1. Implications of the increased role of Asian TNCs in Global FDI to the global business

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1.        Implications of the increased role of Asian TNCs in Global FDI to the global business

 

 

1.1    Increase the resource creation and upgrading process

Asian TNCs’ outward foreign direct investment in the oversea markets usually target at the acquisition of the strategically important resources such as the key technologies and knowledge that the Asian TNCs lack. With the increased need for such strategic resources, according to the book “National competitiveness and economic growth” (Hämäläinen 2003), strategic foreign direct investments particularly involve the acquisition of foreign technology-intensive firms or the establishment of the foreign subsidiaries in areas featured by dynamic resource creation and upgrading processes. As we know, increased demand tends to increase the motives of the suppliers to provide more products and offer new products.

1.2    Increased global competition

With the raise of the Asian TNCs which could just appear with the rapid growth of the Asian economies, it is expected that the entry of many Asian origin companies which used to focus only on the domestic market and business into the global business arena would drive up the global competition. Such increased global competition could be seen from the following two major ways: firstly, the raising Asian TNCs which expand their business in the foreign markets would increase the competition for local talents. Because the available talent numbers could be very limited at a certain period in the open labor market, the new TNCs from Asian countries could also be very much in need of quality talents, this will directly increase the competition for the limited and quality local talents; secondly, with the expansion of the TNCs’ business in the oversea market, it will certainly increase the market competition when these companies release their products and services in the oversea market. And also because of the low labor cost advantage, it could drive up a market competition in term of price competition.

 

1.3    More bargaining power of the Asian TNCs

Bargaining power could be referred as the bargainer’s ability to set the parameters of the dialogue and to influence the result of the negotiation to the desired ownership alternative (Dwyer and Walker 1981). Here one classical view regarding the bargaining power is that with the bargaining power of a company or an individual will decrease with the increase of the reliance on the specific resources. In a historical view, many Asian companies had strong reliance on the global leading multinational corporations for the resources such as supply of advanced technology and production process. And in this point, the expansion of these Asian companies into the oversea market in search for needed resources and even set up their own research and development (R&D) center to build up their own resources by sourcing to the labor and technologies in the oversea market to support their global production. By this way, the external expansion of the Asian TNCs in term of outward foreign direct investment activities will accordingly increase the bargaining power of the Asian TNCs in the global business arena and put them in a better position while competing with the global competitors.

 

1.4    Exposure of business culture differences and rise of Asian business models

A business model is the actual design of the business (Parent, Schewe & Storey 2007, p.88). Though the global business has witness a trend of increasingly adoption of a western model of business management, the researches and studies in the past two decades have shown that the western style business model is not the only best choice and based on the cultural differences and geographical differences Asian business companies could choose to adopt a business system that has Asian cultural and social features. With the increased role of the Asian TNCs, they will help communicate the Asian business models to the rest of world.

 

 

 

Reference list

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