Entry into Foreign Market
International Business Environment: ITB305
Professor Ernesto J Saborio
05 May 2013
Entry into Foreign Market
Doing business on your own soil is challenging in itself, let alone in a foreign market. Initially a firm is at a disadvantage due to the liability of foreignness (Peng, 2011). The differences in regulations, languages, cultures, norms, and currency can make simple business transactions very daunting. A firm must do intensive research when embarking on conducting business in the foreign market. They must conduct value chain analysis, external environment analysis and answer the question, “Do we have the capabilities to successfully manage business in a foreign country?” The best practice for a company contemplating expansion into a foreign market is to learn about the culture, norms, religious beliefs, currency exchange and their way of life. Most cases having a local citizen to mediate or teach the company about the culture provide an easier transition and aids in gaining the trust of the local people. Establishing trust or a working relationship with the local people is the first step in becoming successful in a foreign market. Cameron International Corporation
Cameron International Corporation began as Cooper Cameron Corporation in Delaware in 1994. In 2006 the company officially changed its name to Cameron International Corporation (MarketLine, 2012). Cameron International is a supplier of flow control equipment for oil, gas and process industries around the world. The company operates in 300 locations in 50 different countries. Cameron International has done well in the international market. They certainly have the means and capabilities to be successful in any FDI provided the risks are not too great. Risk Factors
There are several risk factors that must be determined before a firm can successfully perform business in the foreign market. Myanmar is rich in resources and a business could prosper if they manage their business effectively. The institutional factors which include the formal (laws, regulations and rules) and informal (norms, cultures and ethics) institutions should be researched thoroughly in Myanmar, to establish a framework for strategic planning.
There are five key business risks associated with doing business in Myanmar: lack of democracy and continued human rights abuses, lack of regulatory and legal protections, child labor, forced labor and environmental risks (Maplecroft, 2012). Based upon these risks a firm would suffer the biggest risk of all, tarnishing their reputation. A company that does business with a country that violates the civil liberties of their people could be detrimental to their future opportunities. The risk involved with doing business in Myanmar seems to outweigh the benefits at this current time. VRIO
VRIO framework analysis focuses on the resource and capabilities of a firm to determine if the prospective business will give them the competitive advantage. VRIO is broken down into four sections: value, rarity, imitability, and organization. Value
Only value-adding resources or capabilities can lead to a firm gaining the competitive advantage (Peng, 2013). Myanmar is rich in oil and gas and they are strategically located between China and India. An entry into this market would allow Cameron International to exploit an opportunity to create value.
Just having a valuable resource or capability may not be enough to gain the advantage. A rare resource or capability that is not common in the industry could be the vital component to gain that competitive advantage over the competitors. In the case of Myanmar the location makes it a rare resource. Imitability
A company’s rare or valuable resources can create a competitive advantage only if it is not easily duplicated by their competitors. A company has tangible or intangible resources of which the tangible resources can be relatively...
Please join StudyMode to read the full document