Analysis of Asia-Pacific Multinational Enterprises

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Introduction

The business environment in the Asia Pacific region differs from that in Western countries, which also affect the strategies that local multinational companies select when entering foreign markets. Most of these companies began as exporters when entering international markets. This was the case with the Korean Samsung, which later started to invest in manufacturing in China. Chinese corporations, such as Huawei, initially predominantly focused on the local market. However, with extensive support from the government, including financial aid, they began to explore Western markets. Japanese businesses also benefit from governmental support, but mainly as a cooperation, as seen with the examples of Hitachi’s railroad and infrastructure projects. These companies can compete with rivals in Europe and the United States due to their focus on global control and adaptability. This paper will compare Secom, Hitachi, Huawei, and Samsung using four elements that describe the corporation’s operations—strategy, organization, capabilities, and government involvement.

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SECOM

Strategy

SECOM is a security corporation based in Japan (https://www.secom.co.jp/english, no date). Founded in 1962, it continues to operate and deliver security services, including fire alarms and geospatial services to customers in Japan. The aim of this Japanese firm in relation to global strategies is to create an integral safety and security system. As declared by Secom Group’s vision for 2030, the company plans to leverage the ‘megatrends’ that impact society (Vision, no date). Secom aims to provide protection to people and help society become free of crime in collaboration with the government and scholars. To achieve its goals, the company wants to cover all areas of crimes-crimes and accidents, cybersecurity, natural disasters, and illness and aging.

Corporate organization

Secom’s corporate organization has an Audit & Supervisory Board that oversees its operations (Corporate Governance, no date). The Audit & Supervisory Board consists of three members and cooperates with the Board of Directors when conducting internal audits. Next, the corporation is governed by the President and Representative Director together with Executive officers. Another branch of the Board of Directors is The Nomination and Compensation Committee. The Board of Directors makes strategic decisions, while the Executive officers are responsible for the execution of these decisions. On the global level, the company has used the same strategy with ‘SECOM’s Philosophy and the SECOM Group Code of Employee Conduct’ (Corporate governance, no date, para. 11). They were no changes in operational control over time.

Secom tries to use the same approach and translate the traditional Japanese management strategies into the management of the corporation’s branches in other states. Considering that Secom successfully operates in the UK apart from other host nations in the Asia Pacific region, it has successfully adapted to the host markets and the EU environment.

Core capabilities

Traditionally, in Japanese MNEs, core decisions are made by the Board Members, and the structure of the company has a clear hierarchy (Corporate governance, no date). Additionally, Secom aims to create a business that provides ‘security and peace of mind,’ which is why it expanded to not only security services but also fire alarms, cybersecurity, and medical security (Vision, no date, para. 1). This is Secom’s core competency because this corporation wants to create an all-in-one system where its clients and society, in general, are protected by Secom’s services.

Next, employee recruitment and training are distinctive at Secom. The company tries to provide services that are of the same quality in each of the 17 countries it is present in, which Secom achieves by translating its code of conduct to these languages and by teaching the employees the corporation’s philosophy (Global expansion, no date). Secom opened its Sakra World Hospital in India to integrate healthcare into its global security and peace of mind services, which shows that the organization is focused on international markets and on expanding to the global markets.

The role of government

The role of the government for this MNE is essential since Secom declares its goal of partnering with the government to ensure the safety of the society and ‘achieve a society free from concerns’ (Vision, no date). Hence, Secom and the government are integrated and have plans to work in collaboration, and some government officials are members of Secom’s Board of Directors.

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HITACHI Technologies

Strategy

HITACHI is a Japanese-based technology firm, which focuses on IT and infrastructure technologies. One of the European-based competitors of Hitachi is Siemens, which is based in Germany and focuses on industrial manufacturing (https://www.siemens.com/, no date). Unlike Hitachi, where the branches are overseen by the headquarters, Siemens declares a desire to provide more entrepreneurial freedom to its businesses (Vision 2020+, no date). Moreover, Siemen’s strategy comprises of a goal to simplify the governance structure, while Hitachi remains to have a traditional structure with Boards, Committees, and Executives. Both corporations appear to have a focus on global expansion.

