Hcmc sfi mid-term Assignment

THE INTERNATIONAL UNIVERSITY (IU) – VIETNAM NATIONAL UNIVERSITY – HCMC
SFI MID-TERM ASSIGNMENT
Group 4
1. Le Trong Tan - BABAIU19396
2. Nguyen Dang Vu Loi - BABAIU19048
3. Vo Nguyen Nhu Quynh - BABAIU19082
1st November 2021

Table Of Contents
Abstract…………………………………………………………………………………..1
Introduction……………………………………………………………………………...1
Research Method…………………...……………………………………………………1
Export Strategy………………………………………………..………………………....2
Subsidiaries………………………………………………..……………………………..4
Joint venture………………………………………………..….………………………...7
Franchising………………………………………………..……………………………..8
Greenfield………………………………………………..…...……………………....…12
Applied theories of International Market Strategies to Hoa Phat Group…..............13
Conclusion……………………….……………………………………………………...16
References……………………….……………………………………………………...16

Abstract
The goal of this review is to give readers a better grasp of the area of international marketing in
business as it has been explored by past researchers. Medium and large businesses are
increasingly interested in market expansion and attracting international investment. However,
cultural variety, a scarcity of raw materials, and international collaboration in the iron and steel
industry are still limited. This review document examines ten papers published in journals linked
to business, production, and strategic management between 1994 and 2014. The article
summarizes the enterprise's ability to trade goods with domestic and overseas partners, as well as
the various definitions, measures, and theories used throughout the page, as well as the methods
that can be used to extend the market. The findings reveal that organizations are still expanding,
and that diverse methodologies have been utilized to define, measure, and theorize the
responsiveness and scaling of management in the firm. People will visualize its impact on the
market and the variables that stimulate the development and extension of the firm to worldwide
reach through the five aspects of the international market strategy.
Keywords: International market strategy, Export, Joint Venture, Subsidiaries, Franchising,
Greenfield
Introduction
Over the years, internationalization is one of the most popular strategies for organizations
looking to grow their operations and obtain competitive advantages. Manufacturing in the home
country and exporting products to overseas markets are the most common ways for private
enterprises from emerging economies to globalize their business. The foreign-expand methods of
those enterprises usually follow the trend of using both the internationalization and international
product life cycle models: at first, the enterprises export their products to the designated
countries, after they have accumulated experience from that market, they will develop the
commitment in a more investment-focused way. Those ways can be export strategy, subsidiary,
joint venture, franchising, and greenfield investment. The following study will provide thorough
knowledge about each strategy.
Research Method
With the purpose of evaluating the International market strategy and relevant subjects written by
experts, researchers used a literature search approach given previous review papers. Scholars
conducted an electronic search of financial statements, business, and managerial journals, using
the key terms in the heading or body of the article: exporting, subsidiaries, joint venture,
franchising and greenfield companies. The preliminary results of the search yielded a variety of
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papers, and we restricted the search to articles published between 1994 and 2014, or about 20
years. Each paper was reviewed to determine whether its message was crucially relevant to
International market strategy. Specific articles were thoroughly read and checked to raise the
report's reliability and accuracy, and 10 relevant articles were selected.
Export Strategy
To become more competent in the global market, studies have been conducted to provide
comprehension of the export strategies of enterprises from emerging economies. Particularly,
these studies create a framework by combining various strategies about competence in
international marketplaces with export performance. The logic behind the framework is that
although it has been demonstrated that organizational characteristics and managerial risk
perceptions affect internationalization behavior, the current global competitiveness needs the
proactive adoption of specialized export strategies to achieve success in foreign markets. The
study includes three factors to explain the export performance: the competitive strategies of cost
leadership and differentiation, marketing standardization, and geographical diversification of
exports.
Cost leadership and differentiation strategies concern how a firm develops an advantage over
competitors in an industry. A cost-leadership strategy is about providing customers with
comparable value at a lower price than that of rivals. Enterprises that follow this strategy can
reduce prices to match competitors while still earning profits and gaining above-average returns.
Exporting enterprises usually implement a cost-leadership strategy in developed country
markets, which is characterized by competition and dynamism. Exporting enterprises from
emerging countries are at a disadvantage compared to the local companies in terms of reputation,
capital, technology, and product innovation. Furthermore, from customers’ view, products from
developing countries are considered to have bad quality and low price. From all the factors
mentioned, exporting enterprises cannot use differentiation strategies in developed countries.
However, they can use a cost-leadership strategy instead due to their cost advantages. Enterprises
from emerging countries possess this advantage thanks to the low cost of labor, R&D process,
and marketing program. Therefore, those enterprises can easily gain success from developed
country markets by implementing cost-leadership strategy; besides, their products also adapt
customers’ mindset about low price products from emerging countries.
A differentiation strategy aims to provide a product or service that customers perceive to be
unique; this can be achieved through ways such as brand image (Apple, Mercedes-Benz),
technology (Tesla), service, and innovation. The primary purpose of the differentiation strategy is
to build a loyal customer base and create obstacles for newcomers. Thanks to the customers’
loyalty, the demand for the enterprise’s products is inelastic, which will bring a higher profit
margin. Developing countries are the most appropriate place for exporting enterprises to carry
out differentiation strategies. Those marketplaces are characterized as protected economies, so
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customers do not have many choices in purchasing due to the lack of product diversification.
