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National culture impact on business
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A Multinational Enterprise’s (MNE) Entry mode is a function of its goals and of the host country’s institutional and market setting. Using a three-level analysis this essay will discuss the determining factors of a firm’s entry mode decision focusing on the trade offs of Joint Ventures, Acquisitions and Greenfield . Methods of entry can be categorized as functions of equity invested by MNEs upon market entry (BarkemaiandiVermeulen,i1998). Joint-Ventures (JV) are joint ownership contracts with a local actor thereby granting access to the market through proxy. Greenfield and Acquisitions are both equity intensive entry modes. Greenfield entails the creation of a new subsidiary, which may either be wholly owned or co-owned by a partner with complementary assets whilst an acquisition is the purchase of a local firm by the MNE thereby allowing it direct access to the host market. 1. COUNTRY DETERMINING FACTORS An MNE’s entry mode is a function of the host’s market institutional setting. Institutions, tasked with the enforcement of property rights and the rule of law, oversees market mechanisms (North,i1990). Yet institutions in emerging markets often fail to promote efficient transactions thereby limiting the ability of firms to acquire necessary inputs through market exchanges (Meyer et al.,i2009). The State’s stance towards FDI will dictate the MNE’s behavior. It may intervene in the market to protect strategic thereby preventing MNEs from entering through Greenfield or acquisition. Oppositely a State may actively seek FDI and leverage their control of the rule of law to grant preferential treatment to foreign firms. Throughout Sakhalin II, the Russian government promoted FDI by reducing tax obligations for Shell, Matsui and Mits... ... middle of paper ... ... 1996. Multinational Enterprise and Economic Analysis. Cambridge University Press. • Hofstede, G., 2003. Culture’s Consequences: Comparing Values, Behaviors, Institutions and Organizations Across Nations, Second Edition. ed. SAGE Publications, Inc, Thousand Oaks, Calif. • Kogut, B., Singh, H., 1988. The Effect of National Culture on the Choice of Entry Mode. J. Int. Bus. Stud. 19, 411–432. • Meyer, K.E., Estrin, S., Bhaumik, S.K., Peng, M.W., 2009. Institutions, resources and entry strategies in emerging economies. Strateg. Manag. J. 30, 61–80. • North, D.C., 1990. Institutions, Institutional Change and Economic Performance. Cambridge University Press, Cambridge ; New York. • Slangen, A., Hennart, J.-F., 2007. Greenfield or acquisition entry: A review of the empirical foreign establishment mode literature. J. Int. Manag. 13, 403–429. doi:10.1016/j.intman.2007.08.001
The rise in globalization over the last few decades has helped facilitate and encourage corporations to expand into international markets. This paper will review the five common international expansion entry modes, and the pros and cons of each method. Finally, my employer is in the technology industry and I will breakdown and recommend which entry mode would work best for international expansion.
Geert Hofstede, Culture’s Consequences: Comparing Values, Behaviors, Institutions, and Organizations Across Nations. Second Edition, Thousand Oaks CA: Sage Publications, 2001
Hofstede, G. (1980). Culture's Consequences: International Differences in Work-Related Values. Beverly Hills, CA: Sage Publications.
A Multinational Corporation (MNC) can be defined as “a single entity that controls and manages group of goal-disparate and geographically dispersed productive subsidiaries” (Triandis and Wasti, 2008, p. 2). Multinational corporations are entities that make Foreign Direct Investment (FDI) and produce added value in countries other than the country in which they are headquartered. One of the key objectives of the MNC is to obtain capital where is it cheapest and to invest FDI and undertake production in areas that yield the highest rates of return (De Beule and Van Den Bulcke, 2009). However, many theories have been advanced to account for the decision-making process that MNCs undertake in relation to FDI. The purpose of this paper is to explain the two main theories – internalization theory and OLI eclectic paradigm theory – and to critique these in relation to some of the other conceptual models that have been advocated.
Cunningham, Lawrence S., and John J. . Reich. Culture and Values. 7th ed. Vol. 1. Belmont, CA: Thomson/Wadsworth, 2006. Print.
