Table Of ContentMarioGlowik
MarketEntryStrategies
Mario Glowik
Market Entry Strategies
|
Internationalization Theories, Concepts and Cases
3., completely revised and updated edition
ISBN978-3-11-065067-9
e-ISBN(PDF)978-3-11-065311-3
e-ISBN(EPUB)978-3-11-065313-7
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Introduction
ThisentirelyrevisedandupdatedthirdeditionofMarketEntryStrategiescontinuestocombinetheprofound
explanationofinternationalizationtheoriesandmarketentrystrategyconceptswithreal-lifefirmcases.After
reviewingthereaders’valuablefeedbackfromsuccessfulpreviouseditions,thisversiontargetstoimprove
thereadability.NewfirmcasesofDeliveryHeroandTeslacontributetobroadenthebook’sindustryfocus.
Particularattentionispaidtothecasestudieswhichweredevelopedtoexercisewhatistheoreticallytaught
andexplainedinthetextbookinlightofbusinesspractice.Throughitslinktodigitallearningtools,such
aschartsavailabletothepubliconYouTube,thisneweditionfulfillstherequirementsfordistancelearning
environments.Thereaderfindsintotal10QRcodesinthebookwhichleadtotheonlinepresentationson
YouTube(pleaseinstallQRreaderappatyourelectronicdevice).
Globalbusinesstopicsareexplainedinamannerthatresultsinbetterunderstanding,becausethetheories
areappliedinauthoritativecompanycasestudies.Variousillustrationsandtablesenablecomprehensionof
thepointsbeingdiscussed.
Questionsattheendofeachchapterhelpthereaderreviewthecorecontentofthechaptertopics.Thereview
questionsaresuitablebothforstudents’self-assessmentoftheirunderstandingandforteamexercises.Ques-
tionscanbeassignedeitheraswrittenhomeworkorforclassdiscussionsandpresentations.Thecasestudies
areofdifferentlengths,givinginstructorsflexibilityintermsofthetimingandschedulingofthecontentto
betaughtineachclasssession.
Supportingthebook’spragmaticandgoal-orientedphilosophy,thepublicationistransparentlydividedinto
fourmainchaptersnamely:‘HowtoCombineTheoryandBusinessPractice,’‘InternationalizationTheories,’
‘MarketEntryStrategies,’and‘CaseStudies.’
Chapter 1 introduces and explains the importance of solid theory in academicwork. It describes qualita-
tiveandquantitativeresearchapproaches,aswellasmixed-researchmethods,andcomparestherelevant
strengths andweaknessesofeachmethod.Particularattentionispaidtocasestudymethodsbecausethe
firmcasestudiespresentedinthistextbookprovidethereaderwithawindowtointernationalbusinessre-
ality.Atthesametime,thereadergainsknowledgeofcasestudydesign,whichishelpfulwhendeveloping
herorhisowncasestudies–whetherrequiredatauniversity(e.g.,homework,thesiswriting)orinbusiness
(e.g.,competitoranalysis).
Chapter2isdevotedtothemostimportanttheoriesofinternationalization,includingproductlife-cyclethe-
ory, internalization theory, location theories and the diamond model, E.P.R.G. model, eclectic paradigm
framework,Uppsalamodel,networktheory,andinternationalnewventure(bornglobal)concepts.Someof
thesemodelsaregroundedtoaconsiderableextentinthetransactioncosttheoryandtheresource-based
view,asexplainedandillustratedinthechapteraswell.Whilewritingthispart,Iemphasizedthemaincon-
tentsofthetheories,whichnecessarilyincludesareviewoftheirconceptualweaknesses.
Chapter3startswiththeintroductionoftheterm‘strategy,’combinedwithstrategicplanningtoolslikethe
Ansoffmatrix.Thetextbookcontinueswithadiscussionofrelevantinternationalmarketentrystrategies,in-
cludingexporting,franchising,licensing,contractmanufacturing,internationaljointventures,international
strategicalliances,andforeigndirectinvestment.Eachmarketentrystrategyisdiscussedindepth;thus,the
readerbecomesawareofstrategy-specificadvantagesaswellasthepotentialrisks.Allrelevantstrategies
forenteringaninternationalmarketareexplainedandcategorizedinlightofcrucialdeterminantsrelatedto
managerialdecisionmaking:hierarchicalcontrolofoperations,thefirm’sproximitytotheforeignmarket,
theinvestmentriskoftheselectedinternationalstrategy,andthefactoroftime(marketentryrapidity).
