Strategising is the one key component of management and organisational leadership. This aspect of management is critical for the growth, survival, competitiveness of business entities. The component is even more critical for Multinational corporations that face stern challenges that come with plying volatile and characteristically different global business markets and landscapes. In making decisions, companies have factor sin social, political, environmental and economic considerations as way of coming up with feasible short term and long term strategies germane for the growth, sustainability and competitiveness goals of the company.
Although there is ongoing debate on multinational corporations strategy overt the approaches like standardisation versus adaptation there is confluence of ideas and the recognition that multinationals have to assemble working and feasible business strategies that will suffice for the volatile and distinct environs in which MNC operate.There are various factors that exert significant pressure on MNC to formulate working short term and long term strategies germane to the accomplishment of their objectives ad goals.
Upon the underlying fact that h8man needs are basically the same across countries and communities, sticking variances obtain in aspects cultural, economic, geographic, political etc. As such MNC management organs must at the forefront of the matters in the object of modeling policy and operations within feasible and effective strategy premise.
The nature, shape and conduct of companies are for instance subject to the influence of institutional authorities present in every country.
From another perspective MNC have to consider cultural variances and aim to adjust and remodel their business strategic thrust to ensure optimum functionality and profitability in foreign business domains. Countries also have different economic forms and levels of economic development. MNC companies may have to shift from business strategies tailored for free market economies to those germane in typically socialist economies. At another level first world economies would pose different challenges form posed by third world economies. This illustrates that fact that MNC companies have lot to do when it comes to short term and long term strategy formulation and implementation.
Various definitions have been offered on what is perceived to be strategy in business. Johnson and Schools (1998) define strategy as the pathway and functional thrust of an entity for long-term time frame. According to the scholars the thrust would enable the company to accomplish its goals through the setting of resources and operations within a challenging set of circumstances in the objective of supplying clientele needs and meeting all stakeholder expectation.
The scholars in this definition are building on the notions of long term organisational goals. The concepts also entail focus on the specific markets in which the businesses entity has to be focusing on as well as business activities that the entity will be involved in such environs.
The perspectives are also touching on the aspect of how the business entity must do better than other business organisation operating in the identified areas. This brings in the important factor of competitiveness. The strategising process is holistic procedure which must bring all requisite variables into perspective. By extension strategy formulation will bring in the variables, concrete and abstract, such as personnel, capital, assets, etc into consideration.
On broader scale, strategising also premises the business idea within the precincts of broader operational framework that constitutes external factors which may be aspects around the business capacity to compete. Strategising will also bring into consideration the views, values and anticipations of the stakeholders with direct and indirect influence over the business entity.
Strategic decisions are thus the long-term direction of an organisation, they will try to search for strategic fit with the changing business environment and make valuable decisions towards the organisation in order to fulfil stakeholder expectations. In short, a strategy of an organisation is affecting its operational decisions and determining an organisation’s future and profit in a certain extent. In this sense a feasible strategy plays a crucial role in an organisation. And this is the reason why this research is focused on the strategy aspect of the Multinational Corporations (MNC).
Globalisation is a popular phenomenon nowadays. It can be described as the process of social, political, economic, culture and technological integration among countries around the world. In this paper, we focus on the key drivers in the globalisation process, namely the firms that drive this process. We view Multinational Corporations (MNCs) as contemporary ventures that seek scale economies in response to the opportunities and threats posed by the global marketplace using strategies of worldwide integration and coordination.
Our main focus is to obtain a better understanding of the strategies that extend the scope of the company across borders, especially towards the Chinese market. Such an understanding is compelling for at least three reasons. First, globalisation drivers are increasingly more critical in all types of industries, instilling a sense of urgency among senior managers to internationalise their organisations. Secondly, senior company managers are under increasing pressure to develop globally integrated strategies to achieve efficiency and rationalisation across their geographically dispersed subsidiaries. Thirdly, after China entered the WTO in 2001, China has opened up the market of 1.3 billion people, the actual purchasing power of the Chinese people has seriously attract foreign investors to invest in China, as the economy is under rapid development, a large amount of opportunities and potential profit are exited within Chinese market.
As such, exploring the critical factors which determine the global strategies of MNCs towards foreign market, especially the Chinese market, will be of great interest to senior company managers besides laying valuable contributions to various related bodies of knowledge.
Levels of Business Strategy
The concept of strategy exists at different levels and facets of business organisations. The concept runs through the organisational leadership down to the personnel involved within the functionalities of the organisation.
Corporate strategy dwells on the broader and core purpose as well thrust of business entity in the object of the steering of organisational activity towards the fulfilment of the expectations of the stakeholders. By its nature and scope, corporate strategy is of critical significance as it underpins all decision procedure in the organisation and is also subject to the influence of investors. In many instance the corporate strategy of a business entity is normally declared lucidly in company’s mission statement.
Business Unit strategy
At this level business strategy is about the ways adopted by a business entity in order to operate competitively within a certain market. Strategising at this point boils down to the specific on product range, customer satisfaction and the propping up of competitive advantage against other competitors. This component also entails the crucial aspect of the identification and establishment of novel opportunities whose pursuit must account for the business entity’s growth, diversification and sustainability.
This is the strategic component of the organisation tasked with ensuring that we every unit and organ of an organisation is well positioned to facilitate the accomplishment of corporate as well as business level strategic objectives. As such this unit focuses on elements such as business resources, personnel and various organisational procedures, etc.
Multinational Companies (MNCs)
Multinational companies are business entities or organisations that that provide products and services, in other terms, operate in more that one country. Such companies have their mother or native countries but their growth strategy sees their entry into global markets. Multinational companies normally operate at huge scale and are of great benefit for the mother and foreign country owing to amount of people they employ and the contributions they make into the economies within which they operate.
Project Aims and Research Questions
This paper presents an exploration of factors that influence strategic decisions used to extend MNCs scope in China. The study will be conducted in the conceptual and theoretical precincts of the PESTEL Framework.
By extension the study will also present a comparison of factors that influence global strategies towards Chinese market with the factors that influence strategies in MNCs’ home countries as a way of making a distinguishing the difference between them.
This study is premised largely in the tenets of strategic choice paradigm which holds that strategies are about exercising choices by organisation’s decision making organs. In Child (1972) terms, “It adopts a perspective that envisions a more deliberate and participatory role of managers”. The paradigm holds that managers will maintain a significant capability and, more important, creative power to make strategic decisions, determine resource allocations, and shape organizational structure (Child 1997; Miles and Snow 1978). That means managers play an important role in determining firms’ strategies, so the data collected by interviewing different MNCs’ managers is valued for analysis.
On another the dimension the paradigm recognises that environmental conditions have a bearing on the selection reasonable strategies as well as the appropriateness of particular organisational structures.
“As such, the environment presents threats and opportunities and affects information flow in determining the boundaries or parameters of managers’ choices” (Child 1997).
As managers’ choices will be affected and influenced to a significant extent by environmental conditions, the PESTEL framework becomes feasible and handy conceptual design to that can be employed to examine the factors that affect managers’ decisions. The PESTEL framework places various factors and dimensions of influence into six main classes which are political, economic, social, technological, environmental and legal factors.
These factors are interlinked and interdependent. A change in any of the highlighted factor swill trigger ripple effects across the board and impact on other associative factors as well. The effects have pervasive impact on the entirety of the competitive environment within which the multinational organisations operate. This implies that managers must be abreast with all and especially key drivers of change in order to make the adequately informed decisions which yield desired outcomes for their organisations.
The PESTEL Framework
The PESTEL framework presents a feasible and formidable framework of assessing and examining the macro–environmental factors that influence structures operating within the environment. Various factors impact directly or indirectly on the operations, functions and structure of an organisation among other things. The PESTEL model comes in handy in the examination of these factors by enabling the categorisation of the factors to draw lucid distinctions among them. PESTEL framework offers the following categorisation of macro-environmental factors
Political Factors- relate to extent to which political ideology and governments interventions impact on how the economy is run. Political ideological frameworks have a significant bearing on economy models and structure which has further bearing on the business organisations.
