INTERNATIONAL BUSINESS STRATEGIES Andrey G. Medvedev, Professor September 22, 2009 CEMS MIM...
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Transcript of INTERNATIONAL BUSINESS STRATEGIES Andrey G. Medvedev, Professor September 22, 2009 CEMS MIM...
INTERNATIONAL BUSINESS STRATEGIES
Andrey G. Medvedev,
Professor
September 22, 2009CEMS MIM Programme
© Andrey Medvedev
7. INTERNATIONAL ENTRY MODES:INVESTMENT MODES
1. MARKET AND INDUSTRY ENTRY
2. ACQUISITIONS OF FOREIGN COMPANIES
3. GREEN-FIELD PROJECTS
4. JOINT VENTURES
5. ENTRY-MIX
6. STEP-BY-STEP INTERNATIONALISATION VS. NETWORKING
© Andrey Medvedev
SELECTING AN ENTRY MODE
Responsibilities of International ManagerResponsibilities of International Manager:
Evaluate opportunities and risksopportunities and risksof entering foreign economy
Define a degree of local responsivenesslocal responsiveness Analyse advantages and disadvantagesAnalyse advantages and disadvantages
of alternative foreign direct investment options Select an appropriate entry optionentry option Search for strategic partnersstrategic partners and target companiestarget companies
abroad
© Andrey Medvedev
FOREIGN ENTRY: A MODEL FOR ANALYSIS
CompetenceCompetences, values, s, values,
overall overall strategy & strategy &
ODOD
entry mode; entry mode; entry-mix; entry-mix; entry entry stagesstages
PEST-factors PEST-factors of of
opportunities opportunities and threatsand threats
Implementation
Goals of internationalisation
Development (real option)
Industry (SBA) Industry (SBA) / product / product
nature (multi-nature (multi-domestic vs. domestic vs.
global)global)
Current performance
Reasons to internationalise
© Andrey Medvedev
FOREIGN DIRECT INVESTMENT
FOREIGN DIRECT INVESTMENT FOREIGN DIRECT INVESTMENT IS USUALLY NEEDED– THE AMOUNT INVESTED BY A HOME COUNTRY PARENT COMPANY
IN A FOREIGN ENTERPRISE TO HAVE EFFECTIVE CONTROLEFFECTIVE CONTROL
– GENERALLY INVOLVES THE LONG-TERM COMMITMENTLONG-TERM COMMITMENTOF LARGE AMOUNTS OF FUNDS TO PROJECTSWHICH WILL PAY OFF OVER AN EXTENDED PERIOD
BEING CLOSER TO THE MARKETCLOSER TO THE MARKET ACHIEVING HIGHER MARKET SHAREHIGHER MARKET SHARE GETTING ACCESS TO (CHEAPER) RESOURCES AND SKILLSRESOURCES AND SKILLS REALISING LOCATION ECONOMYLOCATION ECONOMY
© Andrey Medvedev
HOW? FDI ENTRY MODES – INDUSTRY ENTRY
ACQUISITIONSACQUISITIONS
GREEN-FIELD ESTABLISHMENTSGREEN-FIELD ESTABLISHMENTS
JOINT VENTURESJOINT VENTURES– MINORITY SHARE (ALLIANCE)
– 50/50
– MAJORITY SHARE
© Andrey Medvedev
STEPS OF ACQUISITION
SEARCHINGSEARCHING FOR A TARGET COMPANY
APPRAISALAPPRAISAL OF A TARGET COMPANY
TAKING ACCOUNT OF ACQUISITION TERMSACQUISITION TERMS– INVESTMENT TENDERS
MAKING POST-ACQUISITIONPOST-ACQUISITION DECISIONS
© Andrey Medvedev
STRATEGIC CONTEXT OF ACQUISITIONS
COMPANY’S GLOBAL DIVERSITY COULD BE REACHED THROUGH DIFFERENT TYPES OF ACQUISITIONS
CROSS-BORDERCROSS-BORDER ACQUISITION OF A “FOREIGN TARGETFOREIGN TARGET”– A FOREIGN COMPANY
WITH OPERATIONS ONLY IN ITS HOME COUNTRYONLY IN ITS HOME COUNTRY(LOCAL ACQUISITIONLOCAL ACQUISITION)
– A MAJOR FOREIGN COMPANYFOREIGN COMPANYWITH EXTENSIVE INTERNATIONAL OPERATIONSINTERNATIONAL OPERATIONS(GLOBAL ACQUISITION – 1GLOBAL ACQUISITION – 1)
ACQUISITION OF A “DOMESTIC TARGETDOMESTIC TARGET”– COMPANY WHICH OPERATES IN MANY COUNTRIES
(GLOBAL ACQUISITION – 2GLOBAL ACQUISITION – 2)
© Andrey Medvedev
SUBSIDIARIES IN RUSSIA:STADA In the beginning of 2005, Stada Arzneimittel AGStada Arzneimittel AG, Germany's third-
largest generic-drug maker, acquired 99 percent of shares in Nizhpharm OAONizhpharm OAO located in Nizhny Novgorod, Russia, for €80 million.
“Stada considers Russia an important growth market,”' the German company said in the statement. In 2006, STADA Group salesin Russia increased by 55 percent to EUR 87.5 million. The ongoing very positive business development of Nizhpharm mainly focuseson branded products contributed the major part of this increase.
In August 2007, Nizhpharm acquired all ofclosely held Makiz-Pharma Makiz-Pharma shares for €135 millionto get low-cost production and expandin the growing Russian market. Makiz-Pharmais one of a few domestic pharmaceuticals producersthat was planned and build accordingto the Russian and international GMP standards.