Political and legal considerations were given first priority in this analysis with primary emphasis given to whether a country's legal or political system prohibits or impedes foreign investment. If a country's political or legal system discouraged or prevented foreign investment, that country was disqualified from further consideration. Factors considered when assessing the political and legal environment:
The ease with which firms can enter into a new market or industry is a critical variable in the strategic management process. In some industries the barriers to entry are minimal. In oth...
Incorporation of SMEs and International companies to better define, penetrate and gain access to both local and international
Gilpin discussed the MNC’s evolution through the lenses of a number of business economic theories. Using Raymond Vernon’s Product Cycle Theory, the overseas expansion of American companies until the 1960s was shown as a means of preempting foreign competition and preserving monopoly positions, which was possible then because of the wealth and technology gaps that existed between the US and the rest of the world (282-83). Following the closing of such gaps, Dunning and the Reading School’s Eclectic Theory explained the next stage of the MNC’s evolution as propelled by the great leaps made in technology and communication, which made internationalized management both possible and viable (283). Michael Porter’s Strategy Theory, meanwhile, asserted that the MNC is now in the era of strategic management, wherein activities and capabilities spanning borders allow it to “tap into the value chain” in the most advantageous positions (285-85). Gilpin made an interesting point, however, that MNCs are oftentimes the result of market imperfections and unique corporate situations. In many instances, the decision to expand a firm’s operations in another country was a means of circumventing protectionist measures and trade barriers, or simply to curry favor with governments, as practiced by IBM (280...
Multinational enterprise (MNE) is “a company that is headquartered in one country but has operations in one or more other countries” (Rugman and Collinson 2012, p.38) that has at least one office in different countries but centralised home office. These offices coordinate global management in the context of international business. MNEs have increasingly essential influence on the development of the global economy and coordinate with other companies in different business environments. However, there are many issues involved with how MNEs operate well overseas, especially in emerging markets (EMs) (Cavusgil et al., 2013, p.5).
Culture-based behaviors can be placed on a spectrum, individuals do not necessarily fall on one extreme end of the spectrum or another.
The Hofstede model of national culture differences, based on research carried out in the early seventies, is the first major study to receive worldwide attention. This influential model of cultural traits identifies five dimensions of culture that help to explain how and why people from various cultures behave as they do. According to Hofstede (1997) culture is Ù[ collective programming of the mind? This referring to a set of assumptions, beliefs, values and practices that a group of people has condoned as a result of the history of their engagements with one another and their environment over time. In this study, culture refers to a set of core values and behavioural patterns people have due to socialisation to a certain culture. The author̼ theoretical framework will be applied to compare differing management practices in China and the West. The five measurements of culture identified by the author are:
All research fully carried out on Entry nodes on the long run remain limited to large manufacturing firms. The foreign market selection and the choice of its entry modes drastically ascertain the performance of a specific firm. Entry mode can be defined as an arrangement for an organization that is organizing and conducting business in foreign countries like contractual transfers, joint ventures, and wholly owned operations (Anderson, 1997). Internationalization is part of a strategy which is going on for businesses and organizations transfers their operations across the national borders (Melin, 1992). The firm that is planning to have the operations across the border will have to choose the country that they are planning to visit. Anderson (1997) argues that the strategic market entry decisions forms a very important part of an organizational strategy. The decision to go international is part of the internationalization strategy of the firm. Multinational Corporations that desire to have international operations will find the strategy to go international, the mode of entry is very important. Even though there are studies which have shown that the main effect of being pioneers in a market promises superior performance in terms of market share and profitability than the late movers, Luo (1997) and other researchers have found out that the effect of the first mover may be conditional and will depend on the mode of strategy that is used (Isobe, & Montgomery, 2000). There are different strategies that MNCs can use to enter new foreign markets; they include exporting, licensing/franchising, full ownership and joint ventures. The mode of exporting entails a company selling its physical products which are usually manufactured outside the...
"The richly divergent patterns of economic development around the world hinge on the interplay of critical junctures and institutional drift. Existing political and economic institutions - sometimes shaped by a long process of institutional drift and sometimes resulting from divergent responses to prior critical junctures-create the anvil upon which future change will be forged."(109-110) Institutional drift is introduced as an instrument to further explain institutional evolution; used to explain the process of economical change.
There are several external growth methods that entrepreneurs may choose for growing their business which are ‘a merger with’ or ‘acquisition of’ other companies.