Premium Essay

Foreign-Market Entry Strategies in the European Union

In: Business and Management

Submitted By kakaking262
Words 7034
Pages 29
48

Foreign-Market Entry Strategies in the European Union
Kyle Stiegert, Archie Amir Ardalan, and Thomas Marsh
This study utilized intra-firm, socio-cultural, geographical-proximity, and political-stability variables to explain bimodal foreign direct investment (FDI) patterns by agri-food and beverage multinational companies into and within the European Union. A logit framework incorporated a unique-count database of firm-level investment patterns from 1987–1998. The results showed the 1992 structural changes under the Maastricht Treaty increased the probability of wholly owned FDI modes such as greenfields and buyouts. The model also found that past modal strategies of firms, language barriers, and exchange-rate volatility all correctly explained modal investment patterns. The results provide important contributions toward understanding modal investment strategies including the role of macroeconomic changes within a custom union.

A popular way for a firm to secure a business presence in a foreign nation is through foreign direct investment (FDI) in production, marketing, and/or distribution facilities. Formally defined, FDI is an investment in which a multinational enterprise (MNE) acquires a substantial controlling interest in a foreign firm or in some other manner establishes fixed assets on foreign soil. Prior to 1970, multinational operations were often characterized as an exclusively American institution (Erdilek 1985). However, during the 1970s the U.S. shifted from being the largest “home” country to being the largest “host” country. Indeed, post-1960s FDI activities had quickly become far less centralized, with an active exchange of capital assets moving within the “Triad” group (United States, European Union, Japan). Table 1 contains the share of FDI monetary inflows to various regions around the world. The average share of inflow into the EU was...

Similar Documents

Free Essay

Foreign Direct Investment

...FOREIGN DIRECT INVESTMENT – LOCATION ATTRACTIVENESS FOR RETAILING FIRMS IN THE EUROPEAN UNION1 Pervez N. Ghauri Manchester School of Management, UMIST United Kingdom Email: Pervez.Ghauri@umist.ac.uk Ulf Elg Dep. of Business Administration, School of Economics and Mgmt, Lund University, Sweden Email: ulf.elg@fek.lu.se Rudolf R. Sinkovics Manchester School of Management, UMIST United Kingdom Email: Rudolf.Sinkovics@umist.ac.uk 1 The authors would like to thank Handelsbanken’s Research Foundations for financial support. FOREIGN DIRECT INVESTMENT – LOCATION ATTRACTIVENESS FOR RETAILING FIRMS IN THE EUROPEAN UNION Abstract For politicians and country representatives it is becoming more and more important to look into ways to attract Foreign Direct Investments (FDI). Not only are successful location decisions of multinational companies good news for surviving in the political system, but related economic and social development implications necessitate a more comprehensive view on whether there is a race to attract FDI in Europe. And if so, what are its implications on different industries and societies within the EU. This paper focuses on the retailing industry and mandates an understanding of managerial decision making: Why do retailing companies enter particular country markets and what are the factors that determine a country’s attractiveness? A conceptual model is developed to understand the factors, corporate as well as market characteristics, which influence......

Words: 9518 - Pages: 39

Premium Essay

Business Environment

...create a phenomenon coffee not only in Vietnam but also all over the world. Trung Nguyen coffee products and G7 instant coffee has been exported to 43 countries around the world with main markets such as America and China. Moreover, they has also built a network of 1000 stores and distributed G7 across the country. Moreover, they were honored to receive EUREGRAP International Certificate for its cleanliness and excellence in producing and they have also won a lot of prizes and good titles for the company. It makes a lot of people know about their products and brand name, and then they become more popular in the coffee market and can compete to the others. II. Task 1 1a. Explain how market structures in practice deviate from the model of perfect competition. As you know, for a company as successful as today, members in Trung Nguyen coffee company knew that business environment is more or less influenced on it, especially market structure because it promote the development of the company and market economy and it can impact on the behaviours and conducts of firm. Besides, Trung Nguyen also know the features of every single market structure in order to forecast and manage to change in market condition and perfect competition. First of all, we should know all about perfect competition and market structures:...

