International Business Strategy: An Institution-Based View

Nowadays, there is the growing popularity of international business activities between both the developing economies and the emerging economies. Therefore, each company is searching for the appropriate strategies to interfere with the world market, as it opens new opportunities for development. Initially, there was an assumption that the industry-based approach is the basic principle to advance the company. However, this method is efficient for the developed economies. Therefore, recently developed research has put forward the institutional view for the emerging economies and has given ground to their successful advancement.

According to the article under consideration called An Institution-based view of international business strategy: a focus on emerging economies (Peng et al. 2008, 920), the institution-based approach constitutes the third major component of a successful performance together with industry-based and researched-based theories. The authors prove that institution-based view is an inherent component not only for the developed economies but also for the emerging ones because the previous theories are not relevant. The focus of ID research on the study of competitiveness of the companies is especially urgent as it covers many areas of marketing strategies.

Considering the four cases, the institution-based theory is to different extent impacts the emerging economies. The reason for that has a complicated nature. Anyway, the new approach considerably contributed to a better adaptation of the newly developed companies.

Hence, the presented novelty in this business establishes the new price policy that excludes dumping. The countries that accept the new businesses must take into closer consideration the height of entry barriers. The institutional view on economies has many negative outcomes such as constant dumping. In that regard, the dumping campaign of the emerging industries could be harmful to the existing business as well as for the customers. The institutional influence imposes the tariff barriers so that the emerging should be subjected to the rules in order to survive. Direct foreign investment will be the only solution to the problem. In this respect, the emerging economies should not rely on the myth of free-market competition, as it is the false to a success.

Because the institutions are just the new rules of the game, they become the basis of the international strategy. Moreover, as those institutions could be both governmental and non-governmental, the emerging businesses should take into consideration social and cultural aspects. In the case of India, the global emergence of the Indian warehouse company was due to the insightful approach. Still, the formal and informal attacks from abroad took place irrespective of the perfect legality of the product. Arising out it, the major task of the companies is to capture the social recognition of the foreigners since even the price policy might not be helpful. In this case, the insight orientation is the best way to invade the international.

The following case reveals another reason why the institution is important in building the new strategy of the emerging economies. In that regard, China’s rapid economic growth also witnesses the interference with the informal institutions that created a powerful system of cooperation. Such economic processes enhanced economic stability and developed a powerful social network. Here, the companies considered carefully the peculiarities of the Chinese mentality and business traditions to fit their product need. Here, the institution view has the main evidence and the main ground for the dramatic economic growth. The transitions that occurred in China triggered the new campaign in the related countries. The web relationships became quite popular among other countries thus promoting the creation of the new corporations. In that regard, China created the fashionable tendency for establishing the new partnerships not only within the cultural framework but also beyond it. Consequently, the local patterns turn out to be international.

Another issue under consideration is the acknowledgment of the existing principal conflicts in the developed economies as the underpinning of the institutional approach. The Anglo-American corporations fail to realize the importance of this innovative theory as the core reason for their problem. The shareholders’ role is to capture the larger segment thus enhancing their control over the others. The contrast between the volume of the shares forces out the minor ownerships to extinct. Due to that, presence of the institutional view is evident here because the problem lies not in the inner structure of the corporations but the personal predictions of the shareholders. Anyway, each of the three types of research contributes to the progress of the emerged companies. To prove from the contrary, the industry and resource-based research do not relate to the existing problem because ownership depends only on the social factor.

Considering the four cases, it should be mentioned that the institutional view on international business in terms of emerging economies does exist. The cases prove that this novelty helps to advance the company at the international marker so that it is even more effective than the previously existed approaches. Moreover, novelty helps to defend and support self-awareness thus forcing companies to produce a “universal” product that would meet the requirements of a foreign consumer.

Reference List

Peng, M.W., Wang, D.Y.L. & Jiang, Y. 2008. “An institution-based view of international business strategy: A focus on emerging economies”, Journal of International Business Studies, 39 (5), pp. 920–936.

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