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Assessing the Competitiveness of Chinese Multinational Enterprises Development: Evidence From Electronics Sector:

Assessing the Competitiveness of Chinese Multinational Enterprises Development: Evidence From... Multinational enterprises (MNEs) are key drivers of globalization. The study investigated the performance of leading Chinese electronics MNEs, Huawei, Lenovo, and Haier, and made a comparison between Chinese electronics MNEs and American electronics MNEs along with their specifications in terms of globalization by using Asmussen’s model, Petersen’s model, Rugman’s firm-specific and country-specific advantage (FSA-CSA) matrix, and the Porter’s diamond model. Findings revealed that only Huawei is the truly global company at present; nevertheless, Lenovo and Haier are both on the right track, reaching the same status as Huawei. These firms can successfully utilize their country-specific advantages by capitalizing on China’s external partnerships and existing trade agreements. Chinese projects seem to be able to provide Chinese MNEs with the ability to maximize their opportunity to seek growth externally and enter the global market. An examination of MNE practices facilitated by American and Chinese firms imparts relevant commonalities but differences in operational practices. Small enterprises can follow the process and strategy, while policymakers will receive a suggestion to implicate an industrial- friendly policy. Keywords multinational enterprises, competitiveness, internationalization, FSA/CSA, diamond model, China (Zhu, 2012) but eventually emerged as the second largest Introduction economy, at present (Qu et al., 2018; Rashidin et al., 2019). Through globalization, multinational enterprises (MNEs) China’s agricultural, state, and non-state reforms from 1978 have now become one of the key players in the global politi- to 2007 comprised pro-people incentive systems, more effi- cal economy (Irogbe, 2013; Khan, 2018). National interest or cient resource allocation, and the expansion of non-state sec- state-bound challenges are overwhelmed by MNEs as they tors (Zhu, 2012). produce and manufacture goods solely for the interest of In particular, China created both direct and indirect poli- profit. This characteristic makes such enterprises bound by cies, regulations that increased the market demand and several advantages and limitations that could be felt within domestic productivity for electronics (Fujii & Managi, their overall operational activities; nevertheless, the contin- 2019). While the country continues to develop policies and ued rise and success of MNEs proves that the current market state-own initiatives from the last 30 years to now, China setup provides income-generating benefits. The emergence raised as the third largest electronics producer in the world of MNEs facilitated by globalization provides an avenue for after the United States and Japan (Huang & Qiao, 2005). At “internationalization,” or the process by which it introduces products in the global market (see Online Appendix 1.2). University of International Business and Economics (UIBE), Beijing, China MNEs may begin their operations anywhere around the Hunan University of Science and Technology, Xiangtan, China world to display company successes, but the United States and Japan are two powerhouse economies that have estab- Corresponding Author: lished a significant presence in the global market as the home Md. Salamun Rashidin, School of International Trade and Economics, base of many MNEs, many of which are among the Fortune University of International Business and Economics (UIBE), No. 10, Huixin Global 500 (Cheung, 2018). Among these countries is China Dongjie, Chaoyang District, Beijing 100029, China. which, in 1978, was one of the poorest nations in the world Email: salamun.du@outlook.com Creative Commons CC BY: This article is distributed under the terms of the Creative Commons Attribution 4.0 License (https://creativecommons.org/licenses/by/4.0/) which permits any use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/open-access-at-sage). 2 SAGE Open the beginning of 1980, when China’s economic reforms when China became a member of the World Trade started, only 3,900 electronics enterprises were recorded to Organization (WTO) and opened its market further with be in operation, earning a total annual output of 11-billion “Chinese open-door policy” (Chow, 2011). China’s acces- RMB; however, by 2003, the number of enterprises almost sion into the WTO presents an enhanced competitive pres- tripled to 10,600, and China’s total annual output increased sure and also been the key factors influencing the to 1.7-trillion RMB (National Bureau of Statistics, 2003– internationalization process of Chinese enterprises (Hong 1 2 2007 ; Huang & Qiao, 2005). In 2003, China’s exports had Kong Monetary Authority, 2002). This market opening may already amounted to 142-billion RMB (Huang & Qiao, lead to the increasing competition among domestic firms, the 2005), and during this time, leaders of China’s electronics sharpening of their comparative advantage, and the increase industry have already established trade partnerships with the of the country’s power in the international markets. This United States and Japan to further boost their MNEs (Tilley, change is the great attraction of inward-oriented FDI (Shatz 1995). These developments have led to the foundation of & Venables, 2000). China’s successful and fast-paced eco- many large firms and MNEs that continue to facilitate the nomic rehabilitation would easily facilitate its economy as a growth of China’s economy (Zou et al., 2018). Developments strong competitor in the global market, especially in the within China’s MNEs are part of its “centrally planned econ- industry of technology and electronics; however, newer stud- omy” that aims to place the country as a leading economic ies on economic growth have postulated that the largest power within the next few years (Lukas et al., 2001). global firms at present only garnered success through their According to Buckley et al. (2007) and Hong et al. (2018), local or domestic operation rather than through the global China’s MNEs rely heavily on foreign direct investments market (He et al., 2019). This would lead to questions regard- (FDIs) that are not in line with its domestic economic strate- ing the efficiency and value of globalization in improving gies. In China, the strategy of attracting inward-oriented FDI economic performance and the track of China’s MNEs, is also utilized in domestic policies and local economic prac- which are heavily reliant on internationalization. However, tices. As a response to this, several changes within China’s international competitiveness of a firm is a broad and com- technological industry have been proposed and promoted. plex topic. It is difficult to identify internationalization pro- For example, a study on the electronics industry in Mainland cesses and competitiveness from different firms. So, to come China found that foreign technology transfer that is facili- up with a clear analysis and understanding, the researcher tated through local innovations could significantly improve has to limit it to one type of firm. The present study has cho- technological outputs for foreign integration (Tilley & sen Chinese electronics industry as the main point of this Williams, 1997). Tilley and Williams (1997) cited that research because of its presently garnering attention from the enabling Chinese electronics MNEs to achieve improve- global market and its emergence that reflects the globaliza- ments in such outputs would enable the nation to rival Japan tion (Yuan & Pangarkar, 2015). and South Korea as major forces in the global technology The researcher found that there were only three Chinese industry. electronics MNEs included in the 2017–2018 United Nations Studies have shown that the role of FDI on Chinese MNEs Conference on Trade and Development (UNCTAD), a rank- remains to be understudied. This would imply that such an ing of the top 100 nonfinancial MNEs from transition and endeavor may pose some limitations or challenges on the developing economies. These companies are Lenovo Group, expansion of MNEs in the global arena, including domestic Huawei Technologies, and Haier Group Corporation. The competition, capital draining, and problematic labor mar- result corresponds to the outcome of existing studies; there- kets. Records of FDIs into China from January to November fore, leading to the questions on the validity of Chinese elec- 2018 showed that there was a slight decline (1.3%) in total tronics MNEs’ competitiveness, particularly in its actual FDI rates. However, an upward trend in FDI integration performance and success rate in comparison with other states within the Chinese economy is still expected until early 2019 and emergent electronics MNEs. (“China Foreign Direct Investment”). An examination of data between 2000 and 2018 would also show an increasing Objective trend in FDI integration over the years. These data support the idea that China can garner the numbers of foreign inves- The present study focused on several salient points: tors, but it still needs a more strategic use of such resource to facilitate better outcomes for the globalization of MNEs. 1. To assess the role of globalization in the emergence In particular, Chinese-owned MNEs place importance on and success of Chinese electronics MNEs; strategic ownerships and nonoptimal locations, but domestic 2. To assess the performance of Huawei Technologies, companies would emphasize “excessive internalization” and Lenovo Group, and Haier Group Corporation in the stricter measures for foreign-owned companies to put up global market; businesses in China (Buckley et al., 2007). The emergence of 3. To make conceptualized a comparison between Chinese MNEs has been started since the Chinese economic Chinese electronics MNEs with other well-established reform in the 1980s, and it reached a turning point in 2001 electronics MNEs such as American MNEs; Rashidin et al. 3 4. To look into future trends and expectations from unidimensional measure. The overview of Sullivan’s (1994) Chinese electronics MNEs. internationalization indices presented a list of 16 studies relying solely on the ratio of foreign sales to total sales (Rashidin et al., 2019; Reeb, 2006; Reeb et al., 1998; Singh Research Questions et al., 2003). T. Nguyen and Cosset (1995) investigated the The present study strives to find answers to the following properties and interrelatedness of single internationalization questions: measures. Chen et al. (2010) used the ratio of foreign pretax income. 1. Is Chinese MNEs growing faster because of heavy Meanwhile, a few kinds of literature present multidimen- reliance on internationalization? sional or composite indices. For instance, Sullivan (1994) 2. How Chinese MNEs are becoming eye catchers in chose five variables to measure internationalization: (a) the the global market? foreign sales as a percentage of total sales, (b) the overseas 3. Are Chinese MNEs getting success progressively in subsidiaries as a percentage of total subsidiaries, (c) foreign the electronic sector than other MNEs? assets as a percentage of total assets, (d) psychic dispersion of international operations, and (e) top manager’s interna- tional experience. However, Fisch and Oesterle (2003) Research Gap appealed that the most common way of measuring the degree The findings from recent studies formulate a gap in previ- of globalization and internationalization of the firms is to ously known information about the success and performance simply calculate the ratio of foreign sales to total sales, such of Chinese electronics MNEs. Wei and Nguyen (2017) as in the study of Rugman and Verbeke (2004). As the explained this phenomenon by stating that prior researches researcher believes that a unidimensional measure does not on Chinese MNEs have only focused on a few case studies suffice, in this article, we would make an endeavor to high- that limit opportunities to explain the role and impact of such light the importance and utilization of a multidimensional MNEs in internationalization. Given this, the researcher measure (Kin & Gray, 2017). Therefore, the case examples could realize it that a generalizable assessment of Chinese in this article are based on UNCTAD’s source. In addition, electronics MNEs’ international competitiveness is not the methods used in this study is consistent with multidimen- widely studied. The emergence of this research problem sional or composite indices developed by Asmussen (2006) entices the researcher to provide an empirically and theoreti- and Asmussen et al. (2007), to measure and explain hetero- cally based assessment of the global competitiveness of geneous aspects of operations. Through the review, we can Chinese electronics MNEs. Previous studies only focus on conclude that the most utilized method in determining glo- Chinese merger and acquisition which is a disproportion in balization level is F/T and R/T, the well-established regional this globalization era (Branch et al., 2008; J. Zhang et al., theory by Rugman and Verbeke (2004) . The studies that 2011). So, we offered to extend the research area to include utilized F/T-R/T model include regional multinationals and merger and acquisition, organization strategy with state-own the Korean cosmetics industry but not globally (Oh & concern included. Policymakers, managers, and the aca- Rugman, 2006); meanwhile, Oh (2009) could confirm that demic environment will receive vast knowledge on future retail and merchandizing firms are predominately regional. development progress. Small enterprises/organizations can At the country level, Collison and Rugman (2007) demon- follow the process and strategy, while policymakers will get strated that the largest enterprises in Europe and Asia oper- a suggestion to implicate industrial-friendly policy. ate, on average, at a regional level. Rugman and Verbeke’s (2004) measurement is simple; business researchers would only need to calculate the ratio of foreign (F) to total (T) Literature Review sales (F/T) and the intra-regional (R) to total (T) sales (R/T) The existing literature displays that there are several ways to of the firms, then divide them into four groups, which are index a firm’s degree of internationalization. Despite the home region–oriented firms, bi-regional firms, host region– variety of indices, most of them are normally composed of oriented firms, and global firms. Rugman and Verbeke’s one or more of these dimensions: (a) firm’s distribution of (2004) found that approximately 72% of MNEs’ sales took employees, assets, activities, and so on between home coun- place in their home region of the triad (North America, the try and foreign countries; (b) psychological management, European Union, and Asia) and were oriented within their that is, international orientation of employees; and (c) firm’s home country, whereas very few MNEs had global disper- sales across countries or regions. According to Asmussen sion or expansion. These data show a lack of globalization et al. (2007), they indicated that there are two different mea- levels for some MNEs, since they mostly operate intra- sures to index firm’s degree of internationalization: unidi- regionally, rather than inter-regionally. However, Fisch and mensional measure (or dichotomous measure) and Oesterle (2003) suggested that the measurement of global- multidimensional (or composite) measure. The literature ization should be from a global economic view rather than review indicated that there are many indices based on the from a regional perspective. Fisch and Oesterle (2003) and 4 SAGE Open Asmussen (2006) argued that the theory of Rugman and analyze the international competitiveness of the firms. Porter Verbeke (2004) and Kin and Gray (2017) is only based on a presented that certain factors in the home country can pre- micro-firm level as regional sales ratio would fail to show pare the firm to work more or less efficient in the interna- the effect of home orientation. Thus, Asmussen (2006) pro- tional market and can provide the firm competitive posed the concept that the sales distribution of a global firm advantages over its competitors. The diamond model can must match the distribution of global gross domestic product analyze why some states are more competitive and why (GDP). Apart from this, Asmussen et al. (2007) also pro- some industries in those states are more competitive than posed a continuation of the study by delving on the global others (Smit, 2010). The model comprises four national specialization indices to determine a firm’s globalization determinants of competitiveness: demand conditions, factor level. conditions, related and supporting industries, and company’s To qualitatively analyze the international competitiveness strategy, structure, and rivalry (Bakan & Dogan, 2012). of a firm, it is necessary to understand the internal factors Change and government factors are also presented in the dia- and external factors of MNEs. According to the existing lit- mond model. These two factors affect competitiveness as a erature of MNEs, firm-specific advantages and country- support of the four main factors (Deniz et al., 2013). Beleska- specific advantages (FSAs-CSAs) are important factors in Spasova et al. (2016) adapted the model by adding these two determining the performance of MNEs (Dunning, 1981; factors in the capacity of a company to gain competitive Ramamurti & Hillemann, 2018). Several pieces of literature advantage and also claimed that the diamond model cannot also suggest that the unique and heterogeneous capabilities be only analyzed at a national level, but must present a local, of a firm and home country can generate competitive advan- regional, national, foreign, and global analysis. In the past tages and lead to sustainable returns (Rugman et al., 2014; few years, there has been an explosion of research on the Rugman & Verbeke, 2004). FSAs may include knowledge of internationalization–performance relationship. The begin- technology, efficient production processes, managerial skills, nings of a theoretical framework are emerging, but there is and skilled labor (Madhani, 2010; Wernerfelt, 1984). still broad disagreement of definition and method of a firm’s Rugman and Verbeke (2004) suggested that in more general internationalization. This article present aims to show that terms, they should view FSAs as knowledge bundles, which multidimensional methods can provide a strong underpin- can be the intangible assets, learning capabilities, and even ning for analyzing a firm’s international competitiveness. privileged relationships with outside actors. They use intan- gible assets as proxies for FSAs in many empirical types of Method research (Rugman & Oh, 2011; Morck & Yeung, 1991; Q. T. K. Nguyen, 2016; Rugman, 1981). Meanwhile, CSAs may This section, therefore, would focus on measuring the global include natural resources, cheap labor, and economies of competitiveness of Chinese electronics MNEs’ key players scale that many developed countries do not offer. From a (He et al., 2017; M. W. Peng, 2012)—Huawei, Lenovo, and macro-economic perspective, Chinese outward-oriented FDI Haier—through the use of three models of assessment has been attributed to public policies and support by the (Arregle et al., 2018; Fu et al., 2018; Li et al., 2018). Chinese government in encouraging domestic firms to go abroad (Buckley et al., 2007; Tsai & Rosenheck, 2013). At Case Study micro level perspective, for internalization strategy i-e merger & acquisition location and management structure of According to Fortune 100 global brand ranking and WPP’s foreign subsidiaries are home country institutional incen- BrandZ rankings (see Online Appendix 1 and 1.1) list, tives for Chinese MNEs’ (Fuad & Gaur, 2019; J. Zhang et al., Huawei, Lenovo, and Haier got position in those ranking 2011). According to Buckley et al. (2007), Chinese govern- lists, displaying growing impact in Global Brand recogni- ment’s support and the role of state ownership, which is a tion. Not only in the higher position in the ranking but also type of Chinese CSAs, confer Chinese firms’ resource advan- they are investing higher amount of R&D, customer satisfac- tages in their outward-oriented FDI, thus compensate for tion, product development, and line products (Du, 2003; Guo their lack of intangible knowledge-based FSAs. Some argue et al., 2019; Liu & Buck, 2009; H. Peng, 2014). Due to these that internationalization may enhance the Chinese firm’s reasons we select these top three Chinese brands. capabilities to take risks abroad. Government’s support and artificially cheap credit also have increased the Chinese Research Method firm’s purchasing power in international M&A (Gammeltoft et al., 2010; Luo et al., 2010). Despite the large support from The emergence of Chinese multinational companies in the the government, Rugman et al. (2014) found that less than global market today is a research focus of many business half of the announced foreign acquisitions of Chinese firms scientists and economists. In the study of Fisch and Oesterle have been successfully completed. (2003), there are many methods for measuring the degree of Aside from the FSA-CSA model, the researcher imple- globalization for a particular company. For instance, Chen mented Porter’s (1990) diamond model as another method to et al. (2010) used the ratio of foreign pretax income to total Rashidin et al. 5 Case 1. Huawei. . Established in 1987 by Ren Zhengfei Annual sales revenue (world’s largest ICT) US$92.55 billion, 2017 December Quality similarity Cisco and Fujitsu R&D 200 production workers but over 500 workers in R&D-related field; invested 10% revenue in R&D, total 394,000-million RMB. In 2017, 80,000 staff were involved in R&D, comprising 45% of the total workforce. Established 22 overseas research institutes including 10 in Europe, 9 in North America, 2 in Asia Pacific, and 1 in South Africa Revenue US$105.191 billion (2018) New era Merger and acquisition with Hutchison Whampoa, 3Com, Vodafone, optus, and MGTC Development strategy R&D and low-cost production Patent (2016) (last data) Accumulated 62,519 patent licenses, cumulative application for 57,632 Chinese patents and 39,613 foreign patents Business categories Products and services, operator carrier networks, enterprise solutions, and consumer Internationalization Started in 1990 in Africa, the Middle East, Latin America, North America, and Europe. 