Economic Factors-This category in PESTEL Framework entails elements such as interest rates, tax changes, exchange rates, inflation GDP growth etc. Changes in these elements have pervasive effects on business organisations and such elements have to be factored in the strategy formulation and implementation.
High interest rates are normally viewed as investor-unfriendly since they imply that it will cost more to borrow money. From another angle a highly valued currency thwarts exporting endeavours owing to high foreign currency prices. High inflation destabilises the economy as it triggers wage demands pressures while on the other end a growing national income increases demand for products and services.
Social Factors- The social fabric and changes obtaining in it in any community or market have critical implications for business organisations. One example of this can be drawn from the consideration that the UK population is largely considered to be ageing and this has upped costs of companies focusing on pension payments for their personnel since their employees are living longer.
Social Factors (Culture) and Marketing
There are varying perspectives on what the term marketing entails, implies and means. Nonetheless mainstream definitions of marketing acknowledge that marketing must be perceived as an ongoing process of spearheading success stratagem of organisations through the feasible forms of promoting the products and/or services that a particular organisation is supplying to its target service market.
“Marketing is an ongoing process of planning and executing the marketing mix (Product, Price, Place, Promotion often referred to as the 4 Ps) for products, services or ideas to create exchange between individuals and organizations.” (Kotler: 2001)
According to the source cited above marketing tends to be seen as a creative industry, which includes advertising, distribution and selling. It is also concerned with anticipating the customers’ future needs and wants, which are often discovered through market research. In contemporary marketing theoretical and philosophical frameworks more considerable definitions of marketing are those which are have significant slant and emphasis on consumer orientation and satisfaction.
In contemporary marketing dispensation the marketing definitions offered by scholars like Philip Kotler have been widely adopted. Kotler defines marketing as ‘satisfying needs and wants through an exchange process’
“Marketing is the social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others” ( Kotler : 2001) 2
According To marketing Teacher (2003), The CIM definition (in common with Barwell’s definition of the marketing concept) looks not only at identifying customer needs, but also satisfying them (short-term) and anticipating them in the future (long-term retention). Adcock (Opcit) on the other hand presents an inclination to the harmonization of the core marketing variables as the crux of the definitions of marketing. In Adcock’s perspectives marketing is simply the right product, in the right place, at the right time, at the right price.
Perhaps the most luminous perceptions on the subject of marketing are those presented by Cohen.
“Implementation of the marketing concept requires attention to three basic elements of the marketing concept. These are: Customer orientation; an organization to implement a customer orientation; Long-range customer and societal welfare. “
Although the definitions of marketing concept vary somewhat widely, some core aspects identifiable in the outlined perspectives suggest that the divergent and varying perceptions and notions nonetheless agree that marketing entail in its design and objectives core, the articulation of an organisation’s success stratagem through feasible product and service promoting approaches.
Culture is widely perceived as the embodiment of a people’s values, beliefs, norms and traditions among various aspects that relate to who the people actually are as a group or as individuals.
“Most social scientists today view culture as consisting primarily of the symbolic, ideational, and intangible aspects of human societies. The essence of a culture is not its artefacts, tools, or other tangible cultural elements but how the members of the group interpret, use, and perceive them. It is the values, symbols, interpretations, and perspectives that distinguish one people from another in modernized societies; it is not material objects and other tangible aspects of human societies.
People within a culture usually interpret the meaning of symbols, artifacts, and behaviours in the same or in similar ways.” (Allyn and Bacon: 1998)
Culture definitions that acknowledge the estate of a people’s culture as a result of various intrinsic and extrinsic forces will be more valuable for the purposes of this tract.
“…culture is defined as the shared patterns of behaviours and interactions, cognitive constructs, and affective understanding that are learned through a process of socialization. These shared patterns identify the members of a culture group while also distinguishing those of another group.” (Carla: 2003)
The perspectives on culture culminate form the fundamental perceptions of culture as simply, a people or individual’s way of life. Culture must be understood to be dynamic as people through development and interaction as well as contact with other sources of influence adjust and modify their lifestyles to keep pace with new challenges, environments and interests among various other aspects that emanate form the inevitable phenomena of change. In the contemporary global dispensations the understanding of the culture of any communities of the world can not overlook the aspects of acculturation and multi-culturalism or cultural pluralism factors that characterize most contemporary societies.
“Culture consists of patterns, explicit and implicit, of and for behaviour acquired and transmitted by symbols, constituting the distinctive achievements of human groups, including their embodiments in artifacts; the essential core of culture consists of traditional (i.e. historically derived and selected) ideas and especially their attached values; culture systems may, on the one hand, be considered as products of action, and on the other as conditioning elements of further action.” (Kroeber, A..L. & Kluckhohn, C: 1952).
The understating of a people’s culture and all its scope and conceptual extensions together with other associative dimensions is imperative for any marketer worth his or her a salt and attempting to run successful marketing strategies in new global markets.
Culture and marketing
Marketing like any thing invented by human beings, use for and on humans by human beings, is not conceived nor implemented in a vacuum. Marketing is invented and implemented within the broader context of environs that embody various factors and elements like the community’s (market) geographical location, time setting and more importantly the market culture. From the key terms definitions presented above the crucial importance of the relationship between culture and marketing can not be gainsaid.
Marketing entails in its core, the championing of an organisation’s set goals and objective s through feasible, effective, efficient and culturally relevant means of promoting an organisation’s products and services to the target market. There is overwhelming evidence across academic and other professional researches on marketing strategies and models which substantiate the fact that any marketing drives, approaches and endeavours that overlooks a people’s culture are definitely set to fail. The following scholar and renowned marketing professional concurs,
“Domestic organizations entering international markets to sustain aggressive growth objectives continue to make the age-old mistake of ignoring the differences of individual locales by standardizing marketing communications for cost-efficiency reasons. Although markets may share fundamental human needs which may justify standardizing a product, marketing successfully to these wants and needs is never universal. Marketing professionals must localize plans and strategies for communicating with these international audiences who have different values, attitudes and buying behaviours, and not presume that standardized communications would be as effective in a multicultural environment.”(Yves Lang: 2004)
The scholar aptly express that understanding the conventions of culture as well as the individual cultural differences and similarities of target locales empowers marketing professionals to realize that one universal message—whether verbal or visual, can never reach a global audience.
“One global culture comprised of people with identical values does not exist—not even within the confines of our own country as the recent elections illustrate. Differences in learning and thinking patterns influence the way people process information, as demonstrated in their innate responses to marketing communications. Audiences differ in the way they perceive and value concepts of time, space, money, relationships, power, risk, and even the protocols of gender roles. It is important to note that when attempting to customize communications with cultural differences in mind, it is just as important to recognize the cultural similarities. As much as localization vendors like to overemphasize “extreme customization”, cultural similarities do exist, and are deeply imbedded in the core values of your products and service offerings.” (Opcit)
The preceding insights and perspectives lay an ideal conceptual and ideological framework for a comprehensible assessment and exploration of the influence of culture in marketing – more specifically, of the challenges that French firms face in attempts to make feasible inroad into Italian markets.
- Technological Factors – In wake of phenomenal technological breakthroughs business organisations will make it or break it depending on how they position themselves against the trends in technological developments. Technological factors also impact significantly on an organisation. Technology advancements result in the creation of new products which will inturn lead to the creation of services that relate to the use and maintenance and repairs of the products.
- Environmental Factors- These relate to the features like weather and climate change. There are certain business activities such as tourism and farming which are directly influenced by such environmental factors. Gillespie (2007) contends that the phenomenon of global warming for instance, coupled with growing levels of environmental awareness environmental factors have become a critical matter for companies to consider.
