When foreign firms invest in any country through the foreign direct investments (FDI), the local companies may either suffer due to competition or build of the foreign companies’ strategies to boost their market share. Notably, the local companies may cooperate with the foreign firms to become more competitive in the local market. However, in the Middle East, the presence of some multinational companies may have a negative impact on the competition of local firms depending on the industry. For instance, the presence of the United States media giant, MTV in the Middle East continues to disadvantage local firms in the media industry. Using the case study of MTV presence in Saudi Arabia, the paper discusses how the company has influenced local competition in the Middle East.
Before the entry of MTV into the Middle East media market, competition among the local firms was healthy and stiff. There was no local firm that seemed to outcompete others. However, with the entry of MTV the stage of competition would be set on another ladder. The media companies of Saudi Arabia would start to compete on airing the local content that did portray cultural significance to the viewers. Notably, the airing of a content that portrayed the good side of the Arabia culture would place the competition on another platform that caught the media industry in Saudi Arabia unawares. Understanding of cultural pillars is an advantage to the international business firms in a foreign country as Griffen points out. It was a negative effect on competition because the companies would start to compete for new content whose idea came into existence as a result of MTV’s presence in the Middle East.
The cultural content of MTV did affect the competition in the Middle East media because the companies would start to worry about incorporating the new content to compete with each other and to compete MTV. Notably, the media firms would want to borrow insights from MTV and they could not because that would infringe the intellectual property rights of MTV. Although the competition could remain as it was earlier, MTV did bring more music content to the Middle East media. Therefore, it would be arguably correct to point out that the Middle East media was free to either introduce the music content or to continue airing the content it was airing before MTV came into the market.
Mergers of bigger companies may affect competition of firms either positively or negatively. The American companies that move to the Middle East have the positive and negative impacts on the competition after merging with local firms. For instance, MTV collaborated with Arabian Media group to enhance its presence in the Middle East. Being the media giant in Saudi Arabia, the Arabian media was competing favorably with other media houses in Saudi Arabia. However, its collaboration with MTV would affect competition in the media industry making the competition appear as monopolistic Von Ungern-Sternberg suggests. For instance, the collaboration popularized Arabian Media across the Middle East. The other media houses were left with less audience to consume their content. Additionally, the popular Arabian media could easily hire recognized journalists to spearhead its growth after its licensing by MTV. Consequently, the competition shifted from the market share to the media personalities that each media house could afford to hire as Saleh points out. The poaching of the media personalities and journalists by MTV through Arabian media group poses a great disadvantage to other media houses because they cannot compete fully with the media house due to their low capital base. Such a competition that disadvantages other firms in the same industry is dangerous to the existence of the smaller firms within the same industry.
Moreover, the competition may cause other media houses to leave the industry due to lack of audience. Additionally, they may lose market because other companies that want to advertise products will advertise on the media house that has more audience. The exodus of the advertisers from advertising from one media house to another as a result of the presence of an international media house in the market is an indication of unfair completion in the market. Consequently, the competition may either lead to the exit of the local firms or may strengthen them to improve their service delivery to attract more audience thereby leading to more stiff and fair completion within the market. If the competition leads to more affordable and better services, then it is an advantage to the consumer.
Apparently, if the competition leads to the exit of some firms, then it disadvantages the consumers who are loyal to the firms that exit the industry. Notably, the exit of some firms leaves the consumers with little options to make choices of which organization to seek services and the management may worsen the situation if they decide to close down due to completion. Moreover, exiting of some firms may lead to increase in prices for services such as advertising because the firms that dominate the market may consider themselves as offering more special services and thereby charge higher prices for their prices. However, the management of MTV did claim that they did not charge more advertising fee compared to other media houses.
However, the effect of MTV in the media market of the Middle East is not worth to wish away. The licensing of Arabian media by MTV would attract even other investors from other industries to embark on advertising on a new platform that MTV presented. For instance, other American companies operating in the Middle East would invest more in making their services known to the potential customers in the Middle East market. For example, America banks and petroleum firms operating in the Middle East got the platform to advertise and triggered competition in the banking and oil industries respectively. Competition is the oil market was not high before the entry of the media into the Arabian market.The competition came as a result of having the presence of MTV that represented another industry but had effects on other industries and service firms. Thus, MTV extended competition from the media industry to other companies in other industries.
It is noteworthy to consider how competition in other companies did change or expected to change as a result of the presence of MTV in the Middle East. As noted earlier, coming of MTV meant that America companies operating in Saudi Arabia got a platform to market their products. For instance, the Bank of America and oil firms used the MTV platform to showcase their products in the Middle East market. Consequently, the use of MTV platform by the bank of Africa for marketing triggered competition in the banking industry. Companies in the banking industry started introducing new products and service to lure more customers to their side; competition became stiff in the banking sector, and the customers benefitted because they could get a variety of services due to competition. Although some banks felt threatened, the ones that adapted to the competition rose above the ladder to make profits even with the stiff competition.
Therefore, a collaboration between American firms and the Middle East companies may force some firms out of the market. However, some companies may adapt to the competition and tailor make appealing products to the customers thereby making higher profits. The subsidiary industry such as banking may respond to competition in other industries to enhance their services to attract more customers. The response draws competition to the subsidiary sector thereby benefitting the consumer.