Update of chapter three
With sources of competitive advantage drawn from other facets of the sector, the study of business competitiveness has long been undertaken under the presumption of location neutrality. Location is a crucial source of competitive advantage, especially for Multi-National Enterprises, according to chapter 3 of Verbeke's (2013) "International Business Strategy" (MNEs). According to the chapter, a company's location grants it various competitive advantages, particularly when operating in its own nation (Verbeke, 2013). These benefits include the following: expert knowledge, a wealth of natural resources, access to important stakeholders like suppliers and a picky clientele, local access to the best technology, and the right social environment. In an effort to advance the theories put forward by Verbeke’s chapter three on the role of the home country as a source of competitive advantage, Inglehart (2009) introduces the factor on democracy of a country. The location advantage of a country engaged with international competition depends on the strength of the home country’s democracy. Strong democracies in the developed countries are able to shield their local companies from fierce international competition by placing trade barriers to enable the survival of local companies. This aspect of strength of a democracy is in line with the country reputation on the products it is famous for producing also mentioned in chapter three.
Hoskisson et al., (2013) acknowledges the influence of the institutions and the factor markets in contributing to location advantages within a home country as stated in the Porter’s Diamond Theory discussed in chapter three. The factor of support institutions collaborating to give a company in its home country the location advantage is clearly established here. An interesting argument is, however, introduced at this point. Multi-national companies are forming intercultural collaborations with local support institutions to penetrate new markets (Mora, 2013).
In order to transact business in a foreign market as a multi-national company, strategic partnerships have to be made with local institutions to level the competing grounds with locally based competitors (Cavusgil, Ghauri and Akcal, 2012). The local home country advantage for MNEs is, therefore, greatly reduced in the modern business environment by companies that approach emerging markets in this way. The international market is very dynamic and such global strategies of foreign-local firm’s cooperation is an emerging innovation used by MNEs from China to coerce local enterprises to do business with them (Peng, 2012).
Further studies on the role of location in competition provide empirical evidence that is critical about the theories suggested in chapter three. Global competition is more intense at the moment than ever due to changes in technology and advancements in asset management (Deng, 2009). Foreign companies are able to perform better than local companies in their home country despite the above factors discussed in chapter three. It is for this reason that Chinese firms are able to acquire strategic positions in foreign markets and perform excellently in the global market.
Modern technology, telecommunication and advanced transport systems have diminished the power of home advantage for a country’s organizations according to this new evidence by Mora (2013) as MNEs seek to survive in the international market. It is, however, true that location is a source of the competitive advantage for most MNEs that utilize their geographical and political boundaries to build a popular brand. The influence of location in the near future may diminish more but the principle attributes stated in chapter three such as access to natural resources remain a first-hand advantage.
References
Cavusgil, S.T., Ghauri, P.N. and Akcal, A.A., 2012. Doing business in emerging markets. Sage.
Deng, P., 2009. Why do Chinese firms tend to acquire strategic assets in international expansion?. Journal of World Business, 44(1), pp.74-84.
Hoskisson, R.E., Wright, M., Filatotchev, I. and Peng, M.W., 2013. Emerging multinationals from mid‐range economies: The influence of institutions and factor markets. Journal of Management Studies, 50(7), pp.1295-1321.
Inglehart, R., 2009. Technological change, cultural change and democracy. University of Michigan.
Mora, C., 2013. Cultures and Organizations: Software of the Mind Intercultural Cooperation and Its Importance for Survival. Journal of Media Research, 6(1), p.65.
Peng, M.W., 2012. The global strategy of emerging multinationals from China. Global Strategy Journal, 2(2), pp.97-107.
Verbeke, A., 2013. International business strategy. Cambridge University Press.
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