In the way that the 20th Century saw the rise of America as a global force, the emergence of India and China as economic juggernauts on the worldwide scene will no doubt be one of the most anticipated storylines of the 21st Century. “East and South Asia are poised to become the long-term power centers of the world,” the director of national intelligence, Admiral Dennis Blair told the U. S. Congress on Thursday. “China and India are restoring the positions they held in the Eighteenth Century when China produced approximately 30 percent and India 15 percent of the world’s wealth. “One question to address during their rise to prominence, however, is whether Asian national companies will be able to compete in industries where large western multinational companies currently have a distinct competitive advantage. A recent article in the Financial Times takes an in-depth look at some of the key influences and challenges currently facing domestic companies versus MNCs in Asia. It seems that MNCs such as Apple, Sony, L’Oréal, Proctor & Gamble, Applied Materials, and Tokyo Electron that set up shop in Asia, tend to dominate high price, high performance industries where investment in R&D and advertising play a critical role. In contrast, slower moving industries where production is a high percentage of prices and factory-capital intensity is high tend to be dominated more by domestic companies. The article lists corporate reputation, global branding, as well as upgrading workers and value propositions as among some of the more important issues which domestic Indian and Chinese businesses need to address in the near future if they want to compete with MNCs. Furthermore, recent events in China, such as powdered milk tainted with melamine and toy exports containing harmful chemicals, do severe damage to domestic companies as a whole due to a decline in overall consumer confidence. On the other hand, strategic issues that MNCs currently need to address in a new country include overcoming differences across markets, adjusting to differences in conditions to achieve greater local responsiveness, and exploiting differences as a source of value creation. Many MNCs are firmly imbedded in China and India and they will likely remain that way as long as they continue to offer something that can’t be replicated with the same degree of quality and consumer confidence. The future outlook on domestic and MNC competition is unclear, as the global credit crisis continues to take its toll on the world economy. However, it is clear that whatever the outcome, India and China will continue to expand and prosper even as economic growth in developed countries crawls to a halt. This article was written by Christian Fleming for 2point6billion. com, a site which offers insight and stories relating to doing business in Asia. It is managed and contributed to by the Asian foreign direct investment law and tax practice Dezan Shira & Associates. For other China business news please visit www. china-briefing. com.


Article Source:China Sourcing Blog

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