China, India, and Multinational Enterprises

Relevance

According to the International Monetary Fund (IMF), World Economic Outlook, advanced economies with deficits will need to compensate for decreases in domestic demand with increases in international exports. Emerging markets such as China and India will compensate by shifting from international markets to their own domestic markets. The IMF has also projected that China will overtake the US economy by 2015 and India is expected to be equal in size to the US economy by 2020 (International Monetary Fund (IMF), 2011). It is clear that the continued expansion of China’s and India’s economies places them as a dominant economic forces that Multinational Enterprises will have to compete with for market share in China, India, emerging markets and domestically. Professor Khanna in his article China + India the Power of Two emphasizes the importance of businesses gaining a competitive advantage by not only looking at China and India as separate countries but by developing business strategies that consider China and India as major trading partners. Professor Khanna supports his position with the following four key points: history, country analysis, cultural relations and successful companies (Khanna, 2007).

History

After 40 years of hostility China and India are renewing cultural ties, for three reasons. First, before the conflict in 1962, China and India enjoyed centuries of close economic, cultural, and religious ties. Second, research indicates that neighboring countries trade more with each other than non-neighboring countries. Third, China and India have evolved in different ways since their economies opened up, reducing the competitiveness between them and enhancing the complementarities (Khanna, 2007).

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... China and India in emerging markets and in their own markets. MNEs should recognize how to obtain a competitive advantage when dealing with the emerging markets of China and India (Khanna, 2007).

Works Cited

Conklin, D., (2011). Chapter 13, Summary and conclusions. In The global environment of business: New paradigms for international management (pp. 271-286). Sage Publications (ISBN-13: 978-1412950282).

Hout, M., & Ghemawat, P. (2010). China vs. the world: Whose technology is it? Harvard Business Review, December: 95-103.

International Monetary Fund (IMF), (September, 2011). World economic outlook. Retrieved October 25 2011, from http://www.imf.org/

Khanna, T., (2007). China + India: The power of two. Harvard Business Review, December: 60-69.

Stalk, G., & Michael, D., (2011). What the west doesn’t get about China. Harvard business Review, June: 126-129.