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things righter. The more efficient you are at doing the wrong thing, the wronger you become. It is much better to do the right thing wronger than the wrong thing righter. If you do the right thing wronger and correct it, you get better.
Russell Ackoff (1919-2009)
strategies may be wrong for emerging markets. Harvard Business Review, 75(4): 41-51.
for emerging markets as the required institutions may not be present to support this western-world mindset. They suggest that companies must adapt their strategies to fit their institutional context.
Structure
Strategic Decisions
International Strategy
Implementation/ Performance
Learning/Alliances
Source: United Nations, 2003, World Investment Report 2003 (p. 13), New York and Geneva: United Nations.
WSJ: September 15, 2009 Update: Sept 2009: 130 protectionist measures planned For 2009, 90% of goods affected by protectionist measures Ratio of discriminatory vs. liberalizing trade laws is 6:1. Most targeted countries: China, U.S., Japan
Why Go Abroad?
Answers traditionally include: More customers:
Economies of scale Economies of scope.
Reduce the dependence on one country. To replicate the success at home in new settings. Possibly: The answer can be all of the above
INTERNATIONALIZATION: GO or NO GO
Figure 6.1
Figure 6.2
hire individuals from competitors. A regional skilled labor force available to work for different firms. A regional pool of specialized suppliers and buyers.
Source: First two columns adapted from J. Dunning, 1993, Multinational Enterprises and the Global Economy (pp. 8283), Reading, MA: Addison-Wesley.
Table 6.2
identifiable dimensions (such as power distance). Institutional Distance (besides culture) The extent of similarity or dissimilarity between the regulatory, normative, and cognitive institutions of two countries. Firms from common-law countries are more likely to be interested in other common-law countries Colony-colonizer links boost trade by 900%
Why and Where to Enter? Cultural/Institutional Distances and Foreign Entry Locations (contd)
Two schools of thought have emerged:
Stage models: Enter culturally similar countries
during the first stage of internationalization and, as they gain confidence, enter culturally more distant countries in later stages.
Strategic Model: Considerations of strategic goals
such as market and efficiency are more important than cultural/institutional considerations as suggested by stage models.
Source: Adapted from Y. Pan & D. Tse, 2000, The hierarchical model of market entry modes (p. 538), Journal of International Business Studies, 31: 535554.
Figure 6.3
How to Enter?
Scale of Entry: Commitment and Experience
Large-Scale Entries Benefit from a strategic commitment Drawbacks of large-scale entries: Limited
strategic flexibility and potential huge losses Small-scale entries Focus on accumulating experience Learning by doing Drawbacks of small-scale entries
A lack of strong strategic commitment Difficulties in building market share
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Franchising
Licensing
Exporting
RISK
Table 6.4
Institutional level.
Competing considerations for where to enter: natural
resource, market, efficiency, and innovation seeking. Selection between options (trade-offs) will depend on goals and risk acceptance regarding mode of entry.
Entry strategies, even when successful, do not guarantee international success. They are just the beginning. The challenge is to simplify and prioritize.
China. Prepare a 4-5 page analysis of the situation using the questions provided. Learning Objectives: We will learn about an increasingly important arrangement between firms that is more formal than a contract but does not involve buying another firm with some comparison to acquisitions.