During the last few decades, globalization has created an increasingly competitive landscape and with established markets becoming saturated, multinational enterprises (MNEs) have turned towards emerging markets in order to capitalise on new opportunities for economic growth (London and Hart 2004). Especially through the recent global crisis, the key role of developing and emerging countries, as they have sought to sustain global economic growth, has become the focal point of worldwide interest (Rao 2010).
According to McKinsey (2010), “an ongoing shift in global economic activity from developed to developing economies, accompanied by growth in the number of consumers in emerging markets, are the global developments that executives around the world view as the most important for business and the most positive for their own companies profits over the next five years.”
The results of recent surveys, such as those by the International Monetary Fund, predict that developing and emerging markets will grow by 6.3% in 2011 In turn this has evoked a significant sense of urgency among several MNE executives (Rao 2010).
Furthermore, a survey by McKinsey (2011) found that in the coming decade more then 45% of global GDP growth will be contributed by China, India, Russia, Indonesia, Turkey and Mexico. Likewise, in about 15 years time about 57% of the one billion households with an income > 20.000$ per annum will be in developing countries.
As Cavusgil et al (2002, p. 166) pointed out, “…once thought of as backward and low tech, these regions are now rapidly transforming their economies.” By adopting new production techniques and technologies, markets such as China, India and South Korea have become vital places for production. Many companies from traditional developed nations have capitalised on this trend, shifting their production and research and development (R&D) facilities, and strengthening their distribution and service networks in emerging markets. In so doing, foreign market activities have reached a new stage of development: beyond the BRIC-countries second-tier emerging markets are becoming an economic driving force, which means that companies must adapt their product and service strategies in an effort to develop sustainable success by not only reaching premium customers but also “Micro-Potentials”, the huge mass of customers with small budgets (KPMG 2011; Pacek and Thorniley 2007). [...]
Table of Contents
INTRODUCTION
1. METHODOLOGY
2. DEFINITIONS
3. IMPORTANT CHARACTERISTICS AND CHALLENGES OF EMERGING MARKETS
4. ADVANTAGES AND DISADVANTAGES OF MARKET ENTRY MODES
4.1 Joint Venture
4.2 Greenfield
4.3 Acquisition
5. APPROACHES TO EVALUATE THE EFFICIENCY OF MARKET ENTRY MODES
6. CASE STUDIES
6.1 Wal-Mart company background and history
6.2 Wal-Mart’s market entry failure in South Korea
6.3 Wal-Mart’s success in India
CONCLUSION
BIBLIOGRAPHY
Research Objectives and Themes
This dissertation investigates the complexities of international expansion by multinational enterprises (MNEs) into emerging markets. It examines how institutional, cultural, and economic factors influence the selection of specific market entry strategies and provides a critical analysis of why certain approaches succeed while others fail, using Wal-Mart’s international operations as a primary case study.
- Analysis of challenges and opportunities in emerging economies.
- Evaluation of various market entry modes (Joint Venture, Greenfield, Acquisition).
- The impact of institutional environments on foreign direct investment.
- The significance of cultural distance and local consumer adaptation.
- Strategic assessment of success and failure factors for global retailers.
Excerpt from the Book
6.2 Wal-Mart’s market entry failure in South Korea
When Wal-Mart entered South Korea, due to the liberalization of the retail market by the local government in 1997, it failed to position itself effectively and thus to penetrate the market successfully as the market was already saturated. In the early 2000s the Korean discount market counted about 300 stores nationwide with an estimated volume of $26 billion (Park et al 2003). The market conditions were marked by globalization and industry consolidation followed by increasing operational costs as well as competition and the necessity for providing customer service and developing promotional campaigns (Samsung Economic Research Institute 2006). In other words, Wal-Mart entered the market at an unfavourable point in time, when Korean retailers such as Lotte, LG, Samsung and Shinsegae had already established their stores, discount outlets and distribution systems strategically in key commercial areas. Furthermore, conglomerates, so called “Chaboels”, operate diversified business units with a variety of retail outlet options through which they are able to merchandise the whole product range from luxury to discount goods. LG for instance, offers four different retail divisions in order to address target-groups in about 1600 advantageously located stores (Scardino 2004). For such reasons Wal-Mart was not only unable to conquer logically advantageous sites, but also to position its company in the market profitably to achieve economies of scale (Choe, 2006; Troy, 2006).
