNCs would be highly benefitted.
Conclusion
Therefore, from the above discussion, it can be concluded that the emerging market
multinational has given rise to the smaller or medium sized organizations from the rapid
developing economies. The contribution of the external forces like governments, lower
labour expenses and various others have substantially become the globalized key players.
Although the emerging marketing multinationals or EMMs have not primarily
internationalized successfully for the cheap products they have produced; some of the major
features have described that these multinationals are emerging slowly and steadily. The
cheaper labours as well as government subsidies are being helpful to them for making their
positions much stronger. MNC or Multinational Corporation, on the other hand, comprises of
the facilities as well as other assets within at least one country and apart from the home
country. These are also referred to as the international, stateless and transnational
corporations. The above essay has properly outlined the detailed comparison between the
emerging marketing multinationals and the multinational corporations for their methods of
doing the business.

9
COMPARISON BETWEEN EMM AND MNC

10
COMPARISON BETWEEN EMM AND MNC
References
Aizenman, J., Binici, M., & Hutchison, M. M. (2014). The transmission of Federal Reserve
tapering news to emerging financial markets (No. w19980). National Bureau of
Economic Research.
Al-Najjar, B. (2013). The financial determinants of corporate cash holdings: Evidence from
some emerging markets. International business review, 22(1), 77-88.
Blitz, D., Pang, J., & Van Vliet, P. (2013). The volatility effect in emerging
markets. Emerging Markets Review, 16, 31-45.
Chen, M. J., Griffoli, M. T. M., & Sahay, M. R. (2014). Spillovers from United States
monetary policy on emerging markets: different this time? (No. 14-240). International
Monetary Fund.
Claessens, S., & Yurtoglu, B. B. (2013). Corporate governance in emerging markets: A
survey. Emerging markets review, 15, 1-33.
Cuervo-Cazurra, A., & Ramamurti, R. (Eds.). (2014). Understanding multinationals from
emerging markets. Cambridge University Press.
Dana, L. P. (2013). When economies change hands: A survey of entrepreneurship in the
emerging markets of Europe from the Balkans to the Baltic States. Routledge.
Eichengreen, B. (2013). 2 Can emerging markets float? Should they inflation
target?. Exchange rates, capital flows and policy, 10.
Koepke, R. (2015). What drives capital flows to emerging markets? A survey of the empirical
literature.

11
COMPARISON BETWEEN EMM AND MNC
Korinek, A. (2018). Regulating capital flows to emerging markets: An externality
view. Journal of International Economics, 111, 61-80.
Marquis, C., & Raynard, M. (2015). Institutional strategies in emerging markets. The
Academy of Management Annals, 9(1), 291-335.
Menkhoff, L. (2013). Foreign exchange intervention in emerging markets: a survey of
empirical studies. The World Economy, 36(9), 1187-1208.
Mishra, P., Moriyama, K., N'Diaye, P. M. B., & Nguyen, L. (2014). Impact of Fed tapering
announcements on emerging markets (No. 14-109). International Monetary Fund.
Ramamurti, R. (2012). Competing with emerging market multinationals. Business
Horizons, 55(3), 241-249.
Soedarmono, W., Machrouh, F., & Tarazi, A. (2013). Bank competition, crisis and risk
taking: Evidence from emerging markets in Asia. Journal of International Financial
Markets, Institutions and Money, 23, 196-221.
Williams, G., Alsakka, R., & Ap Gwilym, O. (2013). The impact of sovereign rating actions
on bank ratings in emerging markets. Journal of Banking & Finance, 37(2), 563-577.