Therefore, developing countries provide many opportunities for exporting enterprises to benefit
from differentiation strategy rather than cost-leadership strategy. Unlike developed countries,
companies in developing countries have cost advantages similar to emerging economies
enterprises. In addition, customers in developing countries are more willing to pay a much higher
price for foreign products as they recognize them to be high quality.
Marketing standardization involves the degree to which one exporting enterprise uses the same
marketing programs in different countries. On the one hand, enterprises can create a single
marketing strategy (SMS) that can be implemented across all export markets. On the other hand,
that enterprise can develop a different marketing strategy (DMS) considering 4Ps ( Product,
Price, Place, Promotion) in each foreign market. Exporting enterprises can benefit from SMS
through several factors. First, enterprises can save a notable cost by developing one or two
marketing programs for use in multiple markets. Second, enterprises may focus more resources
on standardized programs and improve marketing campaign efficacy. Third, uniformity in the
same marketing program can raise brand awareness among customers. Fourth, SMS helps
enterprises to quickly enter new markets while lowering the expenses of doing so simultaneously
in multiple markets. However, enterprises may meet some problems after implementing SMS.
The biggest one relates to subsidiary managers’ lack of autonomy; in exporting enterprises,
independent distributors undertake marketing plans and tend to favor their own unique
techniques based on local market conditions. As a result, subsidiary managers tend to be not
interested in spending full capability in implementing the market program. Another drawback of
SMS is the variation in culture, politics, and economy preventing enterprises from using the
same marketing strategy. Nevertheless, enterprises can then use DMS to minimize those
drawbacks. This strategy typically entails substantial R&D and marketing costs, extensive
engagement of individual subsidiaries in various countries, global marketing, and manufacturing
coordination, and extended lead times. Unfortunately, enterprises from emerging countries do not
have enough capitals to do so, because they have little resources, unpopular brand images, and
little knowledge about international markets. Although it may sound hopeless for exporting
enterprises from emerging countries, they still benefit from developing countries. Because
economic and infrastructure conditions in emerging countries are comparable to those in other
developing countries. Another way to improve marketing standardization is to combine it with
cost leadership and differentiation strategy (CLD). Marketing standardization is different from
CLD strategy; while CLD concerns how an enterprise’s products and services are compared to
that of competitors, marketing standardization relates to the integrity of marketing programs
between home and foreign markets. So, an enterprise can use both strategies to apply for one
marketplace.
The last factor of the strategy is the geographical diversification of exports, which can have a
crucial implication for the firm’s total export performance. Diversification into one or many
foreign markets allows exporting enterprises to gain and maintain competitive advantages by
achieving economies of scale, synergies across geographically dispersed locations, arbitraging
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among marketplaces, and utilizing possession, globalization, and geographical advantage. In
reality, studies find that a moderate level of international diversification is the best when it can
enhance performance. In contrast, a very low level is inadequate to create synergy, and a very
high level is harmful because costs are much higher than potential profits. The primary benefit of
diversified export is converged in four sources. First, it is about improving the exchange rate
disadvantage; exporting companies are more vulnerable to currency conversion than
multinational enterprises, as their costs are in one currency and earnings from product sales are
in a foreign market currency. This creates a significant transaction risk due to the volatility of
currency rates and the lack of futures foreign exchange markets for specific currencies.
Therefore, with geographical diversification, exporting companies can minimize transaction risk
through trading in several currencies. Second, exporting enterprises can expand their market
coverage with their products and services by appealing to the same client segments. This benefit
is especially efficient for companies aiming at niche markets. It can be saturated quickly for a
common product, so the only way to expand the market is to target similar categories in multiple
countries. The third benefit is related to the scale advantage of diversification. Many developing
countries have policies to support their exporting to increase their GDP, so those exporting
enterprises within these countries develop products meeting foreign markets’ standards. Last,
diversification provides exporting enterprises with experiences of one country and allows them
to apply that knowledge to countries having similar cultural and economic characteristics. Thus,
the enterprises can increase their competitive advantage by targeting different international
markets for their goods and services. However, geographical diversification does have some
drawbacks. First, diversification has diminishing effects; when the exporting enterprises disperse
their products and services into too many markets, the managerial cost will significantly
increase, managerial resources will be divided across markets, and the ability to assist overseas
distributors' marketing campaigns will reduce. Second, enterprises’ managers must keep the
company product matched with foreign culture, and deal with different tariff costs in different
markets. Therefore, the exporting enterprises must select an optimal export level where benefits
outweigh the cost.
