Global Strategy Chapter 6 Entering Foreign Markets

Global Strategy 1e Michael Peng Global Strategy Mike W Peng c h a p t e r 6 Copyright © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly acce.

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be scanned, copied or duplicated, or posted to a publicly

accessible website, in whole or in part.

Outline

• Overcoming the liability of foreignness

• A comprehensive model of foreign market entries

• Where to enter?

• When to enter?

• How to enter?

• Debates and extensions

• The savvy strategist

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Overcoming the Liability of

Foreignness

• The Liability of Foreignness - the inherent disadv

antage foreign firms experience in host countries because of their non-native status

• Differences in formal and informal institutions

govern the rules of the game in different

countries

• Foreign firms are often discriminated against

• Foreign firms deploy overwhelming resources

and capabilities to offset the liability of

foreignness

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Understanding the Propensity to

Internationalize

 The size of the firm

 The size of the domestic market

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publicly accessible website, in whole or in part.

Firm Size, Domestic Market Size, and

Propensity to Internationalize

Figure 6.1

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A Comprehensive Model of Foreign Market Entries

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A Comprehensive Model of Foreign Market Entries (cont’d)

 Rivalry

 Entry barriers

 Bargaining power of suppliers

 Bargaining power of buyers

 Substitute products

 Value of firm-specific resources and capabilities

 The rarity of firm-specific assets

 Transaction costs

 Methods of organizing firm-specific resources and capabilities

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A Comprehensive Model of Foreign Market Entries (cont’d)

• Institution-Based Considerations

 Regulatory risks: Obsolescing bargain

 Trade barriers:

requirements, entry modes restrictions)

 Currency risks: Speculation and hedging

• Synthesis - Different considerations may pull the foreign entrant in different directions

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Where to Enter?

Location-Specific Advantages

 Geographical advantages

 Agglomeration - clustering of economic activities

efficiency and innovation

Locations

 Cultural distance - the difference between two cultures

 Institutional distance - comparing the regulatory,

normative, and cognitive institutions

 Two schools of thought: stage models vs strategic goals

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Where to Enter?

Matching Strategic Goals with

Locations

Source: First two columns adapted from J Dunning, 1993, Multinational Enterprises

and the Global Economy (pp 82–83), Reading, MA: Addison-Wesley.

STRATEGIC GOALS LOCATION-SPECIFIC ADVANTAGES ILLUSTRAVTIVE LOCATIONS MENTIONED IN THE TEXT Natural Resource Seeking Possession of natural resources and related

Transport and communication infrastructure

Oil in the Middle East, Russia, and Venezuela

Market Seeking Abundance of strong market demand and

customers willing to pay

IT in Silicon Valley and Bangalore, financial services

in New York and London and aerospace in Russia

STRATEGIC GOALS LOCATION-SPECIFIC ADVANTAGES EXAMPLES IN THE TEXT

Natural Resource Seeking Possession of natural resources and related

Transport and communication infrastructure

Oil in the Middle East, Russia, and Venezuela

Market Seeking Abundance of strong market demand and

customers willing to pay

GM in China

Efficiency Seeking Economies of scale and abundance of

low-cost factors

Manufacturing in China (especially in Shanghai)

Innovation Seeking Abundance of innovative individuals, firms,

and universities

IT in Silicon Valley and Bangalore, telecom in Dallas, and aerospace in Russia

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CULTURAL/INSTITUTIONAL DISTANCES

AND FOREIGN ENTRY LOCATIONS

 Stage model – suggests that firms enter culturally

similar countries first

 Alternative model – highlights the importance of

strategic goals rather than cultures and institutions.

or dissimilarity between regulatory, normative and cognitive institutions of

two countries.

Institutional distance – the extent of similarity

or dissimilarity between regulatory, normative and cognitive institutions of

two countries.

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When to Enter?

• First mover advantages

 Developing proprietary, technological

leadership

 Preempting scarce assets

 Establishing entry barriers

 Becomes the dominant firm

 Opportunity for relationships with key

stakeholders

• Late mover advantages: benefit from first mover investments, experience, and inflexibility

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How to Enter?

Scale of Entry: Commitment and

Experience

 Benefit from a strategic commitment

 Drawbacks of large-scale entries: Limited strategic flexibility and potential huge losses

 Focus on accumulating experience

 “Learning by doing”

 Drawbacks of small-scale entries

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How To Enter?

Modes of Entry: Two Steps

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How To Enter?

• The second step: See the following three slides

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publicly accessible website, in whole or in part.

Modes of Entry: Advantages and Disadvantages

Table 6.3

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Modes of Entry: Advantages and Disadvantages

Table 6.3 (cont’d)

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Debates and Extensions

• Liability versus Asset of Foreignness

 Some foreignness can be an asset (“cool”): the

“country of origin” effect

• Global versus Regional Triad Concentration

Geographic Diversification

 Should MNEs truly globalize?

• Old-line versus emerging multinationals: OLI

versus LLL

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The Savvy Strategist

• Thoroughly understand the dynamism

underlying the industry in a foreign market you are looking into

• Develop overwhelming capabilities to offset the liability of foreignness

• Understand the rules of the game

• Match entries with specific goals

Tiêu đề	Entering Foreign Markets
Tác giả	Mike W.. Peng
Trường học	Cengage Learning
Chuyên ngành	Global Strategy
Thể loại	Textbook
Năm xuất bản	2014
Thành phố	Unknown

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Số trang	22
Dung lượng	2,27 MB