2

Growth through Geographical

Expansion
INTRODUCTION
ln Cbapter ! we dlscussed bow an organlzatlon can grow ln
exlstlng markets uslng exlstlng products. ln tbls cbapter we dlscuss
bow to grow beyond exlstlng markets, rocuslng on growtb beyond
natlonal terrltorles. lougb tbe dlscusslon stresses transnatlonal
expanslon, most lssues and concepts dlscussed are relevant ror
expanslon beyond exlstlng terrltorles (state or reglon) ror a dlverse
country llke lndla.
|or a company wltb global asplratlons, rorelgn market growtb
strategles sbould be evaluated agalnst domestlc ones. Once a
rorelgn market entry declslon ls made, tbe next step ls to plan tbat
entry. |orelgn market entry strategles lnvolve declslons about tbe
target market (country), entry mode, and control system.
!
le
cbosen entry mode slgnlcantly lmpacts tbe success or entry and
perrormance or lnternatlonal operatlons. le process requlres
awareness or alternatlve modes avallable ror a partlcular product
market comblnatlon and a costbenet analysls or tbe same. le
dlverslty or uncertalntles raced by rms ln rorelgn markets
necessltates tbe balanclng or control and exlblllty ln market entry
declslons. lt ls a declslon wbere managers bave to declde wblcb
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trade-os tbey are ready to make. le uncertalntles raced by rms
ln rorelgn markets demand a balance or control and exlblllty ln
tbelr market entry declslons
z
.
ENTRY MODE OPTIONS
lere are a varlety or market entry strategles avallable to
organlzatlons tbat are expandlng lnto rorelgn markets, wblcb can
be broadly categorlzed as exportlng, llcenslng, jolnt venture or
strateglc alllances, and wbolly owned subsldlary.
Export
Lxportlng ls one or tbe most prererred metbods or enterlng lnto
a rorelgn market, as tbe rlsk and lnvestment lnvolved ls low.
Many geograpblcal markets are not large enougb to set up
manuracturlng operatlons ln tbe rorelgn tbat market. Also, wben
tbe target country markets comprlse several small markets, lt ls
more beneclal to adopt tbe export mode or entry. lere are
several strateglc objectlves wblcb are met by adoptlon or tbe
export optlon or entry.
!
Some or tbese are as rollows. a) tbe
organlzatlon galns economles or scale because or blgber capaclty
utlllzatlon at a slngle locatlon, b) tbe organlzatlon learns to
compete ln tbe new envlronment wltbout mucb lnvestment,
and bence llmlted rlsk, and c) sucb a move may belp tbe
organlzatlon overcome growtb constralnts ln tbe markets ln
tbelr bome country.
Indirect exporting
le optlon or export can be executed dlrectly or dlrectly. lndlrect
export lnvolves lntermedlarles, llke agents or export tradlng
Caow+n +naoucn Crocatrnictt Lxrtnsion !7
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bouses, tbat bave marketlng and dlstrlbutlon capabllltles ln tbe
target country.
|lrms tbat do not bave suclent resources can adopt tbe
optlon or exportlng tbrougb a consortlum. lls ls an optlon
usually adopted by smaller organlzatlons by rormlng export
assoclatlons, wbere eacb member enjoys tbe strengtb or
tbe assoclatlons wblle malntalnlng lts lndependence and ldentlty.
Also, tbls glves tbe smaller organlzatlons access to markets wblcb
would bave remalned beyond tbelr reacb due to resource
constralnts. key reatures or export tbrougb sucb a process are.
A target export reglon ls ldentled f
Organlzatlons wltb complementary capabllltles and resources f
enter lnto an agreement or exportlng jolntly
le consortlum or members ls reglstered and managed as a f
company wltb a board or dlrectors and lts own employees
roducts sucb as bandlcrarts and commodlty products sucb
as rubber, rlce, dry rrult, mangoes, etc. are exported tbrougb
sucb consortlums.
le optlon or lndlrect exportlng can also be executed by
exportlng tbrougb brokers. 8rokers are usually experts ln bandllng
exports to a speclc reglon or country, or speclc product groups.
