The paper "The Challenges Faced by Foreign Subunits of Multinational Enterprises by Zaheer" is an outstanding example of a business article. The article focuses on the challenges faced by foreign subunits of multinational enterprises, and then discusses the strategies that might be employed by these establishments to minimize these challenges. Zaheer refers to these challenges as liabilities of foreignness and believes that overcoming these challenges is critical for the success of the enterprises. To determine the most significant liabilities of these foreign enterprises, Zaheer describes a study which she conducted in the banking industry and one which she used to find the most effective strategies that have been proven to be successful for such enterprises.
Before discussing the findings of his study, the author describes two theories that have been proposed for the foreign enterprises to adopt for them to overcome the liability of their foreignness and ensure successful competition against the local firms. One theory proposes that multinational enterprises should adopt the firm-specific advantages approach by importing capabilities that are embodied in the organizational or managerial capabilities of their parent enterprises.
Also proposed is the approach that draws from the institution theory. In this approach, multinational enterprises may attend to the local demands and host country environment and modify their practices so that they are similar to those of the local firms. The author, through the findings of his study, reports that firm-specific advantage, in the form of imported organizational practices, may represent a more effective strategy for the subunits of multinational enterprises as they seek to overcome these liabilities. The author employs rigorous selection processes in the identification of the specific banks to use as she tries as much as possible to represent established international businesses.
This was important for the success of the study and the accuracy of the findings.
List of reference
Dunning, JH, 1988, The eclectic paradigm of international production: a restatement and some possible extensions. J Int Bus Stud, 19:1– 31.
Chen, T, 2006, Liability of foreignness and entry mode choice: Taiwanese firms in Europe, Journal of Business Research, 59:288 – 294
Wernerfelt, B, 1984, A Resource-Based View of the Firm, Strategic Management Journal, 5(2):171-180.
Rumelt, R., 1984, Towards a strategic theory of the firm, in Lamb, R., (Ed.), Competitive Strategic Management, Prentice-Hall, Englewood Cliffs (NJ).
Barney, Jay, 1986, Strategic factor markets: expectations, luck, and business strategy, Management Science, 32(10):1231-1241.
Spanos, Y. & Lioukas, S., 2001, An examination into the causal logic of rent generation: Contrasting Porter’s competitive strategy framework and the resource-based perspective, Strategic Management Journal, 22(10):907-934.
Gaur, AS., Sarathy, R., & Kumar, V., 2011, Liability of foreignness and internationalization of emerging market firms, In Devinney, TM., Pedersen, T. & Tihanyi, L. (eds.), Advances in International Management: The Past, Present and Future of International Business and Management, Volume 24, Emerald, New York, NY.
Rugman A. & Sukpanich N., 2006, Firm-Specific Advantages Intra-Regional Sales and Performance of Multinational Enterprises, The International Trade Journal; 4(24).
Wu, J., 2008, An Analysis of Business Challenges Faced by Foreign Multinationals Operating the Chinese Market, International Journal of Business and Management, 3(12):169-174