California Management

Traditional sources of sustainable competitive advantage are very rare in today's global business environment. The increasing saturation of established markets paired with the impact of the recent financial crisis in many developed economies has made it important for organizations to achieve a strong position in emerging markets. " Going global " is now less of a choice, and more of a necessity. If firms fail to establish a presence in large emerging markets, they will miss out on tremendous growth opportunities while allowing rival firms to quickly gain dominance. However, simply entering an emerging market is not enough. Firms must develop agile organizational systems to deal with heteroge-neity and volatility, institutional challenges, and global competitors. As such, large global firms require strategic agility to succeed in both established and emerging markets. Managers of multinational enterprises (MNEs) would benefit from a framework to guide decision-making , and to create and embed strategic agility within their organization. There are three key dynamic capabilities which contribute to the successful development of strategic agility in MNEs – sensing local opportunities , enacting global complementarities, and appropriating local value. In addition to these key capabilities, it is necessary to reevaluate and broaden the current interpretation of strategic agility. While current research associates strategic agility with the continuous and simultaneous deployment of a set of dynamic capabilities, relying on such a static balance may actually compromise the organization's effectiveness. Instead, most successful MNEs utilize a more dynamic approach. Due to resource constraints and the necessity of greater responsiveness to changing conditions, MNEs should adjust relative emphasis on each of their dynamic capabilities over time. By developing these dynamic capabilities and emphasizing each at the appropriate time, organizations can avoid internal tensions and ensure competitive advantage. General Electric's CEO Jeffrey Immelt recently commented on GE's growth and investments, noting that 50% of GE's business and 70% of its backlog comes from Brazil, China, and other emerging markets. A senior manager at BMW also revealed that while only 8% of all passenger vehicles were sold in emerging markets in the year 2000, as of 2010 that number has risen to 37%. By 2012, China had surpassed the United States as BMW's largest market. Clearly, emerging markets represent a large source of revenue for MNEs. Despite the benefits, operating in emerging economies is very challenging , even for the most experienced global firms. Multinational enterprises face substantial het-erogeneity and …