Subsidiaries
Subsidiaries, like independent businesses, follow strategies to attain economic goals in their
selected market, but they do it in collaboration with their parent MNE. The parent gives them
access to resources, but requires them to share those resources and limits the strategic ambitions
they can pursue. Furthermore, subsidiaries are focusing on a smaller number of well-defined
operations and trading their products and services. And the successful development of local
technology prompted subsidiaries, which had been established to take advantage of low-cost
manufacturing for the MNE's home market, to shift their focus to exporting to their own regional
market. Our starting point for analyzing these subsidiary strategies is the integration –
responsiveness (IR) framework, which was originally designed for global MNE analysis. MNEs
also set up subsidiaries to supply their worldwide operations with local resources. As MNEs use
comparative advantages of diverse local settings and as these contexts vary, the direction of
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intra-MNE trade and knowledge flows is not unilateral but bidirectional. As a result, several
subsidiaries obtain strategic mandates to service numerous countries' internal and external
markets. Building on the concepts of the IR framework, a new three-dimensional IRE framework
of subsidiary strategy is proposed to address the problem of specialization within MNEs
becoming increasingly important as globalization allows supply chains to become more
regionally differentiated while remaining operationally integrated. This standardization and
knowledge integration occurs at the 'above-subsidiary' level, though not necessarily at the global
level, from a subsidiary perspective. If integration is to succeed, a subsidiary's participation in an
integration plan cannot be optional, because allowing an independence-minded company to opt
out could jeopardize the entire MNE strategy's benefits. As a result, responsiveness necessitates
close collaboration between the parent and the subsidiary as they figure out how key strengths
might be leveraged to help where they can. They can focus on the local environment that
produces idiosyncratic conditions that are considerably different from those in the MNE's home
country., or communication and knowledge flows between headquarters and subsidiaries are
relatively free of friction, or local competitors exert strong competitive pressures, increasing the
(opportunity) costs of failing to adapt to the local market.
The newly added dimension of export orientation measures how well subsidiaries serve markets
outside of their host economy, capturing the essence of comparative advantage in international
trade. Export-orientation strategies enable the exploitation of host country comparative
advantages to sell on to customers in third countries, who may be geographically close or
looking for a specific bundle of goods that can be created by combining MNE expertise with
local economic advantages at a reasonable cost. Subsidiaries can also participate in integrated but
geographically dispersed MNE networks and value chains. This lead Export-orientation
strategies at the subsidiary level are therefore more likely in local contexts where distinct
competencies. A given MNE subsidiary could theoretically be located anywhere in this
three-dimensional space. Various strategies, on the other hand, place different demands on the
subsidiary, resulting in crucial strategic trade-offs. A (fictitious) subsidiary that chooses poor
integration, low responsiveness, and low export orientation would be ill-equipped to take
advantage of internationalization opportunities. An MNE attempting to accomplish integration,
responsiveness, and export orientation at the same time, on the other hand, is likely to face
significant organizational and leadership demands. Except under very narrow circumstances, it is
unlikely to be the best option. MNE subsidiaries create their own resource bundles by combining
the resources of their parents with selected local resources. The diversity of subsidiaries is due to
the variability of resource bundles. The type of inputs a subsidiary possesses locally determines
the types of products it can supply profitably and the markets in which it can compete. We
believe that the responsiveness of subsidiaries and their export orientation strategies are
dependent on the quality of local resources; they are what entice foreign investors to place
various sorts of activities in various locations. Strong local competition forces MNE subsidiaries
to look for markets outside the host economy, where they would have a competitive advantage
over local competitors in attracting knowledge spillovers. A fundamental factor of subsidiary
strategy is the MNE's position in relation to the host economy. The distance between an MNE's
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home country and the host nations where it has invested, in particular, has been noted as a crucial
influence on international business. We focus on cultural and resource distance since distance is a
complex phenomenon. There are two main impacts of distance: It raises the costs of doing
business, especially for communication-intensive strategies and creates opportunities for
arbitraging or combining resources
Because the greater the distance between two areas, the more likely a certain location has
meaningful comparative advantages in some products or resources relative to other locations,
cultural distance is a key source of export prospects. Cultural distance expands the possibilities
for arbitrating culturally embedded items or products that are influenced by culture during
manufacture. As a result, cultural variety is a source of innovation that supports export
initiatives. The cultural divide raises the costs of communication and coordination, limiting
mutual understanding and trust between individuals from the two countries' organizations.
Higher levels of integration, such as more expatriate managers, are likely to be used by MNEs to
enhance information transfers between headquarters and subsidiaries, as well as to reduce
possible unit conflicts. The subsidiary executives devised and implemented a strategy to help the
unit stand out within the MNC. The new relationships' content was centered on first improving
the product offering, then developing new improved processes, and finally offering new projects.
It reacted to operational excellence by integrating it into the MNC through the development of a
network of relationships, resulting in Operational Embeddedness. Capability Embeddedness was
achieved by leveraging operational efficiency into distinct capabilities that established
relationships across the MNC.
