Introduction
Strategies should be made in order to survive, most especially in the times of challenges and competitiveness available due the globalization. Uncertainties make the business environment even more complex. The challenges that are tangled in the influence of internationalization are continuously plaguing most of the organizations that are too much confident in creating profits. However, the expansion and market entry of the organizations can be more intriguing since the involved issue in the success of a market entry.
Advantages of MNEs
Multinational companies have various advantages because of their resources and abilities of people in performing within the workplace. In this case, there is a great possibility for the MNEs in the exploitation of their resources. Even the human capital will experience the changes in their workplace because of the raw materials, experience, and processes of information. The nature of the organization is also placed in critical level when it is placed under the pressure of foreign market and falls on the acquisition or Greenfield investment decisions (Ruiz and Mas, 2003). The expansion and target on the foreign market is increasingly popular among the business leaders across the globe which heightens the competition (Permiakova, 2008). It is advised that MNEs should properly choose the easy access and create s sound decision involving the three factors to be success in their entry in market: knowledge, location, and endeavor (Bhaumik and Gelb, 2003).
Modes of Entry
There are various approaches towards the entry of an organization particularly in foreign country. The international production and foreign direct investment (FDI) made such as great influence in boosting the business industries, and because of the benefits gained from the globalization, the corporate leaders are ready to set the sail on other destination. There is no such standard theory on the multinational enterprise when they already face the challenge of internationalization. But because of the complex nature that is engaged with the organizations, there are two popular options emerges in the decision for market entry and its either Greenfield investment or acquisitions (Görg, 1998; Ruiz and Mas, 2003).
In the analysis of the economists, the market entry of either small and medium enterprises (SME) or multinational enterprises (MNE) in foreign and are both challenging and must based on the internationalization theory (Zhao and Decker, 2004). There are many options available like the exporting, franchising, subcontracting, joint-ventures or FDI strategy. But entering in a foreign is a “no joke” opportunity where the business should expect the risks. Facilitating the foreign firms’ production and facilities abroad can definitely exploit the production, resources, or costs as compared with the home country (Görg, 1998).
Market Entry Strategies
MNEs assume that the foreign market will serve a good strategy to improve the business performance. The market entry strategy plans to leverage on the competitive assets such as brand names, managers, and suppliers of marketing services. A more experienced international company can advantageously find ways of adapting to local market conditions, including new locally-oriented brands, distribution channels, and new packaging and pricing. The business expansion strategy of the MNEs explains the relationship of the firms with the foreign government regulations and policies. However, the market entry and strategies still poses threats and challenges particularly in the operation of the organization. There are various reasons that lies in the action of the market. Commonly, the first objective of the MNEs in establishing the business in international markets is through increasing the commitment with the unsaturated markets. And to continue the entry, companies follow the strategies made by the other successful MNEs. Still, the choice of the modes of market entry should be assessed by the level of risk-control or the trade-off the company desires (Dhar, 2006).
Greenfield Investment vs. Acquisitions
Many companies choose this kind of action because of the specific advantages that it can deliver. It wishes to exploit abroad are identified to be difficult to separate from the company’s organization and are intrinsic to its workforce. Meaning, there is an assurance that the control is present. Meanwhile the acquisitions are defined to be the most critical way to enter in a market. It is almost impossible to develop the short-term goal and there is a great need to gain additional resource to cover the other losses and satisfy other needs. According to the expertise of the multinational leaders, the Greenfield investment is a great opportunity because of the fact that it can deliver the sough after international advantages through the routines and organizational practices the leaders can freely crafted (Ruiz and Mas, 2003).
References:
Bhaumik, S.K., & Gelb, S., (2003) “Determinants of MNC's Mode of Entry into an Emerging Market: Some Evidence from Egypt and South Africa”, Accessed 18 June 2010, from http://www.research4development.info/PDF/Outputs/CNEM/drc13.pdf
Dhar, S., (2006) “Case Studies on Market Entry Strategies – Vol. I”, The Institute of Chartered Financial Analysts of India, Accessed 18 June 2010, from http://www.ibscdc.org/businesscasebooks-pdfs/Market%20Entry%20Strategies%20Vol.%20I.pdf
Görg, H., (1998) “Analyzing Foreign Market Entry: The Choice between Greenfield Investment and Acquisitions”, Accessed 18 June 2010, from http://www.econstor.eu/bitstream/10419/1282/1/258189940.pdf
Permiakova, E., (2008) “Russian Market Entry Strategies of Multinational FMCG Companies (Taking Campbell Soup Company as an Example)”, Accessed 18 June 2010, from http://www.edamba.eu/userfiles/Permiakova.pdf
Ruiz, F., & Mas, F.J., (2003) “Spanish Company Foreign Market Entry”, Accessed 18 June 2010, from http://www.ivie.es/downloads/docs/03/wpec-10.pdf
Zhao, X., & Decker, R., (2004) “SMEs’ Choice of Foreign Market Entry Mode: A Normative Approach”, International Journal of Business and Economics, 3(3), Accessed 18 June 2010, from http://www.ijbe.org/table%20of%20content/pdf/vol3-3/vol3-3-01.pdf
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