So, tbe organlzatlon can select tbe broker accordlng to tbelr
expertlse and take due dlllgence on wbo wlll be tbe most
approprlate broker to meet tbe objectlves or tbe organlzatlon.
8rokers sbould be used by organlzatlons tbat are lnrrequent
exporters.
Advantages assoclated wltb lndlrect exportlng are.
le organlzatlon ls able to rocus on lts core competencles f
lt needs low resource commltments and ls a low-rlsk optlon f
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lt provldes a good learnlng experlence ror adoptlon or optlons f
wblcb requlre blgber resource commltments and lnvolve
greater rlsks
Ulsadvantages or lndlrect exportlng are as rollows.
lnadequate attentlon on servlces dellvered, leadlng to long- f
term negatlve lmpact on tbe lmage or tbe organlzatlon
osslblllty or opportunlty loss due to lnsuclent eort or tbe f
agents
Lack or development or rst-band knowledge or tbe export f
market wblcb could bave been galned tbrougb owned
operatlons
Direct exporting
Wben an organlzatlon dlrectly deal wltb tbe customer ln tbe
rorelgn market lt ls consldered as dlrect exportlng. |or dlrect
exportlng, organlzatlons usually set up a company-owned
sales oce (rorelgn sales subsldlary) or lntermedlarles to
manage sales and arter-sales servlce. Organlzatlons wblcb target
long-term growtb rrom a concerned rorelgn market usually set
up a sales oce.
As revenue rrom tbe rorelgn market beglns to rlse, organlzatlons
commlt more resources and take on blgber rlsks. le next pbase
lnvolves wbetber or not to contlnue servlng tbese markets tbrougb
exports or to grow tbrougb lnltlatlon or local manuracturlng.
Licensing
Llcenslng ls a process or cbarglng a ree and}or royalty ror allowlng
a patented tecbnology, trademark, or brand name to be used by
anotber organlzatlon ror a speclc perlod or tlme. lls ls one
Caow+n +naoucn Crocatrnictt Lxrtnsion !9
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metbod or enterlng lnto a rorelgn market wblle commlttlng
llmlted resources. le resources commltted and tbe rlsk lnvolved
ln tbls mode are blgber tban servlng rorelgn markets tbrougb
exports, but less tban tbose requlred ror jolnt ventures, strateglc
alllances, or wbolly owned subsldlarles. Llcenslng terms and perlod
vary wldely across organlzatlons. Llcenslng ls beneclal ror an
organlzatlon wltb llmlted resources ror enterlng lnto rorelgn
markets wltbout maklng lnvestments ror plant and macblnery or
lnrrastructure ror dlstrlbutlon. le pltralls or sucb a mode or
rorelgn market entry are tbat lt results ln llmlted returns ror tbe
llcenser, and tbe llcensee may not glve due attentlon to long-term
market development.
Otber optlons ror rorelgn market entry wblcb lnvolve relatlvely
low commltments or resources and are slmllar to llcenslng are
franchising, contract manufacturing, turnkey projects, and
management contracts.
ln a rrancblslng agreement, tbe rrancblser transrers tbe rlgbt to
use lts brand name, process know-bow, or copyrlgbt to tbe
rrancblsee. lls ls usually more prevalent ln servlce lndustrles sucb
as rast rood, retalllng, educatlon, and botels. McUonalds and
Uomlnos lzza scaled up tbelr lnternatlonal buslness uslng tbls
mode ror expanslon. lls allows tbe rrancblslng organlzatlon
access to local entrepreneurs, tbelr knowledge or local customers
and legal bodles. le rrancblslng organlzatlon sbould also
be carerul tbat product and servlce quallty standards adbere to
tbe norms stated.
Contract manuracturlng ls prererred ln sltuatlons wben tbe
product tecbnology ls wldely known and tbe success or an
organlzatlon ln a rorelgn market ls dependent on tbe marketlng
capabllltles or tbe organlzatlon. Sucb agreements usually are a
long-term relatlonsblps.
