This paper well examines the role of what Multinational Company is and how they enter markets with verity of entry modes. Well look at theories of market entry and Dunning’s theory that can motivate firms to enter new markets, as well using two case studies on entering the Chinese market of Coke-Cola and Foster’s to see if a company should use all the same entry modes to international markets. Multinational Companies
Multinational Companies (MNC’s) are corporations that control interests in production/services in more than one country, operating across borders on a global scale. They usually do this by having offices and/ or factories in host countries that are low economically developed countries (LEDC’s) as they are cheap source of labour and production, and having their headquarters located in their home country. They do this to gain entry to markets, cuts cost, become more competitive and to gain economies of scales and scope. They have both negative effects of, environmental impacts, changing local policies to their needs, expiation of labour and resources and positive effects of economic development, employment and transfers of knowledge and skills (Meyer, 2004).Globalisation has been a driving force of the creation of MNC’s and their needs to conduct business internationally, as it has made the transfer of production and financial factions more efficient and productive, with the advances in technology, transport, and communication bring cheap costs and faster production and transport times, and insistent communication globally. This has bought about the MNC’s being a global company that acts local, that is it has advantages of reducing costs, devilry times, gain economies of scale, increased efficiency, and being able to serve and meet different local market needs (Buckley & Ghauri, 2004). MNC’s can use a lot of different strategies to serve and gain entry into these new international markets. Modes of entry
Pan & Tse (2000) argue that there is hierarchical model for entry modes that is used by managers when selecting to enter a new international market. They compere this model against the levels of resources committed, risk of exposure, level of control, and potential for profit from choosing to export or have fully own subsidiaries to enter the new market. So managers would place all the entry modes into multi-level hierarchical model and define set a few criteria to evaluate the method of entry to all others, and choose the most beneficial and productive mode of entry. In the hierarchical model you break entry modes in non-equity, exporting (under there is direct exporting, indirect exporting, and other), and contractual agreements (Licensing, contacts, franchising, other). The equity based entry modes are equity joint ventures (minority owner, 50%, and majority owner) and wholly owned subsidiary (Greenfield, acquisition, and other). Exporting
Exporting is one of the modes of entry that can be used by MNC’s to conduct their international business functions. Export can be directly where the firm sends the products them self to international market to be consumed, or could be done by indirect exporting where the firm obtains an export agent to sell their goods into a new domestic market internationally (Hill, et al., 2011). After reviewing the case study of Foster’s we can see that they were very successful in using exporting as mode of entry in the South Africa, Pupa New Guinea, Fiji, and Shanghai markets. But after joining the Carlton United Breweries (CUB) they saw that this mode of entry would not suit the needs of the group and Foster’s in entering new markets. As exporting would reduce the risk and costs in doing business into new markets it would also limit the control and market expansion plans of their products (Foster's brews up its Asain Strategy, 2011). Licensing...