Imagine that you are employed by an international company and that you have been charged with the task of producing a report for your CEO to aid in the formulation of the internationalisation strategy of the company. The company need not be a real company. Given the requirement to relate your report to the background of the company and its strategic objectives (see section on background below), it will normally be easier to use a fictitious company rather than try to find a real company that fits in with the background conditions.
Background requirements for your chosen company
The company is from any emerging market and it is considering entry to Europe.
The company operates in either the manufacturing or service sector.
All the major US MNEs in this industry are firmly established in Europe and they are involved in significant R&D and product development work in their European subsidiaries. Similarly the major European MNEs in the industry have subsidiaries in the US and they are involved in significant R&D and product development work in the US. The subsidiaries of US and European MNEs in emerging markets such as Asia or Latin America are engaged in very limited R&D and product development work.
The most important strategic goal of your company is that it plans to enter Europe to develop its capabilities in the areas of R&D and product development and to become one of the technological leaders in this industry. It hopes to use the technological knowledge gained from the investments in Europe to develop products and production processes in its home base and to use this to expand its exports to Europe and the US. It is not a major objective of the company to export from its European subsidiaries.
You must select an industry in which the firm is located and clearly identify all the major industry-specific factors which may affect the selection of the European country chosen for entry. You must also consider any institutional and cultural factors which affect the selected industry, and the impact of any industry-specific factors on organisational structures and control strategies.
Industry – floriculture. Home country – China. To choose from: the Netherlands, Germany and (Italy or Belgium).
Proposed internationalisation strategy – structure.
Elements to be included in the report
– Advice on European country selected (use Porter’s Diamond model)
Your report should provide advice on which European country should be selected for entry; this should be based on an argument (backed by analysis and evidence) for the selection of a particular country. You should choose a country that is most likely to offer the best location to meet the major objectives of the company. Therefore your report must identify a European country with the best technological conditions for your selected industry. Remember to keep in mind the prime objectives of the parent company (developing R&D capabilities rather than creating an export base) and any industry-specific factors that might influence the institutional and cultural differences. It may even be possible for you to identify regions or city-regions within your selected country that provide the best location(s).
– Advice on dealing with institutional and cultural differences (use Hofstede model for cultural, avoid institutional)
The report needs to assess the institutional and cultural differences between the home location of the parent company and the host location of the proposed European subsidiary. Therefore, you need to advise on what the major institutional and cultural differences that are likely to affect the ability of your subsidiary to achieve the prime objectives of the parent company. You need to provide advice on how to deal with these differences. The organisational structures and control strategies you select may provide some options for dealing with institutional and cultural differences. Therefore you may have to link your advice in this section to the advice you give in the section on organisational structures and control strategies.
– Advice on the entry mode
The report should advise on the entry mode that your company will use to enter your chosen European country. You have various options: a greenfield wholly-owned subsidiary, a joint venture, an acquisition or a merger. You will need to justify the entry mode choice. Consider the institutional and cultural differences from the previous section and also the objectives of your parent company when you make the choice.
– Advice on the best organisational structures and control strategies
The report must provide advice on which types of organisational structures and control strategies will be most likely to help the company achieve its major objectives. The arguments should be based on the literature and evidence on organisational structures and control strategies. You should apply the knowledge you gain from the literature and empirical evidence in the context of the prime objectives of the company, the institutional and cultural conditions, and any industry-specific conditions. Do not forget the objectives of your parent company!
– Advice on managing corporate responsibility issues
The report should also provide some advice on how the company could manage corporate social responsibility (CSR) issues or concerns which it may have to resolve in relation to the new company. This could be related to the European firm raising its concerns about CSR practices in the emerging market firm. You should briefly examine broad ethical issues identified in relation to MNEs as well as strategies that they could adopt to manage these ethical concerns globally.
– General issues
The report should be based on the literature on major issues involved in the transfer of technology (including R&D) within MNEs. The report should assess the importance of cultural and institutional differences at both national and organisational level between HQ managers and subsidiary or joint venture managers, for effective transfer of technology. Problems associated with too much or too little subsidiary or joint venture autonomy, and too much or too little entrepreneurial behaviour by subsidiary or joint venture managers should also be noted in the report in the context of organisational structures and control strategies that are recommended in the report. Finally, it should briefly examine related ethical concerns.