Words: 3831 - Pages: 16

Free Essay

Ibm Profile

...statement: 4 1.4. Industry Analysis using Porter’s Five Forces Framework 4 CHAPTER 2 7 MARKET ANALYSIS 7 2.1. Market Analysis 7 2.1. Overview of Ukraine: 9 2.2. Key Facts about Ukraine: (source:BBC) 9 2.3. Strategic Analysis of Ukraine Markets 10 2.3.1. Business Environment: 10 2.3.2. PESTEL Framework analysis: 10 2.4. Investing in Ukraine Market 13 2.4.1. Advantages in Investing: 14 2.4.2. Disadvantages (Risk factors) in Investing: 16 CHAPTER 3 17 METRICUM”S MARKET ENTRY STRATEGY 17 3.1. Metricum’s Market Entry Strategy Development 17 3.2. Entry Mode 17 3.3. Timing of Entry 19 3.4. Romania as a route of entry 19 3.5. China as an alternate route of entry 20 CHAPTER 4 21 SKILLS AND KNOWLEDGE DEVELOPMENT 21 CHAPTER 5 22 METRICUM”S GLOBAL STRATEGY 22 CHAPTER 6 23 RECOMMENDATIONS 23 CHAPTER 7 26 CONCLUSION 26 REFERENCES AND BIBLIOGRAPHY 27 APPENDIX 29 CHAPTER 1 INTRODUCTION 1.1. Objective of the Research: Metricum is a well-established small medium enterprise (SME) that manufactures materials handling equipment and intelligent handling solutions. Their international activities are complex with manufacturing bases in Sweden and China and a wholly owned subsidiary in Romania from which they source many of their raw materials. As the process of re-structuring their Romanian operation, they would like to explore market opportunities in some of the less developed former Eastern Bloc countries......

Words: 6128 - Pages: 25

Premium Essay

Ibs Peugeot Invests in Turkey

...the possible strategies that can be used to enter the market. Peugeot started investing globally through a joint venture form of entry into the economy. The organization normally collaborates with a local enterprise to start the business. In this Peugeot has decided to pick Gefco SA as its local partner in Turkey. Gefco SA is expected to manage and complete the following task to facilitate Peugeot in : * Recruitment of staff and identifying qualified individuals * Supplier satisfaction and maintenance * Helping the international firm to identify the regional conditions. Selected advantages of local firms are: * Retention of customer and their satisfaction * Extensive research and development including innovation * Ability to understand the local market * Stability in the firm’s financial position * Motivated and capable workforce Turkey with its intentions to join the European Union has a lot of advantages as it’s an emerging economy and has a lot of competitive advantage, thus Peugeot intends to start a joint venture strategy to achieve a cost advantage. Peugeot uses a very unique strategy known as the differential strategy. This strategy focuses on the use of innovation to achieve competitive advantage. Turkey has very limited users of foreign cars in the market and has an economy with customers that are unknown to foreign cars therefore; Peugeot will be able to achieve a First-Mover Advantages. The turkey market is in its......

Words: 633 - Pages: 3

Premium Essay

Cross-National Cooperation and Agreements

...present different regional trading groups, such as the European Union (EU), the North American Free Trade Agreement (NAFTA), and Asia-Pacific Economic Cooperation (APEC) • To describe the rationale for and success of commodity agreements Chapter Overview Regional economic integration represents a relatively new phenomenon in the history of world trade and investment. Chapter Eight first examines the roles of the General Agreement on Tariffs and Trade and the World Trade Organization in determining the ground rules of the world trade environment. It then introduces the basic types of economic integration and explores the potential effects of the process. Next it examines in detail both the European Union (its structure and its operations) and the North American Free Trade Agreement and briefly describes a variety of other regional economic groups. The chapter concludes with a discussion of various commodity agreements and producer alliances, including the Organization for Petroleum Exporting Countries. Chapter Outline OPENING CASE: TOYOTA IN EUROPE Known for its low-cost, efficient production operations, and with 2004 global sales of approximately 6.78 million units and a net income of more than US $11 billion, Toyota Motor Corp. was not only the world’s third largest manufacturer of automobiles, it was the most profitable of all. Toyota’s goal is to capture a 15 percent share of the global market and become the world’s top producer of...

