Triad and SME's in International Markets - Case Study Example

? Running head: MNE’S & SME’S The Relationship between MNE’s & SME’s Insert Insert Grade Insert 27 April The patterns of global business have been subjugated by the TRIAD from the time when the WWII ended. In recent years, countless TRIAD based MNE’s have wanted to improve their output by sub-contracting to low cost economies. The consequential growth of multifaceted global supply chains in countries such as China, India and also Brazil has significantly impacted the dynamics of global trade. Other economies across the globe are also set to surface over the next few years and hence add to the current changes underway. Global dominance of the TRIAD and the MNE’s within it will be gone forever. 1. The relationship between MNE’s within the TRIAD and SME’s in low cost economies and characterise how TRIAD MNE’s have sustained their dominance within international markets. The relationship between MNE’s within TRIAD and SME’s in low cost economies has been particularly based on the intricate dynamics of global trade with the former dominating the business environment while the later simply working towards developing a niche in the vast international market (Royd et al, 2004, 94-96). Therefore, MNE’s have been significant in developing global supply chains and other complex networks in low cost economies which saw the rise of SME’s in those countries. As a result, the connection between MNE’s within TRIAD and SME’s in low cost economies is diverse in the sense that the aspect of market competition and economic rivalry has prevailed linking the two in which MNE’s have been perceived as dominating the market in low cost economies at the expense of local SME’s. However, the affiliation can also be described as being complementary because the rise of SME’s can be attributed to the rise of strategic connections and sophisticated supply chains that have been brought about by increased MNE’s of TRIAD, which cleared the way for the enhancement of SME activities in low cost economies. Incidentally, TRIAD based MNE’s have dominated global trade through strategies and opportunities that have not been a preserve of SME’s of local economies since the fall of the second world war. In analysing the link between MNE’s and SME’s, it is necessary to focus on the business environment in low cost economies prior to the entry of TRIAD MNE’s and how their activity spurred growth among local SME’S. There is a symbiotic relationship linking TRIAD based MNE’s and SME’s in low cost economics whereby MNE’s are perceived as potential partners on economic growth and expansion of trade linkages and thus welcomed and supported by the local SME’s through supply networks and other business cooperation mechanism(United Nations, Transnational Corporations and Management Division, 1993, 65-71). As a matter of fact, the relationship involving SME’s and MNE’s has been bolstered by governments and other trade agencies in low cost economies who have realized the huge potential of trade linkages involving the two. Therefore, low cost economies have laid several incentives in place for MNE’s to cooperate with SME’s creating a dynamic liaison that is beneficial to trade. Attracting MNE’s particularly those with manufacturing plants has become the focus of most local economic development agencies that endeavour to promote an enabling environment for the respective MNE’s due to the many benefits associated with MNE activities in local businesses. Apart from the creation of job opportunities in low cost economies, MNE’s have been identified and credible agents in the development of strategic clusters in low cost economies that could spur economic development. More particular has been the fact that MNE’s can augment the development of SME’s in low cost economies through purchasing inputs and material components thus creating niche for local businesses. The connection involving MNE’s of TRIAD and SME’s of low cost economies are primarily based on the opportunities for growth and expansion that SME’s can obtain from MNE’s. This is primarily because in today’s modern age globalization is the way to go for local businesses and that this is not possible without the necessary linkages between MNE’s who are already global and have capacity and SME’s who still need support to nurture their businesses to the global stage (Walker et al, 2007, 24-34). As a result, MNE activity is incidental to the rise of SME’s on the worldwide stage because TRIAD based MNE’s call the shots in global business environment. The lack of capacity and technological advancement has limited the chances of SME’s from low cost economies to compete with TRIAD’s MNE’s that are far a way ahead of their local counterparts. SME’s have to hold tight onto MNE’s so as to be able to rise and operate in the competitive globalised market. The development of supply linkages between MNE plants and SME suppliers is incidental to the exchange of crucial information that leads to the development of skills through the liaison between the versatile buyer and the inexperienced supplier. In this case, the MNE plays the role of tutor to the local SME on matters of trade and competition. In the long run MNE activity leads to the rise of SME’s who learn from the activities of MNE local plants on the dynamics of global trade. In overall, SME-MNE linkages are vital in the establishment of an enabling environment not only for the smooth operation of business organizations but also for the establishment of mechanism through which local SME’s can rise to the globalized business environment. This has been acknowledged all around the business and policy spectrum whereby governments in low cost economies have put a lot of weight on the development of linkages between MNE’S and SME’s. Several studies have been conducted that illuminate on the significance of linkages between SME’s and MNE’s in low-cost economies. Policies have been crafted to guarantee the smooth liaisons between MNE plants and SME’s in low-cost economies. TRIAD MNE’s have sustained their dominance within international markets owing to many dynamics that grant them an edge over other corporations in the global market. First is the fact that TRIAD accounts for 80 per cent of global GDP making the region the core of global economic activity, this fact alone has endeared the MNE’s form the bloc to operate in international business more effectively than their competitors (Lundan and Dunning, 2008, 43). Since TRIAD accounts for most of the world’s business transactions, it is evident that the multinationals from this area are the masters of the globalized market making them to benefit more from international businesses than other enterprises. Furthermore, the technological