2004, success in domestic sales. Later, one-third revenue came from international markets. Now, deploying its products and services in over 140 countries Note. ICT = information and communications technology. See: Huawei, Wiki (accessed April 2019: https://en.wikipedia.org/wiki/Huawei) and Huawei official annual report (https://www.huawei.com/us/press- events/annual-report). Case 2. Lenovo. . Established in 1984; former name “Legend” but in 1990 expanded as a tech company Strategy First, several segments such as mobile internet, online education, real estate, and so on. In 2003, they made a loss. The management team accelerated the internationalization strategy and strengthened its focus on the PC business since the end of 2003. Then they came on the frontline. Then became a strong financial foundation for accomplishing the M&A deal with IBM. Lenovo and IBM co-branding started in 2004. In 2005, Lenovo paid US$1.25 billion and took over approximately US$500 millions of IBM’s balance sheet liabilities for the acquisition of the PC division Ownership 19% IBA, 46% PRC, and public and private investors owned the rest. But later IBM’s 13.2% share sold Revenue (2018) US$45.35 billion New era In 2005, Lenovo acquired IBM Personal Computing Division for US$17.5 billion R&D strategy IBM gave support to Lenevo former 10,000 skilled employees. Moreover, Lenevo sent its engineer to do further research on 1,500 patents and to acquire knowledge from IBM. Development strategy Acquisition strategy helps to speed-up Lenovo to go international and eventually became to penetrate the third largest market share in the global computer industry Patent (2016) (last data) 2,300 Categories ThinkPad (laptops) and Think Center (desktops) and use the IBM on “Think-” products and Others ICT Product. Mobile and others in the top class Internationalization Now world’s second largest PC vendor. Established 9 research centers in China, Japan, and the United States; and 7 manufacturing centers, including 5 in China, 1 in Mexico, and 1 in India Note. ICT = information and communication technology. See Lenovo, Wiki (accessed March 2019: https://en.wikipedia.org/wiki/Lenovo) and Official Portal (https://www.lenovo.com/us/en/about). pretax income to calculate global competitiveness; mean- Studies on other means to measure globalization and while, Sullivan (1994) used various variables to measure, internationalization found that Fisch and Oesterle’s (2003) which include foreign sales as a percentage of total sales, over- claim is true. The most utilized method in determining glo- seas subsidiaries as a percentage of total subsidiaries, foreign balization level is F/T and R/T, the regional theory by assets as a percentage of total assets, psychic dispersion of Rugman and Verbeke (2004). Utilized in many types of international operations, and top managers’ international research for business studies, the reliability of the F/T-R/T experience. However, Fisch and Oesterle (2003) appealed model has been established. For example, Oh and Rugman that the most common way of measuring the degree of glo- (2006), through such method, confirmed that the cosmetic balization and internationalization of the firms is to simply industry operates regionally but not globally. Meanwhile, Oh calculate the ratio of foreign sales to total sales, such as in the (2009) could confirm that retail and merchandising firms are study of Rugman and Verbeke (2004). predominately regional. At the country level, Collison and 6 SAGE Open Case 3. Haier. . Established in 1984 at Qingdao including OEM Strategy Merge and acquire Ownership Partial public ownership; Haier is still technically a “collective” company Revenue (2017) 78.8 billion yuan New era In 2009, focused from OEM to brand building. To get rid of the influence of country of origin, Haier speeded its brand localization through R&D, design, manufacturing, sales, and services. Italian factory, “made in Italy.” This leads to its increase in global market share since 2010 R&D strategy Haier established its R&D institution in Germany and factory in Italy Development strategy They started internationalization strategy and globalization strategy in 1998 and 2005, respectively. Haier built of a global brand in the United States in 2005 and implemented the global brand strategy in 2009—basis of “Difficult first, easy later” and had “three in one” localization strategy, which is having R&D and design, production, marketing, sales to logistics, and services in one region Patent (2019) (last data) Has 16,316 patents and 528 valid patents for invention over 30 nations Categories Home appliance and ICT Internationalization (later 1990) 64 trading companies (19 of which are located overseas), 29 manufacturing plants (24 of which are located overseas), 8 design centers (5 of which are located overseas), and 16 industrial parks (4 of which are located overseas). 50,000 workers around the world. Entered U.S. market in 1994 and Western Europe in 1997. Have plants in Indonesia, Pakistan, India, Philippines, Tunisia, Nigeria, Egypt, Algeria, and South Africa Note. Due to lack of the data and reliable source, we used 2017, 2018, and 2019 data set. OEM = original equipment manufacturer; ICT = information and communication technology. See Haier, Wiki (accessed March 2019: https://en.wikipedia.org/wiki/Haier) and Official Portal (https://www.haierappliances.com/about-us). Rugman (2007) demonstrated that the largest enterprises in Fisch and Oesterle (2003), meanwhile, attached impor- Europe operate, on average, at a regional level. tance to the utilization of multidimensional measures. They Rugman and Verbeke’s (2004) measurement is simple; pointed out that the measurement of globalization should be business researchers would only need to calculate the ratio of from a global economic view rather than from a regional per- foreign (F) to total (T) sales (F/T) and the intra-regional (R) spective. They assumed that the purchasing power of a coun- to total (T) sales (R/T) of the firms, then divide them into try is an outcome of its gross domestic product (GDP). The four groups, which are home region–oriented firms, bi- study of Asmussen (2006) supported the concept of Fisch and regional firms, host region–oriented firms, and global firms. Oesterle (2003). He argued that the theory of Rugman and The researcher explains the criterion of each group below: Verbeke (2004) using regional sales data is solely based on a micro-firm level as regional sales ratio would fail to show the •• Home region–oriented firms have at least 50% of their effect of home orientation. In addition, he suggested that it sales in their home region of the triad (North America, should not apply the same classification criterion to firms the European Union, and Asia). from different countries, as the metric does not take into •• Bi-regional firms are groups with at least 20% of their account the relative sizes of home and host countries. In sales in each of two regions, but less than 50% in any response to the imperfect theory, Asmussen (2006) proposed one region. the index of regional and global market penetration by incor- •• Host region–oriented firms have over 50% of their porating an objective criterion of globalization, suggested by sales in a triad market other than their home region. Fisch and Oesterle (2003). He extended the metric by adding •• Global firms have sales of 20% or more in each of the the market size differences to the regional strategy. The prin- three parts of the triad, but less than 50% in any one ciple of his theory is that the sales distribution of a global firm region of the triad. must match the distribution of global GDP. Alongside this, Asmussen et al. (2007) also proposed a continuation of the The study of Rugman and Verbeke (2004) measured study by delving on the global specialization indices to deter- MNEs based on the world’s 500 largest firms of 2004 in the mine a firm’s globalization level. These measurement models Fortune Global 500. Results showed that approximately 72% shall be utilized in this article alongside another measurement of MNEs’ sales took place in their home region of triad and strategy. were oriented within their home country, whereas very few The extant literature advocates that utilization of three MNEs had global dispersion or expansion. These data show models provides a holistic measure for each company, includ- a lack of globalization levels for some MNEs, as they mostly ing a (a) integration of Asmussen’s (2006) and Asmussen operate intra-regional, rather than inter-regionally. et al.’s (2007) related models for determining globalization Rashidin et al. 7 Table 1. Company Sales and GDP in 2017 (in Billion, USD). Company Home country (H) Regional (E) Global (W) Huawei 45.23 11.03 92.5 Lenovo 1.8 1.02 6.4 Haier 1.2 1.7 23.6 Home country (h ) (China) Regional (e ) (Asia Pacific) Global (w ) 1 1 1 12,240 28,230 80,050 Note. GDP = gross domestic product. levels, (b) Rugman’s firm-specific and country-specific where e = host market sales ratio within the home region advantages, and (c) Porter’s diamond model. (E/T), w = host market sales ratio outside the home region Data on the performance and statistics of Huawei, Lenovo, (W/T), h = host market sales (H/T), h = GDP of the home and Haier were acquired online from their company web- country, e = GDP of the rest of the home region, w = GDP 1 1 sites, existing researches on the companies, and reliable of the rest of the world, R = intra-regionalization, and G = third-party statistical data sites. Results of all analyses are inter-regionalization. integrated and triangulated to come up with a conclusion Asmussen (2006) suggested that a purely globalized regarding the current state and level of competitiveness of MNE would yield R = G = 1; however, as no purely global- Chinese MNEs. Through analyzing the three main MNE ized firm is expected to exist, a truly global firm would just players from China, the researcher expects to meet such a be expected to yield results that are R = G, or values close to goal. each other. Lower values of R compared to G would suggest large home country sales and therefore, home-region orienta- Asmussen’s (2006) model and Asmussen et  al.’s (2007) tion or a local MNE. Lower values of G compared to R, model. Asmussen (2006) proposed that the level of “reach” meanwhile, would suggest host-region orientation or a of MNEs may be quantified through a set of formulas that regional MNE. compare the global GDP standard with the sales distribution The abovementioned formulas shall be utilized to quan- of the firm. Ideally, an MNE may be considered a “global” tify the geographic scope of Huawei, Lenovo, and Haier. firm when its sales distribution falls closely to the global Note that the researcher used the data for 2017 because of GDP. In quantitative terms, an MNE’s host market sales lack of available data for the year 2018. Table 1 summarizes ratios e and w are the sales in each host area divided by the pertinent data needed in the analysis and GDP rates also total sales: essential at 2017. To further assess and explain the globalization levels of these companies, Asmussen et al.’s (2007) model shall also e = (1) be utilized. While measures of firm internationalization are HE ++W available, there is no index that would appropriately measure the level of “global specialization” that certain company would hold (Asmussen et al., 2007). According to Asmussen w = (2) HE ++W et al. (2007), determining an MNE’s resource allocation would facilitate an understanding of how a firm manages its where e = host market sales ratio within the home region resources and how it involves specific countries in doing so. (E/T), w = host market sales ratio outside the home region They hypothesized that a well-established and truly global- (W/T), H = home country sales, E = sales in the rest of the ized firm would have heterogeneous structural and opera- home region, and W = sales in the rest of the world. tional qualities wherein production is not centrally based on Once such values have been determined, one can solve for the home country. Rather, independent processes are made in the implied values and the geographic scope of the firms other host countries, and activity volume (such as research using the following formulas: and product development) is generated in many geographical areas. The main difference about Asmussen et al.’s (2007) model in comparison with existing measures of globaliza- eh / R = (3) tion, such as dichotomous and spread measures, is that the eh / former frames globalization beyond revenue and market shares. Instead, the model takes into account the specialized wh / activities operating within all geographical locations of (4) G = wh / MNEs, and sometimes, even the volume of local and foreign 8 SAGE Open Table 2. Value Chain Activities and Geographical Areas. Value chain activities Geographical areas Company 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 M Huawei 5 5 6 7 7 140 170 170 170 170 164 Lenovo 3 3 3 3 4 60 60 60 60 65 61 Haier 6 7 7 5 5 30 30 30 32 46 34 manpower, to come up with a distinct globalization special- whether they could be considered as global MNEs in the ization index. electronics industry. The abovementioned formulations will Asmussen et al. (2007) came up with a formula to deter- serve as a guide for determining the G of each of these mine the global specialization index. The formula depends Chinese electronics companies. To determine such informa- on a volume matrix: tion, statistical data on performing Huawei, Lenovo, and Haier were acquired through reliable third-party sites. In par- ticular, the researcher gained data on the I or the total number Vv =   ij   of value chain activities of each company and J or the total geographical areas where the company operates within a par- where v is the volume of activity i in area j. To quantify the ticular year. A 5-year period from 2013 to 2017 was included ij number of activities that occur within an MNE, it should use in the study. Presented in Table 2 is a summary of the value the abovementioned formula. The formula is establishing the chain activities and geographical areas of each country in number of activities that are taking place (i) in a certain geo- particular years. graphical formula (j). This formula serves as the foundation In acquiring the global specialization index G of each of computing the global specialization index G which is MNE, the research must compute the weighted variance. A operationally defined as a “measure of the international divi- secondary approach to the above formulas shall be utilized to sion of labor determined by a quantitative assessment of a facilitate an easier understanding of the variables. In this firm’s volume matrix” (Asmussen et al., 2007, p. 797). The approach, it shall acquire the weighted mean and a weighted formula for the global specialization index G (note that this sum of squares acquired using the following formulas: “G” differs from the G value in Asmussen’s geographic scope model presented earlier) is as follows  WD + WD + WD  ()() ()() ()() 11 22 33   1 weighted mean [] WW ++W 12 3   G = T   J −1   where W = weight mean for data point and D = amount of data point. where T is the sum of area-level variances that could be fully 2 2 acquired by manually following the below formulas. 2 weighted sumofsquares WD − DW + DD − [] ()() ()() 11 mm 22 + WD − D ()(() 33 m J I J [] 1 activity weightsw a = [] aa , here =∫ vv ii ∑∑ ij ∑ ij j == 11 i j =1 where D = weighted mean ij   [] 2 aactivityshares S = ss , where =  ij  ij J ∑ ij j =1 2 2 () WD () − DW + ()() DD − 11 mm 22 [] 3a weighted mean shares wa = x S 11 xj xI 1xJ + WD − D 2 ()() 33 m 4 squareddifferences Q = q  ,e where qs =− w 3 weighted variance [] () [] ij ij ij j   W ++ WW 1 12 3 5 area-levelweighted variances shares ra = xQ [] 11 xj x xI 1xJ 61 totalweighted variance Tx = r ′ [] () 11 xJ Jx In acquiring the weighted variance, the research shall exam- ine company revenues. The researcher acquired the sales revenues of Huawei, Lenovo, and Haier from 2013 to 2017 The formulas presented above provide an overview of how V in terms of their most popular product, alongside the average is transformed into G. However, statistical software could annual product price, and total units sold. Table 3 summa- also determine the global specialization index G at a faster rizes the data of the sales report. rate. It is imperative to determine the global specialization The abovementioned formulas were used to acquire the index of Huawei, Lenovo, and Haier to quantitatively deter- weighted mean, a weighted sum of squares, and weighted mine their level of global competitiveness and to confirm Rashidin et al. 9 Table 3. Sales Report. Average sales (in millions) Average price (in USD) Company Product 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Huawei Smartphones 49 73.8 107 139.3 153.1 250 260 280 304 324 Lenovo Computers 10.7 11.9 10.8 10.4 10.2 300 300 320 320 350 Haier Home Appliances 157 197.5 152.6 193.4 184 400 400 450 450 450 variance of the presented data. The researcher used these and Haier are driven by similar CSAs that are characterized data in gaining the global specialization index G. In comput- by China’s lenient provisions on domestic taxation, opera- ing for the global specialization index, the following formula tional expenses, and resource allocation. Research has shown shall be used: that CSAs are the “cornerstone” of FDI in the Chinese domestic market (H. R. Zhang, 2016). Chinese investments are market-seeking, implying for Chinese companies to   G = T   dwell on opportunities that would allow their businesses to J −1   grow and expand. CSAs are also influential in FDI location choices. With China, it provides multinational companies where T = weighted variance and J = average number of with an array of choices regarding potential location and geographical locations. In establishing the significance of business expansions through sociopolitical mechanisms and these data, Asmussen et al. (2007) emphasized that the G China’s culturally specific overall business model. Chinese value would determine global specialization, with higher companies usually select FDIs from areas where business values signifying stronger hold in the international market. expansion is possible. The Chinese government is made by multinational companies to foster growth and development Firm-specific advantages and countr y-specific advantages. FSA- for both public and private business interests. H. R. Zhang CSA matrix is first developed by Rugman (1981). The (2016) also stated that another CSA for Chinese multina- model comprises two building blocks, which can be used in tional corporations would be their expanded equity options. analyzing the international competitiveness of large MNEs. Chinese companies, through China’s many partnerships and FSAs are the elements that determine the unique capability business endeavors globally, can expand its operations and competitive advantage of a firm (Table 6). They might through many shares in many other companies. Measuring base it upon product or process innovation and technology, the global competitiveness of Huawei, Lenovo, and Haier marketing, or distributional abilities. Some argue FSAs of could be facilitated by creating an assessment of the compa- an organization can be examined by testing downstream nies based on the highlighted criteria for gaining CSAs, and upstream processes to find its strengths and weak- namely impact on (a) market-seeking endeavors, (b) location nesses. Ohmae (1985), the well-known Japanese manage- choices, and (c) equity. ment consultant, suggested that there is a threefold movement toward integration and cross-fertilization. First, Porter’s diamond model (1990). In further analyzing the afore- downstream to control interfaces with the customer; sec- mentioned models, a revised Porter’s diamond model shall ond, upstream to acquire new technologies;and third, teth- be utilized. Porter (1990), the founder of diamond model, ered horizontally to share complementary technologies proposed that international competitiveness of an industry prior to joint market exploitation. He shared that upstream depends on a configuration of home country’s diamond activities are R&D, product design, manufacturing, while model conditions, also known as the four corners of the dia- downstream activities are marketing, distribution, and mond. Diamond model is a model that attempts to explain sales. CSAs are country-oriented factors unique to the busi- why particular nations or enterprises are internationally com- ness in each country. petitive (Figure 2). In Figure 1, CSAs are placed either low or high on a verti- It examines the capabilities of companies based on strat- cal axis and it placed FSAs either low or high on a horizontal egy, structure, and rivalry (whereby strong rivalry and bench- axis, building four quadrants of analysis. Quadrant 1 repre- marking against the toughest competitors are critical to sents a situation that CSAs are strong, but FSAs are weak. In innovation); demand conditions (with a focus on total contrast, Quadrant 4 is a company that purely relies on its demand and sophistication of demand); factor conditions FSAs and not influenced by CSAs. Quadrant 3 is a quadrant (with a focus on created and advanced production factors); applicable for international business because its both FSAs related supporting industries (with a focus on the presence of and CSAs are strong. In Quadrant 2, neither FSAs nor CSAs world-class firms with which cluster-type linkages exist); are strong. As Chinese-owned enterprises, Huawei, Lenovo, and government facilitation. 