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55 Seiten, Note: 1,3
Table of Content
List of Tables
List of Figures
List of Abbreviations
1.1. Context and Problem
1.2. Current State of Research
1.4. Structure of the thesis
2. Theoretical framework
2.1. Characteristics of Emerging Market Multinationals
2.2. Reasons for the Internationalisation of EMNEs
2.3. Selected Theories on Identifying Competitive Advantages
2.3.1. Mintzberg’s SWOT Analysis
2.3.2. Rugman’s FSA / CSA Matrix
2.3.3. The Market-Based-View in Extension of Porter’s Five Forces
2.3.4. Linking the Resource-Based-View with the VRIO Framework
3. Empirical Cases of Tata Motors and Leno
3.1. Tata Motors
3.1.1. Business Strategy and Acquisitions
3.1.2. Performance Analysis
3.1.3. Results of the Tata Motors Case
3.2. Lenovo Group
3.2.1. Business Strategy and Acquisitions
3.2.2. Performance Analysis
3.2.3. Results of the Lenovo Case
4.2. Managerial Implications
4.2.2. International Value Chain Configuration
4.2.3. Offshore M&A
4.3. Theoretical Implications for further Research
A meaningful phenomenon of global competitiveness is the increasing amount of Emerging Market Multinational Enterprises (EMNEs) that have succeeded in the constraining institutional home markets and are now participating globally due to foreign direct investments. However, despite the increase in academic research explaining the internationalization of EMNEs, little research has been carried out to analyse the success of EMNEs. Subsequently, the purpose of the thesis is to present selected business strategies and link them with the ability of EMNEs to build and strengthen competitive advantages. Further to that uses the thesis empirical case studies of Tata Motors from India and Lenovo from China in order to analyse their performance and competitive advantages. The results of the thesis reveal that EMNEs employ competitive advantages which underpin their expansion abroad. These advantages are mainly built by finding innovative opportunities to leverage country specific advantages. In addition, competitive advantages are obtained by accessing new knowledge in advanced markets through cross-border acquisitions. The case studies reveal, that EMNEs acquire abroad in order to access knowledge such as brand reputation and technologies. As a result, the international value chain structure needs to be configured.
Table 1: VRIO Framework to evaluate a Firm’s Competitive Advantage
Table 2: An Extract of Tata Motors’ SWOT Analysis
Table 3: Comparison of Tata Motors’ Company Sales in 2008, 2012 and 2015
Table 4: Selected Financial and Profitability KPIs of Tata Motors between 2007 and 2015
Table 5: An Extract of Lenovo’s SWOT Analysis
Table 6: Selected Financial and Profitability KPIs of Lenovo between 2007 and 2016
Figure 1: Outward FDI between 1987 and 2015 in Billions of US Dollars
Figure 2: Benchmarked MSCI Emerging Market Index
Figure 3: Quarterly Market Share of PC Unit Shipments Worldwide from 2011 - 2016
Figure 4: Synoptic Flowchart of Selected Strategy Theory
Figure 5: Process Chart of Managerial Implications
Abbildung in dieser Leseprobe nicht enthalten
This chapter introduces the topic of the thesis and consists of four sections. The first section presents its context, relevance and purpose. This is followed by an overview of the current state of research and the relevant methodology. The final section presents the structure of the thesis in order to contextualise the topic and delve into available literature, which will lay the foundation of subsequent chapters.
Since 1990, a new phenomenon on global markets has appeared due to a deeper internationalisation of multinational companies (MNCs). The globalisation of companies has advanced in the current century to the extent that the global rise of emerging markets multinationals (EMNEs) is visible in the number of worldwide MNCs. According to UNCTAD statistics, only 3,800 EMNEs from developing economies represented 11% of MNCs in 1990, whereas 22,960 EMNEs represented 28% of global multinationals twenty years later (UNCTAD, 1992, 2010).
