Expanding across borders can be a highly beneficial growth strategy for a company. It can find new markets for its products, new sources of raw materials, cheaper labor, or more sophisticated technology. For this reason, increasing numbers of firms are moving out of the confines of their home markets to export products and services, import production factors, and invest abroad to control access to customers or suppliers. Even if managers were not aware that the firm's products could have a market abroad, they may have been contacted by customers or entrepreneurs looking to distribute new products and convinced that the positive prospects in the new country would lead the company toward foreign markets.
However, expansion across borders is also challenging. Success at home does not always result in success abroad, no matter how well liked the products are at home and how desirable they seem to be to customers abroad. Venturing abroad entails serving customers with different preferences, facing new and, in some cases, stronger competitors, and having to deal with cultural, economic, technological, social, legal, and political differences between countries. These will affect the overseas success not only of emerging market multinational corporations (EMNCs) but also of highly successful firms from advanced economies. For example, the US retailer Walmart entered the German market in 1997 but was unable to operate profitably there and decided to exit in 2006. Although Walmart was the largest retailer in the world and had a highly sophisticated logistics system, it could not understand the preferences of German consumers and was unable to counter the strengths of low-cost local competitors. Moreover, failure in the German market was not a unique occurrence for Walmart; it was also unable to understand Korean consumers and had to exit that market as well. And failure abroad was not restricted to Walmart; the first foreign venture of the US retailer Target into Canada in 2013 was also a failure, this time because of difficulties in the management of its supply chain and an inability to face domestic rivals, which led to its exit in 2015.
EMNCs face many of the same challenges as multinational corporations (MNCs) from advanced economies, but they also have to deal with additional challenges that are unique to the conditions of their country of origin and affect not only their operations at home but also their international expansion.