10 SAGE Open Presented below (Table 5) are results from the computa- tions of Asmussen et al.’s (2007) model. In Table 5, they presented it that Huawei possesses the largest weighted variance (T = 673.71) while Lenovo yielded the smallest (T = 346.22). Using the formula, Huawei’s global specialization index was pegged at G = 677, Lenovo’s at G = 346.22, and Haier’s at G = 618.58. The G value would determine global specialization, with higher values signifying stronger hold in the international market. These results are consistent with the findings using Asmussen’s (2006) model. The summary of the internationalization of the three companies using Asmussen’s (2006) model and Asmussen et al.’s (2007) model is presented below. Figure 1. FSA-CSA matrix. Note. CSAs are in a vertical axis and FSAs are in a horizontal axis, and there are four quadrants (Quadrants 1–4) measured by strong and weak. Huawei. The results of the computations of Asmussen’s FSA = firm-specific advantage; CSA = country-specific advantage. model show that Huawei would have R and G values that are closest to each other among the three companies. This would mean that the company is a globalized firm whose revenues Empirical Findings are near global GDP averages. The difference between the R The study utilized two methodologies of data analysis, quan- and G values of Huawei is 206, implying more opportunities titative and qualitative, to assess the level of globalization of for the company to further expand its reach and move toward Huawei, Lenovo, and Haier. Regarding quantitative analysis, becoming a purely globalized firm. Given these tests, it can Asmussen’s model (2006) was used to determine whether the be inferred that Huawei is the most globalized firm. In Table three companies are truly globalized firms. Regarding quali- 5 of the summary of weighted mean, sum of squares, and tative analysis, the study focused on determining the CSAs variance, Huawei possesses the largest weighted variance and FSAs of each company. The research compared them (T = 673.71). Using the formula, Huawei’s global special- against Porter’s diamond model to create a better understand- ization index was pegged at G = 677. Therefore, Huawei ing. Below are the empirical results of each company. technologies could be considered as the strongest global MNE’s among of three. Findings of Quantitative Methods Presented below (Table 4) is the summary of the computa- Lenovo. The results of the computations of Asmussen’s model tions of Asmussen’s (2006) model. show that Lenovo was found to have a greater G value Figure 2. Porter’s diamond model. Rashidin et al. 11 Table 4. Results of Analysis. 2017 sales (in billions, USD) Company E w h R G Huawei .074 .621 .304 .106 .312 Lenovo .111 .694 .195 .247 .544 Haier .064 .891 .045 .617 3.03 Table 5. Summary of Weighted Mean, Sum of Squares, and Variance. Company Weighted mean Weighted sum of squares Weighted variance Huawei 293.66 351,812.52 673.71 Lenovo 317.29 18,695.87 346.22 Haier 429.96 531,048.61 600.39 compared to R, implying that it may focus its presence on Findings of Qualitative Methods regionalization or internationalization. This would mean that Huawei. Huawei, as a rapidly expanding business, is actively the company is making efforts to ensure its presence in the taking part in the global arena for electronics by utilizing global setting, with fewer regards to its domestic operations. CSA. First, with its 170 areas of operations worldwide, there It can imply that Lenovo is a regional firm moving toward appears to be market-seeking mechanisms that enable internationalization. In Table 5 of the summary of weighted Huawei to enter such numerous markets. In terms of location mean, sum of squares, and variance, Lenovo possesses the choices, there would also be country-specific interventions smallest weighted variance (T = 346.22). Using the formula, because of the large number of geographical areas that the Lenovo’s global specialization index was pegged at G = company has gained access. In addition, Huawei could also 346.22. This shows that although Lenovo is trying to gear its achieve greater equity through its expansion and increased regionalization or internationalization considering its sales. In enabling the company to expand, Huawei also uses regional sales computed by Asmussen’s model, the firm is its own FSAs. In Huawei’s case, there are certain FSAs that still lacking a lot to be “internationalized” compared to Hua- facilitated the growth of the company, particularly (a) market- wei and Haier. Its activity volume and geographic locations seeking growth as a response to telecommunication needs, (b) are not heterogeneous enough compared to Huawei’s. It can new technologies and management, (c) minimal domestic be implied that Lenovo is on the right path to achieve its competition, (d) sideward crawl strategy, (e) market strate- internationalization but still has a long way to do so. gies, and (f) joint ventures. Huawei’s market-seeking growth began alongside the need for telecommunications and Haier. Results of the computations of Asmussen’s model increased avenues to establish networks and communica- show that Haier yielded a G value exceeding 1, which implies tions. Huawei’s new technologies range from ultra-cheap over-internationalization. So, a company is heavily focused mobile phones to regularly priced communications devices on expansion at a global and relatively faster scale. It limits that are all user-friendly, affordable, and feature intensive. regional and local operations, which may ultimately pose Compared to other leading brands of mobile phones, Huawei threats to the business when internationalization strategies could innovate cellular phones with almost the same features fail. The research can summarize it that Haier is over-inter- as that of more expensive phones. Huawei’s global expansion nationalizing with very limited focus on local and regional and internationalization strategy, meanwhile, focuses on expansion. In Table 5 of the summary of weighted mean, expanding in various geographical zones which are key elec- sum of squares, and variance, Haier possesses the high tronics areas, such as in Bangalore, Stockholm, and Silicon weighted variance (T = 600.39) and its G is 618.58 using the Valley. Huawei can create new technologies alongside other formula. The result of abovementioned Asmussen’s model leading technology innovators at a low cost. Their expansion also shows that the firm has a very strong internationaliza- is facilitated by a unique market strategy that targets less tion strategy. Despite these, the firm is not “international- developed and developing countries rather than in developed ized” yet. It’s because of considerations of its actual activity countries. These FSAs have allowed Huawei to establish volume and geographic locations. Its activity volume, while itself as a household name for mobile phone products in many continuously trying to be heterogeneous, shows to be lacking countries around the world. in terms of more internationally driven measures. 12 SAGE Open Figure 3. Huawei’s FSA-CSA matrix. Note. FSA-CSA matrix shoes Huawei getting advantages from Figure 4. Lenovo’s FSA-CSA matrix. governmental bodies. FSA = firm-specific advantage; CSA = country- Note. FSA-CSA matrix shows Lenovo’s global competitiveness is specific advantage. challenged by its limited firm strategy for growth that is only focused on strengthening. FSA = firm-specific advantage; CSA = country-specific advantage. In using (Figure 3) Porter’s diamond model in assessing the capability of Huawei, it could be realized that they could see all pertinent factors in the company’s operations. For interests with trust as well as low prices. Going back to the instance, the firm has sufficient strategies to enable it to presented data about the demand for computers between expand globally. Through opening its doors and operations 2013 and 2017, they could realize it that the number contin- away from developing countries, Huawei could establish ues to go down. This would mean that Lenovo’s primary itself as an affordable brand a variety of consumers could products (personal computers) are being overshadowed by use. This enabled Huawei to efficiently take on its rival com- other factors such as cellular phones and decreased demand. panies and expand globally, as shown by its rapidly and con- While the government is also keen on supporting Lenovo’s tinuously increasing product range and revenues. Even today, goals of increased productivity, there seems to be no other demands for mobile phones and mechanisms for communi- related supporting industries and partnerships that Lenovo cation remain big. This ensures Huawei’s presence in the has established apart from IBM. This would provide insights coming years as a leading provider of mobile phones. into Lenovo’s limitation regarding global competitiveness Alongside this, the influence of the Chinese government in and internationalization. enabling Huawei to establish itself globally is still in effect. The factor conditions that enable Huawei to succeed include Haier. Haier is also using the same CSAs in expanding its the continuous need for technological advances and the ever- business toward becoming global electronics MNEs. A par- growing number of mobile phone consumers. ticular focus provided to Haier would be its equity expansion by its acquisition of Whirlpool. In doing so, it could establish Lenovo. Lenovo particularly focuses on equity expansion by itself as a global name for household appliances. This expan- its acquisition of IBM (International Business Machines). sion, however, reflects Haier’s internal operations more than Meanwhile, Lenovo’s FSAs revolve around consumers’ need a CSA. In terms of FSAs, Haier’s FSAs are developed from for personal computers and communicative devices. How- a series of firm-specific disadvantages that have existed ever, its business strategy has always been conservative. This since the early 1990s (Marinova et al., 2010). Haier directly implies that their goal became centered more on strengthen- addressed these disadvantages at the beginning of the 21st ing corporate business deals with IBM where computer sales century. In particular, Haier could facilitate the following relied on, rather than reaching for global expansion. changes and advantages: (a) independent innovation, (b) Regarding (Figure 4) Porter’s diamond model, Lenovo’s customer-driven market strategies, (c) preferential support, global competitiveness is challenged by its limited firm strat- (d) improved production and design capability, (e) competi- egy for growth that is only focused on strengthening ties with tiveness in the global market, (f) expertise in international- IBM. This disabled Lenovo from creating new opportunities ization, (g) customer brand equity, and (h) value-for-money for expansion. Although partnerships with IBM would bring goods. These FSAs showcase Haier’s integrative model of about positive changes in improving the company’s name, internationalization that is centered on holistic growth and this would also serve as a limitation for bringing out devel- customer satisfaction. These FSAs have enabled Haier to oping products that spark consumer and customer needs or expand its growth globally (Figure 5). Rashidin et al. 13 innovation, architectural innovation, and grafting innovation (He & Fallon, 2013). The company also facilitates partnerships with external researches through the Huawei Innovation Research Program, a collaborative endeavor to fund leading universities, research institutes, or individuals to create world- class solutions in technology. This endeavor promotes Huawei in two ways, as a customer-oriented company and as an innova- tive company. This market-seeking strategy is only one of Huawei’s many unique mechanisms in enabling rapid company growth. Another market-seeking mechanism of Huawei is its mar- ket orientation. Previously, it was discussed that Huawei Technologies opted to move from the “tradition” of expand- ing businesses to developed nations. According to Bartlett and Ghoshal (2000) and Rugman, A. M. (2012), this market- Figure 5. Haier’s FSA-CSA matrix. seeking behavior toward providing low-cost services for Note. Matrix centered on holistic growth and customer satisfaction. These FSAs have enabled Haier to expand its growth globally but have limited consumers has already been a long-standing strategy of com- target market. FSA = firm-specific advantage; CSA = country-specific panies intending to go global. In addition, motives for inter- advantage. nationalization are usually motivated by creating innovative products that may be perceived as “fitting” the global con- Through its strategies for expansion, it could acquire many sumer market (Vernon, 1966). The market-seeking behavior companies such as Whirlpool to facilitate larger operations of Huawei toward the low-cost market is a strategy utilized and drive increased sales. They made this opportunity possi- by the company as providing low-cost services would entail ble through the company’s initial goal of expanding its busi- the expansion of its target markets and consumers. The foun- ness and beating out other home appliance companies with dation of Huawei’s global presence could be accounted by its the consumer-centered approach. Because of these, many FSA called the “sideward crawl strategy” which, as men- consumers choose Haier products as their primary choice for tioned, focused on entering developing countries (or coun- home appliances. However, a particular concern that may be tries which are as far away as possible from current raised about Haier would be the demand conditions of home internationalization settings), and expanding businesses in appliances. Compared with cellular phones, there is definitely there. This strategy is comparatively different from what less demand for home appliances. In addition, there are fewer other Chinese companies would do, particularly from estab- target markets for such types of products. This disables Haier lishing operations in one country and moving on to the next to fully become a globalized company because the product (Lazonick & Li, 2012). Different marketing strategies are range is specifically targeted to a decreased number of popu- utilized by foreign investors in entering particular markets, lations in comparison with a mobile phone and computer such as joint ventures or mergers and acquisitions (Buckley companies such as Huawei and Lenovo. The three charts pre- & Casson, 2009; Driscoll, 1995), but with Huawei, all avail- sented a summary of Huawei’s, Lenovo’s, and Haier’s capa- able market entry strategies were utilized in order to deter- bilities for internationalization and global competitiveness. In mine the best-fitting strategy to succeed in the selected the data, the research output noticed that only Huawei could market. The market-seeking behavior of Huawei is also yield all strong points in its country-specific and firm-specific motivated by domestic factors in China. With China’s advantages; meanwhile, Lenovo and Haier faced weaknesses endeavor to formulate a centrally planned economy, the state in some areas of their CSAs and FSAs. is akin to support businesses that aim for international expan- sion. A country-significant advantage for Huawei was when China entered the WTO, because this allowed Huawei as a Discussion MNE, to be backed by the administrative policies of the The results of the analysis and discussions present the rea- supranational organization and be protected from any state sons behind such results, the company dispositions that sup- intervention from member host countries. The WTO mem- port these findings, further issues that may be associated bership also benefits China as a state as the partnership fos- with the findings, and the implications of such results in ters more trade partnerships for China. For instance, in 2005 these companies’ attempt to be truly globalized. alone, China’s exports amounted to US$750 billion. The researchers expect this to grow as more Chinese companies attempt to go global. They also found the domestic environ- Huawei ment to be Huawei’s advantage in enabling itself to enter the Research could link the success of Huawei to its many FSAs global market. Despite the success of Huawei in the Chinese that are heavily focused on market-driven and service-inclusive market, the company continues to foster innovation that 14 SAGE Open would reach the global scale (Pohle & Chapman, 2006). This ways, such movement is strategic because it allowed Lenovo implied that Huawei’s long-term vision has always been to to establish itself as a quality provider of computers and elec- expand beyond China, and to create a world of “connectivity tronics with the strong backing of IBM. However, market- in a fully connected, intelligent world.” However, regional wise, the strategy may be not considered as the best decisions protectionism, limited access to capital, and limits in intel- because the company’s competitors have been establishing lectual property rights are a few of the problems that Huawei means to expand its consumer range and generate new prod- encountered in the Chinese market (H. R. Zhang, 2016). ucts for specific markets. Lenovo’s business strategy is limit- Huawei’s success in internationalization is evident in its ing its market-seeking mechanism that, historically, is proven track record. In 2011, it reported total sales of US$32 billion, to be an effective tool in internationalizing. For instance, and it could patent 23,522 innovations and inventions (He & Lenovo’s partnership with IBM was also strengthened in its Fallon, 2013). Given this, the success of Huawei in establish- acquisition of the former IBM PC Division and rights to the ing itself as a truly global company is without doubt. ThinkPad, both of which ensured Lenovo’s access to global However, it would still be pertinent to explain some relevant consumers and the company’s bargaining power (He & findings generated from this research. Specifically, while Fallon, 2013). However, no strong follow-up marketing strat- Huawei was confirmed as a global company operating in egies were garnered after these acquisitions, and Lenovo con- numerous countries and enabling numerous activities, the tinues to work behind the “prestige” of IBM. In 2013, the Asmussen, Pedersen, and Petersen model utilized for testing company ranked as the fourth leading PC provider in the its globalization level yielded a global specialization rating world (He & Fallon, 2013). Lenovo uses a “horse race strat- G = 677. This result, alongside the result of Asmussen’s egy” in marketing wherein the best “horse” or product is (2006) model, implies that Huawei is a globalized MNE. placed in the market to compete with other opponents (Ahrens Furthermore, this suggests that Huawei’s activity volume is & Zhou, 2013). This strategy helped Lenovo to find opera- adaptive even to its expansive areas of operation. This result tions in developing economies, with emphasis on a manufac- is validated by examining Huawei’s global activities which turing base and a distribution channel. While the company heavily include research and development, market opera- offers other products apart from PCs, it composes its main tions, and market-seeking innovations. Particularly, Huawei product line of computers. Data between 2013 and 2017 runs its operations in eight major zones that would comprise would show that there is little to no increase in the demand for all 170 countries where it operates, along with five research computers over the last 5 years. With the continued advance- and development areas globally. This would show consis- ment of technologies in communications, such as the cellular tency