These qualities, manifested in the form of connections, aided in the development of a strategic
role. In terms of the Constructs that Make Up the Subsidiary Strategy Model Operational
embedding is a term that refers to the fact that anything is The set of relationships between
Brakes Spain and the rest of the MNC that involve operational and manufacturing content and
activities is referred to as operational embeddedness. It is critical to create an appropriate
framework. Initially, the subsidiary focused on improving operational manufacturing efficiencies
and plant coordination, with leading operational embeddedness dominating.Furthermore, the
subsidiary was able to create its own product development competence by hiring R&D and
technical personnel. In addition, it established a sales department that would operate in unison
with R&D and engineering to respond to individual client needs, resulting in an increase in
capabilities embeddedness. Strategic embeddedness is becoming a critical component of the
MNC's overall strategy. Our management development plans also incorporate their participation
in divisional forums so that they can contribute more to the division's strategy development. The
autonomous behavior of the subsidiary is one of the relationships in the Model of Subsidiary
Strategy. Subsidiary autonomy is owing in part to HQ directives or assignments, in part to
strategic neglect on the part of the rest of the MNC, and in part to its own initiative. Subsidiaries
have taken advantage of this flexibility, forming a broad network both within the MNC and with
other entities. "We needed to seek value-added options if we didn't want to be relocated to a
low-cost country." Operational competence to strategic embeddedness is another component in
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the interactions. The subsidiary was given the freedom to build contacts with clients and other
MNC units in order to create operational embeddedness and engage in quality control with other
MNC units. Through the hiring of R&D and engineering personnel, the company was able to
expand its capabilities while also strengthening its links with the MNC, allowing it to expand its
reach and become a sender in the MNC's know-how transfer network [strategic].
Last but not least, as a secondary method, the levels of embeddedness. They took advantage of
being identified as different till they were able to influence the MNC's approach. They were
denied access to their R&D and commercial departments, a more centralized system was
implemented, and several key employees were sent to the MNC. The loss of relationships within
the company and external networks caused a decline in subsidiary identity. As a result, the
degree of differentiation it achieved decreased, and its similarity to other MNC units increased.
And a medium degree of distinctiveness is usually accompanied by a nondescript degree of
difference and similarity. To conclude, they chose to enhance their relationships, which increased
their differentiation.
Joint venture
The international joint venture is defined as a business that, from the start, aims to gain a major
competitive advantage through the use of resources and the sale of output in numerous countries.
Researchers find that there are four methods that are both essential and sufficient for the
existence of worldwide new ventures: Internationalizing some transactions leading to
organizational formation, considerably relying on alternative governing arrangements to acquire
resources, establishing foreign location advantages, and controlling over unique resources. In the
past, only MNEs can have enough economic power to take advantage of joint ventures; however,
with the support of technology innovation and international processes, exporting enterprises from
emerging countries can benefit from it as well.
The emergence of international new ventures poses a one-of-a-kind challenge to the stage theory
of MNE evolution. It is said to be most applicable during the early stages of internationalization,
with only three exceptions. Initially, firms with significant resources are expected to take major
steps toward internationalization. Furthermore, when foreign market conditions are stable and
consistent, it is easier to learn about them. Finally, if a company has extensive experience in
markets that are similar to a new targeted foreign market, that experience may be transferable to
the new arena. However, none of the exceptions appear to be applicable to international new
ventures.
Large size is often assumed to be a demand for multinational markets, in addition to the
perception that companies must go through stages of evolution before venturing into foreign
lands. Regardless of the fact that size is the primary firm-specific factor that has been described
as multinational, large MNE size may be a consequence, rather than a cause, of other more
fundamental sources of competitive advantage. These more fundamental sources of advantage
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enable international new ventures. Even though large size remains a major source of advantage
for some MNEs, changing economic, technological, and social conditions have emphasized
numerous resources in recent times. Rapid advancements in the speed, quality, and effectiveness
of international communication and transportation have drastically decreased the transaction
costs of multinational interchange.
Type of International new ventures: The amount of value chain activities coordinated and the
number of nations entered can distinguish different types of international new ventures. The first
type is “New International Market Makers”, which importers and exporters benefit by
transporting goods from where they are to where they are needed. Export/Import Start-ups or
Multinational Traders can be New International Market Makers. Export/Import Start-ups
concentrate on a few countries with which the entrepreneur is acquainted. Secondly,
“Geographically Focused Start-ups” profit from the use of foreign resources to meet the
specialized needs of a specific region of the world. They are distinguished from the
Multinational Trader in that they are geographically limited to the location of the specialized
requirement, and they coordinate more than just inbound and outbound logistics. Lastly, "Global
Start-up" is a common term of trade. It is the most radical manifestation of the international new
venture since it generates considerable competitive advantages from extended coordination
among various organizational actions with geographically unlimited locations.
Franchising
Franchising is a business model in which the franchisee is granted the right to offer, sell, or
distribute goods or services through a marketing format designed by the franchisor. The
franchisor grants the franchisee permission to use the franchisor's trademark, name, and
advertising materials. There are two general types. The first one is the Product and Trade Name
Franchise, which grants the right to use a widely recognized product or names, such as soft drink
distributors, automobile dealers and gas stations. Another type is Business Format Franchise,
which is the most common type. It provides an entire marketing system and ongoing guidance
from the franchisor, including Fast food; Retail; Service;...
In master franchising, a franchisor has the ability to open numerous franchise locations either
individually, called single-unit franchises, or by a process called sub-franchising that is a type of
multi-unit franchising. The selected franchisees become sub-franchisors, who are granted the
right to establish a minimum number of sub-franchisees within an exclusive territory and over a
specified period of time. Franchisors control how franchisees conduct their businesses, for
instance, site approval, design or appearance standards, restrictions on goods or services offered
for sale, restrictions on the method of operation, and restrictions on sales areas. There are 3 types
of master franchising agreements. Firstly, Area development agreements, which have no resale
rights, but are instead responsible for adhering to a "mandatory development schedule" in their
region. The second agreement is Master franchising agreements that franchisor grants a
subfranchisor or master franchisee the right to develop franchise business in a specific area, as
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well as the right to grant other parties the right to operate franchised outlets as sub-franchisees.
