Multinational Enterprises and Emerging Markets

MULTINATIONAL ENTERPRISES AND EMERGING MARKETS
The need for multinational companies to invest foreign economies becomes erstwhile with increasing globalization. Multinational Enterprises, MNEs, enter foreign markets for different reasons; some enter the market in search for market control as regards sales and distribution of their goods and services while for some, it is either to gain cheaper labour or utilize more specialized expertise or for easier access to a resource(s) that facilitates or is essential to its primary home production process. In most cases, the investment risks are reduced for the investing company. While most MNEs would be involved in either a foreign investment to replicate exactly the same product or service it does in its home country as in a Horizontal Foreign Direct Investment (Horizontal FDI), some others would be interested in a foreign investment where a product or service that facilitates or compliment their home production is subject like in the outsourcing of a particular aspect of a production process either for cheaper labour or for a localized expertise, this investment would be classified as a Vertical Foreign Direct Investment (Vertical FDI). (SHENKAR, et al., 2008)
Developed countries are seen to have benefitted more from globalization than the developing countries and thus MNEs from developed countries are more successful than their counterparts from developing countries. MNEs generally face difficulties as the take on new markets and cultures and hence, success on the part of an MNE embarking on a FDI is highly dependent on its strategic logic, objectives and entry mode. Problems encountered range from multiple entry barriers such as government policies and restrictions, fragmental retailing and nepotistic relations; for instance, (Iyanda, et al., 1979) quotes the Nigeria Enterprise Promotion Decree of 1977 which requires indigenous participation of at least 40% in the equity capital of foreign owned companies, which means for a company to invest in Nigeria, it must first of all change its structure to accommodate the required Nigerian component, inculcate their values and objectives in the new component, etc.
However, MNEs from some developing countries have recorded remarkable success in the foreign market, for instance, a survey in 2006 ranked Indian MNEs based on their foreign assets and the 24 surveyed held over US$ 15 billion in foreign assets with the ONGC, Oil and Natural Gas Corporation which ranked first accounting for just about US$ 4.7 billion. According to the survey, the 24 companies netted about US$ 13 billion in foreign sales in 2006 and employed well over 60,000 workers abroad. The report hinted that India was the fifth largest outward investor abroad among emerging markets. (Sauvant, et al., 2011).
Not much is known about outward FDI from Nigeria, however, Nigeria is Considered as one of the economies with great demand for goods and services with FDI inflow rising from US$2.23 billion in 2003 to US$ 9.44 billion in 2006 which represents a rise of over 800%. (American Journal of Economics: Foreign Direct Investment and The Nigerian Economy, 2012)
There is also recorded growth in Africa-Africa FDI with MNEs like MTN, Trans National Corp. and DSTV etc. expanding across the continent with horizontal FDIs.

References
American Journal of Economics: Foreign Direct Investment and The Nigerian Economy. Danja, Kabir Haruna. 2012. 3, Kampala : Scientific & Academic Publishing, 2012, Vol. 2, pp. 33-40. Available Online: article.sapub.org/10.5923.j.economics.20120203.02.html (Cited: 11/05/2013).
Iyanda, Olukunle and Bello, Joseph A. 1979. Employement Effects of Multinational Companies in Nigeria. Geneva : International Labour Organization (ILO), 1979.
Sauvant, Karl P., Govitrikar , Vishwas and Davies, Ken. 2011. MNEs from Emerging Markets: New Players in the World FDI Market. New York : Vale Columbia Center on Sustainable International Investment, 2011. ISSN 2159-2209.
SHENKAR, ODED and LUO, YADONG. 2008. International Business. CA : Sage Publications Inc., 2008. p. 7.

References: American Journal of Economics: Foreign Direct Investment and The Nigerian Economy. Danja, Kabir Haruna. 2012. 3, Kampala : Scientific & Academic Publishing, 2012, Vol. 2, pp. 33-40. Available Online: article.sapub.org/10.5923.j.economics.20120203.02.html (Cited: 11/05/2013). Iyanda, Olukunle and Bello, Joseph A. 1979. Employement Effects of Multinational Companies in Nigeria. Geneva : International Labour Organization (ILO), 1979. Sauvant, Karl P., Govitrikar , Vishwas and Davies, Ken. 2011. MNEs from Emerging Markets: New Players in the World FDI Market. New York : Vale Columbia Center on Sustainable International Investment, 2011. ISSN 2159-2209. SHENKAR, ODED and LUO, YADONG. 2008. International Business. CA : Sage Publications Inc., 2008. p. 7.