Corporate organization

The businesses within the Hitachi group are structured differently, depending on the branch, with machinery for electronic equipment manufacturing and general machinery being the two main subdivisions (Kimbra, no date). The critical governance body of this group is the shareholders, who meet regularly and appoint the Members of the Board of Directors (Corporate governance, no date). This includes two executive and 11 non-executive members. Next, the corporation itself is governed by the Senior Executive Committee, which consists of the President and the CEO. Independently from these, there is an Internal Auditing Office and Accounting Auditors. Hence, a distinction between Hitachi and Secom, both Japanese firms, is the presence of shareholders in corporate governance and a different structure of the auditing procedures. Since 2003 Hitachi has had a Nominating Committee, a Compensation Committee, and an Audit Committee as part of its strategy for integrating Committees (Corporate governance, no date). Hence, Hitachi’s structure is typical for a corporation, with the Board of Directors making the strategic decisions and appointments, and Executive Officers in charge of the execution.

Core capabilities

In comparison to Japanese rivals, HITACHI has an advantage because of its history. For example, the company’s IT division was established in 1937, while this company was founded in 1910 (Overview of Hitachi’s IT business, no date). In comparison, Secom was established in 1967, which means that HITACHI had an advantage. Cooperation with the government and HITACHI’s contribution to the state-wide development, for example, their work on the train seat reservation system and the Japanese banking system (Overview of Hitachi’s IT business, no date). Hence, the core competency of HITACHI is its history of working in cooperation with the government and ability to develop infrastructure projects of state-level importance.

Other Asia Pacific and European rivals include Siemens, Toshiba, Fujitsu, among others. Creating a Social Innovation Business through ‘Monozukuri’ is Hitachi’s main goal and competency as well (Kimbra, no date). This business has a strong orientation on society, similarly to Secom, where one of the strategic goals is to work for the benefit of the society and not merely for the profits.

The role of government

HITACHI is a socially-oriented business, which is why partnerships with “governments and policymakers around the world are vital for growing our Social Innovation Business” (Working with governments and policymakers, no date). The Japanese government works with HITACHI on infrastructure projects to strengthen the state’s industrial competitiveness. Moreover, HITACHI created the Government & External Relations Division in 2009 to oversee partnerships with government institutions (Working with governments and policymakers, no date). This corporation declares its cooperation with policymakers as integral to its strategic work not only in Japan but globally.

HUAWEI Technologies

Strategy

Huawei is a Chinese technology company established in 1897 (Our company, no date). Huawei produces and sells both consumer and b2b products, for example, smartphones, laptops, cloud computing solutions for businesses, among others. The firm’s strategy is to expand into the global markets, which is evident from its recent report on sustainability released in Geneva (Balch, 2018). This international focus is notable because previously, Huawei was focused on its local strategy, delivering products to the local consumers (Balch, 2018). This strategy differs this Chinese multinational from those in Japan or Europe because other companies have had a focus on the global market as an integral part of their development strategy.

Huawei, however, made a strategic change to develop as an international corporation reasonably recently. This rapid expansion resulted in Huawei having branches in 170 states and surpassing its main competitor from Europe-Ericsson becoming the largest telecommunications equipment provider (Bach, 2018). Additionally, Huawei can be compared to Apple and Samsung. Huawei aims for a rapid expansion within the Western world. Moreover, unlike other Chinese multinationals, which focus on the markets in the South, such as Asia and Africa, Huawei expands towards the Western states (Balch, 2018). The reason why most Chinese multinationals choose Southern states is the cheap credits from the Chinese banks, allowing them to access capital easily (Balch, 2018).

