foreign market entry strategies

Topics: Corporation, International trade, Globalization Pages: 9 (2312 words) Published: November 30, 2013


“Firms which participate in the business system as partners complement the company and its suppliers, thereby increasing the value to customers”. Explain your understanding of this view and provide examples to reinforce your arguments.

For a company, entering new foreign markets may be achieved in a variety of ways. Each of these ways places its unique demands on the company in terms of organizational and financial resources. Most of the times, entering international markets is not a matter of choice but of necessity to remain competitive in new or established markets by meeting the consumer’ needs and values. The decision to go international represents an important commitment, to go into a new line of activity, this being the reason why it should be taken step by step: obtaining information, analyzing them, formulating alternative action plans, (Tookey, 1975) and of course find the right partners that match the company brand image and values.

The international business system model is focused on the advantages determined by the internationalisation process and less on the development process of the internationalisation of companies. The main scope obtained by applying the Uppsala Model is predicting the company’s evolution on foreign markets. Two elements are at the basis of the model: the notion of essentiality attributed to the process and the notion of physical distance. The internationalisation of a multinational company takes place step by step, according to the Uppsala Model, which minimises the risks regarding the new market (Johanson; Wiedersheim-Paul, 1975). Therefore, the company is being involved gradually (investments, control and profit), getting to the point of creating a production subsidiary which ensures also the selling of the products on the new market. The stages of the internationalisation process are presented in Appendix 1.

The concept of physical distance, the second element the Uppsala Model is based upon determines the companies to select, in a first stage, the neighbour countries in order to reduce the cultural, economical, political differences. According to this approach, the bigger the physical distance, the bigger is the incertitude about the new market and bigger the risks associated to this market. In the view of the globalisation phenomena, there are numerous criticisms about the “physical distance” notion. Many papers have developed the subject of the company’s internationalisation; a special place holds J. Birkinshaw who analysed the problems regarding the role of the subsidiaries and the evolution of the mandated in the internationalisation process at the multinational’s level. Therefore, Birkinshaw and Hoods (1998) have shown that creating a subsidiary can be explained on the basis of the interactions between the decisions of the mother-company, the initiatives of the subsidiary and the specific conditions existing on the new market.

The model developed by Birkinshaw (1997) is based on three variables: The relation headquarters – subsidiary; the subsidiary’s initiatives and the local environment. Regarding the internationalisation process, the company has more options (see Appendix 2) The first choice is represented by the development of the existing markets and it is being used by companies that are acting on highly competitive markets; the second choice – the company can choose to develop its activity on new markets, similar to the ones they are already acting on – in this case, they are usually choosing to export their products; the third strategy is developing a new line of products similar to the ones they already have and which will be sold on similar markets- in this case the company can choose between strategic alliances: creating a joint venture or licensing. .

Management’s involvement in export operations is different, as we talk about passive exporters (when selling abroad is induced by the demand existing on the foreign market, meaning that...

References: Tookey, D.A. (1975), Export Marketing Decision, Harmondsworth: Penguin
Johanson; Wiedersheim-Paul, (1975), „The Internationalization of the firm –four Swedish case studies” Journal of Management Studies, vol. 12
Birkinshaw J., Hoods, N. (1998), „Multinational Subsidiary Evolutiona: Capability and charter change in foreign owned subsidiary companies”, the Academy of Management Review, Vol. 23, N. 4, pp. 773 -795
Popa, I. (2006), „Negocierea comerciala internationala”, Editura Economica, Bucharest
Welch, L. (1982) „Decision – making in the international context” in Proceedings of the Seminar on Management Decision-Making, Olso: European Institute for Advanced Studies in Management, June Cho KR, Radmanabhan R. (1995), “Acquisition versus new venture: the choice of foreign establishment mode by Japanese firms”, Journal of International Management (3), pp. 255-285.
Gatignon H, Anderson E. (1988), “The multinational corporation 's degree of control over foreign subsidiaries: an empirical test of a transaction cost explanation”
Journal of Law, Economics and Organization 4, pp. 304-336.
Bradley, Frank (2002), “International marketing strategy”, Prentice Hall
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