in the findings generated from the Asmussen (2006) phone enterprise, it now makes functions that were once and Asmussen et al. (2007) models. However, comparing the available only in computers available to mobile devices. This relatively large global specialization rating of Huawei with phenomenon affects the sale of personal computers as con- its upward performance trend over the past 5 years, it could sumers would naturally purchase mobile phones which are also be assumed that the increase in Huawei’s performance cheaper and handier than personal computers. The increase in are not solely accounted by its activity volume, but rather by the demand for cellular phones, as shown by Huawei’s sales factors that are not part of its internal performance (e.g. cus- data from 2013 to 2017, is expected to negatively affect the tomer preference for Huawei) and quantitatively proven to PC market, in such a way that a downward trend is expected be a truly globalized MNE. regarding the sale of personal computers in the coming years. Based on the analysis of the Asmussen (2006) and Asmussen et al. (2007) models, Lenovo is yet to establish itself as a Lenovo global company. Similar to Huawei, Lenovo has been benefiting from China’s partnership with the WTO and its support to expand Chinese Haier MNEs in the global market. In particular, the Chinese govern- ment urged institutions and consumers to purchase high-tech- Haier’s FSAs were developed to respond to its firm-specific nology products reflective of Lenovo’s brand, alongside disadvantages during the 1990s (Marinova et al., 2010). In intangible benefits that were provided to Lenovo as tariffs and particular, Haier faced issues on lack of production and tech- quotas on imports, distribution and ownership restrictions, nological knowledge, limited knowledge on foreign markets, and trade restrictions that were upheld among foreign compa- lack of internationally recognized brands, and inconsistent nies intending to enter China’s domestic market (Ahrens & global brand image (Marinova et al., 2010). A notable FSA of Zhou, 2013). However, as the findings would suggest, Lenovo Haier is its customer-driven marketing strategies that are faces several limitations that disable the company from fully focused on providing consumers with the best experience becoming globalized. First, Lenovo’s marketing strategy was with Haier products. Haier prides itself as a company whose found to be more conservative than its competitors. Marinova main success driver is its integration with customer needs. et al. (2010) found that Lenovo’s business strategy provided a The innovative approach of Haier also allowed the company heavy emphasis on strengthening ties with IBM. In some to develop improved production and design capability. Rashidin et al. 15 Another advantage of Haier is the establishment of its MNEs from the United States have already made a name for competitiveness in the global market. It also bases the com- themselves and are continuously driving revenues or positive petitiveness of Haier in the global market on its personal outcomes for the U.S. economy. While China has Lenovo, experience with its firm-specific disadvantages in the 1990s. Haier, and Huawei as its frontline firms in the international To increase the company’s reach and promote competitive- electronics market, the United States has Intel, Google, ness, Haier used multiple business strategies, including the NetApp, and Microsoft (Rogers, 2011). These American adoption of a total quality management (TQM) framework in companies, especially Google, could be considered “house- operation, building better plants and production facilities, hold names” in electronics and technology as almost any building its domestic branding in China, introducing new gadget or consumer electronics enables the use of such. For management practices, innovative product development in example, all Android cellular phones have built-in Google both home and the host market, and strong market presence applications such as Google Drive or Google Play. through greenfield investment (Marinova et al., 2010). Meanwhile, Microsoft products such as Microsoft Office Notable among these strategies is the innovation of new prod- could be easily downloaded online. This software is offered ucts both in the home and in the host country. This would separately from consumer electronics from the same brand, mean that Haier’s global operations are heterogeneous, a such as personal computers from Microsoft or tablets from quality which most global multinational corporations pos- Google. sess. This orientation would also allow Haier to continue with In comparing and contrasting Chinese and U.S. MNEs, it its customer-oriented approach. The target market of Haier is pertinent to first establish commonalities between the two per product is relatively limited compared to the previously enterprises. First, both Chinese and American MNEs serve presented industries such as Huawei and Lenovo. While as major players for their state’s economic capacity. Although Haier has a wider array of home appliances, its production is China recently experienced a backlash brought about by an not centralized on a single product, such as mobile phones for extended period of overinvestment, projections for future Huawei or personal computers for Lenovo. However, as the production activities show that Chinese innovations brought analysis from the Asmussen (2006) and Asmussen et al. about by the continued improvement and emergence of elec- (2007) models would suggest, Haier could still not be consid- tronics as well as technological MNEs would improve the ered as a global company. The reason for this could be the country’s GDP (Kindergan, 2016). Similarly, the U.S. econ- relatively lower geographic reach of Haier despite acquiring omy saw significant positive economic implications of U.S. Whirlpool. Table 6 is showing the assessment of FSAs and parent companies, accounting for large shares and increased CSAs of Haier, lenovo and Huawei, and their performance. It GDP growth (Slaughter, 2009). Second, both Chinese and highlights that during few years back, Haier is on its way to American MNEs are usually internationally concentrated in establishing itself as a global MNE (see Table 6). As pre- high-income countries. Among Chinese electronics MNEs, sented previously, the findings presented regarding Huawei, the decision to facilitate operations in high-income nations is Lenovo, and Haier could also be linked with Porter’s dia- brought about because of limiting business operations within mond model. The findings suggest that only Huawei can sat- locations or areas with high exchange rates. For U.S. elec- isfy all segments of the model because of its strategic sideward tronics MNEs, foreign affiliation with high-income countries crawl strategy, expansive use of CSAs, increased markets was found to produce more economic benefits. In 2014, through its low-cost marketing strategy, and innovative high-income countries accounted to 75.9% of U.S. MNEs’ research or development endeavors. Meanwhile, Lenovo and foreign affiliates (BEA News, 2016). These data would Haier are both faced with issues on demand conditions, which imply that MNEs are effective drivers of economic growth, could not be easily controlled. In addition, Lenovo is also especially when integrated appropriately with other macro- challenged by the need to create better firm strategies that level political and economic activities. would allow customer integration into its marketing endeav- Meanwhile, several operational practices differentiate ors. Given these, results would suggest that for Lenovo and Chinese MNEs from U.S. MNEs. For instance, while Chinese Haier to fully establish themselves as global companies, their MNEs continue their effort to expand internationally through activity volume should significantly focus on increasing a strict selection process of potential host countries, U.S. product demand for their products. Both Haier and Lenovo MNEs’ global operations are heavily centralized within should also implement better research strategies to retain or America (Slaughter, 2009). Compared with foreign affili- improve their position in the global market. ates, U.S. MNEs ensure more concentration within its parent countries to alleviate the idea that the industry would “aban- don” its local roots. This phenomenon is evident through the Comparing Chinese and American United States’ continued economic growth and transforma- MNEs tion. Another difference between Chinese MNEs and U.S. Today, Chinese MNEs are a continuously emerging industry MNEs is the latter’s focus on many aspects of growth and that is continuously faced with challenges and limitations in development. Chinese MNEs are generally concerned about fully establishing itself in the global arena. Meanwhile, many maximizing profits and improving the macro-economy, but 16 SAGE Open Table 6. Summary of the FSAs and CSAs. Country-specific advantage MNE (China) Firm-specific advantage FSA operational implications Key issues/disadvantages Huawei State partnership with Market-seeking growth Ability to enter developing Domestic situation in World Trade Organization as a response to markets home base (China) that “Centrally-planned economy” telecommunication needs Low-cost strategy expands imposes limits: Urging the purchase of high- New technologies and market reach Regional protectionism technology products among management Operational areas in over Limited access to capital domestic institutions and Minimal domestic competition 170 countries with five Limited intellectual local consumers Sideward crawl strategy research centers property rights Stricter regulations for Market strategies Obtained Marconi development foreign investors to Joint ventures Thousands of patented decrease competition, inventions including Lenovo Strong business ties with IBM Product quality established Conservative business Import tariffs and quotas Horse race strategy as a result of IBM strategies Restrictions on ownership Relatively cheaper PC partnerships Decreasing demand for and distribution solutions in the market Obtained ThinkPad rights personal computers Trade restrictions Operational in over 60 Increasing economic countries partnerships with other nations Haier Independent innovation Experience-based Limited demand for home Customer-driven market development of FSAs appliances strategies Heterogeneous operational Preferential support orientation Improved production and Operations in over 46 design capability countries Competitiveness in the global Obtained Whirpool market Customer-driven research Expertise in and development internationalization endeavors Customer brand equity Value-for-money goods Note. FSA = firm-specific advantage; CSA = country-specific advantage; MNE = multinational enterprise. not so much about employment or research and develop- for its MNEs. For instance, it usually creates no state adjust- ment. American MNEs use a more holistic treatment for their ments or negotiations for both parties (China and host coun- firms by utilizing employment, output, capital investment, try) to agree upon. Instead, Chinese MNEs choose their exports, as well as research and development levels to assess preferred locations and setups based on their preexisting the success or productivity of their operations (Slaughter, requirements. These salient differences imply varying out- 2009). For instance, recent data showed that U.S. MNEs are comes for U.S. and Chinese MNEs. dominated or led by large companies or firms which have An examination of MNE practices facilitated by American greater than 10,000 employees (BEA News, 2016), suggest- and Chinese firms imparts relevant commonalities or differ- ing that operational activities entailing employees are pro- ences in operational practices. While such common practices vided resolutions in U.S. MNEs. exist between the two economies, U.S. MNEs showcase an Another major difference of U.S. MNEs from Chinese edge and an advantage in comparison with Chinese MNEs. MNEs is in terms of specific international configurations. American multinational corporations have already estab- This would refer to the changes in policies and adaptations lished salient processes or practices to maintain their status that the United States facilitated to successfully and appropri- and immerse themselves with potential foreign partners. ately operate within specific foreign premises. Berry (2017) Meanwhile, Chinese MNEs have yet to discover a sustain- cited that U.S. MNEs utilized major frameworks in ensuring able and long-term approach in dealing with its operations. that foreign integration remains successful and appropriate, including low levels of integration, various methods of Conclusion regional expansion, limited geographic expansion, and spe- cialized global sourcing arrangements. Unlike the United China continuously attempts to boost its economy through States, China facilitates stricter and more selective practices expanding its international partnerships; the emergence of Rashidin et al. 17 multinational corporations provides promise on the future of Second, most of the Chinese electronics’ MNEs in the China and its continuously growing electronics MNEs in the study (Huawei, Lenovo, and Haier) expand their internation- global arena. The findings also revealed that the three firms alization process through cross-border mergers and acquisi- could successfully utilize their CSAs by capitalizing on tions (M&A) instrument. Last, companies from small China’s external partnerships and existing trade agreements. emerging companies can come with niche thinking to domi- This phenomenon provides opportunities for Chinese MNEs nate niche foreign markets. to shape their course by adapting best practices facilitated by While this research can provide significant information Huawei. In particular, the sideward crawl strategy has proven regarding the course and future of Chinese electronics useful in enabling the expansion of the consumer population MNEs, future studies may attempt to focus on analyzing and introducing products to larger markets. The results also Chinese MNEs that have yet to reach an expansive global implied that gaining already well-known companies such as market. Comparing the results of such a study with this Marconi for Huawei, ThinkPad for Lenovo, and Whirlpool research would facilitate an understanding of the “gap” for Haier is a good strategy to facilitate new partnerships and existing between already-globalized Chinese MNEs and touch on more conservative markets. The results of the study those who are yet to overcome the global arena. It may be determine that Chinese MNEs should adopt heterogeneous applied to use this study in determining the direction of measures in expansion by decentralizing production and Haier, Lenovo, and Huawei in terms of China’s interna- operations in various countries. This ensures more activity tional economic initiatives. Understanding such a phenom- volume and greater opportunities for developing multiple enon would also help in gaining an idea about how such innovative products at the same time. Doing so could address MNEs would plan to integrate themselves both in the multiple market needs at a relatively shorter time. Chinese domestic economy and the global market in the A particular implication of the emergence of Chinese MNEs years to come. in the electronics sector is perceived through China’s Belt and Road Initiative (BRI), an economic strategy and foreign policy Limitations of the People’s Republic that attempts to tie Eurasia, Africa, and Oceania into land as well as maritime routes (Rashidin This study has some limitations. The foremost limitation is a et al., 2019; Wade, 2018). This endeavor is beneficial for China lack of data. Second, it is based on selected Chinese enter- which foresees that the development of land-based and mari- prise internationalized processes not categorized as product time-based infrastructures would facilitate the easier develop- lines. Third, this study adopted a comparative approach and ment of economic policies, creation of more connected facilities measured the Chinese top enterprise internationalization pro- network, the strengthening of trade and investment relations, cesses with American enterprises than other nations. the enhancement of financial cooperation, and the deepening of cultural or social exchange (Wade, 2018). Research perceives Declaration of Conflicting Interests this strategy by China as the beginning of its next economic The author(s) declared no potential conflicts of interest with respect trade growth, wherein Chinese exports could be easily accessed to the research, authorship, and/or publication of this article. by the global market (Ngai, 2016). This endeavor should be pursued, and Chinese electronics MNEs will feel significant Funding contributions in globalization. The author(s) disclosed receipt of the following financial support For Huawei, the BRI would help expand its sideward for the research, authorship, and/or publication of this article: “The crawl strategy for more areas of operation. For Haier and Fundamental Research Funds for the Central Universities” in UIBE Lenovo, the facilitation of the BRI would be a good opportu- of China (CXTD10-11); Jiangxi Provincial Department of nity to expand their global capabilities to become global Education Science and Technology Project “An Empirical Study on MNEs. Therefore, as developing economies, Southeast Asia the Factors Affecting the Executive Compensation of Jiangxi GEM enterprises can gain several positive aspects in learning Listed Companies” (No. 161295). Chinese MNEs. First, following the emergence of Chinese electronics ORCID iDs MNEs, most of them have expanded to outside via direct Md. Salamun Rashidin https://orcid.org/0000-0003-1273-8494 overseas investment. Exogenous investments, either domes- Lingming-Chen https://orcid.org/0000-0002-0137-9476 tic or foreign, only temporarily increase the amount of capi- tal per capita. Inward-oriented FDI can only evoke long-term Supplemental Material economic growth if it has a positive impact on technological Supplemental material for this article is available online. development in the respective economy (Knell & Radosevic, 2000). Because of this assumption, FDI will have a full Notes impact on electronics enterprises particularly. It is necessary for Southeast Asia countries to attract FDI and make an eco- 1. We used National Bureau of Statistics, 2003–2007, for appro- nomic environment conducive to FDI. priate technological foundational reform. http://www.stats. 18 SAGE Open gov.cn/enGliSH/ClassificationsMethods/Classifications/ investment. Journal of International Business Studies, 38, (accessed 2019). 499–518. 2. 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Sullivan, D. (1994). Measuring the degree of internationalization His research field is international trade, e-commerce, world econ- of a firm. Journal of International Business Studies, 25(2), omy, and marketing management. He has published lots of research 325–342. paper in the field of international trade, marketing, and Tilley, K. J. (1995). China electronics industry forum, Shenzhen, management. China. Journal of Electronics Manufacturing, 5(3), 235–239. Tilley, K. J., & Williams, D. J. (1997). Technology and change Sara Javed is a PhD scholar in the Department of Marketing at in the Chinese electronics industry. IEEE Transactions on University of International Business and Economics (UIBE). Her Components Packaging, and Manufacturing Technology: Part research field is marketing management, trade management, e-mar- C, 20(2), 142–151. keting, and supply chain management. She has published many Tsai, J., & Rosenheck, R. A. (2013). Psychiatric comorbidity papers in the field of marketing. among adults with schizophrenia: A latent class analysis. Psychiatry Research, 210(1), 16–20. https://doi.org/10.1016/j. Lingming Chen is an associate professor and PhD scholar in the psychres.2013.05.013 Department of Economics at Hunan University of Science and Vernon, R. (1966). International investment and international trade in Technology (HNUST). Her research field is applied economics and the product cycle. Quarterly Journal of Economics, 80, 190–120. international trade. She has published many papers and hosted Wade, D. (2018). China’s “one belt, one road” initiative. many provincial projects in the field of applied economics. Parliament of Australia. https://www.aph.gov.au/About_ Parliament/Parliamentary_Departments/Parliamentary_ Wang Jian is professor in the School of International Trade and Library/pubs/BriefingBook45p/ChinasRoad Economics at University of International Business and Economics Wei, Z., & Nguyen, Q. T. K. (2017). Subsidiary strategy of emerg- (UIBE) as well as cross border e-commerce vice president at ing market multinationals: A home country institutional per- Alibaba Group, China. He is National Excellent Teacher in China. spective. International Business Review, 26(5), 1009–1021. His research area is international trade practices and e-commerce. Wernerfelt, B. (1984). A resource-based view of the firm. Strategic He has already published dozens of books and articles in the top Management Journal, 5(2), 171–180. journals in China. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png SAGE Open SAGE