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Corporate Organization

Shareholder’s Meetings and the Board of Directors (BOD) are the two central governing bodies for Huawei (Corporate governance overview, no date). The shareholders play an essential role in Huawei’s governance because they are responsible for decisions regarding “company’s capital increase, profit distribution, and selection of the members of the Board of Directors/Supervisory Board” (Corporate governance overview, no date, para. 15). The Supervisory Board oversees the BOD and executives. Additionally, independent auditors review the corporation’s financial statements. Currently, the corporation uses the services of KPMG.

Core Capabilities

Being a Chinese multinational, Huawei has access to government support and cheap labor costs. This proves to be a substantial competitive advantage, considering that most Western and European technology manufacturers produce their items in China. Hence, Huawei has access to capital and government support not available to multinationals in Japan, Korea, or Western countries. Next, Huawei owns not only manufacturing plants but also research facilities in China and outside, allowing it to test and develop new technologies. Approximately 45% of its employees are involved in the research and development process (Huawei, no date). About 10% of the revenues are invested in the new products development. Hence, Huawei’s competency is a strong focus on the development of novel technologies.

The Role of Government

The government’s role in Chinese multinationals cannot be overlooked. Although the government’s influence is not expressed in Huawei’s corporate structure and organization, evidence by Inkster (2019) shows that the Chinese government affects the operations of large businesses in the state. Kirby, Chan, and McHugh (2020) argue that the company’s ties with the Chinese government have harmed its reputation and prospects for development in the Western markets. The US government has issued an initiative to backlist Huawei due to its connection with the Chinese government officials. Hence, unlike European or US competitors, such as Ericsson and Apple, Huawei is closely linked with the government, which harms its brand image.

Samsung Technologies

Strategy

Samsung is best known for its consumer electronics products, although Samsung also produces home appliances (https://www.samsung.com/us/explore, no date). The primary strategy of this multinational is flexibility following the external environment of the business (Dudivski, 2017). The corporation evolved using the support of the government and focusing on the industry trends, and choose an outward internalization strategy.

In the 1980s, Samsung was internationalized through Korea’s “segyewha” policy and by leveraging low costs and scale production (‘Samsung Electronics,’ no date). This policy was aimed at the liberalization of the markets in Korea and the encouragement of foreign trade, which benefited Samsung and other Korean multinationals. Hemmert and Jackson (2016) state that 14% of Samsung’s sales are attributed to China, although the corporation also sells its products in the US and European markets. The company achieved this expansion to China by establishing manufacturing facilities in Tianjin and establishing 50″50 partnerships with local businesses. Moreover, initially, Samsung imported many of the components for manufacturing, while now the corporation uses predominantly local Chinese manufacturing. Unlike Japanese manufacturers, such as Secom and Hitachi, Samsung emphasizes the Chinese market.

Corporate Organization

Samsung, similarly to other Asia-Pacific multinationals, has a corporate structure with the Board of Directors overseeing operations and Executive Officers who execute the strategies. This corporation has shareholders who make strategic decisions about its operations. In 2017 this multinational decided to seize its transformation into a holding structure (Samsung electronics completes review of optimal corporate structure, no date). Hence, Samsung’s structure is similar to that of its competitors in the Asia-Pacific region-Secom, Hitachi, and Huawei.

Core Capabilities

Flexibility is Samsung’s best capability in terms of strategy and market orientation. According to Dubrovski (2017), the corporation was established in 1938 as a grocery store, which was later reoriented several times to sell noodles, produce sugar, and sell insurance. Hence, flexibility in the business strategy has been integral to the way Samsung functions. This is linked to the corporation’s efforts dedicated to new product development. Similar to Huawei, Samsung invests heavily in research and development (Dudivski, 2017). Hence, its focus on innovation and new developments is essential and perhaps is linked to the company’s involvement in the Chinese tech market.

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Here, Samsung’s capabilities should be compared to LG Electronics, which is another South Korean multinational. LG, however, has been less successful in the Chinese market due to intense competition from local brands (Mamiit, 2018). Most probably, this is linked to the corporation’s lesser focus on research and development. According to Hemmert and Jackson (2016), it is the largest Korean and global IT manufacturer by volume based on 2014 data. The company has succeeded in the Chinese market, since “Taiwanese, Japanese and European competitors struggled to respond to shifts in the market conditions in China, Samsung could reliably produce high-end products popular with Chinese customers” (Hemmert and Jackson, 2016, p. 582).

