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International Business and Emerging Markets: A Long-Run Perspective -…

- - - - Firms put in place a global banking and trading infrastructure.
  - - - Emerging markets had locational advantages in natural resources and cheap labor.
    - - Transactions cost theory
        
        Explains patterns of vertical integration in minerals and agricultural products.
    - - First Global Economy 1850-1929
        
        Co-opt local elites as partners; seek home country support; overcome logistical challenges; build global value chains
      - Great Reversal 1929-1978
        
        Divest; invest in West; forced negotiations; use joint ventures and local participation
      - Second Global Economy 1978 -
        
        Access low labor costs; adapt to local markets and politics; build and distribute global value chains
- - - - The early localization of senior management was critical in providing voice, contacts and legitimacy in such countries, embedding the firm in local business and political systems.
        
        It identified, and promoted to the most senior positions, some of the best business leaders of their generation in these and other developing countries.
- - - - By the 1970s Western companies were rarely able to directly topple governments, even when they wanted to, but involvement in the politics of developing countries with fragile governance systems did not cease
        
        Most MNEs, if they did not divest, strove to adjust their strategies to postcolonial realities rather than thwart them.
        
        There were other strategies also to align the interests of MNEs with changing political realities. Among the most important was the localization of staff.
- - - - It accepted low dividend remittances for years, or decades, from both India and Turkish businesses, as well as many countries in Africa, both to build up businesses, and to wait for better times.
- - - - Often this was done by outright nationalization, which left companies little to negotiate about except, if they were fortunate, compensation terms.
        
        The limited scope for negotiation was especially evident in the petroleum sector.
        
        The large Western oil companies, which counted amongst the largest capitalist enterprises on the planet, found themselves especially exposed to growing political risk in the Middle East and Latin America.
- - - - By 2000 1.3 million Mexicans were employed in foreign multinational owned factories that assembled imported components for export, mostly located just over the border with the United States.
        
        By then the outsourcing of multinational production to China had become a major trend, making that country essential to global value chains.
  - - - The growing populations of emerging markets, especially their urban middle classes with rising incomes, resulted in fast-growing markets for industries extending from pharmaceuticals to automobiles.
        
        Besides, there were also other processes at work also. The globalization of the ubiquitous hamburger helped stimulate, around the world, a local, cultural, ethnic, religious reaction, which was termed “trivialization” by the political theorist Benjamin Barber.