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Abstract

Multinational enterprises (MNEs) are key drivers of globalization. The study investigated the performance of leading Chinese electronics MNEs, Huawei, Lenovo, and Haier, and made a comparison between Chinese electronics MNEs and American electronics MNEs along with their specifications in terms of globalization by using Asmussen’s model, Petersen’s model, Rugman’s firm-specific and country-specific advantage (FSA-CSA) matrix, and the Porter’s diamond model. Findings revealed that only Huawei is the truly global company at present; nevertheless, Lenovo and Haier are both on the right track, reaching the same status as Huawei. These firms can successfully utilize their country-specific advantages by capitalizing on China’s external partnerships and existing trade agreements. Chinese projects seem to be able to provide Chinese MNEs with the ability to maximize their opportunity to seek growth externally and enter the global market. An examination of MNE practices facilitated by American and Chinese firms imparts relevant commonalities but differences in operational practices. Small enterprises can follow the process and strategy, while policymakers will receive a suggestion to implicate an industrial- friendly policy. Keywords multinational enterprises, competitiveness, internationalization, FSA/CSA, diamond model, China (Zhu, 2012) but eventually emerged as the second largest Introduction economy, at present (Qu et al., 2018; Rashidin et al., 2019). Through globalization, multinational enterprises (MNEs) China’s agricultural, state, and non-state reforms from 1978 have now become one of the key players in the global politi- to 2007 comprised pro-people incentive systems, more effi- cal economy (Irogbe, 2013; Khan, 2018). National interest or cient resource allocation, and the expansion of non-state sec- state-bound challenges are overwhelmed by MNEs as they tors (Zhu, 2012). produce and manufacture goods solely for the interest of In particular, China created both direct and indirect poli- profit. This characteristic makes such enterprises bound by cies, regulations that increased the market demand and several advantages and limitations that could be felt within domestic productivity for electronics (Fujii & Managi, their overall operational activities; nevertheless, the contin- 2019). While the country continues to develop policies and ued rise and success of MNEs proves that the current market state-own initiatives from the last 30 years to now, China setup provides income-generating benefits. The emergence raised as the third largest electronics producer in the world of MNEs facilitated by globalization provides an avenue for after the United States and Japan (Huang & Qiao, 2005). At “internationalization,” or the process by which it introduces products in the global market (see Online Appendix 1.2). University of International Business and Economics (UIBE), Beijing, China MNEs may begin their operations anywhere around the Hunan University of Science and Technology, Xiangtan, China world to display company successes, but the United States and Japan are two powerhouse economies that have estab- Corresponding Author: lished a significant presence in the global market as the home Md. Salamun Rashidin, School of International Trade and Economics, base of many MNEs, many of which are among the Fortune University of International Business and Economics (UIBE), No. 10, Huixin Global 500 (Cheung, 2018). Among these countries is China Dongjie, Chaoyang District, Beijing 100029, China. which, in 1978, was one of the poorest nations in the world Email: salamun.du@outlook.com Creative Commons CC BY: This article is distributed under the terms of the Creative Commons Attribution 4.0 License (https://creativecommons.org/licenses/by/4.0/) which permits any use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/open-access-at-sage). 2 SAGE Open the beginning of 1980, when China’s economic reforms when China became a member of the World Trade started, only 3,900 electronics enterprises were recorded to Organization (WTO) and opened its market further with be in operation, earning a total annual output of 11-billion “Chinese open-door policy” (Chow, 2011). China’s acces- RMB; however, by 2003, the number of enterprises almost sion into the WTO presents an enhanced competitive pres- tripled to 10,600, and China’s total annual output increased sure and also been the key factors influencing the to 1.7-trillion RMB (National Bureau of Statistics, 2003– internationalization process of Chinese enterprises (Hong 1 2 2007 ; Huang & Qiao, 2005). In 2003, China’s exports had Kong Monetary Authority, 2002). This market opening may already amounted to 142-billion RMB (Huang & Qiao, lead to the increasing competition among domestic firms, the 2005), and during this time, leaders of China’s electronics sharpening of their comparative advantage, and the increase industry have already established trade partnerships with the of the country’s power in the international markets. This United States and Japan to further boost their MNEs (Tilley, change is the great attraction of inward-oriented FDI (Shatz 1995). These developments have led to the foundation of & Venables, 2000). China’s successful and fast-paced eco- many large firms and MNEs that continue to facilitate the nomic rehabilitation would easily facilitate its economy as a growth of China’s economy (Zou et al., 2018). Developments strong competitor in the global market, especially in the within China’s MNEs are part of its “centrally planned econ- industry of technology and electronics; however, newer stud- omy” that aims to place the country as a leading economic ies on economic growth have postulated that the largest power within the next few years (Lukas et al., 2001). global firms at present only garnered success through their According to Buckley et al. (2007) and Hong et al. (2018), local or domestic operation rather than through the global China’s MNEs rely heavily on foreign direct investments market (He et al., 2019). This would lead to questions regard- (FDIs) that are not in line with its domestic economic strate- ing the efficiency and value of globalization in improving gies. In China, the strategy of attracting inward-oriented FDI economic performance and the track of China’s MNEs, is also utilized in domestic policies and local economic prac- which are heavily reliant on internationalization. However, tices. As a response to this, several changes within China’s international competitiveness of a firm is a broad and com- technological industry have been proposed and promoted. plex topic. It is difficult to identify internationalization pro- For example, a study on the electronics industry in Mainland cesses and competitiveness from different firms. So, to come China found that foreign technology transfer that is facili- up with a clear analysis and understanding, the researcher tated through local innovations could significantly improve has to limit it to one type of firm. The present study has cho- technological outputs for foreign integration (Tilley & sen Chinese electronics industry as the main point of this Williams, 1997). Tilley and Williams (1997) cited that research because of its presently garnering attention from the enabling Chinese electronics MNEs to achieve improve- global market and its emergence that reflects the globaliza- ments in such outputs would enable the nation to rival Japan tion (Yuan & Pangarkar, 2015). and South Korea as major forces in the global technology The researcher found that there were only three Chinese industry. electronics MNEs included in the 2017–2018 United Nations Studies have shown that the role of FDI on Chinese MNEs Conference on Trade and Development (UNCTAD), a rank- remains to be understudied. This would imply that such an ing of the top 100 nonfinancial MNEs from transition and endeavor may pose some limitations or challenges on the developing economies. These companies are Lenovo Group, expansion of MNEs in the global arena, including domestic Huawei Technologies, and Haier Group Corporation. The competition, capital draining, and problematic labor mar- result corresponds to the outcome of existing studies; there- kets. Records of FDIs into China from January to November fore, leading to the questions on the validity of Chinese elec- 2018 showed that there was a slight decline (1.3%) in total tronics MNEs’ competitiveness, particularly in its actual FDI rates. However, an upward trend in FDI integration performance and success rate in comparison with other states within the Chinese economy is still expected until early 2019 and emergent electronics MNEs. (“China Foreign Direct Investment”). An examination of data between 2000 and 2018 would also show an increasing Objective trend in FDI integration over the years. These data support the idea that China can garner the numbers of foreign inves- The present study focused on several salient points: tors, but it still needs a more strategic use of such resource to facilitate better outcomes for the globalization of MNEs. 1. To assess the role of globalization in the emergence In particular, Chinese-owned MNEs place importance on and success of Chinese electronics MNEs; strategic ownerships and nonoptimal locations, but domestic 2. To assess the performance of Huawei Technologies, companies would emphasize “excessive internalization” and Lenovo Group, and Haier Group Corporation in the stricter measures for foreign-owned companies to put up global market; businesses in China (Buckley et al., 2007). The emergence of 3. To make conceptualized a comparison between Chinese MNEs has been started since the Chinese economic Chinese electronics MNEs with other well-established reform in the 1980s, and it reached a turning point in 2001 electronics MNEs such as American MNEs; Rashidin et al. 3 4. To look into future trends and expectations from unidimensional measure. The overview of Sullivan’s (1994) Chinese electronics MNEs. internationalization indices presented a list of 16 studies relying solely on the ratio of foreign sales to total sales (Rashidin et al., 2019; Reeb, 2006; Reeb et al., 1998; Singh Research Questions et al., 2003). T. Nguyen and Cosset (1995) investigated the The present study strives to find answers to the following properties and interrelatedness of single internationalization questions: measures. Chen et al. (2010) used the ratio of foreign pretax income. 1. Is Chinese MNEs growing faster because of heavy Meanwhile, a few kinds of literature present multidimen- reliance on internationalization? sional or composite indices. For instance, Sullivan (1994) 2. How Chinese MNEs are becoming eye catchers in chose five variables to measure internationalization: (a) the the global market? foreign sales as a percentage of total sales, (b) the overseas 3. Are Chinese MNEs getting success progressively in subsidiaries as a percentage of total subsidiaries, (c) foreign the electronic sector than other MNEs? assets as a percentage of total assets, (d) psychic dispersion of international operations, and (e) top manager’s interna- tional experience. However, Fisch and Oesterle (2003) Research Gap appealed that the most common way of measuring the degree The findings from recent studies formulate a gap in previ- of globalization and internationalization of the firms is to ously known information about the success and performance simply calculate the ratio of foreign sales to total sales, such of Chinese electronics MNEs. Wei and Nguyen (2017) as in the study of Rugman and Verbeke (2004). As the explained this phenomenon by stating that prior researches researcher believes that a unidimensional measure does not on Chinese MNEs have only focused on a few case studies suffice, in this article, we would make an endeavor to high- that limit opportunities to explain the role and impact of such light the importance and utilization of a multidimensional MNEs in internationalization. Given this, the researcher measure (Kin & Gray, 2017). Therefore, the case examples could realize it that a generalizable assessment of Chinese in this article are based on UNCTAD’s source. In addition, electronics MNEs’ international competitiveness is not the methods used in this study is consistent with multidimen- widely studied. The emergence of this research problem sional or composite indices developed by Asmussen (2006) entices the researcher to provide an empirically and theoreti- and Asmussen et al. (2007), to measure and explain hetero- cally based assessment of the global competitiveness of geneous aspects of operations. Through the review, we can Chinese electronics MNEs. Previous studies only focus on conclude that the most utilized method in determining glo- Chinese merger and acquisition which is a disproportion in balization level is F/T and R/T, the well-established regional this globalization era (Branch et al., 2008; J. Zhang et al., theory by Rugman and Verbeke (2004) . The studies that 2011). So, we offered to extend the research area to include utilized F/T-R/T model include regional multinationals and merger and acquisition, organization strategy with state-own the Korean cosmetics industry but not globally (Oh & concern included. Policymakers, managers, and the aca- Rugman, 2006); meanwhile, Oh (2009) could confirm that demic environment will receive vast knowledge on future retail and merchandizing firms are predominately regional. development progress. Small enterprises/organizations can At the country level, Collison and Rugman (2007) demon- follow the process and strategy, while policymakers will get strated that the largest enterprises in Europe and Asia oper- a suggestion to implicate industrial-friendly policy. ate, on average, at a regional level. Rugman and Verbeke’s (2004) measurement is simple; business researchers would only need to calculate the ratio of foreign (F) to total (T) Literature Review sales (F/T) and the intra-regional (R) to total (T) sales (R/T) The existing literature displays that there are several ways to of the firms, then divide them into four groups, which are index a firm’s degree of internationalization. Despite the home region–oriented firms, bi-regional firms, host region– variety of indices, most of them are normally composed of oriented firms, and global firms. Rugman and Verbeke’s one or more of these dimensions: (a) firm’s distribution of (2004) found that approximately 72% of MNEs’ sales took employees, assets, activities, and so on between home coun- place in their home region of the triad (North America, the try and foreign countries; (b) psychological management, European Union, and Asia) and were oriented within their that is, international orientation of employees; and (c) firm’s home country, whereas very few MNEs had global disper- sales across countries or regions. According to Asmussen sion or expansion. These data show a lack of globalization et al. (2007), they indicated that there are two different mea- levels for some MNEs, since they mostly operate intra- sures to index firm’s degree of internationalization: unidi- regionally, rather than inter-regionally. However, Fisch and mensional measure (or dichotomous measure) and Oesterle (2003) suggested that the measurement of global- multidimensional (or composite) measure. The literature ization should be from a global economic view rather than review indicated that there are many indices based on the from a regional perspective. Fisch and Oesterle (2003) and 4 SAGE Open Asmussen (2006) argued that the theory of Rugman and analyze the international competitiveness of the firms. Porter Verbeke (2004) and Kin and Gray (2017) is only based on a presented that certain factors in the home country can pre- micro-firm level as regional sales ratio would fail to show pare the firm to work more or less efficient in the interna- the effect of home orientation. Thus, Asmussen (2006) pro- tional market and can provide the firm competitive posed the concept that the sales distribution of a global firm advantages over its competitors. The diamond model can must match the distribution of global gross domestic product analyze why some states are more competitive and why (GDP). Apart from this, Asmussen et al. (2007) also pro- some industries in those states are more competitive than posed a continuation of the study by delving on the global others (Smit, 2010). The model comprises four national specialization indices to determine a firm’s globalization determinants of competitiveness: demand conditions, factor level. conditions, related and supporting industries, and company’s To qualitatively analyze the international competitiveness strategy, structure, and rivalry (Bakan & Dogan, 2012). of a firm, it is necessary to understand the internal factors Change and government factors are also presented in the dia- and external factors of MNEs. According to the existing lit- mond model. These two factors affect competitiveness as a erature of MNEs, firm-specific advantages and country- support of the four main factors (Deniz et al., 2013). Beleska- specific advantages (FSAs-CSAs) are important factors in Spasova et al. (2016) adapted the model by adding these two determining the performance of MNEs (Dunning, 1981; factors in the capacity of a company to gain competitive Ramamurti & Hillemann, 2018). Several pieces of literature advantage and also claimed that the diamond model cannot also suggest that the unique and heterogeneous capabilities be only analyzed at a national level, but must present a local, of a firm and home country can generate competitive advan- regional, national, foreign, and global analysis. In the past tages and lead to sustainable returns (Rugman et al., 2014; few years, there has been an explosion of research on the Rugman & Verbeke, 2004). FSAs may include knowledge of internationalization–performance relationship. The begin- technology, efficient production processes, managerial skills, nings of a theoretical framework are emerging, but there is and skilled labor (Madhani, 2010; Wernerfelt, 1984). still broad disagreement of definition and method of a firm’s Rugman and Verbeke (2004) suggested that in more general internationalization. This article present aims to show that terms, they should view FSAs as knowledge bundles, which multidimensional methods can provide a strong underpin- can be the intangible assets, learning capabilities, and even ning for analyzing a firm’s international competitiveness. privileged relationships with outside actors. They use intan- gible assets as proxies for FSAs in many empirical types of Method research (Rugman & Oh, 2011; Morck & Yeung, 1991; Q. T. K. Nguyen, 2016; Rugman, 1981). Meanwhile, CSAs may This section, therefore, would focus on measuring the global include natural resources, cheap labor, and economies of competitiveness of Chinese electronics MNEs’ key players scale that many developed countries do not offer. From a (He et al., 2017; M. W. Peng, 2012)—Huawei, Lenovo, and macro-economic perspective, Chinese outward-oriented FDI Haier—through the use of three models of assessment has been attributed to public policies and support by the (Arregle et al., 2018; Fu et al., 2018; Li et al., 2018). Chinese government in encouraging domestic firms to go abroad (Buckley et al., 2007; Tsai & Rosenheck, 2013). At Case Study micro level perspective, for internalization strategy i-e merger & acquisition location and management structure of According to Fortune 100 global brand ranking and WPP’s foreign subsidiaries are home country institutional incen- BrandZ rankings (see Online Appendix 1 and 1.1) list, tives for Chinese MNEs’ (Fuad & Gaur, 2019; J. Zhang et al., Huawei, Lenovo, and Haier got position in those ranking 2011). According to Buckley et al. (2007), Chinese govern- lists, displaying growing impact in Global Brand recogni- ment’s support and the role of state ownership, which is a tion. Not only in the higher position in the ranking but also type of Chinese CSAs, confer Chinese firms’ resource advan- they are investing higher amount of R&D, customer satisfac- tages in their outward-oriented FDI, thus compensate for tion, product development, and line products (Du, 2003; Guo their lack of intangible knowledge-based FSAs. Some argue et al., 2019; Liu & Buck, 2009; H. Peng, 2014). Due to these that internationalization may enhance the Chinese firm’s reasons we select these top three Chinese brands. capabilities to take risks abroad. Government’s support and artificially cheap credit also have increased the Chinese Research Method firm’s purchasing power in international M&A (Gammeltoft et al., 2010; Luo et al., 2010). Despite the large support from The emergence of Chinese multinational companies in the the government, Rugman et al. (2014) found that less than global market today is a research focus of many business half of the announced foreign acquisitions of Chinese firms scientists and economists. In the study of Fisch and Oesterle have been successfully completed. (2003), there are many methods for measuring the degree of Aside from the FSA-CSA model, the researcher imple- globalization for a particular company. For instance, Chen mented Porter’s (1990) diamond model as another method to et al. (2010) used the ratio of foreign pretax income to total Rashidin et al. 5 Case 1. Huawei. . Established in 1987 by Ren Zhengfei Annual sales revenue (world’s largest ICT) US$92.55 billion, 2017 December Quality similarity Cisco and Fujitsu R&D 200 production workers but over 500 workers in R&D-related field; invested 10% revenue in R&D, total 394,000-million RMB. In 2017, 80,000 staff were involved in R&D, comprising 45% of the total workforce. Established 22 overseas research institutes including 10 in Europe, 9 in North America, 2 in Asia Pacific, and 1 in South Africa Revenue US$105.191 billion (2018) New era Merger and acquisition with Hutchison Whampoa, 3Com, Vodafone, optus, and MGTC Development strategy R&D and low-cost production Patent (2016) (last data) Accumulated 62,519 patent licenses, cumulative application for 57,632 Chinese patents and 39,613 foreign patents Business categories Products and services, operator carrier networks, enterprise solutions, and consumer Internationalization Started in 1990 in Africa, the Middle East, Latin America, North America, and Europe. 