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ln a turnkey agreement, tbe contractor takes complete
responslblllty ror a project, rrom conceptuallzatlon to lnstallatlon
and tralnlng or users. Arter commlsslonlng, tbe contractor wlll
bave to operate tbe plant ror a specled duratlon berore bandlng
lt over to tbe cllent. le prlclng or sucb a product ls xed prlce
or cost plus prlclng. Wblle ln tbe rormer tbe contractor bears tbe
rlsk, ln tbe case or tbe later, tbe rlsk ls wltb tbe cllent. lls mode
or entry ls more common ln petrocbemlcals, cbemlcals, power
generatlon, etc.
Management contracts as a mode or entry are used wldely ln
tbe eld or servlces, sucb as botels or prlvately managed bospltals.
lls process lnvolves transrer or management know-bow and
tecbnology rrom one organlzatlon to anotber. lls mode or entry
ls prererred wben scarclty or resources (avallablllty or managerlal
expertlse) or legal burdles dlsallow owned manuracturlng ln a
rorelgn country.
Joint Ventures and Strategic Alliances
A jolnt venture ls tbe creatlon or a separate rm wbose equlty ls
sbared by two or more partners, eacb expectlng dlvldends
proportlonal to tbelr sbareboldlngs.
4
Strateglc alllances are an
arrangement between organlzatlons wbereln tbese organlzatlons
come togetber to rulll a speclc core buslness objectlve. le
alllance may be reglstered as a separate legal entlty, or may be just
a make-sblrt arrangement. le alllance, as an entlty, passes tbrougb
dlerent stages or lts llre cycle, eacb stage ls unlque ln nature, and
so are tbe ractors tbat declde wbetber tbe alllance wlll be able to
address tbe cballenges or tbat stage and pass to tbe next stage or
not. lree major stages (tbe beglnnlng or partner selectlon and
Caow+n +naoucn Crocatrnictt Lxrtnsion z!
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alllance rormatlon, rormatlon or norms and structure or tbe
alllance, and management or tbe alllance) tbat a strateglc alllance
undergoes bave dlerent crltlcal success ractors. low growtb can
be pursued by uslng jolnt ventures and strateglc alllances as a
mode or entry ln rorelgn markets and wbat lssues are to be taken
care or, wlll be dlscussed ln deptb ln Cbapter 7. artners ln jolnt
ventures and strateglc alllances brlng ln complementary resources
and capabllltles. lese requlre mucb larger resource commltments
vls--vls any or tbe entry modes dlscussed earller. Seeds or
dlscontent may develop lr any or tbe assumptlons presupposed
by any or tbe partners durlng tbe due dlllgence pbase go wrong,
or dlscontent may develop as a result or certaln actlons by
a partner.
Wholly owned subsidiary
An organlzatlon asplrlng to be rmly present ln rorelgn markets
can do so tbrougb a wbolly owned subsldlary. lls mode lnvolves
tbe blgbest commltment or resources, and bence lnvolves tbe
blgbest rlsks as well as returns. An organlzatlon may start
operatlons by acqulsltlon or an exlstlng organlzatlon, or any or lts
resources (ractory or brand), or tbrougb greeneld lnvestments.
Wbolly owned subsldlarles glve complete control to tbe
organlzatlon and tbus a potentlal conlct wblcb may arlse ln a
jolnt venture or strateglc alllance ls avolded. Also, tbe potentlal
gap ln eorts wblcb may arlse ln tbe case or exportlng and llcenslng
ls avolded wben an organlzatlon decldes to opt ror tbe wbolly
owned subsldlary mode or entry.
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FACTORS INFLUENCING ENTRY MODE CHOICE
le cbolce or entry mode ls rocused on ractors sucb as market
potentlal, country rlsk, locatlon ramlllarlty, competltlve scenarlo,
transactlon-speclc ractors, as well as strateglc and organlzatlonal
ractors. 8roadly, tbe ractors can be categorlzed as lnternal ractors,
target country ractors, and bome country ractors.

