Literature Review on MNE Entry and Impacts on Host Country

Literature Review
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Table of Contents
2.0 Literature Review......................................................................................................................3
2.1 Introduction............................................................................................................................3
2.2 Traditional Models of Internationalization............................................................................3
2.3 MNE Entry into a New National Market...............................................................................4
2.4 Factors Affecting MNE Performances...................................................................................5
2.5 MNE Entry and its Impacts on the Host Country..................................................................6
2.5 Online Retailing.....................................................................................................................7
2.7 Competitive Dynamics and Porter’s Five Forces..................................................................7
2.7.1 Porter’s five forces for competition..........................................................................8
2.8 Repositioning and Porter’s Generic Competitive Strategies..................................................9
2.9 Competitive Responses and World Responses....................................................................10
2.9 Internationalizing Barriers...................................................................................................10
2.10 Literature Gap....................................................................................................................11
2.11 Research Question..............................................................................................................11
References......................................................................................................................................12
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2.0 Literature Review
2.1 Introduction
Globalisation is characterized firms national as well as international expanding their areas of
operations in countries. There are several theories of international trade and market entry
decisions, which a firm needs to evaluate prior to its application. The scope of current literature
review undertakes several books, articles, journals, internet sources and so on in order to
understand applicability of such theories. A firm selects the most suitable model from amongst
most applicable model for deciding on its market entry strategy.
2.2 Traditional Models of Internationalization
Uppsala Model and OLI Paradigm
Intro...: When a firm decides on expanding its operations in international markets, then the
multi-national enterprise (MNE) selects from varied available entry decision models. Certain
well-known international models for entry include Uppsala Model and Dunning’s eclectic
paradigm.
Uppsala Model: (Description) Johanson and Vahlne (1977) proposed a model by analysing
observation from four Swedish manufacturers. They clearly identified four distinguished steps
for entering the international markets which are not exclusive of each other. Companies starts to
internationalize by starting their expansion in a psychic manner. Initially the company starts
procedure with sporadic export then goes onto export mode by means of independent
representatives, then establishes a foreign sales subsidiary. Finally a foreign production unit is
established.
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OLI Model: (Descriptive) In eclectic paradigm theory more commonly known as OLI Model, a
company visualizes a number of advantages before expansion of its business in the international
markets. Advantages in international business can arise from ownership advantages, locational
advantages and by internationalizing core competencies. Dunning (1979) proposed that a firm
can create competitive advantage by exploitation of core competency in international market by
engaging in cross-border products then it can gain significant advantages.
Network Model of Internationalization
2.3 MNE Entry into a New National Market
 Impacts on the host country (although specific impacts are not covered, so this point is
not effectively made);
o HRM issues and benefits: MNEs provide various employment benefits in
countries that it expands but it faces challenges in managing them as well. A
MNE can select from ethnocentric, polycentric and geocentric approach.
o Technology Transfer: Amazon in its expansion in Australia will provide a
technological transfer and new ways of doing business. The brand is associated
with high quality technological transfer.
o Improving balance of payments: A country’s BOP position is improvised when
international companies set up their business bases in host countries.
o Tax Revenues
o Increasing choice of products (Amazon can provide international brands and
product choices)
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