Emerging Economies and Globalization (Essay Sample)

Emerging Economies and Globalization
Name
Institution
Emerging Economies and Globalization
Introduction
GEH (General Electric Healthcare) is capitalizing on the current trend that the developing economies markets are gradually approaching their saturation level and it has therefore to search for new untapped markets mainly in emerging countries, which include China and India. GEH acknowledges that there will be a continuous growth in the healthcare industry in future because of global population sizes as well its age composition. GEH is expanding its development and operations of new medical equipment manufacturing and new drugs in China and India. Majority of the MNCs (Multi National Corporations) are currently searching for new markets, which are unsaturated and untapped in various emerging countries including China and India so that they tap into their optimisms of capitalizing on future business trends and expand their business (Dadush & Shaw, 2011). GEH is among these MNCs, which are trying to capitalize mainly in the persistently rising healthcare industry.
GE (General Electric) which is a company that was founded by the prominent Thomas Edison in 1878 established General Electric Healthcare (GEH) in 2004. It is worth noting that GE was the initial company in the world to be associated with the household light bulb invention and it has successfully manufactured numerous electric industry appliances, which include light sockets, light fixtures, and house appliances. GE established GEH in order to tap effectively into the healthcare industry that has seen significant expansion since 2005. GEH in 2005 came with a noble innovation whereby it manufactured the world’s first HDMR (high definition magnetic resonance) system. Recently, GEH has expanded its operations mainly into China and India (Faúndez & Tan, 2010). New drugs development for the healthcare industry is currently taking place in its Indian operations whereas X-ray equipment manufacturing for the healthcare industry is taking place in its China location (Kose & Prasad, 2010). This paper will expound on two trade theories which best explains GEH’s expansion of its operations of new drugs development to India as well as its X-ray business manufacturing to china. It will also explain these two selected theories in accordance to GEH’s reasoning and explain any possible pitfalls in using these strategies from the GEH’s perspectives. This study will also identify possible solutions for these pitfalls; evaluate the human resource strategy for GEH in both China and India’s operations and design training in order to prepare expatriates for China and India assignments.
Trade Theories and GEH’s reasoning
There are two trade theories which can best explain the major reasons GEH has expanded its key operations of new drugs development in India as well as its X-ray business manufacturing to China. These two trade theories are the comparative advantage trade theory and the international product life cycle trade theory. GEH has utilized the international product life cycle trade theory to expand its operations of new drugs development in India. Recent research by authoritative scholars has shown that this theory was initially started with the notion that each industry experiences a saturation level mainly after the stages of growth and maturity. Thus, GEH plans to begin expanding in the Indian markets whereby it will introduce various healthcare products as well as maximize its market share in its X-ray business manufacturing in China. It is paramount to note that both India and China are the most populous countries in the world currently and this factor enables GEH to have a huge market for its products in the healthcare industry. These countries also offer affordable labor costs and therefore GEH will be able to reduce its labor costs these countries have people who have vast experience and expertise in working in the healthcare industry (Faúndez & Tan, 2010).
The international product life cycle trade theory acknowledges the saturation level in the developing markets economies and it is therefore paramount that GEH expands its operations in these two countries. The saturation level of these two countries markets will take a substantial period for GEH’s products to reach their peaks due to the huge market opportunities offered there. GEH will however need to advertise and utilize the knowledge of the local vendors in these two countries in order to penetrate effectively their markets. GEH is a world-renowned company due to its vast experience in foreign countries and its superior products and this will greatly assist it to penetrate these countries without many barriers (Dadush & Shaw, 2011).
GEH has the right expertise and competent employees who can be able to make achievable advancements in penetrating these markets. Since these countries are populous, healthcare industry will continue to be a demanding sector because these populations will always seek healthcare services. These healthcare services will include GEH’s new drugs development in India as well as the X-ray business manufacturing in China. The international product life cycle trade theory will enable GEH to continuously advance its new drugs development in India and X-ray business manufacturing in China so that its international product life cycle is always in accordance to new trends so that it can remain in business for the longest possible period. This will enable GEH to maximize its profits and market share in these countries effectively for a very long time without being affected by saturation levels for its products (Kose & Prasad, 2010).
The noble David Ricardo who was a respectable economist introduced the comparative advantage trade theory in 1817 and it is among the paramount concept mainly in the international trade theory. The comparative advantage trade theory in economics refers to a company’s ability to produce a certain service or product at a lower opportunity and marginal cost over another. This theory states that regardless of one country being more efficient and effective in the goods or product production than the other, both of these countries involved in international trade will still gain through trading together despite the different relative efficiencies (Zhang, 2008).
Comparative advantage usually takes place when a certain country has a superiority margin in a service or product production and this ultimately translates to the production opportunity cost being lower. This noble theory further states that different countries have various factor endowments, which include capital, land and labor inputs. The comparative advantage concept has various assumptions such as a perfect occupational mobility for various factors of production, a return to scale which is constant, no externalities that arise from consumption and/or production, and transportation costs are usually ignored (Dadush & Shaw, 2011). However, comparative advantage is usually a dynamic concept, it therefore changes over time, and GEH will be required to review constantly its comparative advantage theory since an increase in competition by rival producers in both countries can erode its comparative advantage. GEH has a comparative advantage in both countries as it sets up its operations and this is evident from its superior products and vast experience in international trade in various foreign countries as well as specialization. A comparative advantage offers GEH the ability of selling its products at a lower price as compared to its competitors and this will enable it achieve stronger sales margins (Kose & Prasad, 2010).
Possible pitfalls in using these strategies from the GEH’s perspective
There are various possible pitfalls in using these two theories from the GEH’s perspective and they include resistance from the people in these local countries co-operating and working with GEH. Various countries have their own local laws, local cultures, and local tastes and preferences and this can be a hindrance when GEH expands its operations in both India and China. India and China are known to be very conservative people who have their own reservations towards other people from other foreign countries. This factor will act as a huge hindrance to GEH since these people might refuse to work for GEH and reject purchasing their products just because GEH is a foreign company (Faúndez & Tan, 2010).
On the other hand, GEH will have to study and comprehend the local laws and regulations of both countries in order to check their ease-of-doing business for each country. These stipulated laws and regulations will enable GEH to know exactly what they are required to comply with in order to establish their businesses and operations in these countries. Lack of adhering to stipulated laws and regulations of these countries by GEH might lead to legal proceedings and this can be detrimental to the company. These two countries also have different labor laws, which protect the local people, and GEH will have to check and comply with these laws. In addition, the cost and availability of raw materials are other pitfalls that GEH will have to consider in order for the company to operate in a profitable manner (Klug, 2006).
Possible solutions to these pitfalls
However, there are numerous solutions to the above named pitfalls and they include the utilization of local prominent personalities to act as partners with GEH as it establishes its operations in these two countries. These local personalities should be people with vast business experiences and they must deeply understand the cultures of the local people so that GEH can be able to penetrate effectively into these markets. This will also enable GEH to understand the local cultures of the people in those two count...