Internal factors
lnternal ractors lnuenclng tbe cbolce or entry mode are rm slze,
product type, avallable resources, global strategy, lnternatlonal
experlence, and management perceptlon.
Firm size: Slze (turnover, number or employees, number or
countrles ln wblcb lt bas a presence, product varlety, etc.) ls a
crltlcal ractor ln tbe cbolce or entry mode. le slze or tbe rm bas
lnuence on several otber ractors dlrectly or lndlrectly and ls
tbererore one or tbe most lmportant ractors lnuenclng tbe cbolce
or entry mode. Larger rms would bave a larger varlety or
dlerentlated products, exlstlng ror a longer perlod or tlme, would
bave excess resources to commlt, capaclty to absorb rlsks, blgber
need ror growtb, and capaclty to ruel tbls growtb. le entry mode
alternatlves avallable to a larger rm are mucb more tban are
avallable to a smaller rm, tbus lt bas tbe ablllty to take
blgber rlsks.
An organizations product portfolio: lls broadly rerers to
tbe capablllty or tbe company to develop dlerent products or
lts exlstlng portrollo or dlerentlated products. roduct-related
ractors sucb as tbe type or product (dlerentlated products,
standard products, servlce-lntenslve products, servlce products,
tecbnology-lntenslve products, low product adaptatlon, and blgb
Caow+n +naoucn Crocatrnictt Lxrtnsion z!
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product adaptatlon) also lnuence tbe cbolce or entry mode.
6

llgbly dlerentlated products wltb dlstlnct advantages over
competltlve products glve sellers tbe advantage or commandlng
a blgber prlce and bence tbey can absorb addltlonal costs or
exportlng and stlll malntaln a slgnlcantly good margln.
An alternatlve vlew ls wben a rm possesses tbe capablllty to
develop dlerentlated products, lt may rlsk loss or long-term
revenues lr lt sbares tbls knowledge wltb bost country rms. ln
sucb cases, tbe blgber control modes may be prererred. lus,
declslon makers need to judge tbelr organlzatlons product deslgn
capabllltles to declde wblcb mode or entry to opt ror.
Availability of resources: le avallablllty or resources (llmlted
or substantlal resources) and tbe level or commltment towards
targeted rorelgn operatlons also may lnuence tbe entry declslon.
le more abundant tbe resources or tbe company related to
management, capltal, tecbnology, productlon skllls, and marketlng,
tbe more numerous lts entry mode optlons. Llmlted resources
constraln tbe optlon to modes wblcb requlre less resource
commltment.
Globalization strategy and internationalization experience
of the rm: le degree or commltment ls also determlned by tbe
lmportance accorded to lnternatlonallzatlon ln a rms corporate
strategy. Wben tbe rm belleves tbat a slgnlcant strateglc control
ln a rorelgn market can belp lt reallze global synergles tben lt may
cboose a mode or entry tbat glves blgber control.
7
lls ls also
lnuenced by any or tbe rms earller successes or rallures ln
lnternatlonal ventures. le degree to wblcb lt bas succeeded or
ralled uslng a partlcular entry mode would declde wbat entry
mode lt would prerer ln lts ruture rorelgn ventures.
Management attitude and perception: Managerlal
perceptlons are also relevant ror tbe assessment or tbe locatlon
advantages or a speclc country.
8
Managerlal perceptlons may
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be dlerent due to varlatlons ln managers past experlences
ln tbat country (and otber countrles), levels or knowledge about
tbat country and lndlvldual blases.
Target country external factors
Wblle evaluatlng tbe external ractors ln servlce or entry mode
strategy, botb tbe target countrys external factors and tbe home
countrys external factors sbould be examlned.
le target countrys external ractors tbat lnuence tbe cbolce
or entry mode are market slze, productlon ractors, macro- and
mlcroeconomlc ractors, soclal ractors, government regulatlon,
avallable market lnrrastructure, locatlon advantage, cultural
dlstance between bome country and bost country. Or tbese
ractors, tbose tbat are crltlcally lmportant are dlscussed below.