- Legal Factors- legal factors pertain to the legal framework within which business organisations operate. It is known that institutional authority as wells legal impositions have a direct bearing on the behavior of companies. Regulations promulgated around aspects of minimum wage, discrimination and labour legislation for instance have direct impact on the shape and behaviors of business organisations. The category can be explored in the assessment of its sub-categories. The sub categories here entail consumer laws, competition laws, labour laws, healthy and safety regulation, etc. These have significant impact on how Multinational companies operate and function.
This research exercise is not being conducted in a vacuum. The research exercise fits into a broad body of knowledge which has had numerous contributions from various scholars, researchers, professionals and students who have carried similar or related research exercises. Also the scope and objectives of this research endeavor occurs within related and implied theoretical, ideological and philosophical frameworks which largely influence the disciplines of business. As such the researcher is spurred to consider the multiple contributions relevant and related to this research endeavor. The researcher will present a literature review conducted in locating the object of this study within the broader confines of the bodies of knowledge in focus.
Birley and Westland (1993) have explored various dynamics relating to the reasons for conducting global business and extending business network across global markets. The studies unveiled that companies have divergent reasons for going global. To the focus concept of this study which is hinged on the objectives of exploring the strategies of multinational companies in China Birley and Westland (1993) contributions have helped illuminate that for most international company’s the penetration of new global markets is viewed as unique phenomenon that demonstrates a company’s capacity to grow and operate profitably in sustainability.,
Some major contributions in the explorations of dynamics around multinational business operations come form the works of McDougall and Oviat. The scholars have outlined theoretical aspects of the business globalization concept. The studies of the scholars focused almost invariably so on companies that execute a global thrust from inception. The researchers surveys over 180 new companies. The heart of empirical research findings compiled by the scholars indicate that global companies have significant differences from domestic firms in the aspects of strategy as well as industry structure.
These have demonstrated the prowess to bolster capacity through competitive advantage gained from the tapping of resources and merchandising of products and services in multiple global markets (countries).
The research findings show that multinational have a clearly distinct strategic thrust that aims at the pursuit of wider market approaches entailing the control of multiple distribution channels and servicing diverse market segments. The research findings also hold that multinational have an acute aim at developing and maintaining high market visibility over their domestic counterparts.
The scholars underscore that result have supported notions that multinationals emphasize a comparatively aggressive market penetration approach which makes use of external financial and production resources to enter multiple geographical domains.
The works of McGrath, MacMillan, and Scheinberg (1992) have also had significant contribution in the studies aimed at exploring the dynamics of multinational companies. The scholars pitted entrepreneurs and no entrepreneurs in multiple counties
Their research outcomes show that there is a remarkable coterie of values shared by global business players regardless of the distinctiveness of the cultural orientations and origins.
Other works of McDougall, Shane and Oviatt (1989) which were an evaluation of case study of global start ups brought-out that business establishers have the specialized competencies germane for the integration of resources over national precincts. The study also revealed that early globalisations are essential as a way of averting the potentialities of falling into what is termed as path-dependency. The studies further show that business establishers favour amalgam organizational structures in form of strategic coalitions and business networks. Scholars conclude in their evaluations that global business success is facilitated by instantaneous critical mass, the development and influence of knowledge personnel as well as sustained global coordination.
Cultural dynamics in China
China had protracted history of seclusion from global trade. The country opened its channels to international trade in the late 1970s. Ever since that time China has been upbeat in rallying its economic activity in an attempt to reduce the gap between its long isolated economy and the economically advanced USA and other European countries. This is illustrated by strong trading ties between China and the US. China has also opened its doors to various multinationals from The US, Europe and the world over.
Nonetheless many global business players have faced stern challenges in adjusting to the Chinese climate largely owing to cultural variances that exist between The Chinese culture and the various European and other global cultures.
Hodgette Luthans et al (2006 note that experienced travellers report that the primary criterion of doing business in china is technical competence. The scholars cite instances where MNCs selling machinery will have to face scenarios where the customers want know specifically how the machine works, all its capabilities as well as how repairs must be conducted.
The salient cultural difference experienced in China pertains to the concept of time. Hodgette Luthans et al (2006) points out quite critical points on the matter of time stating that The Chinese are punctilious when it comes to time. Further states that people conducting business meeting with Chinese have to factor then Chinese regards of time. The scholars also note that the nodding of the head by the Chinese does not necessarily imply they agreed but that they understand what they are listening to.
Organizational and Environmental Factors
Business organisations do not exist in a vacuum and the same applies to multinational companies. The nature and stature of the organisations is shaped largely by internal factors as well external factors. Internal factors entail organisational management strategy, organisational culture and ideology among a host of elements that constitute the organisation. External factors include the concrete and abstract environments in factors social, political, geographic, demographic and economic among many others. Various studies have attempted to substantiate the claims presented which hold that the pathway that an organisation likely to adopt in organisational management, change and transition processes is shaped by the complex interaction of different organisational and environmental factors.
According to Ljiljana Erakovic and Michael Powell (2006) a pathway is a specific progression of changes in an organisation’s development process which may include several stages within or between organisational configurations.
“The matter of a pathway entails structural measures, organisational methods and systems as well as cultural and interpretative models”, (Hinnings and Greenwood in Erakovic et al: Opcit). In Tandem with the scholars perspectives is the notion that determinants to what pathway will be adopted are shaped largely by the forerunning relations (both internal and external) an organisation has had. These perspectives lay a foundational perceptual framework for exploring as well as substantiating the thematic positions holding that the pathway or direction an organisation is likely to adopt is largely determined by the complex interaction of the both organisational and environmental factors.
MNCs have to be structured for survival, growth and efficiency. This has pervasive implications on the organisations’ management fabric that must model the organisation’s strategies in tandem with demands exerted by external influences. Royston Greenwood (1996) concurs, “MNCs in the 21st century do not exist in grand seclusion. It is highly questionable whether business entities ever did, even if someone can present an argument for the self-reliant society in the past. Today MNCs are part of a larger network of organizations with which they interact, operate and critically dependent upon.”
What is noteworthy in observations is that that these set of connections also entail related associations with other networks which culminate in cob-web of interlinking relationships. The preceding nuances underscore the significant impact that external organisational environment bears on that MNCs are consistently under pressure to adopt measures of consolidating their positions and keeping competent in a rapidly evolving contemporary business landscapes especially in the face of the sweeping phenomenon of globalisation. In such circumstances the organisational factors might entail an entity’s aims and objectives of growth and sustainability by leveraging on working networks.
On the other end environmental factors may be in form technological evolutions and the challenges of penetrating global markets. An example of this interaction between an organisation’s factors and environmental factors is well represented in the changes adopted by the United Parcel Service company of U.S.A. The global leader in freighting business transformed its business approach by tapping latest technology to change from a mere parcel delivery company to an efficient e-commerce enabler.
Scholars such as Greenwood and Hinnings (Opcit) have posited that although institutional theory is not generally viewed as providing a model of organizational change it provides an explanation of important issues of organizational dynamics. Erakovic et al also state that institutional theorists have shown why some organizational arrangements become wide spread across sector boundaries and why organisations under similar institutional pressures, may experience different patterns of change.
The pathway and global business strategy related models must thus be construed in the manner in which they illustrate the paradigms of changes and pathway chosen in relation to various dimensions that are based on MNCs’ features and characteristics. The model by Michael Powell et al presents probable outcomes of the particular path ways whose choice culminates from particular organisational dimensions.
The model presents three pathways, the incremental, radical and reductive pathways. The incremental pathway is prompted by dimensions such as established industry standards as well deregulation and competition in associative influence of owners’ strategic intent on stability and market driven expansion. Chief among the outcomes of this pathway is the improvement of current competencies as shown in diagram. (Figure 1)
The notable thrusts in the illustrations of the incremental pathway shown on the diagram allude to the tendency by organisations to adapt to drastic environmental changes in radical forms. In concurrence with this notion Miller and Friesen in Powell et al (Opcit) fitly echo that, “thriving past experiences, intensely entrenched ideologies, powerful inside alliances and normative rather than coercive pressures all drive the MNCs to extrapolate precedent trends, and to execute new radical changes.”