In addition, emerging markets play an increasingly important role in the global economy and are now active participants in worldwide commerce due to increasing foreign direct investments (FDIs) into foreign economies (Raghunath & Rose, 2017). As Figure 1 reveals, outward FDIs by EMNEs climbed constantly to 377 billion USD in 2015. Together with transition economies, they counted for 28 % of worldwide FDI outflows (UNCTAD, 2016). With regards to the direction of FDIs, the flow of high-value trade and FDIs are no longer primarily north-north (within developed economies), northsouth (from developed to developing economies), but are more increasingly south-south and south-north (Raghunath & Rose, 2017). Subsequently, there has been an increase in academic research explaining the nature and the internationalisation process of EM- NEs. However until now, little research has been carried out to analyse the existing business strategies, which build, strengthen and leverage competitive advantages. The approach of linking strategy theories with a firm’s ability to out-perform competitors in international markets has not yet been fully conducted. Furthermore, this thesis reveals an overview about selected business strategies which have the potential to identify the competitive advantages the firm employs, and thus can apply to increase market shares in order to become a global player. Also, the thesis’s perspective on already internationalised EMNEs shifts the focus from internationalisation strategies to core business strategies. Through a stronger focus on competitive advantage building approaches the thesis is differentiated f0-\rom existent internationalisation theory. Incidentally, the thesis contributes to the ongoing discussion about the applicability of Western strategy theories, because selected business models will be used to explain the company’s source of competitive advantage. To evaluate the return on strategy applied, the thesis partly based its results on the performance of Tata Motors from India and Lenovo from China.
The thesis’s objective is to enhance and bring together knowledge about the competitive advantages of EMNEs and how these companies are perceived in global markets. For that reason, the thesis addresses the question: “How do Multinational Companies from Emerging Markets gain competitive advantages in global markets?”
Figure 1: Outward FDI between 1987 and 2015 in Billions of US Dollars
Abbildung in dieser Leseprobe nicht enthalten
Source: Data selected from UNCTAD. (2017). UNCTADstat. Retrieved 9 July 2017, from http://iinctadstat.iinctad.org/wds/TableViewei7tableView.aspx7ReportId~96740
The internationalization process and evolution of EMNEs has become a central topic of interest in current literature debate, which covers three categories about the applicability of these theories. Relevant to the first category are the Uppsala Model by Johanson and Vahlne, the Innovation Related Model, the Entrepreneurial Approach and the ResourceBased View (Johanson & Vahlne, 1977; Sakr, 2016). The second category emphasizes a firm’s competitive advantages by initiating the internationalization process since EM- NEs often lack such advantages (Andreff & Balcet, 2013). Theories such as the Springboard approach and Mathews Linkage-Leverage-Learning (LLL) theory follow this category (Luo & Tung, 2007; Mathews, 2006). Dunning’s Ownership-Localization- Internationalization (OLI) model follows the third theoretical category which combines the motives of firm and host country advantages (Sakr, 2016). In the following, the most cited theories will be discussed in terms of their relevance for EMNEs.
The central explanation for the OLI model suggests that the key advantages of FDI are ownership, location and internationalization advantages in order to overcome the inherent costs and disadvantages of competing with domestic companies in the host country (Kedia, Gaffney, & Clampit, 2012). With regards to EMNEs, this theory does not fully explain the operations of EMNEs because it neither takes notice of new firm’ formation and early development processes nor the dynamic nature of obtaining competitive advantage, but rather focuses on established and large international firms in a static environment Mathews, 2002, 2006; Ramamurti & Cuervo-Cazurra, 2014). In addition, the OLI framework does not explain the pattern of EMNEs because it does not account for the bundling of assets that an EMNE requires to internationalize. This means that the ability of EMNEs to combine country-specific advantages (CSAs) with their own firmspecific advantages (FSAs) is of utmost importance to the success of the company (Hennart, 2009).
However, the Uppsala Model suggests that firms internationalize incrementally in a step-by-step manner by increasing their commitments to foreign markets as they gradually acquire, integrate, and therefore become able to use knowledge about foreign markets and technology (Fey et al., 2016).1 By applying this model to the internationalization process of EMNEs, it can be stated that they often skip out some of these steps and start through acquisitions of foreign firms, mostly from advanced economies.