Target country market factors: le present or projected slze
or tbe target market ls an lmportant ractor to be consldered wblle
decldlng tbe mode or entry. Small market slze ravours entry modes
tbat bave a low break-even sales volume (agent}dlstrlbutor
exportlng or contractual arrangements). Conversely, markets wltb
blgb sales potentlal can justlry an entry mode wblcb requlres
blgber resource commltments and are more rlsky.
Target country production factors: le quallty, quantlty, and
cost or raw materlals, labour, energy and otber productlon ractors,
as well as cost and quallty or avallable economlc lnrrastructure
(transportatlon, communlcatlon, port racllltles, etc.) also lnuence
tbe cbolce or entry mode.
Target country environmental factors: le polltlcal,
economlc, and soclo-cultural cbaracter or tbe target country can
bave declslve lnuence on tbe entry mode. erbaps most lnuentlal
are government pollcles and regulatlons relatlng to operatlons or
Caow+n +naoucn Crocatrnictt Lxrtnsion z
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rorelgn rms and lnternatlonal buslness wltbln pollcles and
regulatlonslmport pollcles and rorelgn lnvestment pollcles are
crltlcal. le mlcro- and macro-economlc ractors or tbe target
countrys economy, sucb as lts slze (measured by CU), per caplta
lncome, and tbe relatlve lmportance or economlc sectors (as
percentage or CU) must also be consldered berore a cbolce or
entry mode ls made. |avourable dynamlc ractors may justlry entry
modes wltb blgb break-even polnts, even wben tbe current market
slze ls below tbe break-even polnt. lls ls due to expectatlon or
blgb market growtb ln tbe long term.
Cultural distance between home and host country: As tbe
cultural dlstance between tbe bome and bost countrles lncreases,
commlttlng more resources ror entry lnto a new market becomes
rlskler. Cultural dlstance can bave opposlte eects on tbe cbolce
or entry modes. ln sltuatlons or blgb cultural dlstance, wbereln
tbe MNC lacks suclent knowledge to operate on lts own, lt may
rely on a local partner to contrlbute local knowledge and tbus
would prerer a low-control entry mode, sucb as llcenslng or
contractual modes. On tbe otber band, lt may opt ror a blgb-
control mode (tbat ls, wbolly owned subsldlary) as a way or
reduclng dependence on local agents wbose bebavlour may be
dlcult to understand.
Home country external factors
lmportant bome country ractors are market, productlon, and
envlronmental. |lrms operatlng ln larger bome country markets
tend to use equlty modes or entry. Also, rms tbat operate ln more
competltlve envlronments prerer a dlrect lnvestment mode or
entry. Otber bome country ractors wblcb lnuence rorelgn entry
declslon are. a) productlon costs ln tbe bome country relatlve to
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costs ln target rorelgn country, and b) pollcy or tbe bome
government related to export and rorelgn lnvestment by domestlc
rms. lr tbe government oers tax bolldays and slmllar lncentlves
ror exportlng, but at tbe same tlme ls neutral or restrlctlve towards
rorelgn dlrect lnvestment, tbe rms may ravour contractual modes
or entry. le bome country government may bave strlct regulatlons
related to pollutlon or blgber costs ror carbon emlsslons, tbls may
lead tbe rms to lnvest ln manuracturlng racllltles overseas.
Born globals
le vlew tbat an organlzatlon evaluates tbe optlon or lnternatlonal
growtb only wben tbe lnternal market potentlal ls exbaustedor
wben tbe organlzatlon bas galned suclent experlence ln lts bome
countryls no longer sacrosanct. Wltb advances ln tecbnology
and communlcatlon, some organlzatlons are leaplng lnto
lnternatlonal transactlons rrom lnrancy. lese organlzatlons are
termed 8orn Clobals. lls new pbenomenon may be attrlbuted
to lncreaslng globallzatlon, relaxatlon ln restrlctlve regulatlons,
new developments ln transportatlon and communlcatlon
tecbnologles, and tbe growlng number or people wltb lnternatlonal
experlence. A dlstlngulsblng reature or born global organlzatlons
ls an lnternatlonal rocus very early ln tbelr journey (at tlmes rlgbt
rrom lnceptlon), and tbe same belng demonstrated by observable
and slgnlcant commltments or resources (ror example, materlal,
people, nanclng, tlme) ln more tban one natlon. lus, smaller
or newly born organlzatlons need not always walt to galn a rm
rootbold ln a bome country berore evaluatlng growtb optlons ln
lnternatlonal markets.
