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The Enteringof the Multinational Enterprises in the Asian Market - Assignment Example

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The author describes the entering of the multinational enterprises in the Asian market. The author states that liberalization has made the Asian countries attractive. China, in particular, had opened up FDI in manufacturing and financial sectors soon after the reforms but in the retail sector…
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The Enteringof the Multinational Enterprises in the Asian Market
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Retailers such as Wal-Mart and Carrefour had entered China in the mid-1990s but Tesco entered China only in 2004 (Kearney, 2006). Tesco, the largest UK retailer had been eyeing China for quite some years but the choice of entry mode depends upon the internal and external business environment. The external environment comprises the macro-environment and includes the political and economic factors of the host country, the government rules and legislation, the barriers in the sector and the host country market environment. The micro-environment is the internal environment which comprises of the corporate goals and objectives, the corporate strengths and weaknesses and the service factors. Location is a very important factor in the choice of entry mode (Ekeledo & Sivakumar, 1998).
The choice of entry mode has a major impact on the success of operations in foreign countries. Because of uncertainties faced in foreign markets, the MNE need to balance between control and flexibility (Lin, 2000). In emerging markets, the MNEs face high external uncertainty and internal constraints. The four most common mode of market entry includes exporting, licensing, starting a wholly owned subsidiary (WOS), and joint venture (JV) with a local partner. In the case of the retail sector, exports and licensing is not possible because goods have to be procured locally. Between WOS and JV, the decision is taken based on the resource commitment, the degree of control required and the risks involved. WOS requires a thorough knowledge of the local market and the government rules and regulations. It also requires knowing and understanding the local people and their ways of working. Tesco had no prior experience in China although other retailers were operating in China. ...Download file to see next pages Read More
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