Multinational Enterprises (MNE) require comprehensive business strategies to build a stronger competitive advantage in local and international markets. However, MNEs tend to experience myriad challenges in foreign markets that hinder the establishment of a stronger competitive advantage (Li & Fleury, 2020). Therefore, MNEs can effortlessly deploy their firm-specific advantages outside their home market. The operations of MNEs outside their home markets depend on many factors. The factors constitute social, political and economic factors. For instance, the capacity of MNEs to build a stronger competitive advantage in foreign countries may be impacted by the diplomatic relationship between the home and host countries. The essay will explore the operation of TikTok, a Chinese company, in the United States to determine if MNEs can effortlessly deploy their firm-specific advantages outside their home markets.
Theoretical Background
MNEs experience competitive disadvantages in markets outside their home country and, therefore, cannot effortlessly deploy their firm-specific advantages (Bu et al., 2022). According to the Module journals, MNE is defined as a firm that involves a foreign direct investment (FDI) through direct investing in, controlling and managing the value-added activities in other countries. According to the journal used in the module, examples of MNEs include the FAW Toyota, which has been operating in China since 2000; the Toyota Motor North America, which has been in the United States since 1957 and Woven Planet, which has been in the United States since 2018. Many factors have impacted the MNEs as they penetrated the foreign markets in the host countries. Some factors that determine the competitiveness of MNEs in outside home country markets include the core competencies such as the availability of resources and capabilities. Also, the MNEs must have effective strategies concerning innovation, customer responsiveness, efficiency, and quality products and services. The core competencies and the effective corporate and business-level strategies determine the success of MNEs in host countries.
The journals used in the modules confirm that MNES has competitive disadvantages outside its home markets. The competitive disadvantages outside home markets are based on various competitive advantages, including firm-specific or ownership advantages, location or country-specific advantages, entry strategy for international advantages and the components of the international strategy. The types of competitive advantages can be easily achieved by the MNEs in the home countries than in the host countries. Therefore, the journals used in the modules confirm that the MNEs have competitive disadvantages in markets outside their home countries.
Firm-specific advances of the MNEs include the ownership advantages and the MNEs` resources that can be transferred across borders (Adarkwah & Malonæs, 2020). The ownership advantage of the MNEs refers to the unique assets, capabilities and advantages that MNEs possess against their competitors (Wan et al., 2020). The firm-specific advantages help the MNEs plan and implement market entry, market penetration, enhancing competitive advantage, market expansion, building resilience to local competition and promoting their bargaining power in the concerned markets. Even though the firm-specific advantages are crucial in building a stronger competitive advantage, the MNEs experience myriad challenges in executing the firm-specific advantages in markets outside their home countries.
The operation of TikTok in the United States’ technology market has been significantly impacted by myriad factors (DeVito, 2022). Even though the company has technological ownership that can help it build a stronger competitive advantage, implementing the firm-specific advantages was negatively impacted by the diplomatic relationship between China and the United States. Mehta (2023) revealed that the government of the United States banned TikTok on Wi-Fi networks and university-owned devices. Therefore, there is evidence that TikTok experienced competitive disadvantages in the United States. Therefore, the operation of TikTok confirms the argument that MNEs experience challenges in markets outside their home countries to deploy their firm-specific advantages.
Potential Sources of the Company’s Competitive Advantage
TikTok, the Chinese social media platform, despite facing several challenges the application has built a stronger competitive advantage in the United States. Even though social media platforms such as Facebook and Twitter have dominated the technological market in the United States, TikTok has penetrated foreign markets (Stanková, 2020). That is despite the various challenges that the company has experienced, such as difficulties in executing the firm-specific advantages. TikTok enjoyed several sources of competitive advantages to penetrate the technological markets in the United States.
TikTok has gained wider use in the United States despite prior penetration of other social media platforms, such as Facebook because the company has an effective user base and engagement (Stanková, 2020). The short-form video formation and algorithms resonate well with the demographics in the United States. Many young people in the United States find the firm-specific technological spectrums introduced by TikTok more appealing than other social media platforms. The user base has enabled TikTok to build competitive advantages through wider reach, user-generated content and network effects.