Caow+n +naoucn Crocatrnictt Lxrtnsion z7
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ILLUSTRATIONS
Illustration 1: Kelloggs entry into the Indian market
kellogg started tbelr operatlons ln tbe Unlted States ln !894, and
by !99, lt was a multlnatlonal company wltb operatlons ln
elgbteen countrles, wltb products avallable ln !60 countrles, and
a turnover or USU7 bllllon.
9
8y tbls tlme, tbe US breakrast cereal
market bad matured, and year-on-year growtb rates were not
movlng beyond slngle dlglts, and were belng consldered as
saturated. Lured by tbe prospect or a bllllon breakrast eaters, lndla
was ldentled as one or tbe potentlal markets or ruture growtb.
le cbanglng, post-llberallzatlon buslness envlronment ln lndla
made lt more buslness rrlendly. kellogg wanted to do tblngs slowly.
lndla was rst consldered as a vltal ruture market ln !986, and a
llalson oce was set up ln Uelbl. Optlons sucb as rormlng a jolnt
venture were evaluated but rejected. |or kellogg, control or
operatlons was more crltlcal and tbererore tbey were ln ravour or
an optlon tbat would provlde tbem more control or lndlan
operatlons. ley were looklng ror at least ! percent control. So,
tbey walted untll sucb an opportunlty arose. ln !99z, tbey galned
permlsslon to set up a ! percent owned subsldlary.
!0
ley planned
to oer tbe balance stake to tbe publlc. lat ldea was later
dropped, and ln !994 tbey got permlsslon to set up a !00 percent
wbolly owned subsldlary. 8ut, bavlng declded to go ror lt alone,
kellogg bad to bulld tblngs rrom scratcb. 8erore tbls, tbe entry or
most consumer product MNCs lnto tbe lndlan marketsucb as
tbat or rocter 8 Camble and Uuracellbad been tbrougb jolnt
ventures to leverage tbe dlstrlbutlon capabllltles or tbe lndlan
partner. lere were several teetblng problems tbat kellogg raced
ln tbe lnltlal years. Later, kellogg dld almost everytblng tbat any
best books on lnternatlonal marketlng would suggest to bulld
Strategies for Growth.indd 28 10/6/2010 5:14:18 PM
brand kellogg ln lndla, but tbey posslbly could not understand
lndlan rood bablts and tbe psycbology or lndlan bomemakers. lt
ls dlcult to ldentlry wbat speclcally went wrong, but posslbly,
an lndlan partner could bave belped kellogg understand
consumers better tban wbat tbey dld by tbemselves
!!
. Movlng ln
as a subsldlary, expectlng to repeat tbe western world success
story ln lndla, overlooklng tbe cultural roots and bablts
assoclated wltb tradltlonal breakrast ln lndla, was posslbly not tbe
best strategy.
