Managerial Challenges Facing Old and New Multinationals

Ravi RamamurtiNortheastern University

Session on:

COST Panel session on Emerging Country Multinationals

37th EIBA Annual Conference, Bucharest, RomaniaDecember 9, 2011

The Challenge

• Old MNEs—how to win in emerging markets while retaining the lead in developed markets?

• New MNEs—how to build presence in foreign markets while retaining the lead at home?

• Each has to learn different things to succeed

Old MNEs

Traditional Approach Demands of Emerging Markets

Strategy Optimize products for Triad markets Cutting-edge, technologically sophisticated,

performance-rich products Premium price, high-margin orientation De-feature global products for emerging markets Target premium segment in EMs

Best solution for EM customer Frugal, functional, good-enough quality Low price, high-volume orientation Zero-based innovation Target mid-market segment in EMs; create

market if necessary

Organization Centralized strategy and new-product

development, by global product divisions EMs play “implementer” role, including COEs that

develop products for Triad markets EMs measured on sales and order taking ‘Exploitation’ mind-set for emerging markets

Decentralized strategy and new-product development

EMs innovate for local market, using capabilities of global product divisions

EMs measured with suitable metrics, and DC subsidiaries roll-out low-cost products from EMs

‘Exploration’ mind-set for emerging markets

Source: Adapted from Govindarajan & Ramamurti, Global Strategy Journal, 2011

New MNEs

• Building international presence: Why do it, and how? (Ramamurti & Singh 2009)

• How to move up the value curve?• How to plug competency gaps?• How to staff the growth, and create a global mind-set?• Professionalizing management (vs family control)• Integrating foreign acquisitions• Profitability, through the “loss valley”• How to remain independent and viable?

Who will win the learning race—EMNEs or DMNEs?