On another angle the radical pathway is presented as an illustration of the overhauling structural changes that organisations implement in their quest to strengthen and reinforce their functionalities and approaches towards the accomplishment of their set business goals and objectives.
“Organizations undergo the process of reorientation by re-creating their past values and redesigning their strategy and structure” (Hinnings and Greenwood: 1988) In this transitional model, the influences of an MNCs’ internal factors have a significant bearing on the kind of pathway that a particular organisation is likely to adopt into the future. Organisations undertaking transitional or changes measures in this model have to refer and tap into their value system and organisational culture to the re-fashion their system commensurate with change demands exerted by the external obverses. This illuminates the interplay of MNCs’ internal factors as well as environmental factors in transitional processes.
David Smukowski, UW CIE, (2006) presents a catalogue of valuable definitions and perspectives ion the subject of sustainability. The author cited above defines sustainability as a pro-active approach to ensure the long-term viability and integrity of the business by optimizing resource needs, reducing environmental, energy or social impacts, and managing resources while not compromising profitability.
According to the author business sustainability is the increase in productivity and/or reduction of consumed resources without compromising product or service quality, competitiveness, or profitability. The author gives following examples.
Facility efficiencies (HVAC, water, raw materials, etc.), material and process improvements, supply chain efficiencies, products or services that are more efficient (i.e. hybrid cars, renewable fuels, etc.), recycling, telecommuting, optimization of any resource use.
In answering question, what is sustainability?
Smukowski presents the following perspective. “Meeting the needs of the present without compromising the ability of future generations to meet their own needs” (Adapted from Washington State Department of Ecology).
The author cited above presents central perspectives on the far reaching concept of sustainability. In his ‘From Sustainability to Stakeholders’ outline the author asserts that all those with an ability to impact the business are stakeholders and that anyone impacted by any business is a stakeholder. He also mentions that a company is stakeholder in other processes. “Focusing upon stakeholder needs is a route to new markets, innovation, reduced business risk, and operational freedom.” he adds.
The resource review has been particularly valuable in presenting the broad context in which a company sustainability strategy and goal are established and leveraged.
The author further outlines the following as fundamental business future roles.
Economic profitability and opportunity, economic growth engine, Innovator global trade, social responsibility and opportunity, livelihoods and benefits participant in democratic processes, resource responsibility and opportunity consumer and polluter of shared natural resources, innovative and economic capacity to restore, and save natural resources as well as creativity of capitalism to create the path to sustainability. The source also presents an exploration of how businesses can lead society’s highest aspirations for sustainability besides exclusively focusing on the sustainability of the business organisation per see.
On marketing science for MNCs W. Miniard, and Michael J. Barone (2000) present eye opening perspectives and findings on various forms of reference groups’ impact on consumer decision making processes. The resource particularly zeroes in on the aspect of attitude as a key aspect in the influence of consumers.
The journal on the Effects of Absurdity in Advertising (2000) by Leopoldo Arias-Bolzmann, Goutam et al explores various models of advertising in relation and cognizance to various references to strategies of penetrating global markets.
The resource also focuses on consumer attitudes on certain products, draws comparisons and presents statistical analysis of findings obtained through various research modals.
The Journal of Marketing Research by Eric T. Bradlow and Vithala R. Ra (2001) captures consumer responses and attitude to particular brands. The resource also explores the effect, pricing, attributes elements relating to the marketing strategies. Managerial implications of the statistically presented findings are also captured in this resource.
The Evolution of Brand Preferences and Choice Behaviours of Consumers to a Market (2003), Journal of Marketing Research by Carrie M. Heilman et al presents the crucial aspects of the Log it-mixture model with time-varying parameters, Consumer panel data, Stages (information collection, extended to lesser-known brands, information consolidation). Elements such as impact, product experience as well as statistical analysis are presented.
In offering various other valuable perspectives Whan Park, Sung Youl Jun et al (1999) explore aspects of option framing, psychological reactions, regret anticipation and product category commitment. These have presented valuable insights in the framing and enhancing the relevance of this research exercise.
According to Haag et al (2006) Supply Chain Management includes the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. The scholars state that the management model also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers.
“In essence, Supply Chain Management integrates supply and demand management within and across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperates to provide product and service offerings has been called the Extended Enterprise.” (Op.Cit)
The resource has furnished the scope of this sustainability study with valuable perspectives on supply chain management in relation various organisational management components for national and multinational companies.
David Simchi-Levi et al (2003) asserts,
“Supply chain management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, at the right time, in order to minimize system wide costs while satisfying service level requirement.”
The above thoughts taken from the resource cited above have deepened the understanding of supply chain management (SCM) aspects in relation to how UPS as major player in this business dimensions has coordinated the SCM variables towards sustainability. In addition to that the study has also made use of Martin Christopher, 2005. Logistics and Supply Chain Management resource in which he states that,
“Supply chain management is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole.”
Ketchen Jr G & Hult TM (2006) insights have been valuable in shedding light on the other important dimension of SCM. In this resource the authors present nuances on how Supply Chain Management can be deciphered as software. The resource presents that in such a case SCM comprises tolls or modules used in executing supply chain transactions, managing supplier relationships and controlling business processes.
Handfield and Bechtel (2001) specifically explore some fundamental concepts and perspectives on SCM the resource has been remarkably valuable for its insights and focuses on Dynamic of Supply chain event management (SCEM). According to the authors SCEM is a consideration of all possible occurring events and factors that can cause a disruption in a supply chain. With SCEM possible scenarios can be created and solutions can be planned.
There is presently a yawning knowledge gap in terms literature available in the area of supply chain management studies, on providing theoretical support for explaining the existence and the boundaries of supply chain management. The minority authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and Lavassani, et al. (2008b) have attempted to supply theoretical basis for dissimilar areas associated to supply chain with employing organisational theories. The theories include:
- Resource-based view (RBV)
- Transaction Cost Analysis (TCA)
- Knowledge-based view (KBV)
- Strategic Choice Theory (SCT)
- Agency theory (AT)
- Institutional theory (InT)
- Systems Theory (ST)
- Network Perspective (NP)
Mainstream global conceptualisation holds that the SCM mechanisms are the third element of the four-square circulation structure. The level of assimilation and management of a business process link is a function of the number and level, ranging from low to high, of components added to the link (Ellram and Cooper, 1990; Houlihan, 1985). Consequently, adding more management components or increasing the level of each component can increase the level of integration of the business process link. The writing on commerce development reengineering buyer-supplier relationships and SCM implies various possible apparatus that must receive managerial attention when managing supply relationships.
Sustainability and Project Management Approaches for MNCs
Sources consulted have also shed significant light there are several approaches that can be taken to sustainability project management, including phased, incremental, and iterative approaches. According to Baars, Wouter (2006) the “traditional” approach identifies a sequence of steps to be completed. According to the scholars this contrasts with the agile software development approach in which the project is seen as relatively small tasks rather than a complete process. “The objective of this approach is to impose as little overhead as possible in the form of rationale, justification, documentation, reporting, meetings, and permission.
This approach may also be called the “spiral” approach, since completion of one of the small tasks leads to the beginning of the next. Advanced approaches to agile project management, applicable not only to software development but to any area, utilize the principles of human interaction management to deal with the complexities of human collaboration.”
Brooks Fred et al (1995) present aspects of the traditional approach.
The resource outlines that in the traditional approach, we can distinguish 5 components of a project (four stages plus control) in the development of a project namely;
- Project initiation (Kick-off)
- Project planning
- Project production or execution
- Project monitoring or controlling
- Project completion
According to the source however not all projects will visit every stage as projects can be terminated before they reach completion. Some projects probably don’t have the planning and/or the monitoring. Some projects will go through steps 2, 3 and 4 multiple times.