Illustration 2: Nike, Inc.s entry into India through
Licensing
Nlke, a major global player ln sports, tness, sboes, and otber
accessorles declded to enter lnto lndla ln tbe mld-!990s tbrougb
an excluslve llcenslng arrangement wltb Slera lndustrlal Lnterprlse
rlvate Llmlted (SlLL). Nlke was to recelve royaltles, wblcb was
a certaln percent or lts net sales revenue. Nlkes marketlng objectlve
was to tap tbe lndlan sports-and-tness sboe market7 mllllon
palrs or sboes. Nlke posltloned ltselr ln tbe premlum nlcbe
segment. katber tban crlcket, tbe rocus was on basketball and
tennls. le perrormance or Nlke ln lndla was not rar below
expectatlons. lls allowed tbe company to cbange lts plan rrom
!00 percent lmports to locallzatlon or tbe product. lls also made
tbe product more aordable. Ulstrlbutlon company-owned and
rrancblse-operated sbowrooms opened. Larller, 8ata sbowrooms
were tbe only cbannels or dlstrlbutlon. Uurlng tbls perlod, sales
were underperrormlng and Nlkes exposure was mlnlmal, as lt was
operatlng tbougb a llcensee. Later ln tbe year z004, once
!z
tbe
company bad

acbleved suclent strongbold ln tbe lndlan market
and bad some lnslgbts on bow to operate ln lndla, lt dld not renew
Caow+n +naoucn Crocatrnictt Lxrtnsion z9
Strategies for Growth.indd 29 10/6/2010 5:14:18 PM
S+at+rcirs roa Caow+n !0
tbe agreement wltb Slera and became a subsldlary.
!!
Crltlcs belleve
tbat because or cbooslng llcenslng as a mode or entry Nlke took
mucb more tlme to adapt to tbe needs or lndlan consumers vls-
-vls lts competltor keebok.
Illustration 3: Bridgestone sentry into India through
a Joint venture with ACC Ltd
8rldgestone, tbe largest rubber and tyre company ln tbe world,
lncorporated ln apan ln !9!!, entered lndla ln !996. le
organlzatlon cbose to set up a jolnt venture wltb ACC Llmlted.
8rldgestone bad 64 percent boldlngs ln tbe jolnt venture, wblcb
rocused solely on radlal tyres ror passenger cars. le jolnt venture
was able to get OLM status ror all lundyal and Matlz cars ln lts
rst year or operatlons. Cettlng tbe same status rrom otber car
manuracturers was part or tbe ruture growtb plan.
!4
le experlence
and contacts or 8rldgestone belped tbe jolnt venture ln gettlng
new contracts. Currently, 8rldgestone enjoys OLM status ror
most or tbe major automoblle manuractures operatlng ln lndla.
Usual pollcy ror 8rldgestones lnternatlonal market entry was a
!00 percent wbolly owned subsldlary. 8ut tbe lndlan market was
culturally dlerent rrom otbers lt already knew. So 8rldgestone
declded to enter lndla as a jolnt venture to benet rrom partners
knowledge or tbe lndlan market. Later lt transrormed lnto a wbolly
owned subsldlary.
CONCLUSION
lus, we observe tbat at one extreme, an organlzatlon can
lnternatlonallze operatlons and perrorm all runctlons ltselr by
establlsblng a subsldlary. At tbe otber extreme, lt may opt not to
Strategies for Growth.indd 30 10/6/2010 5:14:18 PM
perrorm any or tbese runctlons ln a rorelgn market, but to export
tbrougb tblrd-party dlstrlbutors, savlng on asset costs ln tbe bost
country and tbus reduclng rlsks. A rm may also opt to use
lntermedlate optlons sucb as llcensed manuracturlng, lnternatlonal
jolnt ventures or strateglc alllances. Cenerally, a rms entry mode
cbolces are determlned by resource avallablllty and tbe need ror
control.
!
kesource avallablllty rerers to tbe nanclal and managerlal
capaclty or a rm ror servlng a partlcular rorelgn market. Control
rerers to a rms need to lnuence systems, metbods, and declslons
ln a rorelgn market.
!6
Control ls deslrable to lmprove a rms
competltlve posltlon and maxlmlze tbe returns on lts assets and
skllls. llgber operatlonal control results rrom bavlng a greater
ownersblp ln tbe rorelgn venture. lowever, rlsks are also llkely to
be blgber due to tbe assumptlon or responslblllty ror declslon-
maklng and a blgber commltment or resources. Lntry mode
cbolces are orten a compromlse between tbese attrlbutes. le
exportlng mode ls a low resource commltment (lnvestment) and
consequently, a low rlskreturn alternatlve. lls mode, wblle
provldlng tbe rm wltb operatlonal control, lacks ln provldlng
marketlng control tbat may be essentlal ror market-seeklng rms.
