Aker Solutions: Strategic Analysis for Entering the French Market

This report examines Aker Solutions' strategic approach to entering the French market. It begins with an introduction to Aker Solutions, a Norwegian company providing oil and construction services, and explains the rationale for choosing France as a target market, highlighting the favorable relationship between the two countries. The report then delves into various strategies for entering foreign markets, categorizing them into equity modes (joint ventures and wholly owned subsidiaries) and non-equity modes (exporting and contractual agreements). It analyzes the advantages and disadvantages of each mode, considering factors like risk, cost, and control. The report recommends that Aker Solutions establish its business in France through wholly owned subsidiaries using greenfield operations, providing full control over operations and technology. Finally, the report discusses the institutional view of international strategy, emphasizing the importance of formal and informal institutions in the target country, including regulations, cultural norms, and ethics. The conclusion summarizes the key findings and reiterates the recommended strategy for Aker Solutions' market entry into France.

Strategies to enter in foreign market
strategies to enter in foreign market
Aker Solutions (Norway)

Aker Solutions- Strategies to enter in France
Table of Contents
Introduction...................................................................................................................2
Reason for choosing France..........................................................................................3
Strategies for Entering Foreign Market........................................................................3
Equity mode..............................................................................................................3
Non-equity mode......................................................................................................3
Market strategy of Aker to enter France.......................................................................4
Institutional view of international strategy...................................................................4
Formal institutions....................................................................................................4
Informal institutions..................................................................................................5
Conclusion....................................................................................................................5
References.....................................................................................................................5
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Aker Solutions- Strategies to enter in France
Introduction
This assignment is focused on the entry and expansion of Aker Solutions in France. Aker
Solutions is a company providing oil and construction services based in Oslo, Norway. It
serves the oil and gas industry by providing them with the oilfield systems, products, and
services. The company, until 2008, was known as Aker Kværner and was founded in 1841.
(Are, 2016) The slogan of the company is ‘taking the next step in the global oil and gas
success story'. The company is considered as the global leader in designing and supplying
mooring system and deck machinery for offshore and marine applications. The products of
Aker Solutions range from underwater installation of a system nearly the size of a football
field, to equipment that can be worked with under deepest water levels and in the harshest
environment conditions. In 2014, Aker focused its business on two important sectors field
and subsea design. At present, it provides employment to about 13,000 people in around 20
countries including Europe, Asia-Pacific, America and Africa. The company was started by
Aker in Oslo, Norway, in 1841 as a small mechanical workshop named Akers Mekaniske
Verksted. The growth of the company was fast and thus it went through an engineering and
shipbuilding company. The world's first system of subsea gas compression delivered by
Aker which was about 200km off the coast. The system with the size of a football field
revolutionized the production of natural gas by cost cutting and improved safety at the
bottom of the ocean.
The company entered a new era by taking over major construction, engineering, and
shipbuilding rivals in 2002. Merging two companies gave rise to a technically and
financially strong business with diverse interests. The process and construction business
were divested in 2011. In the same year, it also split the procurement, construction, and
engineering activities. In 2013, the business of loading and mooring systems and well-
intervention services was sold by Aker. Now, it is one among the leading providers of
oilfield systems, products and services in the world for upstream oil and gas industry. It is
focused towards rapid growth of subsea oil-services and deep-water markets. It serves the
construction and engineering segment of the market and is targeted towards corporates and
enterprises. The company is positioned as a company that brings technology and engineering
together to the drilling of oil and gas, field development and production.
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Aker Solutions- Strategies to enter in France
Reason for choosing France
Being friendly relationship between France and Norway, it is a great opportunity for Aker
Solutions to enter France for expanding the business. There is a great and better scope of
growth for Aker to expand its business in foreign countries rather than in Norway. France
and Norway, both are members of NATO and Council of Europe, and both have embassies
of the other in their countries. Also, in France, there is a significant number of people living
belonging from Norway. So, it becomes an advantage for Aker to start the business and
relate to the population. ("France–Norway relations", 2016)
Strategies for Entering Foreign Market
Foreign market entering strategies are the opportunities for a business to enter a foreign
market and expand its business. With each foreign country, comes a different challenge that
a company has to face while entering that market. There are two important modes of entering
the foreign market which include equity and non-equity modes. While choosing the strategy
to enter a new market, the company must consider the nature of the foreign market, the
regulations of the target country, and the structure of the company. (Hanks & Hanks, 2016).
Selecting a strategy is a critical decision as it will either result in the success of failure of the
expansion. The involvement of risk, cost, commitment and return is critically analyzed
before selecting a strategy.
Equity mode
Equity modes are those market entering strategies which bring the company closer to its
customers. Equity modes are of two types, joint ventures, and wholly owned subsidiaries.
The Joint Venture is a venture where two or more individual companies form a new entity
independent of their parent companies. This strategy allows the company to share risk,
assets, cost and benefits. But because of the different cultures and distance, it is difficult to