Allen, P (1993) presents that although the definition of sustainable development given by the Brundtland Commission is the most frequently quoted, it is not universally accepted and has undergone various interpretations. The resource has shed light on the aspects that difficulty in defining sustainability stems in part from the fact that it encompasses the entire domain of human activity.
“It is a very general concept like ‘liberty’ or ‘justice’ which is accepted as important, but a ‘dialogue of values’ that defies consensual definition. It is also a call to action and therefore is open to political interpretation concerning the nature of the current situation and the most appropriate way forward.
The Brundtland Report plea to protect the environment for future generations is less controversial than the implied negotiation between environmental, social and economic interests recommended by the 2005 World Summit.” (Op. Cit) The resource gives fundamental principles of sustainability. The nuances have shaped the foundational approach in the conducting of this study.
“A further practical difficulty with a universal definition is that the strategies needed to address “sustainability” vary according to the level of sustainability governance under consideration.” the author indicates.
According to Atkinson (1999), “Environmentalist disenchantment with some aspects of the global sustainability agenda can be attributed to the view that the environmental, social, and economic pillars cannot, strictly, be treated as equal.” The resource gives an interesting and valuable dimension on the subject of sustainability as the scholar state that the notion of sustainable development is sometimes resisted because many regard it as an oxymoron – which development is inevitably carried out at the expense of the environment.
Bartlett, A. (1998) insights have been helpful in highlighting aspects of sustainability that relate to population growth and how company sustainability endeavours relate must relate to various external environmental conservation efforts.
Blackburn W.R (2007) presents a historical background of the business sustainability theories as well related philosophical frameworks within which strategies of business longevity can be formulated, implemented and managed. The resource has particularly helpful in guiding this study towards exploring the concept of sustainability within the broader bodies of knowledge that relate to the discipline.
Blewitt, J. (2008) on Sustainable Development outlines approaches to analysis and assessing a business entity’s development. The resource is handy for its description of sustainable development which is conceptually and contextually akin to the very core of the scope and objectives of this study.
Sustainability accounting for MNCs
To enrich the perspectives body of the study, the researcher has also conducted a literature review under the sub themes of sustainability accounting. This has been done in the understanding that business success can only be achieved through synergy, when all the organs of a business body function harmoniously towards the accomplishment of common goals. As such, the accounting facility of a company plays a vital role in the entire company sustainability stratagem.
Sustainability accounting also sometimes called sustainability metrics or sustainable development indicators is a general term for the variety of measurements used as a quantitative basis for the informed management of environmental, social and economic sustainability.
Schaltegger S et al (2003) On sustainability accounting assert that once sustainability accounting has established approximate boundaries for sustainability at a global level then, in principle, the adjustments needed for the human system to become self-sustaining will be known. “Of course biological and physical resources are spread unevenly over the planet and this, as well as the multilevel nature of sustainability governance, means that obtaining such an overview presents a formidable challenge.” (Opcit)
Lamberton, G. (2005) on Sustainability Accounting brings up useful information on the historical development of Sustainability accounting as well as how the disciple has evolved in past years. Stanners D et al (2007) focus on sustainability science in a way to find out what is sustainable requires measuring and monitoring.
The authors posit that with quantitative information it is then possible to simplify complicated data, establish benchmarks, set management goals, assess trends, anticipate problems, and measure progress. “Because this form of calculation is very similar to the careful way we manage our financial lives it has been referred to as sustainability accounting. Sustainability accounting can be carried out at all levels and contexts of sustainability governance. Major areas of assessment include measures of consumption, resource use, and ecosystem change across a wide range of social, environmental, temporal, and spatial scales.” (Op.Cit.)
The resource has been relevant in broadening perceptions and perspectives on the dynamics and dimensions of the broad concept of sustainability.
The resource United Nations Department of Economic and Social Affairs, (2007) has been particularly useful in highlighting elements such as sustainability indicators and how these can provide information on any aspect of the interplay between the environment and socio-economic activities. The scholars state that one popular general framework used by The European Environment Agency uses a slight modification of the Organisation for Economic Cooperation and Development DPSIR system.
“This breaks up environmental impact into five stages. Social and economic developments (consumption and production) (D)rive or initiate environmental (P)ressures which, in turn, produces a change in the (S)tate of the environment which leads to (I)mpacts of various kinds. Societal (R)esponses (policy guided by sustainability indicators) can be introduced at any stage of this sequence of events. Building strategic indicator sets generally deals with just a few simple questions: what is happening? (Descriptive indicators), does it matter and are we reaching targets? (Performance indicators), are we improving? (Efficiency indicators), are measures working? (Policy effectiveness indicators), and are we generally better off? (Total welfare indicators).”, the scholars add.
Sustainability and Risk Management for MNCs
From mainstream knowledge resources consulted risk management is mainly perceived as a structured approach to managing uncertainty related to a threat, a sequence of human activities including: risk assessment, strategies development to manage it, and mitigation of risk using managerial resources.
Alberts, Christopher; Audrey Dorofee, Lisa Marino (March 2008) the strategies in risk management include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk.
Sheedy, Elizabeth (2005) outlines the factors that may cause risk or the factors that in businesses sense amount to business risk. “Some traditional risk managements are focused on risks stemming from physical or legal causes (e.g. natural disasters or fires, accidents, death and lawsuits)”
The resource also outlines that on the other end, financial risk management, focuses on risks that can be managed using traded financial instruments.
Borodzicz (2005) asserts that the objectives of risk management among other things entail the reduction of risks which are related to a pre-selected domain to the level accepted by society. Borodzicz states that risks may refer to numerous types of threats caused by environment, technology, humans, organizations and politics. “On the other hand it involves all means available for humans, or in particular, for a risk management entity (person, staff, and organization)”
The scholars Gorrod Martin et al (2004) explore the concepts of applying risk management activities to project management. According to the scholars in project management, risk management includes the following activities:
- Planning how risk management will be held in the particular project. Plan should include risk management tasks, responsibilities, activities and budget.
- Assigning a risk officer – a team member other than a project manager who is responsible for foreseeing potential project problems. Typical characteristic of risk officer is a healthy skepticism.
- Maintaining live project risk database. Each risk should have the following attributes: opening date, title, short description, probability and importance. Optionally a risk may have an assigned person responsible for its resolution and a date by which the risk must be resolved.
- Creating anonymous risk reporting channel. Each team member should have possibility to report risk that he foresees in the project.
- Preparing mitigation plans for risks that are chosen to be mitigated. The purpose of the mitigation plan is to describe how this particular risk will be handled – what, when, by who and how will it be done to avoid it or minimize consequences if it becomes a liability.
- Summarizing planned and faced risks, effectiveness of mitigation activities, and effort spent for the risk management.
Risk management and business continuity for MNCs
Understanding drawn from consulted literature entails that risk management is a practice of systematically selecting cost effective approaches for minimising the effect of threat realisation to the organisation. The concepts explored from different scholars concur that all risks can never be fully avoided or mitigated simply because of financial and practical limitations and that therefore all organizations have to accept some level of residual risks.
Stoneburner, Gary et al (2002) holds that whereas risk management tends to be preemptive, business continuity planning (BCP) was invented to deal with the consequences of realised residual risks. “The necessity to have BCP in place arises because even very unlikely events will occur if given enough time. Risk management and BCP are often mistakenly seen as rivals or overlapping practices. In fact these processes are so tightly tied together that such separation seems artificial. For example, the risk management process creates important inputs for the BCP (assets, impact assessments, cost estimates etc).”
In the perspectives outlined in the resource risk management is perceived as also proposing applicable controls for the observed risks therefore covering covers several areas that are vital for the BCP process. It is also noteworthy that the scholars acknowledge that nonetheless the BCP process goes beyond risk management’s preemptive approach and moves on from the assumption that the disaster will realize at some point.
