The Competitive Dynamic Multinational Enterprise: Mode Of Entry And Performance

Factors Influencing Mode of Entry for MNEs

What Is The Competitive Dynamic Multinational Enterprise.

International business transactions are associated with varied societal value systems over different national borders. After a business settles for the decision of foreign market entry, the element of the culture of the host country comes into play. Besides this, other aspects such as technology are also considered and the influence that the MNE has on the market performance within the host country. The general outlook of the host country will always influence the decision that the organization makes regarding its mode of entry. The presented topic is worth researching since it provides an insight about how MNEs can utilised their local assets as resources to obtain a competitive advantage in the new international market. Having in mind that the firm is seeking to expand into a new international market for the first time, settling for the most appropriate mode of entry is regarded as the most important factor of consideration in that it is directly linked to the survival and competitiveness of the business within the new destination. The presented research topic is important to policy makers since it outlines the most favourable forms of market entry modes based on the international location.

The research on the entry mode of MNEs and how it is perceived in the host country has developed over the years. The presented factor is evident as researchers are continually expanding their research on the entry mode decisions which is important for organizations which seeks to expand their operations to new destinations (Blomkvist, Kappen & Zander, 2010). Even though organisations lack clear tools which may guide them in making informed decisions about the right mode of international market entry, the management can rely on other factors which ensures that they only make informed decisions about the appropriate modes which may benefit the firms (Parboteeah & Cullen, 2017). Normative merit related with a proposed theoretical model is an example of a factor that managers can consider establishing prescriptive models which guides their informed decisions about the appropriate model of international market entry (Brouthers, 2012). Research suggests that the potential destination that a firm opts to expand into as well as its diversity and scope will have a significant impact on the next step of internationalisation that a firm seeks to employ (Brouthers, 2012).

Demirbag, McGuinness and Altay (2010), showed that the managers of the firms seeking to expand internationally can now rely on an integrated risk management framework which would guide them when it comes to making an informed decision about the perceptions of the environmental uncertainty when it comes to making decisions about the most effective mode of international market entry (Brouthers, 2012). The presented factor stems from the notion that economic dynamics of an organisation is likely to improve when it expands its operations on an international spectrum to benefit from a globalised world economy. Joint ventures have been established as one of the most effective forms of international market entry in comparison to the establishment of wholly owned subsidiary (Demirbag et al., 2010). The presented factor suggests that firms are more aware of the best form of market entry to consider when entering destinations such as the Central Asian Republics even though there are no tools which are directly associated with the task of monitoring the benefits related to the use of other tools. The mode of entry that firms choose will always be perceived by the host country as a factor, which drives the firm’s competitiveness in the new market.

Market Entry Modes for MNEs

The development of internet and internet technology has enhanced the rate at which organisations are entering new markets. However, the presented framework has prompted organisations to establish a new platform, which it is continually relying on entering new markets such as in the case of Amazon’s entry into the Australian market. The e-commerce strategy of market entry has worked in favour of the presented organisation by enhancing the process at which the organization ventures in the presented destination. Within the Australian market, it is true that the mode of market entry that the firm settles for will always determine the ability of the organization to administer its intended services. Globalisation provides an indication that firms have a great opportunity, which drives them to perform their business within a foreign market (Buckley & Casson, 2010). Various studies show that eclectic paradigm has managed to retain its power over the years, making it a robust framework, which examines specific theories such as the foreign direct investment as well as production in the international market (Buckley & Casson, 2010).

Even though theories of international market entry can be applied within the concept of international service firms, there is need for the presented factor to be carried out with great caution. The presented fact stems from the notion that the service features that the firms offer in the international market are distinctive in nature (Hennart, 2009). Additionally, under the presented globalisation trend, the development of the internet and the internet technology has enhanced the operations efficiency of firms while intensifying competition such as in Amazon’s case where the internet has enabled its entry into the Australian market (Schu, Morschett & Swoboda, 2016). The presented factor indicates that the e-commerce strategy adopted by the firm has enhanced its ability to expand its business scope as well as the tension of the competition while forcing the firm to go beyond its traditional businesses (Demirbag et al, 2010).

The entry mode strategies employed by businesses to enter the international market destinations are highly important in increasing the service operability of the business in various ways (Papanastassiou, 1997). For instance, Amazon has established a desirable way of overcoming the existing environmental barriers, which are likely to affect the firm’s ability to expand internationally (Zekos, 2003). Through the internet, Amazon has still managed to obtain a positive perception in Australia, based on its e-commerce features. The presented characteristics has allowed the business to engage in a process of communicating and interacting with the consumers even in a dispersed market at varied stages of buying (Johanson & Vahlne, 1977). The competitiveness of the organisation in the presented potential destination is enhanced since the mode of international market entry has significantly contributed towards bringing the experiences of the consumers together despite their location. Additionally, the entry mode has also enhanced the ability of the firm to exchange service and production details while communicating with customers in different environments despite their different buying stages.