Words: 5888 - Pages: 24

Premium Essay

The Economic Environment

...Economic Environment This Unit covers the second of the PESTLE elements LEARNING OUTCOMES The application of trade theory to explain the benefits of engaging in International Trade Economic Implications of a country’s membership of a trading bloc for a business Compare the various types of Foreign Direct Investment (FDI) and analyze how they may affect the various countries involved as well as the businesses within these countries INTERNATIONAL TRADE THEORY Four Theories of International Trade are: Absolute Advantage Product Life-cycle Theory New Trade Theory Porter’s determinants of National Competitive Advantage MERCANTILIST THEORY States that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports. Aim is to maximize exports and minimize imports. Rest on the idea that if one country gained, then another must lose. MERCANTILIST THEORY Problems : This theory excludes the fact that in some cases it is good to import. By discouraging import the population will have to do without certain consumer items. ABSOLUTE ADVANTAGE This concept is generally attributed to Adam Smith . Refers to the ability of a country/firm to produce greater output of a good or service than other countries/firms using the same amount of resources. Smith argued that a country should specialize in producing those goods/services for which it has an absolute advantage. Countries would......

Words: 2401 - Pages: 10

Free Essay

Country Risk and Assessment of Moldova

...Introduction Learning Team A, prior to moving forward with plans to expand internationally to the country of Moldova, located in Eastern Europe, will conduct a country risk assessment. Any organization contemplating a business venture into a foreign country could encounter multiple risks. Therefore, prior to embarking on an international expansion, extensive, in-depth research of the target country is a necessity for success in the foreign marketplace. Team A will conduct a risk analysis of Moldova and its winery production and analyze all aspects of risk involved from entry to an exit plan. This paper will also describe the market risks and include a SWOTT analysis of the country. Political, Legal, and Regulatory Risks BDSD will encounter several risks when entering Moldova on a business level. A political risk is the current inability of the country’s parliament to elect a president. The country, divided over the election of leaders, disenchanted with the current leadership, and facing ongoing power struggles with neighboring countries has caused political deadlock. In addition, Moldova faces internal uprisings and tense relations with other nations in the region. If the country does not elect a president this year then the Moldovan Constitution calls for the dissolution of parliament. Dissolving parliament could have the potential to cause an uprising of the population creating an uncertain political forecast for the country (BBC News 2011). The legal risks......

Words: 3807 - Pages: 16

Premium Essay

Country Risk and Strategic Planning Analysis

...Country Risk and Strategic Planning Analysis TSI international consulting is a firm that provides services that support the United States and foreign businesses in globalization operations. TSI consulting international will be entering a 50/50 partnership with Setex consulting international, a Romanian integral investment company that provides tailored expert business services for global and national businesses who wish to extend business to the Romanian market and other foreign countries. TSI international partnerships with Romania will help develop the country's weak rural agricultural infrastructure. By providing 50% of the capital the government will have a vested interest in firm’s success. Our company will provide modern agricultural training techniques and machinery to the rural area citizens of Romania. The bigger strategy will be to drive revenue through export to the Eastern European region and eventually the members of the European Union. As a country that was previously a communist nation the minds of rural citizens will easily buy into the strategy where they see clear authority and a mode to enhance their standard of living. Launching a global joint venture can present a generous amount of risks that require analysis. The potential risks of TSI consulting opening and maintaining a partnership business venture in Romania with global ambitions will be vast and complex. To begin, TSI international will analyze numerous categories of risks ranging from legal to......