The theory to explain EMNE internationalization, offers with the LLL model an extension of the OLI paradigm to strategic asset seeking latecomer firms (J. Mathews, 2006; Yuefang, Liefner, & Tao, 2013). Because of their status as latecomers to the industry in which they compete, EMNEs have to internationalize rapidly with the aim of gaining access to resources, assets, or capabilities not found in their home market (Luo & Tung, 2007). For that reason, the theory is guided by the idea of turning the disadvantage of being a latecomer into a source of advantage (Yuefang et al., 2013). The following chapters of the thesis mainly refer to the springboard theory whereby the internationalisation of EMNEs is as a result of asset-augmentation. From that perspective, EMNEs lack the competitive advantages (CA) required to out-compete local firms in foreign markets so therefore they internationalize in order to build CA by augmenting strategic assets and resources acquired from through offshore acquisitions (Luo & Tung, 2007).
The methodology of the thesis is mainly driven by a systematic analysis of available literature and secondary literature from academic business and management journals. The strategic theories and models used for the theoretical framework of the thesis were mainly published as primary literature in the 20th century. To ensure the actuality and applicability of the theories, the strategic models will be enhanced with current academic literature.
One of the most important issues to be considered in a research study is the definition of the research question. Different types of research questions lead to three main options to conduct a case study: exploratory case study, descriptive case study and explanatory case study (Yin, 2003). Since the objective of the bachelor thesis is to understand how MNEs from emerging markets obtain competitive advantages in an international context, it exhibits an exploratory character.
The thesis is divided into four consecutive chapters. Chapter 1 is introductory consists of four sections. The topic of the thesis is placed in the context of internationalised companies from emerging markets. Furthermore, it outlines the thesis’s enhancement of knowledge about EMNEs and their competitive advantages. It also gives an overview of the research that has been undertaken on the internationalisation of EMNEs. Chapter two presents the theoretical framework of the thesis and is divided into three sections. The characteristics of EMNEs and how they have grown to international competitors will be explained in the first two sections, whereas the third addresses selected strategic theories on identifying competitive advantages within an EMNE.2
Chapter three pursues two empirical case studies. The first section explains Tata Motors’ business strategies in order to become globally competitive. It also analyses the performance of the company, just as the second section analyses Lenovo under the same parameters. Chapter four summarizes the results obtained from the previous chapters within the conclusion. It also presents managerial implementations based on the results of the case studies. These are listed in the second section and contain innovation, valuechain configuration and offshore M&A as a source of competitive advantage. Theoretical implementations and limitations of the thesis are presented in the last two sections.
With regard to the importance of emerging markets within the international trade system, and the impact of multinational companies operating from these markets, the following chapter explains the nature of these phenomena. The following definitions are relevant for a profound understanding of the reasons to internationalize, the applicability of extant strategic theory, and the source of their competitive advantage (CA).
The term emerging market (EM) was first introduced by the International Finance Corporation in 1981 to describe new developing stock markets (Aybar & Thirunavukkarasu, 2005). Emerging markets are characterized by institutional instability and lower levels of economic development in comparison to industrialized economies (Ramamurti & Cuervo-Cazurra, 2014). In terms of emerging markets, most scholars refer to the BRICS states which include Brazil, Russia, India, China and since 2010, South Africa (Hervieu, 2011). Although economic growth decreased in Russia due to decreasing oil prices and Western sanctions, and in Brazil due to inflation and corruption, the market value of the BRICS economies counts for 70% of the twenty strongest EMs in the FT 500 Emerging Index1 (Dullforce, 2015; The World Bank, 2017).
