What Are Some the Challenges for Multinational Companies Seeking to Enter Emerging Markets in Developing Countries?

Essay question: “What are some the challenges for multinational companies (MNCs) seeking to enter emerging markets in developing countries? Focusing on one challenge, suggest the most viable methods for successful internationalization.”

Nowadays, one of the real impacts of globalization is the rapid development and expansion of international business. Multinational companies are one part of this scheme where they are huge business organizations that own and manage the production of their own goods or services in at least one country other than their home country. Developing countries are one of the goals of all multinational companies in the world to invest and operate. In fact, there are always problems that these companies must face in maintaining the stability of their business. This essay will discuss some problems faced by multinational companies to enter the market in developing countries which are cultural differences, and financial challenges. It will focus on legal and policy issues, then finally argue that by conducting research on rules that must be obeyed, creating an international regulatory body inviting third parties to state contracts, and adding a legal layer to state contracts are several methods that can help multinational companies in the process of internationalization.

There are two problems that must be faced by multinational companies when doing their business in various countries. Firstly, cultural differences is one of the most common problems faced by multinational companies when they want to expand their business in developing countries. According to Wu (2008), traditions, attitudes, and views in the business of each individual spread across the world will certainly not be the same for each person. That is to say that multinational companies must understand and study the business culture of their host country before they can develop their company. In addition, problems with differences in culture also usually affect language problems. Feely and Harzing (2003) states that language problems can cause a lack of mutual trust between colleagues, and even major conflicts in the office that can end in chaos. Secondly, the problems that often happen are problems in the financial sector. Some problems in the financial sector are income risks, accounting risks, inflation risks, transactional risks, and instability of host countries banks (Khan, 2014). Moreover,  if those sections have problems, it will certainly spread to other sections because the financial sector is one sector that is interconnected and very complicated. Khan (2014) adds that all kind of costs from operations, management, to the fluctuations in the value of local currency exchanges are often faced by multinational companies in developing their business in new countries. This means that multinational companies must think smartly to be able to balance all the money that they spend in order to continue to grow. Thus, the problems that often occur and must be faced by multinational companies are differences in culture, financial problems, and in the next paragraph will focus more on legal and policy issues.