Additionally, when a franchisor enters into joint venture agreements with a foreign firm within
the country where the network is to be developed, it is called Joint venture franchising.
Master franchising is especially prevalent in two circumstances. Initially, when a new franchise
opportunity is being launched in the domestic market and the franchisor wishes to expand
locations rapidly. Besides, International franchising is establishing large territorial franchises
(city/region/nation) through one individual or a single business entity and in order to create
sub-franchisees. In recent years, large US franchises such as KFC, McDonald’s, Pizza Hut…
have applied a multi-faceted strategy with the purpose of creating sub franchises in foreign
countries. Franchisors award multiple-unit franchises to aggressive entrepreneurs as well as
apply joint ventures or traditional licensing arrangements. Incorporating multiple-unit franchises
into a franchisor's overall growth plan or strategy allows for rapid market penetration and also a
decline in administrative burdens and costs to the franchisor via effective cost-shifting
techniques.
According to Pizanti and Lerner (2003), a debate over the desire of the franchisor’s control
versus the franchisee’s desire for autonomy has occurred. From the franchisor’s view, control
over the franchising agreement is aimed to safeguard and stabilize the brand name. In contrast, in
the franchisee’s point of view, more autonomous agreement enables local adaptation to domestic
needs. As a result, excessive levels of control or autonomy can be counterproductive and
negative. In implementation, however, franchisor’s control has limitations, such as monitoring
capacity. Because of these constraints, a franchisee may have de facto autonomy, particularly if
the franchise's establishment necessitates some degree of decentralization. In addition, in order to
reflect the quality control obligation of the franchisor, they may provide sub-franchisors with
regional operations manual, for example, an extensive training at their own “universities'' (e.g.
Hamburger University (McDonald’s) and Dunkin’ Donuts University).
Although there are many economic hurdles and political risks that arose, such as corrupt or poor
political leadership; frequent changes in the form of government; political involvement of
religious or military leaders,... franchising continues to grow rapidly. Direct government
assistance programs and rapidly expanding economies have helped franchising develop
significantly in many Pacific Rim nations. Franchising opportunities are especially strong in
Singapore, Malaysia, Indonesia, Hong Kong, India, and Taiwan, China, Vietnam. These
opportunities bring certain unique challenges not found in domestic franchising.
In the mid-1960s, few fast-food chains began experimenting on a “trial and error” basis with
foreign operations. Let’s have an example: McDonald's started in 1970, but until 1992, its
international operations accounted for 39% of its $21.9 billion in worldwide system sales. It is
worth mentioning that McDonald's succeeded by following the same formula in its domestic
operations, despite different cultures. McDonald's had to export practices and eating habits of
Americans such as fast food, drive-ins…, which are not common elsewhere except America. In
Iceland, in order to attract customers who would not venture out into the extreme temperatures,
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McDonald's had to construct an underground parking lot. In Japan, people find it hard to
pronounce the word its brand name “McDonald's”; therefore, the local franchisee changed into
“Makudonaldo!”. In Australia, it had to redesign the menu to satisfy the unique taste of people
there, for instance, English-style fish and chips. In Germany, besides adding beer and bratwurst,
McDonald's became the biggest segment in Europe with special stores’ decorations, such as dark
colors and use of a lot of wood, some stores also look like a beer hall. Additionally, customers of
McDonald's in Paris prefer a glass of wine with a “Big Mac” combination meal; while people in
London choose to order a lamb burger special meal or “crisp fries”. As a result, we can conclude
that International franchising concentrates mostly on flexibility and adaptability.
Nevertheless, there are some issues master franchisors and possible franchise partners should
consider before entering a foreign market. Gray marketing is one of the major problems. “Gray”
goods are not counterfeit, but their distribution is “unauthorized” as manufacturers did not permit
the seller to sell these products. Next, franchisors have to be ready for a “long-term” business
commitment and be pleased to assume more stable and practical access to fees and ongoing
royalties. What is more, master franchisors need to be fully aware of international copyright and
trademark laws, which can differ in reality for each nation or not have any safeguards at all.
Lastly, master franchisors must have a central internal management group and a qualified cadre
of external advisers who have realistic practice in international business and franchising.
Franchising in the U.S is a motivating force in the establishment of entrepreneurial revolution,
which is still fueling the sluggish economy by creating new business owners and careers.
Because of the saturation of the market, U.S franchisors have started to internationalize concepts
with the percentage of 63%. It is essential to recognize that international franchising differs from
other kinds of market entry and distribution, including licensing, exporting, and FDI, and as a
consequence, has a significant influence on the environments in which it operates.
Next, let’s have a look at the economic effects of international franchising.
The first mention here is Output and Job Creation. The franchising multipliers indicate how
much impact a given investment will have all across the economy, even though ultimate
influences fluctuate by industry and strategic planning. Franchisors help boost demand for a
variety of commodities by offering employment and wages to workers.