The Role of Government

The industrialization of Korea in the 1980s has provided Samsung with an opportunity to access the government’s support. This help was reflected in access to capital and aid in expanding to the foreign markets (‘Samsung Electronics,’ no date). With this aid and considering the commitment of the Korean multinationals to the national development, Samsung successfully branched into foreign markets using outward strategy.

Conclusion

In general, the Asia Pacific multinationals have strong traditional cultures and corporate hierarchies. Hence their corporate organization is the same. Moreover, within the four factors analyzed, the focus on social responsibility and cooperation with the government is integral to these businesses. According to Hemmert and Jackson (2016), both Japanese and Korean firms have similar outward internalization patterns, which begins with exports and transforms into foreign direct investment. However, the entry strategies for the Chinese market differ for the Japanese and Korean firms, with Korean companies entering it later but with more force in terms of investments and partnerships.

Huawei, unlike other multinationals, enjoys extensive support from the Chinese government and can leverage low costs in its market expansion strategy. The Japanese firms focus more on creating value for the society, for example, by integrating different safety and security services, which Secom does. Hitachi focuses on competency and involvement in large government-led infrastructure projects. Korean businesses’ expansion into the global markets has been supported by the government since the 1980s. With this, one can conclude that for the Asia-Pacific companies, all are linked to their governments, but the extent and nature of support differ depending on the state.

Reference List

Balch, O. (2018) ‘The Chinese smartphone giant’s latest CSR report hopes to convince western consumers it is serious about sustainability, writes Oliver Balch’, Reuters, Web.

Corporate governance (no date) Web.

Corporate governance overview (no date) Web.

Corporate governance system (no date) Web.

Dudovski, J. (2017) Samsung business strategy and competitive advantage: effective exploitation of market readership. Web.

Global expansion (no date) Web.

Inkster, N. (2019) ‘The Huawei affair and China’s technology ambitions’, Survival, 61(1), pp. 105-111.

Hemmert, M. and Jackson, K. (2016) ‘Is there an East Asian model of MNC internationalization? A comparative analysis of Japanese and Korean firms’, Asia Pacific Business Review, 22(4), pp. 567-594.

Huawei (no date) Web.

Kimbra, N. (no date) Symbolic core competence of Japanese strength in Monozukuri.” Web.

Kirby, W., Chan, B., and McHugh, J. P. (2020) ‘Huawei: a global tech giant in the crossfire of a digital cold war’, Harvard Business School Case Collection, January. Web.

Mamiit, A. (2018) ‘LG exits China smartphone market because it just can’t compete with local brands’, Tech Times, Web.

Overview of Hitachi’s IT business. (no date) Web.

Our company (no date) Web.

https://www.samsung.com/us/explore/ (no date). Web.

‘Samsung Electronics’ (no date) [Power Point presentation].

Samsung electronics completes review of optimal corporate structure (2017) Web.

https://www.secom.co.jp/english/ (no date). Web.

Secom’s group vision for 2030 (no date) Web.

Secom global business (no date) Web.

https://www.siemens.com/ (no date). Web.

Vision (no date) Web.

Vision 2020+ (no date) Web.

Working with governments and public policymakers (no date) Web.

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BusinessEssay. 2022. "Analysis of Asia-Pacific Multinational Enterprises." May 12, 2022. https://business-essay.com/analysis-of-asia-pacific-multinational-enterprises/.

1. BusinessEssay. "Analysis of Asia-Pacific Multinational Enterprises." May 12, 2022. https://business-essay.com/analysis-of-asia-pacific-multinational-enterprises/.


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BusinessEssay. "Analysis of Asia-Pacific Multinational Enterprises." May 12, 2022. https://business-essay.com/analysis-of-asia-pacific-multinational-enterprises/.