Strategic Importance of Cross-Border Acquisitions for Emerging Market Multinationals

Abstract

Business environment has changed significantly during the last two decades under a rapid globalization. The growing number and power of multinationals from emerging markets is one of the most prominent results of these changes. From niche players in the global market or regional competitors in similar emerging markets, they became multinationals that are challenging world leaders, even in high intensive industries. As late followers in the global market, these companies are faced up with competition gap. Therefore, they use cross-border acquisitions to obtain strategic resources necessary to compete in the global market (technology, brands, marketing knowledge, etc.). They combine the obtained resources with their own cost advantage to reshuffle competition in the industry. To preserve targets’ strategic resources, these multinationals retain the top management and give them great autonomy. Through this approach, the risk of acquisition failure is reduced, regardless of the fact that some cost synergies are not achieved. Two case studies, Lenovo and Tata Motors, from China and India, the major emerging markets, are used to show how emerging market multinationals rewrite motives and strategies for cross-border acquisitions.