Business Sustainability and Financial Risk Management
Van Deventer et al (2004) perceives that as widely held, risk management is the practice of creating economic value in a firm by using financial instruments to manage exposure to risk, particularly Credit risk and market risk.
“Other types include Foreign exchange, Shape, Volatility, Sector, Liquidity, Inflation risks, etc. Similar to general risk management, financial risk management requires identifying its sources, measuring it, and plans to address them. As a specialization of risk management, financial risk management focuses on when and how to hedge using financial instruments to manage costly exposures to risk.”
The resource has been helpful in giving an understanding of the core financial risk management facets and instruments.
Robert L. Hirsch (2005) outlines the elements of the impact of the oil price crisis as an unprecedented risk management problem.
“As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking. Mitigating the peaking of world conventional oil production presents a classic risk management problem: “
The source includes a few points which present valuable insight germane to the focus concepts of this research exercise.
- Mitigation initiated earlier than required may turn out to be premature, if peaking is long delayed.
- If peaking is imminent, failure to initiate timely mitigation could be extremely damaging.
- Prudent risk management requires the planning and implementation of mitigation well before peaking
- Early mitigation will almost certainly be less expensive than delayed mitigation
Researches in the cited source bring up that a unique aspect of the world oil peaking problem is that its timing is uncertain because of inadequate and potentially biased reserves data from elsewhere around the world. They further state that in addition, the onset of peaking may be obscured by the volatile nature of oil prices. Since the potential economic impact of peaking is immense and the uncertainties relating to all facets of the problem are large, detailed quantitative studies to address the uncertainties and to explore mitigation strategies are a critical need.
The researchers posit that the problem of the peaking of world conventional oil production is unlike any yet faced by modern industrial society. “The challenges and uncertainties need to be much better understood. Technologies exist to mitigate the problem. Timely, aggressive risk management will be essential.”
The source by Johnsen, Thore (2008) presents valuable analyses on co-movements between the prices of crude oil and major refined products during the period 1992–1998. The analysis focus entails an exploration of the existence of long-run equilibrium price relationships, and the assessment to determine whether deviations from estimated equilibrium can be utilized for predictions of short-term price changes and for risk management.
“The econometric evidence strongly supports the hypothesis that crude and product prices are co-integrated. Past deviations from long-term equilibrium are significant in an error correction specification of short-term product price changes. The results represent valuable information for hedging, particularly in integrated oil companies for which price risk is related to margin variations.”
Limitations of Literature review
The research exercise has endeavoured to solicit as much detail as possible under the scope and objectives defined and implied in the thesis statement. Nonetheless the research exercise has not been in any way exhaustive and the researcher herein acknowledges the limitations of the research exercise owing to it’s encompass and goals among a host of other factors. The focus of the research, and as such the literature review, is thus limited to the time-frame, conceptual scope and objectives defined and implied in the thesis statement.
Research ideology and methodology
To meaningfully frame the ideological, theoretical and conceptual platform for the research into the factors that influence the strategic decisions of MNCs it is imperative to consider the employ various research models that will enable the researcher to bring a considerable proportion amount of research detail into perspective. The research thrust will adopt the two salient research theoretical frameworks, the positivist and non-positivist research paradigms. (Barker E: 2003) contends that the positivist theory entails the economic, behavioural, cognitive, motivational/trait/attitudinal, and situational viewpoints. According to the scholar the viewpoints are treated as the conventional perceptions as they came before the crafting of the non-positivist model.
In the views of the scholar, the positivist model which is still the principal framework reinforces the superiority of human reason and stresses that there is one objective reality which can be unearthed by scientific means. As such this design renders the world as an ordered and coherent environment with a well defined past, present and future. The tenets of the theory are clearly underpinned on the suppositions of rationalism.
On the other end the contrasting non-positivist model holds the interpretive and post-modern viewpoints. Tenets of this model entail that the world be view as s composite social and cultural world contrary to the viewpoints of the positivist paradigm which hold the world in a rationality view that supposes a homogenous social fabric.
Leveraging on the theoretical and principal tenets of largely, the non-positivist research theory, this research exercise will provide new perspectives, findings and insights that will assist in the exploration of the dynamics that have a direct or indirect bearing on the strategic decisions made by MNCs in China. The research exercise will not be exclusive to any research thrust and will thus employ various research models to gather and collate data germane to arriving at meaningful positions on the research matter and subjects under probe.
Quantitative Analysis versus Qualitative Analysis
James Neil outlines, “Qualitative research entails the analysis of data such words, pictures or objects gathered in the research drive. The gathered elements are evaluated in subjective and relative manner toward the making of conclusion and recommendations in tandem with research scope and objectives. On the other end quantitative research involves a scientific evaluation of numerical data.”
This research project will be conducted mainly by qualitative research methods and accompany by analysing secondary data, like companies’ annual reports, press release, their official website…etc. The reasons for choosing qualitative research method instead of quantitative research method are due to four perspectives: 1) the nature of the research project; 2) the scale of the project; 3) the cost of carrying out the project and 4) time limitation.
Rubin and Babbie (2001:44) have emphasized the totally different nature of qualitative and quantitative research method.
“Quantitative methods emphasize the production of precise and generalisable statistical findings and are generally more appropriate to nomothetic aims. When we want to verify whether a cause produces an effect in general, we are likely to use quantitative methods……
Qualitative research methods emphasize the depth of understanding associated with idiographic concerns. They attempt to tap the deeper meanings of particular human experiences and are intended to generate theoretically richer observations that are not easily reduced to numbers.”
As a direct result of the objective of this research project, the researcher intends to have a deeper understanding of what specific factors will affect MNCs’ strategic decision towards its local market and Chinese market; besides, it is hard to have a statistical proof towards the influential extent of different factors. Moreover, this research aims at gaining the opinions, feeling, beliefs and suggestions of different MNCs’ managers. As such qualitative research methods appeared to be more appropriate for this type of study, instead of quantitative methods.
Besides, as this is just a small scale research project with very short period of time (about three to four months), so there will be not enough time and manpower to carry out quantitative research method, such as conducting survey to collect primary data for statistical analysis.
The research h has also anticipated financial resources constraints that have inhibited the adoption of more capital intensive quantitative research thrust. On another end it is considerably too time-consuming to collect enough amounts of qualified questionnaires as well as to analyse large amounts of data drawn from received questionnaires.
According to Stewart and Kamins (1993), the use of secondary data is advantageous for a researcher since one can already evaluate the suitability of a data as it is already in existence, thus, much time can be saved. Before delving into secondary sources of data, an evaluation of potential secondary data is essential as a way of screening resources to establish the relevant sources of information which will provide relevant data germane to fulfilling research scope and objectives.
Among different qualitative research methods, this research intend to conduct six semi-structured interviews with six MNCs’ managers with their firms’ head office base in countries other than China and doing global business in the Chinese market, in order to collect data in the area of what specific factors are influencing their strategic decision towards doing business in Chinese market with the comparison of their local market strategic decisions. Due to geographical and cost limitation, all six interviews will be conducted by phone. The duration of each interview will be around 30-40 minutes.
Besides, this research will also support by analysing secondary data, like annual reports, official websites and press release…etc, of some MNC which do global business in the Chinese market, in order to determine whether the factors that influence managers’ strategic decisions which stated by the managers within the interviews are in general or a special case.
Finally, literature and journals review will be used to collect data for the study as well.
Scholars and researchers Rubin et al have underscored the significance of qualitative interviewing in research exercises of this nature. The scholars have reinforced that qualitative interviewing is flexible and incessant rather than prepared beforehand and sheltered.
Steinar Kvale (1996:3-5) also states, “….wanders through the landscape and enters into conversations with people encountered. The traveller explores the many domains of the country, as unknown territory or with maps, roaming freely around the territory….The interviewer wanders along with the local inhabitants, asks questions that lead the subjects to tell their own stories of their lived world….”
The researcher will therefore set a range of questions (appendix A) to keep the interviews focused on the core research themes and topic.
