Global Strategy and Multinationals Entry Mode of Choice - Article Example

 Global Strategy and Multinationals Entry Mode of Choice INTRODUCTION The first article to be reviewed is the article titled, “Global Strategy and Multinationals Entry Mode of Choice” by Kim Wc and Hwang P in the Journal Of International Business Studies 23 (1): 29-53 1992. The purpose of the article is to present a case for entry mode of choice for multinationals seeking to enter the foreign markets based on environmental and transaction specific factors. As the article points out, “This paper is concerned with the critical decision of multinationals' foreign entry mode choice. While existing studies have already identified a diversity of variables that influence this decision, in our view these variables can essentially be collapsed into one of two categories: environmental or transaction specific-factors”. (Hwang, 1991). The research question that is posed is the factors that lead to the entry of multinationals into foreign markets and the specific entry strategies that these multinationals adopt when entering these markets. The authors point out that, “The geocentric approach outlined by Perlmutter provided a succinct explanation for the existence of and benefits attached to managing subsidiary units not as a portfolio of independent units but as an interdependent network.” (Hwang, 1991). Hence the emphasis is on the strategy of multinationals in enhancing the profits of the company at large and not necessarily those of the subsidiary unit. BODY The article makes very relevant points about the nuts and bolts of decision making when it comes to entry into foreign markets. The article is an important contribution to the existing literature on how multinationals base their decisions on which markets to enter and the factors that go into this decision making process. For instance, the entry strategy of multinationals into a specific market might be dictated by considerations of geography and to counter completion from its international rivals. This is the strategy that the cola majors, Coke and Pepsi use to enter specific markets and the entry mode is often dictated by factors that include the rival’s business strategy and the geographical advantage of operating in a specific market. The article tests the validity of the framework used in decision making by undertaking firm level research by an empirical method that focuses on the micro as well as the macro factors. To quote from the article, “We test the importance of each variable in differentiating among distinct entry modes; the aim here is to gain a better Understanding of the relative importance of global strategic considerations vis-à-vis the other entry mode variables in determining multinationals’ entry mode choice” (Hwang, 1991). A limitation of the article is that the entry mode of choice is sometimes dictated by the relative openness of the target country’s economy and this is not part of the discussion in the article. CONCLUSION The learning from the article is about how multinationals often make choices that are driven by top-down approaches rather than bottom-up approaches. The article is definitely useful for anyone seeking to understand the rationale behind why multinationals choose to enter specific markets and why they ignore some other markets. In conclusion, the article is definitely worth reading and adds to the literature that is available on the entry modes of multinationals and particularly to those in the third world countries. ARTICLE REVIEW 2 INTRODUCTION The second article to be reviewed is by Murray, Janet Y, Kotabe, Masaaki and Westjohn, Stanford titled “Global Sourcing Strategy and Performance of Knowledge-Intensive Business Services: A Two-Stage Strategic Fit Model. Journal of International Marketing; 2009, Vol. 17 Issue 4, p90-105, 16p. The article talks about the outsourcing strategies of knowledge based companies and the KIBS or the Knowledge Intensive Business services model for sourcing. As the article states, “Using a systems integrator as the sourcing firm’s perspective, the authors argue that complex KIBSs involve a complicated mixture of interfaces in that the performance of an individual KIBS is insufficient in defining the overall performance of the integrated KIBS system” (Murray et al, 2009). The contention of the authors is that the KIBS need to integrate their internal and external processes if they are to deliver solutions that take the complexity of the solutions that are demanded by their customers. The article argues that single causal factors are not enough to explain the range of solutions that are needed to service increasingly demanding customers. To quote from the article, “As the demand for faster design and integration of increasingly robust systems rises, systems integrators must compete on new development processes, such as rapid application development, extreme programming, and agile software development” (Murray et al, 2009). Hence the authors’ contention that business models evolve with complexity. BODY The article makes the case for an integrated two-stage strategic fit model that takes into account the imperatives under which a firm’s KIBS systems integrator influences performance. The article reaches the conclusion that “firms that align the type of sourcing strategy for each KIBS activity with a specific sourcing attribute (i.e., a KIBS attribute) should perform significantly better than those that do not achieve the requisite match” (Murray et al, 2009). Hence, the contention of the authors’ that sourcing strategy be aligned with a specific attribute can guarantee success. There are different facets to a sourcing strategy and it is left to each individual KIBS to decide the appropriate strategy that best fits their business model. The strength of the article lies in its ability to explain complexity and the need for integrated solutions in an easy and accessible manner. A limitation of the article is that though the others make the case for integration, they have not defined the attributes of integration in a structured manner. Rather, the attributes have been strewn over the article in a haphazard manner. I have learned about the use of the KIBS terminology with reference to the sourcing strategies and this is an important addition to the body of knowledge that I have accumulated. CONCLUSION As outlined above, the article makes the point that each of the KIBS needs a different sourcing strategy based on the needs of their customers and the complexities of the sourcing strategy must take into account the attributes involved in the process. The article is relevant and timely in these times when the Knowledge based companies are on the ascendant. I have found the article useful and reading and analyzing it was a learning experience. ARTICLE REVIEW 3 INTRODUCTION The third article to be reviewed is: Roger Cheng.  "Managing Technology; 'Cloud Computing': What Exactly Is It, Anyway? Everybody's talking about it. Here's what you need to know. "Wall Street Journal (Online)” 8 Feb. 2010.16 Feb. 2010. The article is about the latest trend in computing and how it can add value to your business. The trend that is covered here is the concept of “Cloud Computing” that has caught the imagination of the businesses, particularly those that are small but have high turnover during a specific time period. Hence, the article is about how businesses can rely on downtime in hardware of other businesses and “share” the server power during this time. The article also talks about service providers in this area. The model of cloud computing works on the principle of “renting out” of server power and making it available to businesses that cannot afford expensive new hardware but have a need for the server power during times when there is a spike in the volume of transactions that these businesses process. To quote from the article, “Broadly speaking, any service or program sent over an Internet connection can be considered a cloud service. An outside vendor runs the servers and software, so the buyer doesn't have to worry about the technical issues in-house--and can focus on its own business.” (Cheng, 2010). BODY The article makes use of publicly available information to drive home the benefits of cloud computing and the author conducts interviews with some industry experts as well. The article’s strengths lie in its ability to provide information about the concept of cloud computing and answer the questions about cost savings that are uppermost on businesses agenda, particularly in these recessionary times. To quote from the article, “The primary savings come from the lack of capital expenditure to buy a program or equipment. Servers, for instance, run between $2,000 and $6,000, and companies might need to add multiple machines as demands on their IT system grow. There are other benefits, as well.” (Cheng, 2010) However, the article is not about benefits alone and the author lists the primary reasons for resistance to outsourcing hardware functions among businesses. The article makes a strong case for adoption of this technology and the details the benefits that accrue to businesses when they use this to lessen the load on their servers at times of peak carrying capacity. One of the most useful points of the article is the author’s contention regarding the cost savings and as outlined above, this technology is particularly beneficial to businesses that see seasonal spikes in activity as opposed to businesses that do steady business throughout the year. The point here is that the article does a good job explaining the benefits of this approach to prospective customers and outlining the pitfalls of the approach as well. CONCLUSION I have learnt about the emerging concept of cloud computing and its utility to small businesses as well as the potential pitfalls before hiring server power from a service provider. Overall, I would think that the article does a good job of explaining the intricacies of cloud computing though the article could have highlighted the risks involved as well. This is one limitation of an otherwise good article. In conclusion, it is my view that cloud computing is going to emerge in a big way in the near future. Read More