Words: 2358 - Pages: 10

Premium Essay

Global Business Today

...Hill University of Washington McGraw-Hill Irwin contents PREFACE xiii PART ONE Chapter One Introduction 4 What Is Globalization? 6 The Globalization of Markets 6 The Globalization of Production 7 The Emergence of Global Institutions 9 Drivers of Globalization 11 Declining Trade and Investmen t Barriers 11 The Role of Technological Change 14 The Changing Demographics of the Global Economy 16 The Changing World Output and World Trade Picture 16 The Changing Foreign Direct Investment Picture 18 The Changing Nature of the Multinational Enterprise 19 The Changing World Order 22 The Global Economy of the Twenty-First Century 23 The Globalization Debate 24 Antiglobalization Protests 24 Globalization, Jobs, and Income 26 Globalization, Labor Policies, and the Environment 28 Globalization and,National Sovereignty 29 Globalization and the World's Poor 30 Managing in the Global Marketplace 31 Key Terms 33 Chapter Summary 33 Critical Thinking and Discussion Questions 34 Research Task 34 Closing Case: Legal Outsourcing 35 Introduction and Overview 2 Globalization 3 PART TWO Chapter Two Country Differences 36 National Differences in Political Economy 37 Opening Case: Ghana: An African Dynamo 37 Introduction 38 Political Systems 39 Collectivism and Individualism 39 Democracy and Totalitarianism 42 Economic Systems 44 Market Economy 44 Command Economy 45 Mixed Economy 45 Legal Systems 46 Different Legal Systems 46 Differences in Contract Law 47 Property Rights and Corruption 48 The......

Words: 2427 - Pages: 10

Premium Essay

Eu Expansion: Accession of Turkey and Its Potential Impact on the Atmosphere Within the Eu

...…………………………………...6 4. Customs Union………………………………………………………………..7 5. Turkish government and the accession of Cyprus in the EU………………8 5.1 Turkey’s short term economic effect on the EU…………………………..9 5.2 Turkey’s territorial advantages for the EU……………………………….10 5.3 Religion and culture in Turkey…………………………………………….11 5.4 Food in Turkey and its safety- Security and the EU……...………………12 6. Impact of EU’s democratic standards to Turkey…………………………..13 7. Conclusion…………………………………………………………………….16 Index of Abbreviations BTC- Baku Tbilisi Ceyhan EEC- European Economic Community EU-European Union EC- European Council EP- European Parliament FAO- Food and agriculture organization SEES-Southeastern European states Introduction Europe - the cradle of human civilization, boiling pot full of many various nationalities, cultures and languages. Geographical borders within and outside of the Europe have changed every time when a new Empires began to flourish. Even now, in the 21st century borders of EU are not defined clearly. Should the Borders be set according to the historical data, geographical location or according to the economical benefits? It is a very controversial topic. How does every additional member of EU affect the economical, political and demographical atmosphere within the EU? In order to find answer to these questions, a lot of historical data has to be analyzed and various economic theories must be considered. European...

Words: 6757 - Pages: 28

Premium Essay

Economic

...Seattle, Washington. Starbucks is the largest coffeehouse company in the world, with 20,891 stores in 62 countries, including 13,279 in the United States, 1,324 in Canada, 989 in Japan, 851 in China, 806 in the United Kingdom, 556 in South Korea, 377 in Mexico, 291 in Taiwan, 206 in the Philippines, 171 in Thailand and 10 in India. Starbucks locations serve hot and cold beverages, whole-bean coffee, microground instant coffee, full-leaf teas, pastries, and snacks. Most stores also sell packaged food items, hot and cold sandwiches, and items such as mugs and tumblers. Starbucks Evenings locations also offer a variety of beers, wines, and appetizers after 4pm. Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company's products are seasonal or specific to the locality of the store. Starbucks-brand ice cream and coffee are also offered at grocery stores. From Starbucks' founding in 1971 in Seattle as a local coffee bean roaster and retailer, the company has expanded rapidly. Since 1987, Starbucks has opened on average two new stores every day. The first store outside the United States or Canada opened in the mid-1990s, and overseas stores now constitute almost one third of Starbucks' stores. The company planned to open a net of 900 new stores outside of the United States in 2009, but has announced 300 store closures in the United States since 2008. [ (Wikipedia) ] Stakeholder Expectation *......