India and China have grown in terms of annual GDP growth more strongly than the European Union and the United States. In addition, the two economies remain the strongest economies of the BRICS which count together for 27.8 trillion USD of economic output and exceed the European Union (19.18 trillion USD) and the United States with 18 trillion USD (Azevado, Chin, & Khanna, 2016). The level of EMs includes growing economies facing structural transformation from a centrally controlled economy to the level of matured economies such as India and China. This development has been advanced through an adoption and integration of reforms facing markets and companies (Sandberg, 2012). As a result, EMs have developed multinational companies which compete globally with companies from advanced economies for customers, market share, and recognition. For this reason, further explanations are needed to characterize emerging market multinational enterprises (EMNE).
An EMNE is a firm that is based in an emerging economy and controls foreign direct investment (FDI) in a foreign country (Corban, 2017). In addition, EMNEs are firms that acquire a substantial controlling power through establishments in at least two foreign countries (Dunning & Lundan, 2008). The impact for international trade is apparent, because the top companies from EMs grew significantly faster than their counterparts in advanced economies between 2002 and 2014. This becomes apparent in the MSCI Emerging Market Index which lists 24 countries and tracks the market capitalization of every company listed on the countries' stock markets. In addition, the aforementioned BRICS represent 47% of the index, whereas 53% are represented through other emerging economies (MSCI, 2017)2. As Figure 2 reveals, the Emerging Market Index has been following a long-term uptrend since 1990 and realised a sharp performance growth between 2002 and 2008. The financial crisis in 2007 led to a two year downtrend and tested the supporting line in 2009. The strength of EMNEs is visible in the sharp climb afterwards which led to a growth of 150 % in 2016. If benchmarked against global indices such as the S&P 500, Dow Jones or the FTSE Global 100, the average growth was considerably stronger but more volatile.
Figure 2: Benchmarked MSCI Emerging Market Index
Abbildung in dieser Leseprobe nicht enthalten
Source: Data selected from Financial Times. (2017). MSCI Emerging Market Index. Retrieved 10 July 2017, from https://markets.ft.com/data/indices/tearsheet/summary?s=MIEF00000PUS:MSI
The involvement of EMNEs in international markets should also be taken into consideration because EMNEs differ significantly in their strategic orientation. Based on the geographical proximity between the home economy and the foreign markets, (Rugman, 2005) distinguishes between regional and global EMNEs. He contends that regional EMNEs concentrate their value-added activities in neighboring markets, because of cultural and traditional similarities, while global EMNEs operate both in neighboring markets and control activities in markets outside their home regions (Sakr, 2016).
The motivations of EMNEs to internationalize are divided into asset-augmentation and asset- exploitation (Pathak, 2016). As identified in the current research debate, these companies tend to augment assets instead of exploit assets. Based on this assumption, the following chapter highlights the most relevant reasons why EMNEs internationalize. Thus, the chapter takes a closer look on the reasons for asset - augmentation. Emerging market multinationals use unique home country-specific advantages such as preferential access to low-cost labor or government policy in order to seek knowledge-based FSAs through FDI (Kedia et al., 2012). The ability to close the knowledge gap through knowledge seeking in foreign countries, and thus to become globally competitive, is influenced by the disadvantage of being latecomers (Kedia et al., 2012). The knowledge sought by EMNEs through FDI can be classified into four functional types which are technology and brands, research and development (R&D), consumer and market experience, and management and operational expertise (Kedia et al., 2012; Pathak, 2016).
The first type of knowledge, technology and brands, can be defined as gaining access to established technologies that are necessary to serve a customer base (Kedia et al., 2012). This refers to the springboard theory of internationalization mentioned earlier, because EMNEs venture abroad in search of valuable technologies and brands (Ramamurti, 2012). This argument is evidenced by the case studies about Lenovo and Tata Motors, because both EMNEs acquired well-known companies from developed markets in order to access brand identity and further technological capabilities. The second type of knowledge is R&D which helps EMNEs to develop new products and refine their existent product portfolio through innovations. A further type of knowledge can be identified as consumer and market expertise which is defined as in-depth understanding of a particular market and its customers. This type of knowledge allows a firm to operate in an idiosyncratic environment and thus to tailor its current and future products (Kedia et al., 2012). Adding a strategic level to the consumer seeking motivation, EMNEs pursue market-seeking strategies abroad through cost-reducing horizontal and vertical linkages in the domestic market (Yiu, Ng, & Ma, 2013). Within the same context, EMNEs’ motivation to go abroad to sell more occurs if the company is successful in the domestic market by selling products and providing services to customers. In this case, the company transfers its competitive advantage. On the contrary, the motivation to expand abroad to buy better requires accessing the comparative advantages of the host country and transferring these to the home country (Cuervo-Cazurra et al., 2016).