2004, success in domestic sales. Later, one-third revenue came from international markets. Now, deploying its products and services in over 140 countries Note. ICT = information and communications technology. See: Huawei, Wiki (accessed April 2019: https://en.wikipedia.org/wiki/Huawei) and Huawei official annual report (https://www.huawei.com/us/press- events/annual-report). Case 2. Lenovo. . Established in 1984; former name “Legend” but in 1990 expanded as a tech company Strategy First, several segments such as mobile internet, online education, real estate, and so on. In 2003, they made a loss. The management team accelerated the internationalization strategy and strengthened its focus on the PC business since the end of 2003. Then they came on the frontline. Then became a strong financial foundation for accomplishing the M&A deal with IBM. Lenovo and IBM co-branding started in 2004. In 2005, Lenovo paid US$1.25 billion and took over approximately US$500 millions of IBM’s balance sheet liabilities for the acquisition of the PC division Ownership 19% IBA, 46% PRC, and public and private investors owned the rest. But later IBM’s 13.2% share sold Revenue (2018) US$45.35 billion New era In 2005, Lenovo acquired IBM Personal Computing Division for US$17.5 billion R&D strategy IBM gave support to Lenevo former 10,000 skilled employees. Moreover, Lenevo sent its engineer to do further research on 1,500 patents and to acquire knowledge from IBM. Development strategy Acquisition strategy helps to speed-up Lenovo to go international and eventually became to penetrate the third largest market share in the global computer industry Patent (2016) (last data) 2,300 Categories ThinkPad (laptops) and Think Center (desktops) and use the IBM on “Think-” products and Others ICT Product. Mobile and others in the top class Internationalization Now world’s second largest PC vendor. Established 9 research centers in China, Japan, and the United States; and 7 manufacturing centers, including 5 in China, 1 in Mexico, and 1 in India Note. ICT = information and communication technology. See Lenovo, Wiki (accessed March 2019: https://en.wikipedia.org/wiki/Lenovo) and Official Portal (https://www.lenovo.com/us/en/about). pretax income to calculate global competitiveness; mean- Studies on other means to measure globalization and while, Sullivan (1994) used various variables to measure, internationalization found that Fisch and Oesterle’s (2003) which include foreign sales as a percentage of total sales, over- claim is true. The most utilized method in determining glo- seas subsidiaries as a percentage of total subsidiaries, foreign balization level is F/T and R/T, the regional theory by assets as a percentage of total assets, psychic dispersion of Rugman and Verbeke (2004). Utilized in many types of international operations, and top managers’ international research for business studies, the reliability of the F/T-R/T experience. However, Fisch and Oesterle (2003) appealed model has been established. For example, Oh and Rugman that the most common way of measuring the degree of glo- (2006), through such method, confirmed that the cosmetic balization and internationalization of the firms is to simply industry operates regionally but not globally. Meanwhile, Oh calculate the ratio of foreign sales to total sales, such as in the (2009) could confirm that retail and merchandising firms are study of Rugman and Verbeke (2004). predominately regional. At the country level, Collison and 6 SAGE Open Case 3. Haier. . Established in 1984 at Qingdao including OEM Strategy Merge and acquire Ownership Partial public ownership; Haier is still technically a “collective” company Revenue (2017) 78.8 billion yuan New era In 2009, focused from OEM to brand building. To get rid of the influence of country of origin, Haier speeded its brand localization through R&D, design, manufacturing, sales, and services. Italian factory, “made in Italy.” This leads to its increase in global market share since 2010 R&D strategy Haier established its R&D institution in Germany and factory in Italy Development strategy They started internationalization strategy and globalization strategy in 1998 and 2005, respectively. Haier built of a global brand in the United States in 2005 and implemented the global brand strategy in 2009—basis of “Difficult first, easy later” and had “three in one” localization strategy, which is having R&D and design, production, marketing, sales to logistics, and services in one region Patent (2019) (last data) Has 16,316 patents and 528 valid patents for invention over 30 nations Categories Home appliance and ICT Internationalization (later 1990) 64 trading companies (19 of which are located overseas), 29 manufacturing plants (24 of which are located overseas), 8 design centers (5 of which are located overseas), and 16 industrial parks (4 of which are located overseas). 50,000 workers around the world. Entered U.S. market in 1994 and Western Europe in 1997. Have plants in Indonesia, Pakistan, India, Philippines, Tunisia, Nigeria, Egypt, Algeria, and South Africa Note. Due to lack of the data and reliable source, we used 2017, 2018, and 2019 data set. OEM = original equipment manufacturer; ICT = information and communication technology. See Haier, Wiki (accessed March 2019: https://en.wikipedia.org/wiki/Haier) and Official Portal (https://www.haierappliances.com/about-us). Rugman (2007) demonstrated that the largest enterprises in Fisch and Oesterle (2003), meanwhile, attached impor- Europe operate, on average, at a regional level. tance to the utilization of multidimensional measures. They Rugman and Verbeke’s (2004) measurement is simple; pointed out that the measurement of globalization should be business researchers would only need to calculate the ratio of from a global economic view rather than from a regional per- foreign (F) to total (T) sales (F/T) and the intra-regional (R) spective. They assumed that the purchasing power of a coun- to total (T) sales (R/T) of the firms, then divide them into try is an outcome of its gross domestic product (GDP). The four groups, which are home region–oriented firms, bi- study of Asmussen (2006) supported the concept of Fisch and regional firms, host region–oriented firms, and global firms. Oesterle (2003). He argued that the theory of Rugman and The researcher explains the criterion of each group below: Verbeke (2004) using regional sales data is solely based on a micro-firm level as regional sales ratio would fail to show the •• Home region–oriented firms have at least 50% of their effect of home orientation. In addition, he suggested that it sales in their home region of the triad (North America, should not apply the same classification criterion to firms the European Union, and Asia). from different countries, as the metric does not take into •• Bi-regional firms are groups with at least 20% of their account the relative sizes of home and host countries. In sales in each of two regions, but less than 50% in any response to the imperfect theory, Asmussen (2006) proposed one region. the index of regional and global market penetration by incor- •• Host region–oriented firms have over 50% of their porating an objective criterion of globalization, suggested by sales in a triad market other than their home region. Fisch and Oesterle (2003). He extended the metric by adding •• Global firms have sales of 20% or more in each of the the market size differences to the regional strategy. The prin- three parts of the triad, but less than 50% in any one ciple of his theory is that the sales distribution of a global firm region of the triad. must match the distribution of global GDP. Alongside this, Asmussen et al. (2007) also proposed a continuation of the The study of Rugman and Verbeke (2004) measured study by delving on the global specialization indices to deter- MNEs based on the world’s 500 largest firms of 2004 in the mine a firm’s globalization level. These measurement models Fortune Global 500. Results showed that approximately 72% shall be utilized in this article alongside another measurement of MNEs’ sales took place in their home region of triad and strategy. were oriented within their home country, whereas very few The extant literature advocates that utilization of three MNEs had global dispersion or expansion. These data show models provides a holistic measure for each company, includ- a lack of globalization levels for some MNEs, as they mostly ing a (a) integration of Asmussen’s (2006) and Asmussen operate intra-regional, rather than inter-regionally. et al.’s (2007) related models for determining globalization Rashidin et al. 7 Table 1. Company Sales and GDP in 2017 (in Billion, USD). Company Home country (H) Regional (E) Global (W) Huawei 45.23 11.03 92.5 Lenovo 1.8 1.02 6.4 Haier 1.2 1.7 23.6 Home country (h ) (China) Regional (e ) (Asia Pacific) Global (w ) 1 1 1 12,240 28,230 80,050 Note. GDP = gross domestic product. levels, (b) Rugman’s firm-specific and country-specific where e = host market sales ratio within the home region advantages, and (c) Porter’s diamond model. (E/T), w = host market sales ratio outside the home region Data on the performance and statistics of Huawei, Lenovo, (W/T), h = host market sales (H/T), h = GDP of the home and Haier were acquired online from their company web- country, e = GDP of the rest of the home region, w = GDP 1 1 sites, existing researches on the companies, and reliable of the rest of the world, R = intra-regionalization, and G = third-party statistical data sites. Results of all analyses are inter-regionalization. integrated and triangulated to come up with a conclusion Asmussen (2006) suggested that a purely globalized regarding the current state and level of competitiveness of MNE would yield R = G = 1; however, as no purely global- Chinese MNEs. Through analyzing the three main MNE ized firm is expected to exist, a truly global firm would just players from China, the researcher expects to meet such a be expected to yield results that are R = G, or values close to goal. each other. Lower values of R compared to G would suggest large home country sales and therefore, home-region orienta- Asmussen’s (2006) model and Asmussen et  al.’s (2007) tion or a local MNE. Lower values of G compared to R, model. Asmussen (2006) proposed that the level of “reach” meanwhile, would suggest host-region orientation or a of MNEs may be quantified through a set of formulas that regional MNE. compare the global GDP standard with the sales distribution The abovementioned formulas shall be utilized to quan- of the firm. Ideally, an MNE may be considered a “global” tify the geographic scope of Huawei, Lenovo, and Haier. firm when its sales distribution falls closely to the global Note that the researcher used the data for 2017 because of GDP. In quantitative terms, an MNE’s host market sales lack of available data for the year 2018. Table 1 summarizes ratios e and w are the sales in each host area divided by the pertinent data needed in the analysis and GDP rates also total sales: essential at 2017. To further assess and explain the globalization levels of these companies, Asmussen et al.’s (2007) model shall also e = (1) be utilized. While measures of firm internationalization are HE ++W available, there is no index that would appropriately measure the level of “global specialization” that certain company would hold (Asmussen et al., 2007). According to Asmussen w = (2) HE ++W et al. (2007), determining an MNE’s resource allocation would facilitate an understanding of how a firm manages its where e = host market sales ratio within the home region resources and how it involves specific countries in doing so. (E/T), w = host market sales ratio outside the home region They hypothesized that a well-established and truly global- (W/T), H = home country sales, E = sales in the rest of the ized firm would have heterogeneous structural and opera- home region, and W = sales in the rest of the world. tional qualities wherein production is not centrally based on Once such values have been determined, one can solve for the home country. Rather, independent processes are made in the implied values and the geographic scope of the firms other host countries, and activity volume (such as research using the following formulas: and product development) is generated in many geographical areas. The main difference about Asmussen et al.’s (2007) model in comparison with existing measures of globaliza- eh / R = (3) tion, such as dichotomous and spread measures, is that the eh / former frames globalization beyond revenue and market shares. Instead, the model takes into account the specialized wh / activities operating within all geographical locations of (4) G = wh / MNEs, and sometimes, even the volume of local and foreign 8 SAGE Open Table 2. Value Chain Activities and Geographical Areas. Value chain activities Geographical areas Company 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 M Huawei 5 5 6 7 7 140 170 170 170 170 164 Lenovo 3 3 3 3 4 60 60 60 60 65 61 Haier 6 7 7 5 5 30 30 30 32 46 34 manpower, to come up with a distinct globalization special- whether they could be considered as global MNEs in the ization index. electronics industry. The abovementioned formulations will Asmussen et al. (2007) came up with a formula to deter- serve as a guide for determining the G of each of these mine the global specialization index. The formula depends Chinese electronics companies. To determine such informa- on a volume matrix: tion, statistical data on performing Huawei, Lenovo, and Haier were acquired through reliable third-party sites. In par- ticular, the researcher gained data on the I or the total number Vv =   ij   of value chain activities of each company and J or the total geographical areas where the company operates within a par- where v is the volume of activity i in area j. To quantify the ticular year. A 5-year period from 2013 to 2017 was included ij number of activities that occur within an MNE, it should use in the study. Presented in Table 2 is a summary of the value the abovementioned formula. The formula is establishing the chain activities and geographical areas of each country in number of activities that are taking place (i) in a certain geo- particular years. graphical formula (j). This formula serves as the foundation In acquiring the global specialization index G of each of computing the global specialization index G which is MNE, the research must compute the weighted variance. A operationally defined as a “measure of the international divi- secondary approach to the above formulas shall be utilized to sion of labor determined by a quantitative assessment of a facilitate an easier understanding of the variables. In this firm’s volume matrix” (Asmussen et al., 2007, p. 797). The approach, it shall acquire the weighted mean and a weighted formula for the global specialization index G (note that this sum of squares acquired using the following formulas: “G” differs from the G value in Asmussen’s geographic scope model presented earlier) is as follows  WD + WD + WD  ()() ()() ()() 11 22 33   1 weighted mean [] WW ++W 12 3   G = T   J −1   where W = weight mean for data point and D = amount of data point. where T is the sum of area-level variances that could be fully 2 2 acquired by manually following the below formulas. 2 weighted sumofsquares WD − DW + DD − [] ()() ()() 11 mm 22 + WD − D ()(() 33 m J I J [] 1 activity weightsw a = [] aa , here =∫ vv ii ∑∑ ij ∑ ij j == 11 i j =1 where D = weighted mean ij   [] 2 aactivityshares S = ss , where =  ij  ij J ∑ ij j =1 2 2 () WD () − DW + ()() DD − 11 mm 22 [] 3a weighted mean shares wa = x S 11 xj xI 1xJ + WD − D 2 ()() 33 m 4 squareddifferences Q = q  ,e where qs =− w 3 weighted variance [] () [] ij ij ij j   W ++ WW 1 12 3 5 area-levelweighted variances shares ra = xQ [] 11 xj x xI 1xJ 61 totalweighted variance Tx = r ′ [] () 11 xJ Jx In acquiring the weighted variance, the research shall exam- ine company revenues. The researcher acquired the sales revenues of Huawei, Lenovo, and Haier from 2013 to 2017 The formulas presented above provide an overview of how V in terms of their most popular product, alongside the average is transformed into G. However, statistical software could annual product price, and total units sold. Table 3 summa- also determine the global specialization index G at a faster rizes the data of the sales report. rate. It is imperative to determine the global specialization The abovementioned formulas were used to acquire the index of Huawei, Lenovo, and Haier to quantitatively deter- weighted mean, a weighted sum of squares, and weighted mine their level of global competitiveness and to confirm Rashidin et al. 9 Table 3. Sales Report. Average sales (in millions) Average price (in USD) Company Product 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Huawei Smartphones 49 73.8 107 139.3 153.1 250 260 280 304 324 Lenovo Computers 10.7 11.9 10.8 10.4 10.2 300 300 320 320 350 Haier Home Appliances 157 197.5 152.6 193.4 184 400 400 450 450 450 variance of the presented data. The researcher used these and Haier are driven by similar CSAs that are characterized data in gaining the global specialization index G. In comput- by China’s lenient provisions on domestic taxation, opera- ing for the global specialization index, the following formula tional expenses, and resource allocation. Research has shown shall be used: that CSAs are the “cornerstone” of FDI in the Chinese domestic market (H. R. Zhang, 2016). Chinese investments are market-seeking, implying for Chinese companies to   G = T   dwell on opportunities that would allow their businesses to J −1   grow and expand. CSAs are also influential in FDI location choices. With China, it provides multinational companies where T = weighted variance and J = average number of with an array of choices regarding potential location and geographical locations. In establishing the significance of business expansions through sociopolitical mechanisms and these data, Asmussen et al. (2007) emphasized that the G China’s culturally specific overall business model. Chinese value would determine global specialization, with higher companies usually select FDIs from areas where business values signifying stronger hold in the international market. expansion is possible. The Chinese government is made by multinational companies to foster growth and development Firm-specific advantages and countr y-specific advantages. FSA- for both public and private business interests. H. R. Zhang CSA matrix is first developed by Rugman (1981). The (2016) also stated that another CSA for Chinese multina- model comprises two building blocks, which can be used in tional corporations would be their expanded equity options. analyzing the international competitiveness of large MNEs. Chinese companies, through China’s many partnerships and FSAs are the elements that determine the unique capability business endeavors globally, can expand its operations and competitive advantage of a firm (Table 6). They might through many shares in many other companies. Measuring base it upon product or process innovation and technology, the global competitiveness of Huawei, Lenovo, and Haier marketing, or distributional abilities. Some argue FSAs of could be facilitated by creating an assessment of the compa- an organization can be examined by testing downstream nies based on the highlighted criteria for gaining CSAs, and upstream processes to find its strengths and weak- namely impact on (a) market-seeking endeavors, (b) location nesses. Ohmae (1985), the well-known Japanese manage- choices, and (c) equity. ment consultant, suggested that there is a threefold movement toward integration and cross-fertilization. First, Porter’s diamond model (1990). In further analyzing the afore- downstream to control interfaces with the customer; sec- mentioned models, a revised Porter’s diamond model shall ond, upstream to acquire new technologies;and third, teth- be utilized. Porter (1990), the founder of diamond model, ered horizontally to share complementary technologies proposed that international competitiveness of an industry prior to joint market exploitation. He shared that upstream depends on a configuration of home country’s diamond activities are R&D, product design, manufacturing, while model conditions, also known as the four corners of the dia- downstream activities are marketing, distribution, and mond. Diamond model is a model that attempts to explain sales. CSAs are country-oriented factors unique to the busi- why particular nations or enterprises are internationally com- ness in each country. petitive (Figure 2). In Figure 1, CSAs are placed either low or high on a verti- It examines the capabilities of companies based on strat- cal axis and it placed FSAs either low or high on a horizontal egy, structure, and rivalry (whereby strong rivalry and bench- axis, building four quadrants of analysis. Quadrant 1 repre- marking against the toughest competitors are critical to sents a situation that CSAs are strong, but FSAs are weak. In innovation); demand conditions (with a focus on total contrast, Quadrant 4 is a company that purely relies on its demand and sophistication of demand); factor conditions FSAs and not influenced by CSAs. Quadrant 3 is a quadrant (with a focus on created and advanced production factors); applicable for international business because its both FSAs related supporting industries (with a focus on the presence of and CSAs are strong. In Quadrant 2, neither FSAs nor CSAs world-class firms with which cluster-type linkages exist); are strong. As Chinese-owned enterprises, Huawei, Lenovo, and government facilitation. 