Business strategies in unstable institutional environment: Case of BRIC countries

Abstract

The visionary idea of BRIC1 countries and their leading position in the development of globaleconomy, conceived by the leading investment bank Goldman Sachs more than a decade ago, cameunder heavy skepticism. However, what many doubted came true. At the end of 2011 BRIC countriesgenerated approximately 26% of global GDP, and their share in the growth of global GDP was morethan 50%. The impressive growth of BRIC countries has been in large measure due to FDI inflow2.Intensive FDI inflow and economic development have not been followed by improved institutionalefficiency. This article will show that inefficient institutions in BRIC countries have not beendiscouraging to MNCs3, who were predominantly led by the extent and the growth dynamics of themarket. Modifications to business strategies applied in developed countries by MNCs, in order tomanage unstable institutional environment in BRIC countries, will be analyzed. The conclusion isthat the key modification is establishment of strong relationships with local stakeholders, in order forMNCs to gain necessary knowledge of the new business environment and create a sound basis forinstitutional efficiency improvement.