Due to the aforementioned circumstances, Wal-Mart was forced to build its stores in distant regions where land prices were relatively low because of the devaluation of the South Korean currency at this time and tried to penetrate the market by replicating its home country strategy of smaller town store build-up. However, Wal-Mart was not able to achieve the desired economies of scale with just 16 stores nationwide and only one in Koreas main capital Seoul (Choe 2006).
Summary of Chapters
INTRODUCTION: Provides an overview of the global economic shift towards emerging markets and establishes the relevance of multinational expansion strategies.
1. METHODOLOGY: Details the deductive, qualitative research approach utilizing secondary data and literature review to analyze entry mode decisions.
2. DEFINITIONS: Clarifies terminology regarding multinational enterprises and defines the criteria for identifying emerging markets.
3. IMPORTANT CHARACTERISTICS AND CHALLENGES OF EMERGING MARKETS: Examines the institutional, cultural, and political risks that influence firm behavior and entry success.
4. ADVANTAGES AND DISADVANTAGES OF MARKET ENTRY MODES: Analyzes specific equity-based entry vehicles, including their operational benefits and strategic risks.
5. APPROACHES TO EVALUATE THE EFFICIENCY OF MARKET ENTRY MODES: Discusses theoretical frameworks for assessing market potential and institutional fit.
6. CASE STUDIES: Contrasts the failed market entry of Wal-Mart in South Korea with its successful collaborative approach in the Indian market.
CONCLUSION: Synthesizes the findings to emphasize that success is contingent upon local adaptation, deep market research, and institutional awareness.
BIBLIOGRAPHY: Lists the academic, industry, and online sources used to substantiate the arguments provided in the dissertation.
Keywords
Emerging Markets, Multinational Enterprises, Market Entry Strategy, Joint Venture, Greenfield Investment, Acquisition, Wal-Mart, Institutional Theory, Foreign Direct Investment, Globalization, Cultural Distance, Transaction Costs, South Korea, India, Retail Industry.
Frequently Asked Questions
What is the core focus of this dissertation?
The research focuses on the strategic challenges faced by multinational enterprises when attempting to enter emerging markets and how these firms select appropriate entry modes.
Which specific themes are prioritized in this work?
The study prioritizes the analysis of institutional environments, cultural adaptation, resource management, and the comparative performance of different entry strategies like Joint Ventures and Greenfield operations.
What is the primary research objective?
The objective is to understand the complexity of market entry decisions and identify why certain strategic approaches succeed in diverse, emerging environments while others result in failure.
Which scientific methodology is employed?
The author uses a deductive, qualitative research approach based on a comprehensive review of existing literature and case studies to ground theoretical frameworks in real-world observations.
What content is covered in the main body of the work?
The main body covers the definition of MNEs, the challenges inherent in emerging economies, a detailed theoretical breakdown of various entry modes, and an applied comparative study of Wal-Mart’s performance in South Korea and India.
What are the primary keywords that characterize the research?
Key terms include Emerging Markets, Multinational Enterprises, Market Entry Strategy, Institutional Theory, Foreign Direct Investment, and Strategic Adaptation.
Why did Wal-Mart fail in the South Korean market?
Wal-Mart failed in South Korea primarily due to an inability to adapt its business model to local shopping habits, a lack of deep market research, and difficulties in navigating established local competition and logistical distribution systems.
How does the case of Wal-Mart in India contrast with its South Korean experience?
In India, Wal-Mart adopted a collaborative Joint Venture approach with a local partner, Bharti Enterprises, which allowed them to leverage local knowledge and distribution networks, thereby avoiding the errors of standardization that caused their failure in Korea.
How does the work explain the concept of 'Liability of Foreignness'?
The work defines this as the inherent disadvantage of operating in an unfamiliar environment, which MNEs must overcome through local asset accumulation, strategic partnerships, and deep understanding of cultural and institutional norms.
- Citar trabajo
- Svenja Martina Gnosa (Autor), 2011, Constraints and Opportunities of Market Entry Strategies for Multinational Enterprises in Emerging Markets, Múnich, GRIN Verlag, https://www.grin.com/document/338828