Words: 1138 - Pages: 5

Premium Essay

Acoja; Jca

...Spanish telecommunications in the market. Due to these changes, followed by a sharp reduction in workforce, rapid adaptation of new technologies, and begun to focus in driving up profits and shareholder's value, the Telefonica began to grow and allowed the business to expand globally.   2. Why Telefonica did initially focused on Latin America? Why was it slower to expand in Europe, even though Spain is a member of European Union?   * As Telefonica looking for a growth, they searched first the Latin America and it seemed that the nation is the perfect fit for them because the Latin America also experienced the rapid deregulation and privatization across the region. So, telefonica initially focused on Latin America because the similarities in the development of the market, language and culture. Also, Latin America markets were increasing the adoptation rate and usage not just traditional fixed line telecommunications services, but also include the internet connections and mobile phones.   * Even though Spain is a member of the European Union, the Telefonica had been an implied agreement between the national telecommunication companies that they would not invade each other's market which result for Telefonica to slower their expansion in Europe 3. Telefonica has used acquisitions rather than greenfield ventures, as its entry strategy. Why do you think this has been the case? What are the potential risks associated with this entry strategy?  By firms choosing to use......

Words: 314 - Pages: 2

Premium Essay

Internation Trade

...A-International Trade theory 1-Mercantilism Thomas Mun (17th century) stated that foreign trade was only beneficial if a country “sells more to strangers yearly than we consume of theirs in value” 2-Absolute advantage (1776, Adam Smith) The ability of a country to produce a product with fewer inputs than another country 3-Comparative advantage (1817, David Ricardo) The notion that although a country may produce both products more cheaply than another country, it is relatively better at producing one product than the other 4-Product life cycle theory A product life cycle refers to the time period between the launch of a product into the market till it is finally withdrawn from it. In a nut shell, product life cycle or PLC is an odyssey from new and innovative to old and outdated! This cycle is split into four different stages which encompass the product's journey from its entry to exit from the market. This theory suggest that products pass through a four-stage cycle: 1- Introduction 2- Growth 3- Maturity 4- Decline 5-New trade theory Free trade implies specialization and requires that nations neither artificially limit imports nor artificially promote exports. It suggested that it might benefit countries with an advantage in producing certain goods to initially protect the trade of such goods. By doing so, the economic advantage for the producing company might be more greatly realized, especially in the future. 6-Porter’s determinants of...

Words: 1470 - Pages: 6

Premium Essay

Global Management

...Dimensions of Management * The international management challenges of globalization * Key concepts in the challenges of globalization: Global economy, Globalization, International management, Global manager * Europe- European Union (EU) * The Americas- NAFTA, FTAA * Asia & Pacific * Africa- SADC (South Africa Development Community), ECOWAS (Economic community of West African States) * Forms and opportunities of international business * Reasons for engaging in international business: Profits, Customers, Suppliers, Capital, Labour * Market entry strategies involve the sale of goods or services to foreign markers but do not require expensive investments * Types of market entry strategies: Global sourcing, exporting, importing, licensing agreement, franchising * Direct investment strategies require major capital commitments but create rights of ownership and control over foreign operations * Types of direct investment strategies: Joint ventures, foreign subsidiaries * Criteria for choosing a joint venture partner: Familiarity with your firm’s major business, strong local workforce, future expansion possibilities, strong local market for partner’s own products, good profit potentials, sound financial standing * Complications in the global business environment: Environment is complex, dynamic and highly competitive, global business executives must deal......

Words: 259 - Pages: 2

Premium Essay

Arla Foods

...1. Arla Foods acted upon the abolishment of the milk quota by the European Union. Janus Skot, the senior director of Arla Foods Latin America and the Caribbean (LATAM), was attempting to build a competitive advantage in Latin America because of their milk deficit. Janus was slowly accomplishing his business goals by developing a strategy to work with local partners to integrate into local retail chains. Janus could not do this by himself; he had a team supporting him. Janus received his MBA from Denmark and held many positions in various Danish firms. He began working for Arla as an export manager and after work a few different international positions; he branched off into his own international distribution market known as LATAM. Other European professionals that were well versed in international trade supported him. Beret Jeanette Haven Andersen and Lars Tang Mikkelsen were two of these people. Arla Food has an ethnocentric orientation because they only employed European professionals in the key positions. “An ethnocentric company operates under the assumption that tried and true headquarters’ knowledge and organizational capabilities can be applied in other parts of the world” (Keegan 17). This is seen when Janus hired other European graduates to fill his key positions. They easily filled those positions because they had the proper credentials and educational history that Janus needed. Although the company is mainly ethnocentric, they have an......

Words: 1629 - Pages: 7