1. Global Strategy Mike W. Peng c h a p t e r 66 Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Global Strategic Management Mike W. Peng Chapter 5 Foreign Market Entries

2. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Overcoming the Liability of Foreignness The Liability of Foreignness - the inherent disadvantage foreign firms experience in host countries because of their non-native status Differences in formal and informal institutions govern the rules of the game in different countries Foreign firms are often discriminated against Foreign firms deploy overwhelming resources and capabilities to offset the liability of foreignness

3. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Firm Size, Domestic Market Size, and Propensity to Internationalize Figure 5.1

4. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A Comprehensive Model of Foreign Market Entries Figure 5.2

5. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Where to Enter? Matching Strategic Goals with Locations Source: First two columns adapted from J. Dunning, 1993, Multinational Enterprises and the Global Economy (pp. 82–83), Reading, MA: Addison-Wesley. STRATEGIC GOALSLOCATION-SPECIFIC ADVANTAGES ILLUSTRAVTIVE LOCATIONS MENTIONED IN THE TEXT Natural Resource SeekingPossession of natural resources and related Transport and communication infrastructure Oil in the Middle East, Russia, and Venezuela Market SeekingAbundance of strong market demand and customers willing to pay Seafood in Japan Efficiency SeekingEconomies of scale and abundance of low-cost factors Manufacturing in China Innovation SeekingAbundance of innovative individuals, firms, and universities IT in Silicon Valley and Bangalore, financial services in New York and London and aerospace in Russia STRATEGIC GOALS LOCATION-SPECIFIC ADVANTAGES EXAMPLES IN THE TEXT Natural Resource Seeking Possession of natural resources and related Transport and communication infrastructure Oil in the Middle East, Russia, and Venezuela Market SeekingAbundance of strong market demand and customers willing to pay GM in China Efficiency SeekingEconomies of scale and abundance of low-cost factors Manufacturing in China (especially in Shanghai) Innovation SeekingAbundance of innovative individuals, firms, and universities IT in Silicon Valley and Bangalore, telecom in Dallas, and aerospace in Russia

6. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. First Mover Advantages and Late Mover Advantages Table 5.2

7. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

8. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. How To Enter? Modes of Entry: Two Steps First step  Strategists must prioritize variables  A decision model is helpful  Non-equity vs equity modes  Level of commitment  Contractual and ownership alternatives Foreign direct investment advantages  Ownership  Location  Internalization

9. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. How To Enter? The second step: See the following four slides

10. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Choice of Entry Modes: A Decision Model Source: Adapted from Y. Pan & D. Tse, 2000, The hierarchical model of market entry modes (p. 538), Journal of International Business Studies, 31: 535–554. Figure 5.3

11. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Modes of Entry: Advantages and Disadvantages Table 5.3

12. Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Modes of Entry: Advantages and Disadvantages Table 5.3 (cont’d)