Second, increasing Tax Revenue aids the development of emerging economies' physical and
institutional facilities. Through their involvement, as well as franchisees and small company
networks, international franchisors diversify and indirectly boost business tax base.
Thirdly, Economic Modernization relates to economic development and globalization. When
giant corporations joined emerging economies, they made significant investments in local
markets to help put their products and services up to the standards of the businesses.
Fourthly, the effect of franchising on the Balance of Payments (BOP) is less obvious. On the
surface, franchising appears to be less advantageous than FDI in terms of BOP, with an
asymmetry between the profits gained by the home and host markets. Since local production is
not substituted, imports do not improve, and net capital inflows rise due to royalties, franchising
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benefits the home market BOP. Nevertheless, imports to the host country frequently increase as a
consequence of the growth of international franchising because franchisors frequently import
elements of their business formats and sources from the home market.
Fifthly, one of the major commitments of franchising is its ability to improve small and
medium-sized enterprises (SMEs) and boost local entrepreneurship of a host market. In
developing countries, franchising generates innovation as a byproduct of entrepreneurship.
According to Siggel, Maisonneuve, and Fortin (2003), in the African context, franchising enables
new technologies to be spread, introduces new business models into the local market, adds value
to increased productivity, and creates external economies.
Finally, formal training and imitation are used in franchising education. Institutions in some
nations provide franchising education programs. Furthermore, local businesses who notice the
accomplishment of international franchises imitate and modify individual foreign franchising
systems to local preferences, transforming themselves into formidable competitors by improving
their own brands and business formats. International franchising transfers knowledge,
technology, and human capital while also improving labor force skills and abilities.
What is more, the social impacts of franchising is another thing we have to be concerned about.
One of the vital issues is Standards of living and the rationalization of consumer choice. The
ability of franchising to make a contribution to higher living standards and more consumer
choice is influenced by demographic and social trends in host areas. The cultural identification of
franchises with a specific country of origin influences the perception of local customers and, as a
result, the franchise's approval. For example, McDonald's has been chastised by French buyers
for destroying local culture, and the jobs of local cheese farmers, as well as providing "bad" food
to their kids.
Another matter is the McDonaldization of society. Several scholars called it the trend toward
Westernization and homogenization of consumerism, relating to the big fast-food franchise. Four
core principles of Ritzer's McDonaldization theory, as reported by Alfino and his colleagues
(1998), are efficiency, calculability, predictability, and control. The McDonaldization thesis
demeans franchising.
Lastly, some scientists believe that global franchising and globalization may lead to
socio-economic tensions. Social dissatisfaction with American-led globalization, and particularly
franchising, is sometimes demonstrated through resistance. For instance, in 2001, a bomb
detonated in a McDonald's in Xi'an, China, which indicated more than simple retaliation by
disgruntled employees or jilted lovers. Other experts, however, see more positive characteristics
and diversification in the emerging global economy. According to this viewpoint, franchising
broadens the range of options while having no significant impact on society.
Furthermore, researchers may find that variation in effects indicates that franchisors may face
opposition in the short term, but the market may accept the franchised format after some cultural
learning. Relating to the economic environment of franchising, to assess the economic effect of
franchising on the host country, output and employment multipliers must be advanced.
Moreover, the franchise aspect's competitiveness will leave a lasting impact on the economic
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growth in a variety of ways. Additionally, another matter is the type of regulations, if any, that
may be used to enhance and command the effect of franchising companies within a developing
country. Lastly, to reduce their risk exposure, U.S franchisors are much more likely to do
area-based and multi-unit franchising arrangements rather than direct franchising or fully owned
operations in developing markets.
Greenfield
Greenfield and acquisitions are affected by R&D intensity, the degree of diversification, the
level of foreign experience, cultural distance, the size of the foreign direct investment in
comparison to the size of the investing company, and the time of entry, which lead to a big
impact on a firm’s choice of entry mode is the firm’s international strategy. Furthermore, two
different types of international strategies are “global” and “multidomestic/multinational”. Global
strategies are characterized by a high level of globalization of competition with national product
markets being interconnected and a focus on capturing economies of scope and scale. Therefore,
they can integrate and rationalize production. Subsidiaries fulfill a role as a “pipeline” for
headquarters. The company can be characterized as a decentralized network. Subsidiaries are
relatively autonomous and are allowed to be very responsive to the local market. Because of the
problems, Foreign direct investment (FDI) has been chosen as the most efficient mode of entry,
and internationalization advantages are assumed to be present
They focus on exploiting non-location-bound home-based FSAs, such as proprietary technology,
but are limited to the exploitation of low-cost locations, which allows global companies to
pursue their strategy based on cost efficiency. Besides, building up a low-cost production site is
easier when the site can be set up from scratch. It can incorporate the latest production
technologies and be built to match the company’s exact production requirements rather than
having to accept existing ones. And they also need to be well aware of local circumstances and
well-integrated into the local market. Subsidiaries are confronted with an external environment
that could include parent and the host government, local interest groups, and other organizations
which may be subsidiaries of other MNCs, which lead to institutional pressures from within the
organization to become isomorphic to the parent organization’s norms. Linking this with the
choice of entry modes may lead to particular modes of entry facilitating either internal or
external isomorphism. Establishing foreign subsidiaries as a mirror image of headquarters is
important to ensure that key structures, policies, and procedures are similar and is much easier to
realize for greenfields than for acquisitions. To sum up, companies follow a global strategy to
prefer greenfields over acquisitions.