advancement characterised by TRIAD MNE’s is not comparable to enterprises in low cost economies in the sense that TRIAD multinationals are technologically savvy, which aids their operation in the globalised business environment. The fact that low cost economies are still technologically backward has made it difficult for SME’s to compete favourably with MNE’s for space in the international business; this has guaranteed the continued dominance of MNE’s. TRIAD represents the wealthiest countries of this world indicating that MNE’s from this region have huge capacity to operate in the global trade. The high capital and financial might required to operate in the competitive international business is available to the MNE’s who favourably prevail against their low cost economies counterparts. Economic advancement and viability of financial resources is a huge factor in the global dominance of TRIAD based MNE’S. 2. How the relationships between the TRIAD MNE’s and SME’s in countries such as China, India and Brazil might continue to evolve as new low cost economies around the world also begin to emerge. The emergence of new low cost economies around the world will change global trade dynamics in significant ways though the relationship between TRIAD MNE’s in countries like China, India and Brazil, which will continue to evolve owing to strategic factors both in global commerce in the countries (Hoon et al, 2007, 76). Therefore, the emergence of new low cost economies will not halt the relationship between the TRIAD multinationals and nations like Brazil, China and India because in as much as the MNE’s from the TRIAD bloc may want to explore the new emerging economies, it will be imperative for them to maintain contact with other existing low cost economies because of the established structures that bond the MNE’s to existing economies. In fact, it is unlikely that the relationship between these MNE’s and China, Brazil and India will deteriorate because of strategic reasons. There is a distinct business and strategic connections between emerging economies (China, India and Brazil) which has a lengthy history of economic cooperation. Whereby several multinationals from TRIAD have established subsidiaries in these countries for various business processes. These subsidiaries and manufacturing plants have evolved over time thus cementing the economic relationship between TRIAD and these economies. This tendency is expected to persist even in the face of new low-cost economies which might provide newer opportunities for multinationals from TRIAD. Though it is evident the several MNE’s from TRIAD will open up plants and subsidiaries in the emerging low cost economies, there are no indication that this trend will adversely affect the MNE’s affiliation with China, Brazil and India. The emergence of new low cost economies is a certainty in the near future because of availability of capacity, opportunity and technology. Such an eventuality is likely to alter the global business environment especially regarding the opening of new avenues of investment and globalization (Rugman, 2003, 34). In fact globalization will play an exceptionally significant role in the development of new low-cost economies that will further expand international business. Low-cost economies are of great importance in globalization because they provide cost effective avenues for production of goods and other businesses process making it convenient to conduct cross border trade. Multinationals from developed countries often resort to low-cost economies for several reasons that comprise the availability of cheap labour, inexpensive resources and raw materials necessary in production activities and the overall simple environment through which the business processes can function. Hence, the emergence of low cost economies other than China, Brazil and India will open fresh avenues of the activities of MNE’s more so from the TRIAD bloc (Watson, 2010, 59). This will create alternative avenues for business collaboration that will link governments, trade agencies and relevant SME’s in the respective countries making it possible for international trade in these new fronts. International trade or the broad activities of MNE’s is of great relevance to economic activities in emerging economies in many ways; particularly the development of a credible business environment along with the rise of local small enterprises. Thus, emerging low cost economies will create a new pattern in global business through the participation in trade by collaborating with existing TRIAD MNE’s developing opportunities for developed countries to partner with them as well as nurturing their SME’s for global competitive businesses (Rugman and Verbeker, 2005, 61). Countries such as China, India and Brazil will continue to evolve even as new low-cost economies around the world also begin to emerge creating unique points of international trade. However, the relationship linking TRAD MNE’s and these countries is likely to remain in fact even though there will be certain modifications to suit the merging realities (Hart and Prakash, 2000, 56-61). There is no doubt the business has been shifting to brazil, India and China in the recent past and this trend is likely to continue owing to the fact that there are several factors that make these countries favourable for international trade. First is the fact that these countries offer cheaper labour, raw materials, and their convenient parameters required for multinational corporations operations. However, the most significant factor that will make these countries attractive in maintaining TRIAD MNE’s presence is the technological advancements that have been made in these countries as well as other strategic advancements that exist. Such technological developments in India, china and Brazil will make MNE’s from the TRIAD zone to maintain a remarkable presence in the regions. Hence, the emergence of new cheap economies around the world will not have devastating effect on china, India and Brazil as regards the presence of MNE’s rather they will create alternative fronts for business and globalization (Rugman, 2005, 27-33). Countries like Brazil, china and India have also outlived the cheap economy distinction and my take up bigger roles in the global business environment in the near future making them more strategic for investment attraction and general participation in international trade. Bibliography Hart, J., and Prakash, A., 2000. Coping With Globalization. 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International Logistics And Supply Chain Outsourcing: From Local to Global. London: Kogan Page Publishers. Watson, J., 2010. Sme Performance: Separating Myth from Reality. Washington: Edward Elgar Publishing. Read More