International Business Theory and Practice (5Q5Z0047)
Foreign Direct Investment (Samsung)
Assignment deadline: Wednesday 23th January 2013
Foreign Direct Investment
The paper shows how Samsung developed their system for FDI using innovative products, people and substantial investment in R&D, the early policy of export which lead to purchasing of subsidiaries, including the global managerial experience has lead them to become a global market leader, if Samsung continue in the same way, we will see continual growth, with possible focus on BRIC economies to expand the area of investment, it is important that they do thorough research before entering the market and not cause any cultural barriers to the products been accepted, future focus should be on Emerging markets, with continual investment in R&D also innovation in low cost products would facilitate any market entry with a lower end consumer market.
This report shows how Samsung have become a global force through acquisitions, investments and good business management; they began as a small Korean enterprise and over the space of two thirds of a century have become a tour de force in the world of business, the overall topic is to ascertain the methods used by Samsung to undertake FDI and the reasons behind them, in the report it shows a History of Samsung, the methods used and a theoretical understand of how they have become so influential.
The main body of the research has come from Samsung themselves, the corporate website provides all relevant information, including a full history of the company which has helped me to understand the background and reasoning behind FDI that the company instigates, they also have a full list of subsidiaries, with the innovative managerial practices and procedures Samsung implement to expand around the world, for myself to better understand the theoretical background I found pages that explained the way Samsung have implemented procedures and policies that facilitate any type of market entry where ever they wish to implement them. They are a globally recognised brand with a good history and quality products this has helped them take a foot hold in many of the markets they have entered in the last 10 years. Theoretical background
The main theories and concepts that apply to Samsung and the reasons that they undertake FDI are Life cycle theory (Raymond Vernon 1966), Where early in the companies existence it began exporting goods, which has led them to undertake FDI, while the whole time designing new products and modifying existing ones to meet customer demand and competitor products (Appendix 1).
The 5 stage theory (John Dunning 1981).
Stage 1 / Stage2 – Samsung began producing in China in 1991, they had recently expanded their portfolio and they needed a larger cheaper workforce which was, and still is available in china, they dominated their home market and were looking to expand into a global multinational, which was possible through the resources they had procured over 40 years. Stage 3 – Pressure from not only domestic companies but the financial crisis that hit Korea in 1997, even though Samsung continued to grow, they were forced to lose 50.000 employees, and reduce their affiliated companies to 45, these two and very good managerial techniques allowed Samsung to survive this turbulent period. Stage 4 / Stage 5 – The main production facility located abroad in China, with the main focus now on R&D, the implementation of ideas and encouragement of innovation, the strategies Samsung have in place work very well, between 2007 and 2010 they held the number 1 worldwide market share, and are still in the top 5 in world in 2012 (Appendix 2).
The Eclectic paradigm is essential to Samsung and its reasoning behind FDI; the ownership specific advantage shows that they perfectly situated themselves, by procuring raw material; companies, research companies and...
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