Chapter4containscompanycasestudiesthataredesignedasabasisforpracticeinlightofbusinessreality
whichistaughtinchapterstwoandthree.TheSonycaseservestoapplyimportantelementsoftheresource-
basedviewandhowcrucialfirmresourceschangeovertimeasaresultofstrategicmanagementdecisions.
https://doi.org/10.1515/9783110653113-201
VI | Introduction
Inlightoftheresource-basedview,thecasestudyofPanasonicinvitesthereadertoquestionPanasonic’s
corecompetenceandtodevelopscenariosforthefirm’sbusinessfuture.Thetopicofinstitutionalindustrial
analysisisexercisedagainstthecasestudiesofTeslaandSharp.Bothcasesillustraterapidlychangingtech-
nologicalindustrydynamicsandthephenomenonof‘disruptivetechnology.’ThecaseofTesladescribesa
marketnewcomerwhichis‘takingitschance’throughtechnologicalexpertisecombinedwithnewmarketing
conceptswhicharesuccessfullylaunchedagainstlong-lastingcarindustryincumbents.ThecaseofSharpil-
lustrateshowtechnologicalleadershippositioningislostwhenemergingmarkettrendsarenotconsequently
consideredforthefirm’sstrategydevelopment.
Theemergingphenomenonofdigitalizationanditsimpactonafirm’sinternationalizationstrategies,among
othersfoundintheliteraturewithintheframeworkofinternationalnewventure(or‘bornglobal’)concepts
areillustratedagainstthebackgroundofthecasestudyonDeliveryHero.
ThetheoreticaldiscussionofrelevantmarketentrystrategiescomesalivethroughthecasesstudiesofSam-
sung(strategybuildingandinternationalization),Foxconn(contractmanufacturing),andLGElectronics(in-
ternationaljointventures).
Isincerelythankallthereaders,instructors,scholars,businessexecutives,andmystudents,whocontributed
tovariousimprovementsinthisthirdeditionwiththeirvaluablecomments.IwouldliketothankProfessor
Dr.Jan-ErikVahlne(UniversityofGothenburg)andDr.WaheedA.Bhatti(UniversityofVaasa)forjointlyde-
velopingthecasestudyofDeliveryHero.Forme,itisasincerehonorandprivilegetoworkwithbothofthem.
IthankMartinWiemeyerforhisveryprofessionalexpertisepreparingmyvariousinterviewsinthecourseof
constructingthecasestudyonDeliveryHero.IwouldliketothankMarieSaulforherassistancecollecting
variousfirmdataandforhersupportpreparingthepresentationmaterialforlecturingandteaching.
IsincerelythankDr.StefanGiesenofthepublishingDeGruyterforhisoutstandingsupportmakingthisthird
editionof Market Entry Strategies possible. Fortheir professionalexpertise and ongoing assistanceinthe
courseofrealizingthisthirdeditionofMarketEntryStrategies, Iwholeheartedly thankKathleenHerfurth
andparticularlyMaximilianGeßlofthepublishinghouseDeGruyter.