Finally, researcher is cognisant of certain variables that exist as way of limitations to the study in the use of interviews. As Anderson (1998:133) enquires, ‘if another person was to conduct the same study would their observations find the same results?’ In response to this question, researcher would like to reiterate that the study is a typically small scale exercise whose results must not be generalized and applied to all MNC s and all managers’ beliefs. Moreover, throughout all the four interviews, researcher will use the same set of questions’ guidelines. In doing so, the variation in conducting interviews should be minimized.
Data gathered in this research thrusts of this study will be used exclusively used explore the dynamics MNCs strategic decision making. The research exercise is being carried out within the precincts and confines of regulations of the governing institutions as well as scholastic and professionalism values. As such the research drive is being conducted according to the guidelines and rules and regulations of the governing academic and research institution.
Details and information solicited from targeted and contacted research respondents will be used in the strictest of confidence and will not be availed to any other endeavours unless where all requite arrangements have been made and fulfilled in the interest of the research respondents and all other parties concerned. The researcher also hereby declares categorically the factor of absolute independence from organisations of or bodies of knowledge or interest that may be perceived to be of some association with the carrying of this study. The four stages of ethics in doing research are followed by the way of a good design, modes of data collection, analysis of data and for proper dissemination.
Confidentiality and anonymity will be maintained on the part of the research participants and all other respondents contacted in premise and for the objectives of this research. Respondents will also be requested to participate out of their free will and conscience without any instrumentation of forces of coercion or impulsion by the researcher whatsoever.
Threats to research
Whilst the research is being conducted in commitment to the ideals of objectivity and authenticity, the concepts and ideas used and developed in the course of the study are by no means exhaustive nor are they sacrosanct in any way.
The research endeavour may not accomplish the desirable and ideal zero incidences of ambiguity. The research is also prone to suffering the blow of some perceivable logic leaps much attributable to the novel approach towards fulfilling the scope and objectives of the study as well as answering the hypothetical research questions. On another dimension the ideas presented in this study must be construed and used in the full cognisance of the tacit and underlying assumptions for instance that strategic decision making for MNCs is characteristically different from that of local companies.
The success of this study is attributable to the both primary and secondary research methods that have need devised and administered to obtain authentic data from identified sources. The data processing and analysis which is preceded by this study component will be conducted for the analysing; synthesizing an extrapolation of the gathered data obtained through both the primary and secondary research methods. The ultimate objective of the study is to establish the way in which various factors impact on the strategic decision making processes of Multinational companies.
Data Presentation and Analysis
The data analysis components of this study entails data derived from MNCs in China. The research exercise derived information from MNCs mangers in china from two companies in the Insurance, Automobile and banking industry categories. The two Insurance company managers unveiled that they were part of the joint venture processes aimed consolidating the MNCs positions in the Chinese market. The managers indicated that their entities boast of vast proportions of experienced personnel yet local Chinese companies are well versed with the dynamics of the Chinese market making the joint ventures a formidable and feasible move. The two Insurance MNCs probed were Manulife and AIA.
The study conducted on the feasibility of the market share consolidation by Multinational Insurances companies in China showed that for the first time in 7 years Manu-life-Sinochems new business sales surged by up to 66% over the same period in the previous year. Data obtained from the company also showed that the companies premiums and deposits revenue also increased by 87.5 %.
Data from the Automobile multinational companies’ managers Volkswagen and BMW shows that MNCs in China are tapping the merits of transformation leadership model which is hailed most for its merits of facilitating the adoption of pro-change organisational management approaches. BMW manager particularly noted that China is experiencing phenomenal economic growth demonstrated by the growing GDP margins. He noted that if the current rate continues China will be a formidable economic force in the next fifty years.
More importantly; data derived from the manager shows that MNCs strategy has largely been underpinned on attaching sufficient importance to the growing prospects of the purchasing power in the Chinese economy and market.
The study has shown that MNCs in China have particularly employed transformational leadership models in tandem with the demands of the rapidly changing and growing Chinese economy held currently as the world biggest economy in the measures of parity share.
The study shows that MNCs like Volkswagen which have relocated their Headquarters to China for strategic reasons are pushing the sales acceleration strategy. Volkswagen manger states, “There seems to be a developing trend in the business approaches of MNCs where in companies move their businesses and technical evolutions to setting up production bases, it clear that the central strategy is to start by focusing on occupying the Huge Chinese market first.”
It also ascertainable that MNCs have also pain considerable attention to the culture factor and hence modelled their strategies to run in tandem with the Chinese culture dynamics. The study has also aimed to establish means employed by UPS to ensure global markets penetration success. This is against the background that multinationals face inhibiting challenges in penetrating global markets owing to cultural variances.
In an interview with the researcher Principal Lecturer of International Strategy at Anglia Ruskin University and published author Jonathan Knowles envisages the UPS faces a few cultural barriers owing to its nature of service. He notes,
“It depends on how culturally sensitive a product or service, some companies transcend cultural easily barriers others don’t. Leisure activities for example such as eating out would have cultural barriers to their free and unlimited movement although of course cultural barriers do affect the types of products that might be shipped within a country. However I think UPS is a company with very few cultural barriers. In others words a parcel service is the same in China as it is in Argentina.”
On the other dimensions Udayan Raut-Roy (2008) holds that any company plying global markets in bound to encounter cultural hindrances in one way or another.
He asserts, “Yes because they need to contextualise their operational to what the locals demand, in India for example they have many more local collection points which operate on a commission basis but that model does not exist in the UK as the country is smaller and has a different culture. So they have to recognise local needs to provide a truly global service. I believe that UPS is and can continue to be successful at this”
This is an illumination of the flexibility and dynamism wielded by UPS in implementing its global growth and expansion stratagem. Cultural variances have resulted in failure in many MNCs attempting global expansion. UPS service in 185 countries testifies to the company’s success in weathering cultural challenges.
The PESTEL framework also comes in fitly in the collation and analysis of data derived from probed MNCs in China. On the socio-political dimension of the Framework the China economic and market landscape can be viewed as an emerging play zone for the business global players. This is in line with the upbeat counties economic activity in a country of protracted political and economic isolation in past years.
China is attempting to reduce the gap between its economy and that of well establish economies of USA and various European Economies. This remarkable phase has also been characterised by the modelling of business regulatory framework to be more conducive and accommodative for global trade and MNCs as China seeks to consolidate its position in the global economic and political pedestals. Such transformations have pervasive implications for business entities as outlined in Legal framework dimensions of the PESTEL Framework.
AS demonstrated by the UPS case, social dynamic of PESTEL model is of particular essence in exploring multi-dimensional strategies of MNCs especially in culturally diverse and distinct China. The model presents that social factors such as culture are invaluable to any attempts aimed at conducting holistic analyses of scenarios. Successful MNCs in China have demonstrated dynamism and factoring cultural variance and modelling their business practices in line with cultural expectation set in the Chinese business environs.
Conclusion and recommendations
Further research must be conducted to bring into comparison the features and behaviours in the native and foreign precincts of MNCs in light of framing up ways in which these can be assisted. Current and precedent studies on MNCs are bereft of thrusts focusing on various entrepreneurial and business processes of MNCs in the global sphere. More studies need to be done to explore dynamics and factors like sponsorship, marketing and human resource management challenges and dynamics of the MNCs.
Precedent studies on the strategies of MNCs focusing on the environmental factors have been largely descriptive in nature. There is need for more empirical inquests into the subjects relating to the actual role of environmental aspects in influencing MNCs. In conclusion it can be stated that the salient of the previous studies on the strategies of MNCs have been generic in their regard of MNCs as homogenous entities The studies have failed to draw lines between types, size, entry strategies among other distinguishing factors of the MNCs as these lay significant bearing on the shape, functionality as well as short term, medium term and long term pathways of the MNCs.