The fourth type of knowledge seeking is classified as management and operational research to improve existing processes within an organization (Kedia et al., 2012). Further to this are cheaper resources, lower tariffs, tax incentives from the home government, and worldwide production synergies, among the efficiency-seeking reasons to expand abroad (Fey et al., 2016). Efficiency seeking through FDI is defined as the result of the presence of EMNEs and MNCs from developed economies in global markets. As all companies intend to enhance their market share, growing competition in global markets is the natural result. However, since companies from developed countries have offshored business functions in order to benefit from cost structures, former cost advantages of EMNEs have eroded so that EMNEs seek new efficiency abroad (Accenture, 2008; Fey et al., 2016).
Finally, the most relevant reason for going abroad is knowledge-seeking outward FDI based on asset-augmentation through the exploitation of EMNEs’ unique position in the value chain. Moreover, country-specific advantages function in this context as temporary links for EMNEs to access the knowledge-based capabilities which then enhance the opportunity of creating sustainable competitive advantages (Kedia et al., 2012; Ramamurti, 2012). For example, the Indian based company Tata Motors has used its existing low-cost automobile brands to enter other developing countries and thus tailor these products to the local markets. As a consequence, the internationalization of EM- NEs is seen as the result of exploiting home country comparative advantages in order to seek the knowledge and capabilities to develop the FSAs that will help the company to remain globally competitive (Dunning, 2006; Rugman, 2009). A competitive advantage can consequently be derived from the obtained capabilities such as an increased understanding of specific market operations and consumer preferences (Kedia et al., 2012). The results obtained for the reasons of internationalization have revealed the significance for building competitive advantages and their value-adding character for EMNEs to become global competitors. With regards to the existing strategy theory, the following chapter analyses relevant strategic models on identifying competitive advantages.
Before analyzing EMNE-applicable strategic models, a brief explanation of the competitive advantage’s nature will guide further explanations within the thesis. In general, a firm has CA when it is able to create more economic value than rival firms. Thus, it is seen as the difference between perceived benefits gained by a customer that purchases a firm’s product and the full economic costs of these products. Furthermore, a CA can be temporary or sustained whereby the sustained CA last much longer than the temporary one (Barney & Hesterly, 2015).3
It is now relevant to analyse business strategy models to identify an EMNEs competitive advantage. This requires an analysis of the firm’s FSAs in order to identify how the firm can use and improve its advantage globally (Cuervo-Cazurra et al., 2016). Corporate strategies such as the portfolio analysis will not be considered in the chapter due to their general applicability and only slight relevance for EMNEs. It rather concentrates on business strategies such as the SWOT analysis, Rugman’s FSA / CSA Matrix, the Market-Based View (MBV) in extension of Porter’s Five Forces and finally the Resource-Based View (RBV) linked with the VRIO-Framework (Dyson, 2004; Porter, 1979; Rugman, 2009). Case studies about Tata Motors from India and Lenovo from China will be carried out in order to elaborate their competitive advantages and their business strategies to become globally competitive. A specific focus lies on their corporate acquisitions. In order to evaluate their success, the performance of both companies will be analyzed to find correlations between CA building activities and long-term profitability.
The SWOT-Analysis was developed in the 1960s at Harvard Business School by Henry Mintzberg and is key to successful strategic management, because the tool collects industry information and helps to understand competitive dynamics among the various firms in the relevant industry (Dess & Eisner, 2016). The analysis breaks down the available information in four areas: Strengths, Weaknesses, Opportunities, and Threats (Berger, Kotler, & Bickhoff, 2016). The general idea of the model is that a firm’s strategy must build on its strength, reduce the weaknesses, take advantage of the externally presented opportunities and protect the firm from threats (Dess & Eisner, 2016).
