Mne Challenges in Emerging Markets Essay

International business and global innovation Individual report 1. Please discuss MNEs challenges in emerging markets? How can MNEs solve these? First of all, I would like to mention that It would be hard to describe challenges in emerging markets of the whole world, because question either can be roughly generalized or otherwise requires deep and wide research which is not the case right now. That’s why in my discussion I would like to stop on one country – Russia. The Russian economy is growing by 7. 7 per cent per year, supported by the soaring price of oil. But with stories about government corruption and mobsters, how attractive is the country for the more entrepreneurial-sized business? I would like to discuss some of the challenges most companies face while entering this emerging market. I would like not to talk in details about common problems and stereotypes which are often mentioned about Russia, amongst those I already noticed are high level of corruption, gangsters and seemed political instability. And one thing I would like to mention first is a labor problem. Management in Russia is faced presently with two major issues in the labor force: the battle for highly qualified specialists and the cost-to-productivity ratio. The battle for top specialists has become extremely rough in the recent time. Recruiting companies are very busy these days with headhunting. Professionals already receiving top salaries at multinational corporations are being stolen away, often by Russian majors, attracted by dramatic salary increases. It used to be that the professional would look at these offers with skepticism, questioning the reputation or stability of most Russian companies. Nowadays, these people do not worry as much and instead look at the cost-of-living, which is also rising dramatically, especially in major cities among which are Moscow, Saint Petersburg, Yekaterinburg and many others. The situation has gotten so bad that many companies are afraid to let their specialists be quoted in articles or to send them to conferences or other events where headhunters or competitors may be looking around in search for their next pray. It would be impossible for me not to notice the other side of this process which is the fact that labor market has become â€Å"spoiled.Salaries are steadily increasing but productivity levels are not. At the current salary levels, business owners and management are becoming increasingly sensitive to productivity levels and attempting to demand more work ethic and more productivity from their highly paid employees. At the same time, there is very little choice in the current market. More and more foreign-owned companies in partic ular seem to be looking more closely at hiring and importing foreigners, now that Russian salaries are roughly on par with those of foreigners in many sectors. Foreigners coming from countries known for higher productivity levels and initiative are especially attractive – minimally in the hopes that they can set an example. Young foreigners eager to gain experience in Russia’s developing market, are finding work – particularly in sales, client relations, business development, and marketing. So, generally it can be summed up that finding qualified local partners and employees is a difficult process. The pool of managers who understand Western accounting and business practices remains limited, as well as the pool of qualified, experienced Russians proficient in English. Another big challenge and â€Å"nightmare† for most foreign-owned companies operating in Russia is lease rates for commercial real-estate. It’s avoided by most foreign-operated Class A properties, but the situation is quiet bad in most of it’s sector lower. It is the rare landlord who fulfills most of his side of the contract. Moreover, rental contracts in Russia are usually biased toward the landlord. As a result foreign companies often find themselves looking for a new place. However, finding a better situation can be extremely difficult in Russia’s current real estate market. Centrally located, Class A property can run $USD 2000 and more per square meter per year. Bidding wars are not unusual and most other classes of property are seeing equal pressure. These are two challenges which I would like to point out, apart from that I’d like to briefly mention other challenges: * Government bureaucracy, poorly established rule of law and corruption affect such areas as establishing a business, tax collection, dispute settlement, property rights, product certification and standards, as well as Russian Customs clearance.Adequate financial resources for Russian buyers still remain a problem, but it is not as acute as it was in years past. There are more foreign banks operating in Russia and more cash circulating within the economy due to the Russian oil and gas boom. * The Russian government continues to use its oil and gas resources to increase the states’ ownership in certain strategic industries and companies. So it is not completely clear to forei gn companies which sectors are open to them for investment without Russian majority partners. The Russian Government continues its work on defining what are Russia’s strategic sectors. And after I stated challenges I must answer the second part of the question which is how to overcome these challenges. And in my view, a fundamental consideration must be there as a major phase of preparation if someone is going to go into Russia. This preparation involves surrounding company’s branch with reliable people, having an adequate concept of what is to be done and a well-defined strategy plan. You also need the necessary investment capacity and time arranged to follow this way. 2. You are expatriated to work in an emerging market (e.India or Brazil) What capabilities do you need? What and how can firm provide you for the expatriation in emerging markets? (Maybe take one country as example) I think generally company must have an on-going business processes with the country, otherwise the necessity of having employees overseas is indistinct. There can be several cases when headquarters would need their employee to be expatriated to the subsidiary or partner company, f or example:* Company knowledge and experience diffusion or sharing; * Leader position in one of the overseas branches;Emerging market opportunities opened etc. Brazil is a great example of an emerging market. And if life will propose the opportunity for me to work there, I think I’d take it with great pleasure. Of course, there’re certain capabilities I must possess to take this kind of job opportunity: * Particularity of doing business in Brazil is that a potential Brazilian partner is essentially looking for two things: someone they like and trust as well as someone who is competent in business. The most important of these is to build a strong relationship first which will then naturally lead to trust. Time must be invested in getting to know people on a personal level in order to allow for open and honest discussions in business. So, naturally, the environment will require from me to be a trustworthy, sophisticated person with a clear understanding of benefits and goals. * Another point Brazilians usually comment on is the tendency of European and American business people to â€Å"get straight down to business†. This can be seen as offensive and even aggressive. It is good practice to indulge in small talk whether it is asking about their children or chatting about the latest news or football (soccer) results. This interesting feature of business ethics will require from me a positive, easygoing attitude at all times. * Despite Brazil poses as an emerging, fast-growing market English proficiency still remains low levels especially in the social sector and in the matter of daily life. So in my understanding extradition to Brazil will be more effective with readiness to learn Portuguese at least until the level which will allow me to be independent on the matter of daily life, e. g. survival level of it. * Apart from all of that, I should have a clear view of business ethics and interpersonal relationship customs in Brazil. One of the important things is that I will have to be ready for a total change of values and concepts in any part of business and social life. In fact, that rule can be applied to all of cultures. In Rome act like a Roman.