Berlin,Germany,April2020 MarioGlowik
Contents
Introduction|V
1 HowtoCombineTheoryandBusinessPractice?|1
1.1 AboutTheory|1
1.2 Qualitative,Quantitative,andMixedResearchMethods|2
1.3 CaseStudyAnalysis|4
2 InternationalizationTheories|9
2.1 TheInternationalProductLife-CycleTheory|9
2.1.1 MarketEntryAccordingtotheProductLife-CyclePhase|9
2.1.2 ReviewofVernon’sModel|10
2.2 LocationTheories|11
2.2.1 HistoricalFoundations|11
2.2.2 LocationFactors|12
2.2.3 TheDiamondModel|16
2.2.4 ReviewoftheLocationConcepts|18
2.3 InternalizationTheory|20
2.3.1 TheIssueofTransactionCosts|20
2.3.2 EmergenceofMultinationalEnterprises|22
2.3.3 ReviewofInternalizationTheory|23
2.4 TheE.P.R.G.ModelbyPerlmutter|24
2.5 TheEclecticParadigm|26
2.5.1 AdvantageCategories|26
2.5.2 MarketEntryStrategyAccordingtoAdvantageCategories|27
2.5.3 ReviewoftheEclecticParadigm|28
2.6 TheUppsalaModelofInternationalization|29
2.6.1 IncrementalMarketEntryThroughAccumulatedKnowledge|29
2.6.2 ReviewoftheUppsalamodel|31
2.7 NetworkTheoryofInternationalization|33
2.7.1 Inter-OrganizationalRelationships|33
2.7.2 InterpersonalRelationshipsApproach|40
2.8 SummaryofInternationalizationTheories|52
3 MarketEntryStrategies|65
3.1 AboutStrategyandInternationalization|65
3.2 ForeignMarketEntryStrategies|68
3.2.1 ContractualModesofMarketEntry|68
3.2.2 CooperativeModesofMarketEntry|76
3.2.3 HierarchicalModesofMarketEntry(ForeignDirectInvestment)|80
3.3 DecisionDeterminantsofanInternationalMarketEntry|83
3.3.1 EntryRapidityandProximitytotheMarket|83
3.3.2 DegreeofHierarchicalControlandFinancialRisk|83
3.3.3 ATwo-StepDecisionProcessApproachTowardsanInternationalMarketEntry|84
4 CaseStudies|97
4.1 TheCaseStudyofSony|97
4.1.1 CompanyOrigins(ThePeriodfrom1945untilthe1980s)|97
4.1.2 DiversificationTowardsMovieandEntertainment|98
VIII | Contents
4.1.3 LossofCoreCompetenciesinElectronics|99
4.1.4 AccesstoScreenTechnologyThroughJointVentureNetworks|100
4.1.5 MarketEntryStrategiesforEuropeasPartofaGlobalValueChain|102
4.1.6 EntrepreneurshipandFirmCulture|104
4.1.7 PromisingBusinessDuringtheRecentYears–HowAbouttheFuture?|106
4.2 WhatExactlyisMeantbyPanasonic’s‘CoreBusiness’?|109
4.2.1 CompanyBackground|109
4.2.2 TheMarketattheBeginningofthe21stCentury|110
4.2.3 NewBusinessesIntroduced,OtherBusinessesDisappear|112
4.3 EnvironmentalAnalysisinBusinessPractice:StronginTechnologicalForecasting
butPoorinMarketingImplementation|115
4.4 ThePhenomenonofDisruptiveTechnologiesAppliedintheAutomotiveIndustry:
TheCaseofTeslaInc.|117
4.4.1 DisruptiveTechnologies|117
4.4.2 MissionandVision|118
4.4.3 VerticalIntegration|119
4.4.4 OpportunitiesandChallengesforanIndustryNewcomer|119
4.4.5 AndtheFuture(isBright)?|122
4.5 DeliveryHero:InstantInternationalizationThroughDigitalization|124
4.5.1 LaunchingaNewBusinessConceptandtheRoleoftheFoundingEntrepreneur|124
4.5.2 DigitalTechnologiesandInternationalExpansion|125
4.5.3 FirmOrganizationandCulture|126
4.6 TheCaseStudyofSamsung|131
4.6.1 SamsungManagementPhilosophy–HistoryandToday|131
4.6.2 ConglomerateDiversificationofSamsungGroup|134
4.6.3 TheStrategyofVerticalIntegrationofSamsungElectronics|141
4.6.4 InternationalBusinessExpansion|145
4.7 ContractManufacturing:TheCaseStudyofFoxconn|151
4.8 TheCaseStudyofLGElectronics|154
4.8.1 AbouttheFirm|154
4.8.2 TheFoundationoftheFirstInternationalJointVentureBetweenLGElectronicsandPhilips
NamedLG.PhilipsLCD|155
4.8.3 PhilipsReducesitsStakeinLG.PhilipsLCDandSaysGood-Bye|159