Arguably, the tool finds a general applicability for EMNEs in all types of markets because external and internal conditions are provided everywhere as long as the company attends a market. Since its results are purely descriptive and a clear strategy is difficult to formulate, the analysis remains highly abstract in practice. Apart from that, strategic recommendations can be drawn out because the SWOT analysis provides four influential factors that shape the company’s business strategies (Berger et al., 2016). Whereas the SWOT analysis collects information about the competitiveness of the industry the company competes in, the question about the foundation of the strategies EMNEs build arises and is thus analyzed in the following matrix.
To analyze the performance and strategies of EMNEs, it is obligatory to explain the competitive and comparative advantages on which EMNEs build their strategy. In this regard, a firm-specific advantage determines the competitive advantage of an organization and is defined as a unique capability belonging to the organization which can be built upon product or process technology, marketing and distributional skills (Rugman & Nguyen, 2014, p.50). This correlates closely with the knowledge - seeking motivation of obtaining technology in a foreign country. In addition, the FSAs retained by a firm are based on its internationalization of an asset, such as knowledge or managerial capabilities over which the company has the mentioned proprietary control. The second advantage is country-specific advantage which is country related and unique to the business in each country (Rugman & Nguyen, 2014, p.51). Building on the CSAs, the company adjusts its global configuration of its value chain depending on the country it wants to profit from (Williamson, 2014). For a better understanding of the correlation between FSAs and CSAs, a closer look at India helps understanding its importance for CA building measures. The competitive advantage of Indian MNEs is centered on lowcost production and design capabilities, process excellence, and restructuring capabilities. Those advantages are founded in India’s technological absorptive capacity, its cheap brainpower and seasoned managerial class, and a historically rooted entrepreneurial tradition (Williamson, 2014).
With regards to the international orientation of EMNEs, four strategies in order to realize and obtain CA can be derived from the FSA / CSA matrix: Firms that follow the local optimizer strategy build their FSAs as a result of designing processes and products for EMs. These FSAs help to out-perform competitors such as MNC from advanced economies in the local market and thus build a set of CA that can be exploited to other EMs with similar income levels. This strategy requires absorptive capacity to manage acquired technologies and as Ramamurti states, “a degree of innovation and productionengineering capability to optimize design and processes” (Ramamurti & Singh, 2009, p.130). Pursuing the strategy as a low-cost partner, the company can leverage CSAs to satisfy the needs of customers and companies from developed economies. The CA in this case is based on helping customers to optimize their global business, mainly through IT-outsourcing and services. Further to that, EMNEs following this strategy have to rebuild their CA when competitors start to obtain knowledge about the market with the consequence that EMNEs lose their initial CA against competitors. In addition, EMNEs operating as low-cost partners focus on advanced economies to offer their services (FSAs), but also extend to other EMs for serving customers from there (Ramamurti & Singh, 2009). A third strategy EMNEs can follow to realize their CA globally is the global consolidator strategy where companies begin in their home markets, expand to neighboring EMs through horizontal acquisition, and terminate in advanced economies through further acquisitions. Hereby results their CA from the difference in market momentum between saturated markets of developed economies and growing markets in EM (Ramamurti & Singh, 2009). The fourth strategy is the global first mover strategy. Following this strategy, the company builds CAs through strong product and process innovation capabilities. Companies need to have the technical ability to absorb, acquire, and integrate acquired technology in order to be successful (Ramamurti & Singh, 2009). The relevance of FSAs and CSAs on obtaining competitive advantages in internationalized markets was explained in detail and extended with strategic implementations for EMNEs. From that point of view, it is relevant to explain the impact of market forces on the chance of building CA.