Effects of Host Country Institutions on MNEs

The ecommerce strategy is also regarded as an effective strategy of market entry, which allows service firms to extend their operability to different foreign organisations (Zeng & Glaister, 2015). Based on the service characteristics that an organisation is directly involved with the e-commerce strategy of entry is regarded as the most desirable one for consideration for most firms. The e-commerce mode of international market entry embraced by Amazon to enter the international market has played a significant role in bring the experiences of the customer together (Dunning, 2001). Apparently, the strategy enables the customers to understand the type of products offered by the company to the Australian market. Additionally, the strategy also aims in promoting the quality of its products to the consumers as well as effectively coordinates its marketing functions. The presented aspect stems from the notion that the firm has the capability of marketing its brand over the online platform thanks to the mode of entry that the organization settled for to enter the international market.

Through the exploration of the e-commerce as a strategy, which can be effectively adopted by international firms, the chosen strategy for international market entry determines the success of the organisation in the industry. The selection of the right mode of international market entry is important for an organisation since it provides a description of the success rate of the firm in the international environment based on the advantages, which the business can explore in the presented case. The use of e-commerce strategy of international market entry is considered as an effective mode of entry for service firms such as Amazon because of various factors. For instance, the presented strategy is considered as effective since it enables the firm to enjoy the distinctive features, which comes along with the chosen mode of entry such as the concept of timeliness and the ability to engage in a virtual form of communication.

The mode of entry is an important factor of consideration for any organization, which seeks to expand on an international spectrum. However, the mode of choice of international market entry should be considered in that they directly influence the rate at which the host country will perceive the firm especially when it comes to the ability of the organisation to remain competitive in the industry (Rathert, 2016). Looking in the case of Amazon in Amazon’s entry into the Australian market, it is clear that the choice of entry is directly related with the general performance of the organisation in the new market.

Strategies of Legitimations and CSR Policies of MNEs

The service characteristics of an organization will always provide an indication whether the chosen e-commerce strategy will serve the mission and purpose of the organization on the international market. Apparently, the culture of the host country is an important consideration in this case since the strategy will imply if the firm will easily adopt to the noticeable differences for it to be successful and effective in the industry (Dikova & van Witteloostuijn, 2007). Apparently, the way services of an organisation are marketed will always provide a reflection of the nature of the values of the society.

Lack of appropriate tools with a capability of measuring the effectiveness of the different modes of market entry is one of the research gaps evident under the presented topic. Even though organisations have established similar techniques which guides them in making informed decisions about international market entry modes, it is evident that a gap still exists on the appropriate tools which can be considered by firms to gauge the direct economic impact of various modes of international market entry.  Additionally, it is also clear that the existing research has failed to explore the existing relationship between service intangibility, cultural aspects, and the e-commerce entry strategy.

There is need to explore and identify the most effective tools which can be used in gauging the effective modes of market entry. In addition, there is need to explore the existing relationship between service intangibility, e-commerce entry strategy and cultural aspects from the perspective of the service recipients and providers. Having knowledge of the presented factors would play a vital role in eliminating the problems noted in research as well as the existing gaps to ensure that the members of the firms seeking to expand internationally can make informed decisions on the presented issue for a successful performance.

References

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Brouthers, K. (2012). A retrospective on: Institutional, cultural and transaction cost influences on entry mode choice and performance. Journal of International Business Studies, 44(1), 14-22. doi:10.1057/jibs.2012.23

Buckley, P., & Casson, M. (2010). The Multinational Enterprise Revisited (1st ed.). London: Palgrave Macmillan.

Demirbag, M., McGuinness, M., & Altay, H. (2010). Perceptions of Institutional Environment and Entry Mode. Management International Review, 50(2), 207-240. doi:10.1007/s11575-010-0028-1

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Dunning, J. (2001). The Eclectic (OLI) Paradigm of International Production: Past, Present and Future. International Journal of The Economics of Business, 8(2), 173-190. doi:10.1080/13571510110051441

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Johanson, J., & Vahlne, J. (1977). The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments. Journal of International Business Studies, 8(1), 23-32. doi:10.1057/palgrave.jibs.8490676

Papanastassiou, M. (1997). Firm-Strategies and the Research-Intensity of US MNEs’ Overseas Operations: An Analysis of Host-Country Determinants. Global Competition and Technology, 153-179. doi:10.1007/978-1-349-25856-7_7

Parboteeah, P., & Cullen, J. (2017). International business: Perspectives from developed and emerging markets (2nd ed.). New York: Routledge.

Rathert, N. (2016). Strategies of legitimation: MNEs and the adoption of CSR in response to host-country institutions. Journal of International Business Studies, 47(7), 858-879. doi:10.1057/jibs.2016.19

Schu, M., Morschett, D., & Swoboda, B. (2016). Internationalization Speed of Online Retailers: A Resource-Based Perspective on the Influence Factors. Management International Review, 56(5), 733-757. doi:10.1007/s11575-016-0279-6

Zekos, G. (2003). MNEs, globalisation and digital economy: legal and economic aspects. Managerial Law, 45(1/2), 1-296. doi:10.1108/03090550310770875

Zeng, J., & Glaister, K. (2015). Competitive Dynamics between Multinational Enterprises and Local Internet Platform Companies in the Virtual Market in China. British Journal of Management, 27(3), 479-496. doi:10.1111/1467-8551.12136