© Andrey Medvedev
GREEN-FIELD INVESTMENT:VOLKSWAGEN The foundation stone was laid in Kaluga on October 30, 2006
for VolkswagenVolkswagen's new factory, the largest foreign projectin the Russian automobile industry.
Volkswagen has reserved 800 hectares of land in Kaluga Region:400 hectares for the factory itself, in which the company will invest 400 million euros, and 400 hectares for its partners in the automobile parts industry. The Kaluga technoparkKaluga technopark will be the largest projectin the history of the post-Soviet automobile manufacturing industry.
© Andrey Medvedev
UPM-KYMMENE
UPM-KymmeneUPM-Kymmene is a global forest products groupwith core businesses in printing papers, speciality papers,label materials and wood products.
UPM has 64 wood production units in 14 countriesand 21 paper mills in 8 countries (Finland, Germany,France, the UK, Austria, the US, Canada and China).They employ about 28,000 people.The UPM’s sales in 2006 were about EUR 10 billion,of which three quarters came from Europe.
In the end of 2007, UPM agreed to forma 50-50 joint venture with Russian SvezaSvezato invest more than 1 billion euros in Russia.
The venture will produce about 800,000 tons of pulp, 300,000 cubic meters of wood and 450,000 cubic meters of building panels per year.
© Andrey Medvedev
THE ROLE OF A PARTNER
LOCAL PARTNER COULD SERVE AS A MARKETING SATELLITEMARKETING SATELLITE(TRADE AND SERVICE COMPANIES, CONSULTING AGENCIES)– THEY KNOW LOCAL CONDITIONS BETTER
– THEY MAY CONCENTRATE ON SALES, MARKETING AND SERVICES
LOCAL PARTNERS MAY HELP A FOREIGN FIRMLEARN AND UNDERSTANDLEARN AND UNDERSTAND LOCAL CONDITIONS BETTER
MANY JOINT VENTURESJOINT VENTURES IN RUSSIA WERE TURNEDINTO FULLY-OWNED SUBSIDIARIES AFTER FOREIGN PARTNERS HAD ACCUMULATED ENOUGH LOCAL EXPERIENCE
JOINT VENTURE MAY SERVE TEMPORARYAS A “TESTTEST” MODE
© Andrey Medvedev
ENTRY MIX – GENERAL MOTORS
1993 EXPORTINGEXPORTING
2001 JOINT VENTUREJOINT VENTURE (WITH AVTOVAZ)
2004-2008 CO-OPERATIONCO-OPERATION(WITH ASSEMBLER IN ST. PETERSBURG)
2008 GREEN-FIELDGREEN-FIELD(ST. PETERSBURG)
© Andrey Medvedev
ENTRY MIX – FRANCHISINGPLUS INVESTMENT: OBI
German OBIOBI (do-it-yourself retailer) has franchisingfranchising agreements with two stores in Moscow Regionand one in Leningrad Region near St. Petersburg.
49 percent of investmentinvestment were made by OBI,51 percent by franchisee, DIY Project RussiaDIY Project Russia.
© Andrey Medvedev
ENTRY STAGES – WRIGLEYFOLLOWING WINDOW OF OPPORTUNITIES 1991 INDIRECTINDIRECT EXPORTINGEXPORTING
LEARNING LOCAL CONDITIONS
DEVELOPING DISTRIBUTION 1995 REPRESENTATIONREPRESENTATION WRIGLEY’S RUSSIA 1999 GREEN-FIELDGREEN-FIELD (ST. PETERSBURG) 2004 RECONSTRUCTIONRECONSTRUCTION
OF ST. PETERSBURG PLANT
2008 DIVERSIFICATIONDIVERSIFICATION THROUGH ACQUISITIONACQUISITION (ODINTSOVO CONFECTIONERY PLANT
IN MOSCOW REGION) 2008 WRIGLEY HAS BEEN ACQUIRED BY MARS
© Andrey Medvedev
ENTRY STAGES – TIKKURILAFOLLOWING WINDOW OF OPPORTUNITIES 1993 JOINT VENTURE JOINT VENTURE (LENBYTCHIM), BUY-OUT
(FINNCOLOR)
LEARNING LOCAL CONDITIONS
DEVELOPING DISTRIBUTION 1999 GREEN-FIELDGREEN-FIELD (KRASKI TIKKURILA)
2006 ACQUISITIONACQUISITION (TEKS)PLANT IN BELGOROD REGIONWAREHOUSE IN CHELYABINSK REGION
© Andrey Medvedev
ENTRY STAGES – KRAFT FOODSVERTICAL INTEGRATION 1993 EXPORTINGEXPORTING
1999 GREEN-FIELDGREEN-FIELD (INSTANT COFFEEPACKAGING PLANTNEAR ST. PETERSBURG)
2006-2008 VERTICALLY INTEGRATED GREEN-FIELDVERTICALLY INTEGRATED GREEN-FIELD(INSTANT COFFEE MANUFACTURING)
2007 ACQUISITIONACQUISITION FROM DANONE(BOLSHEVIK PLANT IN MOSCOW)
© Andrey Medvedev
«SCANDINAVIAN» MODELOF FOREIGN EXPANSION
ENTRY IS VIEWED AS A GRADUAL PROCESSGRADUAL PROCESSTHAT CAN BE SUBDIVIDED
– EXPORTING
– LICENSING
– CONTRACT MANUFACTURING
– JOINT PROJECTS
– DIRECT INVESTMENT