The Market Based View approach takes an outside-in perspective and defines the company’s position in the competitive environment as the significant determinant of its success and the ability to build sustainable competitive advantages (SCAs) (Berger et al., 2016). The outside-in perspective reveals that external factors of the company’s market environment influence the company’s performance. Within this context, Michael Porter presents his Five Forces approach in the interest of showing companies exactly what strategies can be chosen respecting their market positions (Porter, 1979).
The five forces model describes the environment of a company in terms of five competitive forces, whereas the threat of new entrants defines the possibility that the profits of already established firms within a certain industry may be eroded by new companies who turn into competitors. The bargaining power of buyers describes the threat that buyers may force down prices, bargain higher services or quality, and play competitors against each other. Furthermore, the bargaining power of suppliers may threaten the company due to rising prices or a lower level of quality of goods and services enforced by suppliers. The threat of substitute products and services explains the threat of limiting the potential returns of an industry by placing a ceiling on the prices that firms within the industry can profitably charge without losing too many customers to substitute products. The fifth and final force of the model describes the intensity of rivalry among companies in an industry. The threat that consumers switch to competitors within the industry is demonstrated by that force (Berger et al., 2016; Institute for Strategy and Competitiveness, 2017). Subsequently, each of these forces affect a firm’s ability to compete in a given market and determine the potential to gain profits for a particular industry (Dess & Eisner, 2016).
In order to apply Porter’s model, which mainly applies to clear structured markets, to EMNEs, an extension is needed. Downes for example, added the forces of digitalisation, globalization, and deregulation to the framework. In addition, the digitalization of nearly every industry and the availability of information for customers, competitors and suppliers influences a company’s strategy as well as its position within a market (Pister, 2014). Having analysed the outside-in perspective, the inside-out perspective has to be taken into consideration in order to explain EMNEs competitive advantages.
The Resource-Based-View reveals an attempt to explain the internal sources of a firm’s SCA. In particular, the RBV is based on the idea of Economic Value Added that the company earns beyond cost of capital employed in their business (Yolles, 2009). The idea of the RBV is that if a firm is to achieve a level of SCA, it must acquire and control valuable (V), rare (R), inimitable (I), and non-substitutable resources and capabilities. Further to that, the firm needs the organization (O) in place to apply these capabilities (Spender, Kraaijenbrink, & Groen, 2010). The inside-out perspective is based on the FSAs to find the markets in which the highest returns can be achieved with the competencies the company employs (Berger et al., 2016). Within this context, resources are either tangible or intangible, whereby tangible resources are simple to identify such as organizational assets, physical assets, financial resources, and technological resources. On the contrary, intangible resources are organizational assets that are difficult to identify and account for, and are typically embedded in unique practices and routines, including innovation, reputation and human resources (Dess & Eisner, 2016)3. Consequently, competitive advantages are maintained and thus utilized for superior performance if the company’s resources coincide with the VRIO framework displayed in Table 1 (Srivastava, Fahey, & Christensen, 2001).
As a consequence of the RBV, the framework evaluates firm-specific resources with regards to their potential of becoming a source of SCA. The resource must be valuable in the sense that it exploits opportunities and neutralises threats in the firm’s environment. Resources are therefore valuable when they enable a firm to formulate and implement strategies that improve both the efficiency and effectiveness of the company’s operations. The resources also must be rare within the firm’s environment, because it is not a source of CA if companies have the same access to the resource. Further to that, the resource must be difficult to imitate regarding their key to value creation, and constraining competitors (Barney & Hesterly, 2015). If all factors can be affirmed, the resource has the potential of functioning as a sustainable competitive advantage.
1 The 20 strongest emerging economies listed in the index are displayed in Appendix 1
2 An overview of 24 emerging countries of the MSCI Index is listed in Appendix 2
3 A list of tangible and intangible resources a firm employs is listed in Appendix 3
Wissenschaftliche Studie, 75 Seiten
Masterarbeit, 113 Seiten
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Wissenschaftliche Studie, 75 Seiten
Masterarbeit, 113 Seiten
Diplomarbeit, 78 Seiten
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