10 SAGE Open Presented below (Table 5) are results from the computa- tions of Asmussen et al.’s (2007) model. In Table 5, they presented it that Huawei possesses the largest weighted variance (T = 673.71) while Lenovo yielded the smallest (T = 346.22). Using the formula, Huawei’s global specialization index was pegged at G = 677, Lenovo’s at G = 346.22, and Haier’s at G = 618.58. The G value would determine global specialization, with higher values signifying stronger hold in the international market. These results are consistent with the findings using Asmussen’s (2006) model. The summary of the internationalization of the three companies using Asmussen’s (2006) model and Asmussen et al.’s (2007) model is presented below. Figure 1. FSA-CSA matrix. Note. CSAs are in a vertical axis and FSAs are in a horizontal axis, and there are four quadrants (Quadrants 1–4) measured by strong and weak. Huawei. The results of the computations of Asmussen’s FSA = firm-specific advantage; CSA = country-specific advantage. model show that Huawei would have R and G values that are closest to each other among the three companies. This would mean that the company is a globalized firm whose revenues Empirical Findings are near global GDP averages. The difference between the R The study utilized two methodologies of data analysis, quan- and G values of Huawei is 206, implying more opportunities titative and qualitative, to assess the level of globalization of for the company to further expand its reach and move toward Huawei, Lenovo, and Haier. Regarding quantitative analysis, becoming a purely globalized firm. Given these tests, it can Asmussen’s model (2006) was used to determine whether the be inferred that Huawei is the most globalized firm. In Table three companies are truly globalized firms. Regarding quali- 5 of the summary of weighted mean, sum of squares, and tative analysis, the study focused on determining the CSAs variance, Huawei possesses the largest weighted variance and FSAs of each company. The research compared them (T = 673.71). Using the formula, Huawei’s global special- against Porter’s diamond model to create a better understand- ization index was pegged at G = 677. Therefore, Huawei ing. Below are the empirical results of each company. technologies could be considered as the strongest global MNE’s among of three. Findings of Quantitative Methods Presented below (Table 4) is the summary of the computa- Lenovo. The results of the computations of Asmussen’s model tions of Asmussen’s (2006) model. show that Lenovo was found to have a greater G value Figure 2. Porter’s diamond model. Rashidin et al. 11 Table 4. Results of Analysis. 2017 sales (in billions, USD) Company E w h R G Huawei .074 .621 .304 .106 .312 Lenovo .111 .694 .195 .247 .544 Haier .064 .891 .045 .617 3.03 Table 5. Summary of Weighted Mean, Sum of Squares, and Variance. Company Weighted mean Weighted sum of squares Weighted variance Huawei 293.66 351,812.52 673.71 Lenovo 317.29 18,695.87 346.22 Haier 429.96 531,048.61 600.39 compared to R, implying that it may focus its presence on Findings of Qualitative Methods regionalization or internationalization. This would mean that Huawei. Huawei, as a rapidly expanding business, is actively the company is making efforts to ensure its presence in the taking part in the global arena for electronics by utilizing global setting, with fewer regards to its domestic operations. CSA. First, with its 170 areas of operations worldwide, there It can imply that Lenovo is a regional firm moving toward appears to be market-seeking mechanisms that enable internationalization. In Table 5 of the summary of weighted Huawei to enter such numerous markets. In terms of location mean, sum of squares, and variance, Lenovo possesses the choices, there would also be country-specific interventions smallest weighted variance (T = 346.22). Using the formula, because of the large number of geographical areas that the Lenovo’s global specialization index was pegged at G = company has gained access. In addition, Huawei could also 346.22. This shows that although Lenovo is trying to gear its achieve greater equity through its expansion and increased regionalization or internationalization considering its sales. In enabling the company to expand, Huawei also uses regional sales computed by Asmussen’s model, the firm is its own FSAs. In Huawei’s case, there are certain FSAs that still lacking a lot to be “internationalized” compared to Hua- facilitated the growth of the company, particularly (a) market- wei and Haier. Its activity volume and geographic locations seeking growth as a response to telecommunication needs, (b) are not heterogeneous enough compared to Huawei’s. It can new technologies and management, (c) minimal domestic be implied that Lenovo is on the right path to achieve its competition, (d) sideward crawl strategy, (e) market strate- internationalization but still has a long way to do so. gies, and (f) joint ventures. Huawei’s market-seeking growth began alongside the need for telecommunications and Haier. Results of the computations of Asmussen’s model increased avenues to establish networks and communica- show that Haier yielded a G value exceeding 1, which implies tions. Huawei’s new technologies range from ultra-cheap over-internationalization. So, a company is heavily focused mobile phones to regularly priced communications devices on expansion at a global and relatively faster scale. It limits that are all user-friendly, affordable, and feature intensive. regional and local operations, which may ultimately pose Compared to other leading brands of mobile phones, Huawei threats to the business when internationalization strategies could innovate cellular phones with almost the same features fail. The research can summarize it that Haier is over-inter- as that of more expensive phones. Huawei’s global expansion nationalizing with very limited focus on local and regional and internationalization strategy, meanwhile, focuses on expansion. In Table 5 of the summary of weighted mean, expanding in various geographical zones which are key elec- sum of squares, and variance, Haier possesses the high tronics areas, such as in Bangalore, Stockholm, and Silicon weighted variance (T = 600.39) and its G is 618.58 using the Valley. Huawei can create new technologies alongside other formula. The result of abovementioned Asmussen’s model leading technology innovators at a low cost. Their expansion also shows that the firm has a very strong internationaliza- is facilitated by a unique market strategy that targets less tion strategy. Despite these, the firm is not “international- developed and developing countries rather than in developed ized” yet. It’s because of considerations of its actual activity countries. These FSAs have allowed Huawei to establish volume and geographic locations. Its activity volume, while itself as a household name for mobile phone products in many continuously trying to be heterogeneous, shows to be lacking countries around the world. in terms of more internationally driven measures. 12 SAGE Open Figure 3. Huawei’s FSA-CSA matrix. Note. FSA-CSA matrix shoes Huawei getting advantages from Figure 4. Lenovo’s FSA-CSA matrix. governmental bodies. FSA = firm-specific advantage; CSA = country- Note. FSA-CSA matrix shows Lenovo’s global competitiveness is specific advantage. challenged by its limited firm strategy for growth that is only focused on strengthening. FSA = firm-specific advantage; CSA = country-specific advantage. In using (Figure 3) Porter’s diamond model in assessing the capability of Huawei, it could be realized that they could see all pertinent factors in the company’s operations. For interests with trust as well as low prices. Going back to the instance, the firm has sufficient strategies to enable it to presented data about the demand for computers between expand globally. Through opening its doors and operations 2013 and 2017, they could realize it that the number contin- away from developing countries, Huawei could establish ues to go down. This would mean that Lenovo’s primary itself as an affordable brand a variety of consumers could products (personal computers) are being overshadowed by use. This enabled Huawei to efficiently take on its rival com- other factors such as cellular phones and decreased demand. panies and expand globally, as shown by its rapidly and con- While the government is also keen on supporting Lenovo’s tinuously increasing product range and revenues. Even today, goals of increased productivity, there seems to be no other demands for mobile phones and mechanisms for communi- related supporting industries and partnerships that Lenovo cation remain big. This ensures Huawei’s presence in the has established apart from IBM. This would provide insights coming years as a leading provider of mobile phones. into Lenovo’s limitation regarding global competitiveness Alongside this, the influence of the Chinese government in and internationalization. enabling Huawei to establish itself globally is still in effect. The factor conditions that enable Huawei to succeed include Haier. Haier is also using the same CSAs in expanding its the continuous need for technological advances and the ever- business toward becoming global electronics MNEs. A par- growing number of mobile phone consumers. ticular focus provided to Haier would be its equity expansion by its acquisition of Whirlpool. In doing so, it could establish Lenovo. Lenovo particularly focuses on equity expansion by itself as a global name for household appliances. This expan- its acquisition of IBM (International Business Machines). sion, however, reflects Haier’s internal operations more than Meanwhile, Lenovo’s FSAs revolve around consumers’ need a CSA. In terms of FSAs, Haier’s FSAs are developed from for personal computers and communicative devices. How- a series of firm-specific disadvantages that have existed ever, its business strategy has always been conservative. This since the early 1990s (Marinova et al., 2010). Haier directly implies that their goal became centered more on strengthen- addressed these disadvantages at the beginning of the 21st ing corporate business deals with IBM where computer sales century. In particular, Haier could facilitate the following relied on, rather than reaching for global expansion. changes and advantages: (a) independent innovation, (b) Regarding (Figure 4) Porter’s diamond model, Lenovo’s customer-driven market strategies, (c) preferential support, global competitiveness is challenged by its limited firm strat- (d) improved production and design capability, (e) competi- egy for growth that is only focused on strengthening ties with tiveness in the global market, (f) expertise in international- IBM. This disabled Lenovo from creating new opportunities ization, (g) customer brand equity, and (h) value-for-money for expansion. Although partnerships with IBM would bring goods. These FSAs showcase Haier’s integrative model of about positive changes in improving the company’s name, internationalization that is centered on holistic growth and this would also serve as a limitation for bringing out devel- customer satisfaction. These FSAs have enabled Haier to oping products that spark consumer and customer needs or expand its growth globally (Figure 5). Rashidin et al. 13 innovation, architectural innovation, and grafting innovation (He & Fallon, 2013). The company also facilitates partnerships with external researches through the Huawei Innovation Research Program, a collaborative endeavor to fund leading universities, research institutes, or individuals to create world- class solutions in technology. This endeavor promotes Huawei in two ways, as a customer-oriented company and as an innova- tive company. This market-seeking strategy is only one of Huawei’s many unique mechanisms in enabling rapid company growth. Another market-seeking mechanism of Huawei is its mar- ket orientation. Previously, it was discussed that Huawei Technologies opted to move from the “tradition” of expand- ing businesses to developed nations. According to Bartlett and Ghoshal (2000) and Rugman, A. M. (2012), this market- Figure 5. Haier’s FSA-CSA matrix. seeking behavior toward providing low-cost services for Note. Matrix centered on holistic growth and customer satisfaction. These FSAs have enabled Haier to expand its growth globally but have limited consumers has already been a long-standing strategy of com- target market. FSA = firm-specific advantage; CSA = country-specific panies intending to go global. In addition, motives for inter- advantage. nationalization are usually motivated by creating innovative products that may be perceived as “fitting” the global con- Through its strategies for expansion, it could acquire many sumer market (Vernon, 1966). The market-seeking behavior companies such as Whirlpool to facilitate larger operations of Huawei toward the low-cost market is a strategy utilized and drive increased sales. They made this opportunity possi- by the company as providing low-cost services would entail ble through the company’s initial goal of expanding its busi- the expansion of its target markets and consumers. The foun- ness and beating out other home appliance companies with dation of Huawei’s global presence could be accounted by its the consumer-centered approach. Because of these, many FSA called the “sideward crawl strategy” which, as men- consumers choose Haier products as their primary choice for tioned, focused on entering developing countries (or coun- home appliances. However, a particular concern that may be tries which are as far away as possible from current raised about Haier would be the demand conditions of home internationalization settings), and expanding businesses in appliances. Compared with cellular phones, there is definitely there. This strategy is comparatively different from what less demand for home appliances. In addition, there are fewer other Chinese companies would do, particularly from estab- target markets for such types of products. This disables Haier lishing operations in one country and moving on to the next to fully become a globalized company because the product (Lazonick & Li, 2012). Different marketing strategies are range is specifically targeted to a decreased number of popu- utilized by foreign investors in entering particular markets, lations in comparison with a mobile phone and computer such as joint ventures or mergers and acquisitions (Buckley companies such as Huawei and Lenovo. The three charts pre- & Casson, 2009; Driscoll, 1995), but with Huawei, all avail- sented a summary of Huawei’s, Lenovo’s, and Haier’s capa- able market entry strategies were utilized in order to deter- bilities for internationalization and global competitiveness. In mine the best-fitting strategy to succeed in the selected the data, the research output noticed that only Huawei could market. The market-seeking behavior of Huawei is also yield all strong points in its country-specific and firm-specific motivated by domestic factors in China. With China’s advantages; meanwhile, Lenovo and Haier faced weaknesses endeavor to formulate a centrally planned economy, the state in some areas of their CSAs and FSAs. is akin to support businesses that aim for international expan- sion. A country-significant advantage for Huawei was when China entered the WTO, because this allowed Huawei as a Discussion MNE, to be backed by the administrative policies of the The results of the analysis and discussions present the rea- supranational organization and be protected from any state sons behind such results, the company dispositions that sup- intervention from member host countries. The WTO mem- port these findings, further issues that may be associated bership also benefits China as a state as the partnership fos- with the findings, and the implications of such results in ters more trade partnerships for China. For instance, in 2005 these companies’ attempt to be truly globalized. alone, China’s exports amounted to US$750 billion. The researchers expect this to grow as more Chinese companies attempt to go global. They also found the domestic environ- Huawei ment to be Huawei’s advantage in enabling itself to enter the Research could link the success of Huawei to its many FSAs global market. Despite the success of Huawei in the Chinese that are heavily focused on market-driven and service-inclusive market, the company continues to foster innovation that 14 SAGE Open would reach the global scale (Pohle & Chapman, 2006). This ways, such movement is strategic because it allowed Lenovo implied that Huawei’s long-term vision has always been to to establish itself as a quality provider of computers and elec- expand beyond China, and to create a world of “connectivity tronics with the strong backing of IBM. However, market- in a fully connected, intelligent world.” However, regional wise, the strategy may be not considered as the best decisions protectionism, limited access to capital, and limits in intel- because the company’s competitors have been establishing lectual property rights are a few of the problems that Huawei means to expand its consumer range and generate new prod- encountered in the Chinese market (H. R. Zhang, 2016). ucts for specific markets. Lenovo’s business strategy is limit- Huawei’s success in internationalization is evident in its ing its market-seeking mechanism that, historically, is proven track record. In 2011, it reported total sales of US$32 billion, to be an effective tool in internationalizing. For instance, and it could patent 23,522 innovations and inventions (He & Lenovo’s partnership with IBM was also strengthened in its Fallon, 2013). Given this, the success of Huawei in establish- acquisition of the former IBM PC Division and rights to the ing itself as a truly global company is without doubt. ThinkPad, both of which ensured Lenovo’s access to global However, it would still be pertinent to explain some relevant consumers and the company’s bargaining power (He & findings generated from this research. Specifically, while Fallon, 2013). However, no strong follow-up marketing strat- Huawei was confirmed as a global company operating in egies were garnered after these acquisitions, and Lenovo con- numerous countries and enabling numerous activities, the tinues to work behind the “prestige” of IBM. In 2013, the Asmussen, Pedersen, and Petersen model utilized for testing company ranked as the fourth leading PC provider in the its globalization level yielded a global specialization rating world (He & Fallon, 2013). Lenovo uses a “horse race strat- G = 677. This result, alongside the result of Asmussen’s egy” in marketing wherein the best “horse” or product is (2006) model, implies that Huawei is a globalized MNE. placed in the market to compete with other opponents (Ahrens Furthermore, this suggests that Huawei’s activity volume is & Zhou, 2013). This strategy helped Lenovo to find opera- adaptive even to its expansive areas of operation. This result tions in developing economies, with emphasis on a manufac- is validated by examining Huawei’s global activities which turing base and a distribution channel. While the company heavily include research and development, market opera- offers other products apart from PCs, it composes its main tions, and market-seeking innovations. Particularly, Huawei product line of computers. Data between 2013 and 2017 runs its operations in eight major zones that would comprise would show that there is little to no increase in the demand for all 170 countries where it operates, along with five research computers over the last 5 years. With the continued advance- and development areas globally. This would show consis- ment of technologies in communications, such as the cellular tency in the findings generated from the Asmussen (2006) phone enterprise, it now makes functions that were once and Asmussen et al. (2007) models. However, comparing the