The international strategy of the MNC will have an impact on the choice of entry mode. It
influences the way subsidiaries are managed after they have been set up/acquired. However,
companies might be “forced” to accept a non-preferred entry mode. A reason for a company
following a multidomestic strategy to decide to set up a greenfield could be that no suitable
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take-over candidates are available in the country in question. And a reason for a company
following a global strategy to acquire an existing company might be a (temporary) lack of
managerial resources or government regulations in particular countries preventing new entries. If
companies are forced to enter a market via a non-preferred entry mode, we would expect that
over time they would try to change the headquarters—the subsidiary relationship of this
subsidiary to make it resemble the headquarters—subsidiary relationship of subsidiaries with
their preferred entry mode, which overcomes part of the disadvantage of entering a market
through a non-preferred entry mode.
Applied theories of International Market Strategies to Hoa Phat
Group
According to these researches, we can see that scholars have applied various theories when
analyzing International market strategies. With export strategy, Hoa Phat Group can follow three
factors to increase its export performance competitive strategies of cost leadership and
differentiation, marketing standardization, and geographical diversification of exports. First, Hoa
Phat can benefit from a cost-leadership strategy in developed countries such as America,
England, and Japan. Because of Hoa Phat’s low cost in R&D, labor, and production process, Hoa
Phat can provide customers a much cheaper steel price than domestic enterprises but still meet
the international standard quality like JIS ASTM, BS EN. Second, the best marketplaces for Hoa
Phat to apply the differentiation strategy are developing countries (Malaysia, Brazil,
Campuchia). These countries usually either do not have enough product diversities or only have
low-quality products. Hoa Phat can gain substantial profit exporting their high-quality furniture
like office chairs, tables, medical equipment, and international standardized steel with country
characteristics like that. Furthermore, global citizens will know and trust Vietnamese products,
increasing sales of other exported goods. Third, another way to expand export performance is to
use marketing standardization. With this strategy, Hoa Phat can either use DMS or SMS;
however, as a steel exporting enterprise, it is best for Hoa Phat to use SMS because steel does not
relate to culture, politics, or economy of different countries. So, Hoa Phat can minimize
marketing costs, reduce new-market entry costs, and raise multinational customers’ recognition
of its products as there is only one marketing program used in multiple countries. Last, the
strategy that Hoa Phat is currently using is geographical diversification. So far, Hoa Phat has
exported its products to 14 different countries, but in the future, there will be much more. Hoa
Phat will gain from this strategy because it will minimize exchange rate risk, increase Hoa Phat’s
reputation globally, and provide Hoa Phat with knowledge about customers’ references and
buying cultures in different markets. However, Hoa Phat should not expand its business too
large, where costs outweigh the benefits gained from this strategy.
As you may know, Hoa Phat Company has a number of subsidiaries in Vietnam, including Hoa
Phat Dung Quat Steel JSC, An Thong Mineral Investment JSC, Hoa Phat Plate Rolling Joint
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Stock Company, Golden Gain Vietnam, and so on. They operate as autonomous enterprises,
implementing strategies to achieve economic objectives in their target markets, but they
collaborate with the parent MNE. Hoa Phat's international integration is still limited, despite its
great growth in the domestic market. As a result, Hoa Phat must encourage the formation of
overseas subsidiaries in order to enable the company's expansion and development into the
international market. The host firm provides them with resources, but they must share those
resources and limit their strategic goals. Together with a defined development strategy and a
focus on certain regions, this will be a stepping stone in helping subsidiaries integrate into the
world more quickly and easily. Hoa Phat has been performing exceptionally well in terms of
integrated framework - reactivity (IR). Links to mining blocks or firms in Singapore demonstrate
this. The subsidiary's strategic aim at the time was to service several countries' internal and
exterior markets. A new three-dimensional IRE framework of subsidiary strategy is proposed
based on the concepts of the IR framework to address the issue of specialization in MNEs, which
is becoming increasingly important as globalization allows supply chains to become more
regionally differentiated while still integrating operations. If the overseas branch's subsidiaries
successfully integrate, a subsidiary's participation in the integration plan must be optional,
because enabling an independent-minded company to opt out could undermine the MNE
strategy's entire benefits. Hoa Phat is aware of their competitive advantages and strengths (a
plentiful supply of raw materials, inexpensive labor, and cutting-edge machine technology) and
uses these to sell to consumers in foreign nations who may be geographically close. You are
looking for a specific category of goods that may be produced at a fair cost by combining MNE
expertise with local economic benefits. However, the vital demand for this product and the
capacity to fulfill it face many challenges, since Hoa Phat's low integration abilities and
restricted export focus will be a major roadblock. The quality of local resources is what entices
foreign investors to perform a variety of operations in various locations, and it is what
determines the responsiveness of subsidiaries and their export-oriented plans. As a result, hunt
for markets outside the host economy where they may capture knowledge spillovers at a lower
cost than local competitors. To succeed, HPG must concentrate on increasing production and
factory coordination efficiency, with top operations taking precedence. It has also formed a sales
department that will collaborate with R&D and engineering to suit specific customer
requirements, resulting in increased embedding capabilities. Because subsidiaries have corporate
autonomy, they are allowed to form relationships with customers and other MNCs in order to
achieve operational coherence and engage in quality control. With the help of other MNC units,
we were able to increase our volume.