MNC Managers Questionnaire
The following questionnaire is drafted and used in the premise of the declared goals and objectives in the conceptual scope and focus of this research exercise. The respondents are implored to be as informative as possible. The respondents are also assured that the information they will contribute will be used solely and exclusively for the purposes of this study. The strictest of confidence is also guaranteed for the use of questionnaire and interview generated information. We thank you in advance for your valuable insights.
- What distinguishes your native strategies from those you apply in China?
- Have you in any way modelled your strategies in tandem with unique Chinese cultural dynamics?
- What similarities do you think exist in China as a foreign market and those in your native markets?
- Qualitatively what do you think of the Legal and Regulatory framework for MNCs in China?
- What are the major features of your competitiveness strategy in China?
- What are the major features of your sustainability strategy in China?
- What are the salient characteristics of your financial Strategy in China?
- What are the major features of your marketing strategy in China?
- Do your strategies in China match those you apply in other foreign markets? please kindly explain.
- How do your strategies in China and in other global markets differ from your native strategies?
- What do you make of the future of your business in China?
- Given the experience you have had in plying the Chinese market as a global paradigm, how would you model your strategy for any typical global markets endeavour?
- What would you advise smaller and macro business players to consider particularly when contemplating entering the Chinese or any global market?
Abetti, P. A. Planning and building the infrastructure for technological, entrepreneurship. International Journal of Technology Management, 1992.
Alvarez, J. L. The popularization of business ideas: The case of entrepreneurship in the 1980s. Management Education and Development, 1993.
Bagnasco, A., & Trigilia, G. 1990. Entrepreneurship and diffuse industrialization. International Studies of Management and Organization, 1990.
Baumol, W. J. Entrepreneurship and a century of growth. Journal of Business Venturing, 1986.
Befus, D. R., Mescon, T. S., Mescon, D. L., & Vozikis, G. S. International investment of expatriate entrepreneurs: The case of Honduras. Journal of Small Business Management, 1998.
Bianchi, P. Technology and human resources in Europe after Maastricht. International Journal of Technology Management, 1994.
Birley, S. & Westhead, P.A comparison of new businesses established by “novice” and “habitual” founders in Great Britain. International Small Business Journal, 1993.
Boyle, E.. The rise of the reluctant entrepreneurs.International Small Business Journal, 1994.
Bouchikhi, H. A constructivist framework for understanding entrepreneurship performance. Organization Studies, 1993.
Bracker, J. S., & Methe, D. A cross-national study of planning characteristics of United States and Japanese entrepreneurs. International Journal of Management, 1994.
Chorda, I. M. Technopolitan strategies: At the edge of an innovation-driven territorial approach. International Journal of Technology Management, 1995.
Dana, L. P.. Saint Martin / Sint Marten: A case study of the effects of culture on economic development. Journal of Small Business Management, 1990.
Dana, L. P. The Canada-United States Free Trade Agreement and its implications for small business. Journal of Small Business Management, 1990.
D’Souza, D. E., & McDougall, P. P. Third world joint venturing: A strategic option for the smaller firm. 1998.
El-Namaki, M. S. S. Small business — The myths and the reality. Long Range Planning, 1990.
Erramilli, M. K., & D’Souza, D. E. Venturing into foreign markets: The case of the small service firm.Entrepreneurship: Theory and Practice, 1993.
Erwee, R. South African women: Changing career patterns. International Studies of Management & Organization, 1986.
Gartner, W. B. A conceptual framework for describing the phenomenon of new venture creation. Academy of Management Review, 1985.
Giamartino, G. A., McDougall, P. P., & Bird, B. J. 1993. International entrepreneurship: The state of the field.Entrepreneurship: Theory and Practice, 1993.
Gibb, A. A. The enterprise culture and education. International Small Business Journal, 1993.
Gnyawali, D. R., & Fogel, D. S. Environments for entrepreneurship development: Key dimensions and research implications. Entrepreneurship: Theory and Practice, 1994.
Hordes, M. W., Clancy, J. A., & Baddaley, J. A primer for global start-ups. Academy of Management Executive, 1995.
Huisman, D. Entrepreneurship: Economic and cultural influences on the entrepreneurial climate. European Research, 1985.
Lasin, E. G. The reform experience: Directions for development. Problems of Economic Transition, 1995.
Kolvereid, L. & Obloj, K. Entrepreneurship in emerging versus mature economies: An exploratory survey. International Small Business Journal, 1994.
Kurtulus, K. Entrepreneurship in Turkey. Journal of Small Business Management, 1987.
Maschmeyer, R. A., Yen, M. Y., & Yang, J. Entrepreneurship and state enterprises in the People’s Republic of China. International Journal of Management, 1993.
McBrierty, V. J., & O’Neill, E. P. The college role in innovation and Entrepreneurship: An Irish experience. International Journal of Technology Management, 1991.
McDougall, P. P. International versus domestic entrepreneurship: New venture strategic behavior and industry structure. Journal of Business Venturing, 1989.
McDougall, P. P., & Oviatt, B. M. New venture internationalization, strategic change, and performance: A longitudinal research note. Unpublished work. 1994.
McDougall, P. P., Shane, S., & Oviatt, B. M. 1994. Explaining the formation of international new ventures: The limits of theories from international business research. Journal of Business Venturing.
McGrath, R. G., MacMillan, I. C., & Scheinberg, S.Elitist, risk-takers, and rugged individualists? An exploratory analysis of cultural differences between entrepreneurs and non-entrepreneurs. Journal of Business Venturing, 1992.
Morrow, J. F. International entrepreneurship: A new growth opportunity. New Management, 1988.
Oviatt, B. M., & McDougall, P. P. Toward a theory of international new ventures. Journal of International Business Studies, 2004.
Oviatt, B. M., & McDougall, P. P. 1995. Global start-ups: Entrepreneurs on a worldwide stage. Academy of Management Executive.
Patricof, A. The internationalization of venture capital. Journal of Business Venturing, 2001.
Peterson, R.Understanding and encouraging entrepreneurship internationally. Journal of Small Business Management, 2006.
Quddus, M. Entrepreneurship in the apparel export industry of Bangledesh. Journal of Asian Business, 2007.
Scheela, W. J. The increasing importance of venture capital in Singapore. Journal of Asian Business, 2005.
Public Administration Vol. 84, No. 1, Pathways of Change: Organisations in Transition, Blackwell Publishing Ltd, Arlington Road, Oxford OX4 2DQ, UK,2006.
Royston Greenwood and C. R. Hinings, Understanding Radical Organizational Change: Bringing together the Old and the New Institutionalism Author(s), The Academy of Management Review, Vol. 21, Academy of Management, 1996. Web.
Danny Miller and Peter Friesen, Archetypes of Organizational Transition Author(s), Administrative Science Quarterly, Vol. 25, No. 2, Johnson Graduate School of Management, Cornell University, 1980. Web.
Paul J. DiMaggio and Walter W. Powell,The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields Author(s): American Sociological Review, Vol. 48, No. 2,: American Sociological Association, 1983. Web.
Miller, D. and P.H. Friesen, Organizations: a Quantum View. Englewood Cliffs, NJ: Prentice Hall. Mintzberg, H. The Structuring of Organizations, Englewood Cliffs. NJ: Prentice Hall. 1984
Powell, W.W, ‘Expanding the Scope of Institutional Analysis’, in W.W. Powell and P.J. DiMaggio (eds), The New Institutionalism in Organizational Analysis. Chicago, IL: University of Chicago Press, 1991.
Scott, W.R., ‘Institutions and Organizations: Toward a Theoretical Synthesis’, in W.R. Scott and J.W. Meyer (eds), Institutional Environments and Organizations: Structural Complexity and Individualism. Thousand Oaks, CA, 1994.
Veljanovski, C. ‘Privatisation: Monopoly Money or Competition?’, in C. Veljanovski (ed), Privatisation and Competition: a Market Prospects. London: Institute of Economic Affairs, 2007.