available only in computers available to mobile devices. This relatively large global specialization rating of Huawei with phenomenon affects the sale of personal computers as con- its upward performance trend over the past 5 years, it could sumers would naturally purchase mobile phones which are also be assumed that the increase in Huawei’s performance cheaper and handier than personal computers. The increase in are not solely accounted by its activity volume, but rather by the demand for cellular phones, as shown by Huawei’s sales factors that are not part of its internal performance (e.g. cus- data from 2013 to 2017, is expected to negatively affect the tomer preference for Huawei) and quantitatively proven to PC market, in such a way that a downward trend is expected be a truly globalized MNE. regarding the sale of personal computers in the coming years. Based on the analysis of the Asmussen (2006) and Asmussen et al. (2007) models, Lenovo is yet to establish itself as a Lenovo global company. Similar to Huawei, Lenovo has been benefiting from China’s partnership with the WTO and its support to expand Chinese Haier MNEs in the global market. In particular, the Chinese govern- ment urged institutions and consumers to purchase high-tech- Haier’s FSAs were developed to respond to its firm-specific nology products reflective of Lenovo’s brand, alongside disadvantages during the 1990s (Marinova et al., 2010). In intangible benefits that were provided to Lenovo as tariffs and particular, Haier faced issues on lack of production and tech- quotas on imports, distribution and ownership restrictions, nological knowledge, limited knowledge on foreign markets, and trade restrictions that were upheld among foreign compa- lack of internationally recognized brands, and inconsistent nies intending to enter China’s domestic market (Ahrens & global brand image (Marinova et al., 2010). A notable FSA of Zhou, 2013). However, as the findings would suggest, Lenovo Haier is its customer-driven marketing strategies that are faces several limitations that disable the company from fully focused on providing consumers with the best experience becoming globalized. First, Lenovo’s marketing strategy was with Haier products. Haier prides itself as a company whose found to be more conservative than its competitors. Marinova main success driver is its integration with customer needs. et al. (2010) found that Lenovo’s business strategy provided a The innovative approach of Haier also allowed the company heavy emphasis on strengthening ties with IBM. In some to develop improved production and design capability. Rashidin et al. 15 Another advantage of Haier is the establishment of its MNEs from the United States have already made a name for competitiveness in the global market. It also bases the com- themselves and are continuously driving revenues or positive petitiveness of Haier in the global market on its personal outcomes for the U.S. economy. While China has Lenovo, experience with its firm-specific disadvantages in the 1990s. Haier, and Huawei as its frontline firms in the international To increase the company’s reach and promote competitive- electronics market, the United States has Intel, Google, ness, Haier used multiple business strategies, including the NetApp, and Microsoft (Rogers, 2011). These American adoption of a total quality management (TQM) framework in companies, especially Google, could be considered “house- operation, building better plants and production facilities, hold names” in electronics and technology as almost any building its domestic branding in China, introducing new gadget or consumer electronics enables the use of such. For management practices, innovative product development in example, all Android cellular phones have built-in Google both home and the host market, and strong market presence applications such as Google Drive or Google Play. through greenfield investment (Marinova et al., 2010). Meanwhile, Microsoft products such as Microsoft Office Notable among these strategies is the innovation of new prod- could be easily downloaded online. This software is offered ucts both in the home and in the host country. This would separately from consumer electronics from the same brand, mean that Haier’s global operations are heterogeneous, a such as personal computers from Microsoft or tablets from quality which most global multinational corporations pos- Google. sess. This orientation would also allow Haier to continue with In comparing and contrasting Chinese and U.S. MNEs, it its customer-oriented approach. The target market of Haier is pertinent to first establish commonalities between the two per product is relatively limited compared to the previously enterprises. First, both Chinese and American MNEs serve presented industries such as Huawei and Lenovo. While as major players for their state’s economic capacity. Although Haier has a wider array of home appliances, its production is China recently experienced a backlash brought about by an not centralized on a single product, such as mobile phones for extended period of overinvestment, projections for future Huawei or personal computers for Lenovo. However, as the production activities show that Chinese innovations brought analysis from the Asmussen (2006) and Asmussen et al. about by the continued improvement and emergence of elec- (2007) models would suggest, Haier could still not be consid- tronics as well as technological MNEs would improve the ered as a global company. The reason for this could be the country’s GDP (Kindergan, 2016). Similarly, the U.S. econ- relatively lower geographic reach of Haier despite acquiring omy saw significant positive economic implications of U.S. Whirlpool. Table 6 is showing the assessment of FSAs and parent companies, accounting for large shares and increased CSAs of Haier, lenovo and Huawei, and their performance. It GDP growth (Slaughter, 2009). Second, both Chinese and highlights that during few years back, Haier is on its way to American MNEs are usually internationally concentrated in establishing itself as a global MNE (see Table 6). As pre- high-income countries. Among Chinese electronics MNEs, sented previously, the findings presented regarding Huawei, the decision to facilitate operations in high-income nations is Lenovo, and Haier could also be linked with Porter’s dia- brought about because of limiting business operations within mond model. The findings suggest that only Huawei can sat- locations or areas with high exchange rates. For U.S. elec- isfy all segments of the model because of its strategic sideward tronics MNEs, foreign affiliation with high-income countries crawl strategy, expansive use of CSAs, increased markets was found to produce more economic benefits. In 2014, through its low-cost marketing strategy, and innovative high-income countries accounted to 75.9% of U.S. MNEs’ research or development endeavors. Meanwhile, Lenovo and foreign affiliates (BEA News, 2016). These data would Haier are both faced with issues on demand conditions, which imply that MNEs are effective drivers of economic growth, could not be easily controlled. In addition, Lenovo is also especially when integrated appropriately with other macro- challenged by the need to create better firm strategies that level political and economic activities. would allow customer integration into its marketing endeav- Meanwhile, several operational practices differentiate ors. Given these, results would suggest that for Lenovo and Chinese MNEs from U.S. MNEs. For instance, while Chinese Haier to fully establish themselves as global companies, their MNEs continue their effort to expand internationally through activity volume should significantly focus on increasing a strict selection process of potential host countries, U.S. product demand for their products. Both Haier and Lenovo MNEs’ global operations are heavily centralized within should also implement better research strategies to retain or America (Slaughter, 2009). Compared with foreign affili- improve their position in the global market. ates, U.S. MNEs ensure more concentration within its parent countries to alleviate the idea that the industry would “aban- don” its local roots. This phenomenon is evident through the Comparing Chinese and American United States’ continued economic growth and transforma- MNEs tion. Another difference between Chinese MNEs and U.S. Today, Chinese MNEs are a continuously emerging industry MNEs is the latter’s focus on many aspects of growth and that is continuously faced with challenges and limitations in development. Chinese MNEs are generally concerned about fully establishing itself in the global arena. Meanwhile, many maximizing profits and improving the macro-economy, but 16 SAGE Open Table 6. Summary of the FSAs and CSAs. Country-specific advantage MNE (China) Firm-specific advantage FSA operational implications Key issues/disadvantages Huawei State partnership with Market-seeking growth Ability to enter developing Domestic situation in World Trade Organization as a response to markets home base (China) that “Centrally-planned economy” telecommunication needs Low-cost strategy expands imposes limits: Urging the purchase of high- New technologies and market reach Regional protectionism technology products among management Operational areas in over Limited access to capital domestic institutions and Minimal domestic competition 170 countries with five Limited intellectual local consumers Sideward crawl strategy research centers property rights Stricter regulations for Market strategies Obtained Marconi development foreign investors to Joint ventures Thousands of patented decrease competition, inventions including Lenovo Strong business ties with IBM Product quality established Conservative business Import tariffs and quotas Horse race strategy as a result of IBM strategies Restrictions on ownership Relatively cheaper PC partnerships Decreasing demand for and distribution solutions in the market Obtained ThinkPad rights personal computers Trade restrictions Operational in over 60 Increasing economic countries partnerships with other nations Haier Independent innovation Experience-based Limited demand for home Customer-driven market development of FSAs appliances strategies Heterogeneous operational Preferential support orientation Improved production and Operations in over 46 design capability countries Competitiveness in the global Obtained Whirpool market Customer-driven research Expertise in and development internationalization endeavors Customer brand equity Value-for-money goods Note. FSA = firm-specific advantage; CSA = country-specific advantage; MNE = multinational enterprise. not so much about employment or research and develop- for its MNEs. For instance, it usually creates no state adjust- ment. American MNEs use a more holistic treatment for their ments or negotiations for both parties (China and host coun- firms by utilizing employment, output, capital investment, try) to agree upon. Instead, Chinese MNEs choose their exports, as well as research and development levels to assess preferred locations and setups based on their preexisting the success or productivity of their operations (Slaughter, requirements. These salient differences imply varying out- 2009). For instance, recent data showed that U.S. MNEs are comes for U.S. and Chinese MNEs. dominated or led by large companies or firms which have An examination of MNE practices facilitated by American greater than 10,000 employees (BEA News, 2016), suggest- and Chinese firms imparts relevant commonalities or differ- ing that operational activities entailing employees are pro- ences in operational practices. While such common practices vided resolutions in U.S. MNEs. exist between the two economies, U.S. MNEs showcase an Another major difference of U.S. MNEs from Chinese edge and an advantage in comparison with Chinese MNEs. MNEs is in terms of specific international configurations. American multinational corporations have already estab- This would refer to the changes in policies and adaptations lished salient processes or practices to maintain their status that the United States facilitated to successfully and appropri- and immerse themselves with potential foreign partners. ately operate within specific foreign premises. Berry (2017) Meanwhile, Chinese MNEs have yet to discover a sustain- cited that U.S. MNEs utilized major frameworks in ensuring able and long-term approach in dealing with its operations. that foreign integration remains successful and appropriate, including low levels of integration, various methods of Conclusion regional expansion, limited geographic expansion, and spe- cialized global sourcing arrangements. Unlike the United China continuously attempts to boost its economy through States, China facilitates stricter and more selective practices expanding its international partnerships; the emergence of Rashidin et al. 17 multinational corporations provides promise on the future of Second, most of the Chinese electronics’ MNEs in the China and its continuously growing electronics MNEs in the study (Huawei, Lenovo, and Haier) expand their internation- global arena. The findings also revealed that the three firms alization process through cross-border mergers and acquisi- could successfully utilize their CSAs by capitalizing on tions (M&A) instrument. Last, companies from small China’s external partnerships and existing trade agreements. emerging companies can come with niche thinking to domi- This phenomenon provides opportunities for Chinese MNEs nate niche foreign markets. to shape their course by adapting best practices facilitated by While this research can provide significant information Huawei. In particular, the sideward crawl strategy has proven regarding the course and future of Chinese electronics useful in enabling the expansion of the consumer population MNEs, future studies may attempt to focus on analyzing and introducing products to larger markets. The results also Chinese MNEs that have yet to reach an expansive global implied that gaining already well-known companies such as market. Comparing the results of such a study with this Marconi for Huawei, ThinkPad for Lenovo, and Whirlpool research would facilitate an understanding of the “gap” for Haier is a good strategy to facilitate new partnerships and existing between already-globalized Chinese MNEs and touch on more conservative markets. The results of the study those who are yet to overcome the global arena. It may be determine that Chinese MNEs should adopt heterogeneous applied to use this study in determining the direction of measures in expansion by decentralizing production and Haier, Lenovo, and Huawei in terms of China’s interna- operations in various countries. This ensures more activity tional economic initiatives. Understanding such a phenom- volume and greater opportunities for developing multiple enon would also help in gaining an idea about how such innovative products at the same time. Doing so could address MNEs would plan to integrate themselves both in the multiple market needs at a relatively shorter time. Chinese domestic economy and the global market in the A particular implication of the emergence of Chinese MNEs years to come. in the electronics sector is perceived through China’s Belt and Road Initiative (BRI), an economic strategy and foreign policy Limitations of the People’s Republic that attempts to tie Eurasia, Africa, and Oceania into land as well as maritime routes (Rashidin This study has some limitations. The foremost limitation is a et al., 2019; Wade, 2018). This endeavor is beneficial for China lack of data. Second, it is based on selected Chinese enter- which foresees that the development of land-based and mari- prise internationalized processes not categorized as product time-based infrastructures would facilitate the easier develop- lines. Third, this study adopted a comparative approach and ment of economic policies, creation of more connected facilities measured the Chinese top enterprise internationalization pro- network, the strengthening of trade and investment relations, cesses with American enterprises than other nations. the enhancement of financial cooperation, and the deepening of cultural or social exchange (Wade, 2018). Research perceives Declaration of Conflicting Interests this strategy by China as the beginning of its next economic The author(s) declared no potential conflicts of interest with respect trade growth, wherein Chinese exports could be easily accessed to the research, authorship, and/or publication of this article. by the global market (Ngai, 2016). This endeavor should be pursued, and Chinese electronics MNEs will feel significant Funding contributions in globalization. The author(s) disclosed receipt of the following financial support For Huawei, the BRI would help expand its sideward for the research, authorship, and/or publication of this article: “The crawl strategy for more areas of operation. For Haier and Fundamental Research Funds for the Central Universities” in UIBE Lenovo, the facilitation of the BRI would be a good opportu- of China (CXTD10-11); Jiangxi Provincial Department of nity to expand their global capabilities to become global Education Science and Technology Project “An Empirical Study on MNEs. Therefore, as developing economies, Southeast Asia the Factors Affecting the Executive Compensation of Jiangxi GEM enterprises can gain several positive aspects in learning Listed Companies” (No. 161295). Chinese MNEs. First, following the emergence of Chinese electronics ORCID iDs MNEs, most of them have expanded to outside via direct Md. Salamun Rashidin https://orcid.org/0000-0003-1273-8494 overseas investment. Exogenous investments, either domes- Lingming-Chen https://orcid.org/0000-0002-0137-9476 tic or foreign, only temporarily increase the amount of capi- tal per capita. Inward-oriented FDI can only evoke long-term Supplemental Material economic growth if it has a positive impact on technological Supplemental material for this article is available online. development in the respective economy (Knell & Radosevic, 2000). Because of this assumption, FDI will have a full Notes impact on electronics enterprises particularly. It is necessary for Southeast Asia countries to attract FDI and make an eco- 1. We used National Bureau of Statistics, 2003–2007, for appro- nomic environment conducive to FDI. priate technological foundational reform. http://www.stats. 18 SAGE Open gov.cn/enGliSH/ClassificationsMethods/Classifications/ investment. Journal of International Business Studies, 38, (accessed 2019). 499–518. 2. 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Sullivan, D. (1994). Measuring the degree of internationalization His research field is international trade, e-commerce, world econ- of a firm. Journal of International Business Studies, 25(2), omy, and marketing management. He has published lots of research 325–342. paper in the field of international trade, marketing, and Tilley, K. J. (1995). China electronics industry forum, Shenzhen, management. China. Journal of Electronics Manufacturing, 5(3), 235–239. Tilley, K. J., & Williams, D. J. (1997). Technology and change Sara Javed is a PhD scholar in the Department of Marketing at in the Chinese electronics industry. IEEE Transactions on University of International Business and Economics (UIBE). Her Components Packaging, and Manufacturing Technology: Part research field is marketing management, trade management, e-mar- C, 20(2), 142–151. keting, and supply chain management. She has published many Tsai, J., & Rosenheck, R. A. (2013). Psychiatric comorbidity papers in the field of marketing. among adults with schizophrenia: A latent class analysis. Psychiatry Research, 210(1), 16–20. https://doi.org/10.1016/j. Lingming Chen is an associate professor and PhD scholar in the psychres.2013.05.013 Department of Economics at Hunan University of Science and Vernon, R. (1966). International investment and international trade in Technology (HNUST). Her research field is applied economics and the product cycle. Quarterly Journal of Economics, 80, 190–120. international trade. She has published many papers and hosted Wade, D. (2018). China’s “one belt, one road” initiative. many provincial projects in the field of applied economics. Parliament of Australia. https://www.aph.gov.au/About_ Parliament/Parliamentary_Departments/Parliamentary_ Wang Jian is professor in the School of International Trade and Library/pubs/BriefingBook45p/ChinasRoad Economics at University of International Business and Economics Wei, Z., & Nguyen, Q. T. K. (2017). Subsidiary strategy of emerg- (UIBE) as well as cross border e-commerce vice president at ing market multinationals: A home country institutional per- Alibaba Group, China. He is National Excellent Teacher in China. spective. International Business Review, 26(5), 1009–1021. His research area is international trade practices and e-commerce. Wernerfelt, B. (1984). A resource-based view of the firm. Strategic He has already published dozens of books and articles in the top Management Journal, 5(2), 171–180. journals in China.

Journal

SAGE OpenSAGE

Published: Jan 6, 2020

Keywords: multinational enterprises; competitiveness; internationalization; FSA/CSA; diamond model; China

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