As for joint ventures, Hoa Phat can gain benefits by cooperating with local enterprises in
designated markets. Through sharing information between companies, Hoa Phat can
acknowledge the purchasing culture, government policies, and distribution channel. For example,
New Zealand, Canada, South Korea are the most growing marketplace with increasing steel
orders from Hoa Phat over the year. Thus, Hoa Phat should create a venture with local
distributing firms within those countries to expand Hoa Phat’s reputation, creating opportunities
for exporting other types of products like furniture or medical equipment. HPG has contributed
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capital to establish many joint ventures, for instance, Hoa Phat - Mitraco joint venture, which
main purpose is implementing the project of iron ore refining and refining factory at Thach Khe
iron mine; or Hoa Phat Quang Binh breeding LLC, cooperating with Viet Trung Quang Binh.
From the first quarter of 2021, Hoa Phat became the largest steel producer in Vietnam as well as
in Southeast Asia, owning a diverse ecosystem of steel products from iron ore. Also, Hoa Phat is
in the top 50 largest steel companies in the world. This advantage helps boosting HPG’s
reputation and develop its international joint venture in a smooth and easy way as large company,
in major cases, brings some benefits.
When considering the franchising method, HPG has the advantage that it is Southeast Asia's
largest steel producer, with an annual crude steel capacity of 8 million tonnes. Therefore, there
are many opportunities for HPG to develop its international franchise business. One of the first
things Hoa Phat has to focus on is adaptability and flexibility. In each market, there will be
numerous differences related to cultures, lifestyles, standard of living,... and these factors will
have an influence on the franchise development. Let’s see the product ‘bathtub’ of Funiki - HPG
as an example. In Japan, a bathtub is a necessity that every Japanese house owns at least one.
Japanese enjoy soaking in a tub as a time of relaxing, however, the weather in Japan is
commonly extreme, especially in winter. As a result, HPG can improve its items in order to adapt
to Japan's condition. Besides, aiming at bathroom furniture in Japan is a considerable choice due
to its unique bathing culture. Next, HPG has to determine carefully which countries will be first
priority for future expansion. There are lots of options to examine. As mentioned in the research,
nowadays, emerging markets such as Latin America, Eastern and Central Europe, Asia, the
Pacific, Latin America… make up for a large portion of franchising’s international expansion.
HPG can choose big potential markets, for example, India or China; or familiar nations such as
Japan, Cambodia, Korea, Taiwan, Malaysia, Australia, USA,... which have high consumption of
Hoa Phat’s products. Although market size and market risks are just two of the many variables
that influence success in international markets, it’s still a requirement needed for franchising.
Moreover, some difficulties when entering the foreign market as well as controlling franchise
business, are other concerns. HPG needs to have an effective management strategy so that it can
best manage and supervise its franchisees. In addition, creating a good relationship between
franchisor and franchisee is noteworthy.
The company can use a Greenfield approach or not depending on the intensity of research and
development, degree of diversification, level of foreign expertise, cultural distance, size of
foreign direct investment relative to the size of the investing company, and time of admission.
Hoa Phat has only one base in Singapore and is mostly focused on the domestic market.
Subsidiaries act as a "conduit" for the headquarters and are largely autonomous, allowing them to
respond quickly to local market demands. A decentralized network can be used to characterize
the company. Hoa Phat, on the other hand, is one of the most powerfully developed and
steel-producing corporations in the world. When the company wants to develop and expand its
operational market, this gives it the ability to attract large amounts of foreign investment capital.
As a result, they will be able to consolidate and streamline production in order to speed up the
15

process. As a result, foreign direct investment (FDI) or a greenfield plan has been chosen as the
most successful entry route, and Hoa Phat is claimed to benefit from internationalization. To do
well, first, it's easier to create a low-cost production site when it can be built from the ground up.
They also use the most up-to-date production technology and are custom-built to meet Hoa
Phat's particular manufacturing needs. The greenfield approach will be a carbon copy of the
headquarters, therefore they must guarantee that the basic structures, rules, and procedures are
similar and straightforward to implement.
Conclusion
This study reviews ten research studies undertaken by economic and managerial
experts/scholars to provide information on five worldwide market strategies. The findings show
a survey of the literature on definitions linked to international market strategy and international
market integration by research management scholars over the previous 20 years. The findings
reveal that the strategy for expanding and integrating into foreign markets varies from year to
year in order to fulfill the needs of customers. Each step of development will have a distinct
target audience, so you'll need to research the insights or demands of the region you're focusing
on. Because the integration process will be tough, the findings demonstrate that academics have
looked into and investigated several sorts of economic growth promoters such as exporting, joint
ventures, subsidiaries, franchising, and greenfield development. In economic integration with
developed countries, these strategies are popular and widely employed. This review contains
some obvious flaws, however, it is objective and limited to only ten research articles.
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