The application has built a stronger competitive advantage due to its creative tools and effects. The creative tools and effects used alongside the application have provided an effective opportunity for the users to enhance the quality and the content of their videos (Kleisner & Garmey, 2022). That is lacking in many social media platforms, such as Facebook. The creative tools include effects, filters, editing features, and rich sound libraries that make young users make appealing videos. The creative tools and effects enable TikTok users to make unique and entertaining content. Therefore, the unique and entertaining videos have attracted more creators and audiences to the platform.
Additionally, TikTok has provided easy-to-use monetisation features that enable users to earn money from their unique content (Kleisner & Garmey, 2022). The application has provided strong influencer marketing and marketing models. Therefore, creators with large followers attract brands and advertisers to collaborate in social media marketing. As a result, TikTok content creators with many followers have been able to make lucrative incomes through advertising various brands. Therefore, the application has encouraged brand partnerships, enabling creators with many followers to monetise their content. Therefore, TikTok has built a stronger competitive advantage in the United States technological markets because it has emerged alongside unique features from pre-existing social media platforms such as Facebook.
Chosen Country’s Business Environment
A review of TikTok’s operation in the United States indicates that MNEs must bestow much effort to deploy their firm-specific advantages (Miao et al., 2023). Even though TikTok had effective firm-specific advantages such as unique technological features, including creator tools, it experienced a harsh business environment in the United States. According to the study done by Oxford Analytica (2023), by December 2022, 14 states in the United States had banned TikTok from government-issued devices. The study also reported that five other states were in the process of doing so during the period. Oxford Analytica (2023) reported that the states took the approach after citing security concerns endorsed by the director of the FBI. The concern was increasingly becoming bipartisan.
The ban on access to the TikTok application on government devices negatively impacted the execution of the firm-specific advantages of TikTok. Even though the application could have unique and efficient technology, the security concern by the FBI discouraged many users from trusting the privacy and confidentiality of their details. Also, there has been a strained diplomatic relationship between China and the United States. This influenced the two countries to impose business sanctions on foreign companies. According to Yuan (2020), “China-US relations show great differences in terms of public opinions, economic and trade relations after the outbreak of the Covid-19 pandemic” (14). The study reveals that the two countries imposed economic sanctions on foreign companies. Therefore, TikTok experienced stringent trade policies and standards while operating in the US (Ni et al.). That negatively impacted the implementation of its firm-specific advantages.
Entry Mode and Strategy Used in Host Country
TikTok has used many strategies to penetrate the United States market. The company focused on understanding the local audience and enhancing the paradigm of localisation (Fan et al., 2022). The company did market research to understand the behaviors and preferences of local customers. The company determined that there had already been social media platforms such as YouTube that allow content creators to post videos and monetise their content. However, TikTok establishes that many of the social media platforms do not allow content creators to have access to video editing tools that are efficient and easy to use. Therefore, the company established a platform that provides access to tools such as filters and effects.
The company integrated US English and culture into the application to make the application more appealing to American users (Fan et al., 2022). Language is a crucial domain concerning the usability and applicability of social media applications. Because the application has options for North American English, many people in the United States find it more attractive. The application also considers North American culture; therefore, the users find it more appealing than other social media platforms. The company has also partnered with local collaborators in the United States to help it with marketing (Fan et al., 2022). The company has also implemented effective marketing and advertising strategies to reach many potential customers in the United States. The entry strategies helped the company to penetrate the United States technological market.
Conclusion
In conclusion, MNEs experience more challenges in foreign and global markets than in home markets. The challenges revolve around governments` concern about data privacy protection for national security, geopolitical factors, international trade policies, locational advantages, the dynamic nature of emerging markets and the resources required to navigate international markets. However, TikTok has overcome the odds to build a more vital competitive advantage in local and foreign markets. Some potential sources of competitive advantage are an effective and efficient user interface and the platform’s monetisation schemes. Therefore, the operation of TikTok in the United States indicates that MNEs must bestow much effort to build a stronger competitive advantage outside the home market.
References
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