4.8.4 TheFoundationoftheSecondInternationalJointVentureBetweenLGElectronicsandPhilips
NamedLG.PhilipsDisplays–ThisTimeEverythingWillbeBetter?!|159
4.8.5 LG.PhilipsDisplaysGetsaNewName|163
4.8.6 WhatHappenedNexttotheInternationalJointVentureTerminations?|163
4.8.7 AndtheFuture?|164
Index|169
1 How to Combine Theory and Business Practice?
1.1 AboutTheory
‘Thereisnothingmorepracticalthanagoodtheory,’wroteLewin(1952:169).Inotherwords,theoristsshould
developnewideasforunderstandingandconceptualizingachallengingresearchissue,ideasthatmaysug-
gestpotentiallyfruitfulandpracticalavenuesfordealingwiththeissueintherealworld(Vansteenkiste&
Sheldon2006).
Wacker(2008)describesatheoryasasetofconceptualrelationshipsthatmainlycomprisesfourproperties:
definitions,domain,relationshipsandpredictions.Thefirstproperty,‘definitions,’referstoaclearterminol-
ogyanddescriptionofthetargetsubject.‘Domain’meansthatagoodtheoryprovidesgeneralizationsand
abstractionsofthephenomenaobservedinreality.Thethirdproperty,‘relationships,’focusesonthecon-
sistencyoftheentiretheoryandthepossibilityofverifyingthetheory’svariables.Finally,awell-grounded
theoryallowsvaluable’predictions’forthefuture(Wacker2008).
Eisenhardt(1989)definesthedevelopmentoftheoryasacentralactivityinorganizationalresearch.Athe-
oryisdevelopedbycombiningobservationsfromtheliterature,commonsenseandexperience.Thegoalof
explanatory(academic)research,includinginductivetheorybuildingandhypotheticaldeductivetheorytest-
ing,istodevelopanunderstandingofanexistingphenomenonaswellastodeveloptheoreticalexplanations
for,andpredictionsregarding,thephenomenon(Holmström,Ketokivi,&Hameri2009).
Thereareconcernsthatacademicresearchfindingsare,tosomeextent,notusefulforbusinesspractition-
ersbecauseatheorynecessarilyreducesthemultifacetedandcomplexissuesofafirm’senvironmenttoa
generalizedandsimplifiedmodel.
Thus,atheoryprovidesonlylimitedpotentialforspecificrecommendationstomanagers.Thegapbetween
theoryandpracticeisknownastheknowledgetransferproblem.Knowledgetransferisbasedontheassump-
tionthatpracticalknowledge(knowledgeofhowtodothings)inaprofessionaldomainisderived,atleastin
part,fromresearchknowledge(knowledgefromscienceandscholarship)(VandeVen&Johnson2006).Itis
necessarytoreconciletheorybuildingandbusinesspractice,withtheaimofgeneratingtheoryandacademic
researchfindingsthatarerelevantandapplicableinpractice(Anderson,Herriot,&Hodgkinson2001;Slack,
Lewis,&Bates2004).Researchshouldconceptualizeandgeneralizenewdevelopmentsofusetobusiness
practitioners;atthesametime,newknowledgederivedfrompracticeshouldstimulatenewdirectionsforre-
searchandtheorizing(operationalizingtheory).VandeVen(2011)proposesa‘diamondmodel’tolinktheory
withreality,whichsuggestsaprocessof
1. problemformulation,inwhichthephenomenonisgroundedonconcretedetails;
2. developmentandtestingofalternativemodelstoaddresstheresearchquestion;
3. collectionofevidencethatallowscomparingexistingalternativemodels;and
4. communicationandapplicationofthefindingsinwaysthatencouragetheiruse
intherealworld,forexampleinbusinesspractice.
Researchersshouldlocatethemselvesinboththetheoreticalandthepracticalperspectivesintheresearchcy-
cleatdifferenttimes.Theycannotstayfixedineithertheworldofpracticeortheworldoftheory.Researchers
shouldkeepinmindPooleandVandeVen(1989:562),whoarguethat‘evenagoodtheory’isalimitedand
‘fairlyprecisepicture’asitattempts‘tocaptureamultifacetedrealitywithafinite,internallyinconsistent
statement’andis,therefore,essentiallyincomplete.