coordinate, and chances of different goals and interests are high.
Whereas, a wholly owned subsidiary is a subsidiary business owned by the parent company
in a foreign country. It can be set up in two ways- either by Greenfield operations or by
acquisition. In greenfield operations, the organization can build the offices and factories on
the land which was previously used for agricultural purposes from the start. It will be
beneficial for the company to have full control over operations and equity. But it includes
high costs and is a slow entry strategy. On the other hand, through acquisition, the company
can make fast entry into the foreign market by acquiring an already existing organization to
avoid red tape. But the new organization may face integration problems post acquisition as
the equity has already catered to the previous owner. ("Equity Modes", 2016)
Non-equity mode
Under non-equity modes, there comes two strategies, exporting and contractual agreements.
Exporting is a way of selling its products in the foreign market without investing in facilities
within that country. Exporting is of two types, direct exporting, where the company has
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Aker Solutions- Strategies to enter in France
better control over the economies of scale and operations; and indirect exporting, where an
intermediary or any other organization is involved in helping in selling the products and
services. Exporting will make the company distant from customers and also, shipping and
other fees will be charged.
Contractual agreements are a way to expand the business without a long commitment in a
foreign market. It is of various types; they are: licensing, franchising, turnkey operations,
R&D contracts, etc. in licensing/ franchising, the parent company sells the rights of its
intellectual property to another entity operating in a foreign market for a royalty fee. It
involves low risk and low costs, but the organization has very less control over the marketing
and technology of its products and services.
Turnkey project is the one where a client/ parent company pays the contractor for designing
and constructing new facilities and train the human resource. It lacks a long-term presence in
the foreign market.
R&D contracts are those in which an organization performs the work of research and
development for another firm. It provides an ability to an organization to tap best locations
for low-cost innovations. ("Non-Equity Modes", 2016)
Market strategy of Aker to enter France
Aker Solutions should choose the strategy to set up its business through wholly owned
subsidies using green field operations in France. This will help the company to build the
business according to the technology and quality the company wants its business to use and,
will give the company full control over the operations, technology and equity of the
business. Considering that it is a slow entry strategy and involves high cost, the company
should attract some clients from the foreign market towards its business before starting the
operations or production. It will keep the technology of the company protected which
through other strategies might not remain that protected if the company will choose joint
venture or licensing/ franchising. It gives the ability to the company to analyze location, to
engage in global strategic coordination and to experience economics.
Institutional view of international strategy
While selecting a strategy to enter a foreign market, the aim of the company must be to
match the strength of the MNE to the challenges and opportunities that can be found in the
target country. There can be two perspectives to analyze the strategy: institution based or
resource based view. The strategy formulation must be according to the implications of
formal or informal institutions in the target country
Formal institutions
Formal institutions define the implications which are the codified rules like in the
constitution. It includes political, legal and economic system. Some regulations of a business
are which shows, how long the business is working and on what terms; trade barriers, i.e.,
the barriers that the company can face while doing the trade; the protection of property
rights, etc. (Ionascu, Meyer, & Estrin, n.d.). According to the construction, design, and
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Aker Solutions- Strategies to enter in France
management regulations 2015, the companies must implement minimum health and safety
measures. And by no chance, any company can sweep away from this regulation as enacted
by EU Directive 1992/57/EEC. The company must also have the certificate of energy
performance for all types of properties.
Informal institutions
The uncertainty to be faced by the MNEs entering the foreign market due to informal
institutions is critical to understand. These institutions involve the implications of the
culture, ethics, and norms of the foreign company which influence the behavior of the parent
company resulting in success or failure. The increased distance of informal institutions will
lead to a greater proportion of subsidiaries investment of expatriates and a full ownership
preference. (Sartor, 2013)
Conclusion
By conducting this assignment, we can conclude that Aker Solutions are a company
providing oil and construction services and for expanding its business France would be the
country. As both the countries share some similarities and population. And as per the formal
institutions, Aker can conduct business in France as France is a stable economy. For entering
the market of France, the company must choose the strategy according to the nature of the
business and market. So, accordingly the strategy of the joint venture and wholly owned
subsidiary (WOS) can be chosen, but there can be a situation of sharing the technology
which will end the uniqueness of the technology. So, WOS is the most appropriate strategy
as per the business, but if the company does not mind to share the technology with the other
company then they must choose joint venture as there will be less cost and risk involved as
compared to the wholly owned subsidy.
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Aker Solutions- Strategies to enter in France
References
Are, W. (2016). Who We Are. Aker Solutions. Retrieved 10 August 2016, from
http://akersolutions.com/who-we-are/
Hanks, G. & Hanks, G. (2016). Compare & Contrast Equity & Non Equity Modes for
International Business | eHow. eHow. Retrieved 10 August 2016, from
http://www.ehow.com/how_6747391_compare-equity-modes-international-business.html
Equity Modes. (2016). Entry Strategies into Foreign Markets. Retrieved 10 August 2016,
from http://entrystrategies.weebly.com/equity-modes.html
Non Equity Modes. (2016). Entry Strategies into Foreign Markets. Retrieved 10 August
2016, from http://entrystrategies.weebly.com/non-equity-modes.html
France–Norway relations. (2016). Wikipedia. Retrieved 10 August 2016, from
https://en.wikipedia.org/wiki/France%E2%80%93Norway_relations
Sartor, M. (2013). The Impact of Informal Institutions on MNE Strategy: Innovation
Investments in Emerging Markets. Academy Of Management Proceedings, 2013(1), 17167-
17167. http://dx.doi.org/10.5465/ambpp.2013.17167abstract
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