le owned venture, on tbe otber band, ls a blg lnvestment and
consequently, a blgb rlskreturn alternatlve tbat also provldes a
blgb degree or control to tbe lnvestlng rm. le jolnt venture
requlres relatlvely lower lnvestment and bence lnvolves rlsk, return,
and control proportlonate to tbe extent or equlty partlclpatlon
or tbe lnvestlng rm. |lnally, tbe llcenslng optlon ls a low lnvestment
(low compared to owned ventures or jolnt ventures), low rlsk
return alternatlve wblcb provldes lower control (low compared
to owned ventures or jolnt ventures but blgber tban export
optlon) to tbe llcenslng rm.
!7

Caow+n +naoucn Crocatrnictt Lxrtnsion !!
Strategies for Growth.indd 31 10/6/2010 5:14:18 PM
S+at+rcirs roa Caow+n !z
NOTES
!. koot, |.k. (!977). Entry Strategies for Foreign Markets: From Domestic
to International Business. New York. Amacom.
z. koot, |.k. (!994). Entry Strategies for International Markets. New York.
Lexlngton 8ooks.
!. Cbaudburl, S. and Uas, k. (z00!). Entry Strategies and Growth in
Foreign Markets: Text and Cases in the Indian Context. New Uelbl.
Oxrord Unlverslty ress.
4. Contractor |.. and Lorange, . (!988). Cooperative Strategies in
International Business. Lexlngton. Lexlngton 8ooks.
. le dlscusslon ln tbls sectlon bas drawn beavlly rrom a worklng
paper or Sabyasacbl Slnba (z009) (doctoral student, llM Abmedabad),
tltled |actors tbat lnuence |orelgn Market Lntry Mode Strategy.
6. Cbaudburl and Uas (z00!).
7. 1aylor, C.k., 7ou, S., and Osland, C.L. (z000). |orelgn Market Lntry
Strategy or apanese MNCs, International Journal of Marketing Review,
!7 (z), pp. !466!.
8. Mlles, k.L., Snow, C.C., and Meyer, A.U. (!978). Organization Strategy,
Structure and Process. New York. McCraw llll.
9. Cbaudburl and Uas (z00!), pp. 799z.
!0. Cbaudburl and Uas (z00!).
!!. ketrleved rrom bttp.}}www.rtpress.com}artlcles}artlcle.aspx:p
=!0!888seqNum=!, dated !0 August z0!0. ketrleved rrom bttp.}}
communlcatlons.webalne.com}z009}09}!4}brandlng-mlsbaps-
kellogs-lndla-menture-a-jallure}z8 August z0!0.
!z. Cbaudburl and Uas (z00!), pp. zz!4. ketrlved bttp.}}www.redl.
com}moneyz006}nov}!4spec!.btm dated z8

August z0!0. ketrleved
rrom bttp.}}www.nanclalexpress.com}new}brldgestonebasbelped-
lndlrasterradlstlonondlanmarket}747z4}0. on z8

August z0!0
!!. ketrleved rrom bttp.}}www.redl.com}money}z006}nov}!4spec!.
btm on z8 August z0!0.
Strategies for Growth.indd 32 10/6/2010 5:14:18 PM
!4. ketrleved rrom bttp.}}www.nanclalexpress.com}news}brldgeston
ebasbelpedlnrrasterradlallsatlonondlanmarket}747z4}0 on z8
August z0!0.
!. Stoprord, .M. and Wells, L.1. (!97z). Managing the Multinational
Enterprise. New York. 8aslc 8ooks.
!6. Anderson, L. and Catlgnon, l. (!986). Modes or |orelgn Lntry. A
1ransactlon Cost Analysls and roposltlons, Journal of International
Business Studies, !7(!), pp. !z6.
!7. Cbaudburl and Uas (z00!), pp. zz4.
Caow+n +naoucn Crocatrnictt Lxrtnsion !!
Strategies for Growth.indd 33 10/6/2010 5:14:18 PM