Thus,thechallengeaddressedbyinternationalbusinessandmanagementresearchistoprofoundlydevelop
aninteractionbetweentheworldofpracticeandtheworldoftheory,ratherthanfocusingoneitheroneof
themalone(Tranfield&Starkey1998).
https://doi.org/10.1515/9783110653113-001
2 | 1 HowtoCombineTheoryandBusinessPractice?
1.2 Qualitative,Quantitative,andMixedResearchMethods
Qualitativeandquantitativeresearchmethodshaveincommonthatresearcherssystematicallycollectand
analyzeempiricaldataandcarefullyexaminethepatternsinit.However,thetwoapproachesdifferinsome
waysthatmainlydependontheresearchsubjectandtheavailabilityofreliableinformationanddata.Qual-
itativeresearchmethodsdescribeandinterpretaresearchobjectifareasonableamountofquantifiabledata
arenotavailableand,therefore,hypothesistestingisimpossible.Themaincircumstancesinwhichqualita-
tiveresearchapproachesarerecommendedare,forexample,whentheresearchsubject
– isnewand,therefore,reliabledatasetsinlargernumbersarenotavailableyet;
– tendstobecomplexandneedstobedescribedindepth;
– isbasedonvariablesthataredifficulttoquantify;and
– requiresananalysisaimedatformulatingspecificrecommendationsinsteadofdeducinggeneralmodels.
Becausequalitativeresearchisusuallydoneinexploratorysettings,thatis,instudyingtopicsthatarenew
tothefieldandhithertounder-researched,itisofvitalimportancetomakesurethesubjectmatteristruly
novelandmeritsattention(Birkinshaw,Brannen,&Tung2011).
Thequalitativeresearcherviewsthesocialphenomenaofcomplexsocialnetworksholistically(Orum,Fea-
gin,&Sjoberg1991).Thisexplainswhyqualitativeresearchstudiesappearbroad,withpanoramicviewsof
anobject,ratherthanasmicro-analyses.Themorecomplex,interactive,andencompassingthenarrative,
themoredesirablequalitativestudyapproachesare.Qualitativeresearchersoftenrelyoninterpretativedata
andapply‘logicinpractice’byfollowinganonlinearresearchpath.‘Logicinpractice’isbasedonanappren-
ticeshipmodelandthesharingofimplicitknowledgeaboutpracticalconcernsandspecificexperiences.The
researchersspeakalanguageofcasesandcontexts(Creswell2009;Neuman2006).
Inheuristicqualitativeresearch,the dataanalysistriesto find similarities– whichhelp withformulating
propositions, researchquestions, andhypotheses – instead ofsimply testing ahypothesis, whichisdone
atlaterstagesofresearchwhenmoreinformationanddatasetsrelevanttothetargetsubjectsareavailable
(Kleining & Witt 2001). Qualitative research methods are particularly well suited to theory development,
whichmeansbothframingastudyintermsoftheexistingdebatesintheliteratureandbeingexplicitabout
whatbodyoftheoriesitisbuildinguponandwhy(Birkinshawetal.2011).
Inordertoexplainoutcomesinparticularcases,qualitativeresearchersthinkaboutthefactorsthatmaybe
causallyrelatedtoaresearchsubject.Thus,withthisapproach,scholarsseektoidentifythemainvariables
(causes)andtheircombinationsthatinfluencetheresearchphenomena(outcomes).Theapproachassumes
thattherearemultiplecausalpaths(equifinality)tothesameoutcome.Researchfindingscanbeformally
expressedthroughBooleanequationssuchasthefollowing.
Outcome(Y)=CausingVariablesA(t1,t2...tn)andB(t1,t2...tn)andC(t1,t2...tn)
Becausethe causingvariables(A and B andC)maychangeover time,itfollows that the researchermust
makeanumberofobservationsovertime.Thismightinvolveaverylongperiodoftime(e.g.,years,decades)
or multiple observations made over a short period (e.g., an hour, a week) of time (t1, t2 ... tn). To say
that A and B and C cause the outcome Y presumes that all other things are equal. In other words, any
temporal variation in Y observable from t1 to tn should be the result of temporal variations in A and B
and C (the causal factors of interest). This ceteris paribus assumption must hold; otherwise, causal ar-
gumentation within a qualitative research project, such as a case study, is impossible (Gerring & McDer-
mott2007).
