While choosing an emerging economy, TNEs competitive advantage is its superior technology, products, etc. which generates direct social and proprietary benefits or maximum profits. TNEs have the opportunity to enhance their structural bargaining power versus workers and states, and thus reduce claims by employees, creditors and owners on their income (Jones, 2000). TNEs have the advantage to "crowd out" domestic industry or damage the upcoming industries of the host nation (Perspective on TNC, 2005). Openness (referring to lack of obstacles and regulatory) of government for foreign investors increases success or failures for TNEs.
Until early 1980s, only Hindustan Motors (HM) and Premier Auto Limited (PAL) were the two car manufacturers in India. Suzuki from Japan wanted to enter into Indian automobile industry. Government allowed Suzuki to set up a joint venture in 1983. The number of car models increased in India and also developed the Indian economy. Hence Suzuki was benefited by choosing India as an emerging market to invest in. The negative impact of openness of government for TNEs would result in high competition in market and thus lower the amount of profit which would have been targeted earlier (Johnson and Tellis, 2008).
Venkata Ratnam (1998) said that the government of India was highly stabilized to welcome any MNE and TNE to invest in its market and utilize its high natural and human resources. Hence any MNE or TNE selecting India as an emerging market and entering to establish its office will be highly benefited. A chief executive of a MNC has effectively said, "India has opened its economy with less discrimination than any other country, including the Far East and South East economies at their comparable stage of development. " (Venkata Ratnam, 1998) The marketing mix and consumer demand in market of an emerging economy also influences a TNE.
According to Ghauri and Cateora (2006), the reason behind Wal-Mart's failure in Germany was due to the wrong understanding of German culture and shopping habits of people. Thus, it turned up to be a disadvantage for TNE (Jonsson, 2008). One of the disadvantages to enter in developing countries is the opaque legal and regulatory systems, corruption, inadequate infrastructure, political uncertainty on the host nation (Perspective on TNC, 2005). Vodafone, one of the famous UK-based TNE planned to expand its business in India as an emerging market. The mobile market of India was increasing very fast.
At first Indian regulatory was afraid to give the approval because of the fear that Vodafone would breach the Investment rules in India. But later, it agreed. Vodafone studied the Indian Investment rules and government policies and bought 52% stake of Hutchison of Hong-Kong (BBC News, 2007). As the market was quite immature, Vodafone entered with a strategy to impose high call rates and roaming charges and low value contract mobile phones without any interference on the government (Vodafone, 2006). The report enhances the understanding of the benefits and risks for a MNE or TNE to select an emerging economy for business.
There are some solutions for TNEs and MNEs which can balance the benefits and risks as well. The presence of Human Resources Department with the MNEs and TNEs helps them to find cheap labor and manages them very efficiently. And to manage this on a global basis, UNCTAD (United Nations Conference on Trade and Development) is set up to check the working conditions. The business strategies implemented by MNEs for emerging markets need closer examination and broader view of their inter-firm relationships (Hatani, 2009). The success or failure of a MNE or TNE depends on its entry mode.
They should also look at the joint ventures or wholly-owned business. To whatever extent the government of the host nation may be stable, the corruption level of the government of emerging market also influences the MNEs and TNEs in selecting the emerging market. (Rodriguez et al. , 2005) The new trend in globalization is in favor of TNEs and the transnational strategy, but it needs to understand the significant organizational challenges regarding the decision making process and structure of organization. For a successful and secure entry of TNE, the forward knowledge flow (home nation to host nation) is most important.
There are huge investment needs for infrastructure yet to be met in the emerging markets. TNEs dealing with infrastructure can be advantageous here, if they select the time of entry as to when the host nation is in requirement to develop and manage infrastructure. For Vodafone entering into India has proved to be a successful deal by keeping the investment rules in mind. The disadvantage that they would face in future is the competition, because India is am emerging market for telecommunication. Hence it is seen from the discussion that both MNEs and TNEs can excel in emerging markets keeping the entry mode and 'rules of the game' in mind.