Literature Review: Competitive Dynamics of MNE Entry in Australia

This literature review examines the strategic decisions multinational enterprises (MNEs) face when entering new national markets, focusing on the competitive dynamics and potential impacts on the host country. It begins by introducing traditional internationalization models like the Uppsala Model and Dunning's OLI Paradigm, which guide MNEs in their market entry strategies. The review explores factors affecting MNE performance, including SLEPT environmental factors (social, legal, economic, political, and technological), and analyzes different entry modes such as contractual agreements, trade-related activities, strategic alliances, and investment-related approaches. It also delves into the online retailing landscape, competitive forces using Porter's Five Forces framework, and generic competitive strategies. The review identifies a gap in the literature regarding online retailing store formats and poses a research question concerning the impact of foreign online retailers on incumbents in the host country's retail sector, specifically focusing on Amazon's entry into Australia.

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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o National reputation
o Cultural Issues
 Benefits to the MNE of market entry
 Competitive advantage in market entry
2.4 Factors Affecting MNE Performances
Factors that will affect MNE’s performance in Australia;
 SLEPT environmental factor analysis (social, legal, economical, political and
technological)
o Social Factors: Social and cultural analysis of Australia.
o Legal Factors: Legal situations prevalent in Australia.
o Economic Factors:
o Political Factors:
o Technological Factors:
 Online Retail industry specific factors
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2.5 MNE Entry and its Impacts on the Host Country
MNE can select from the below mentioned types of entry models and decide upon which one to
select.
International companies while executing their international trade related strategies can select
from the below mentioned categorical choices.
 Trade Related: Deciding upon the trade approach in the host country and deciding upon
the appropriate method for entry.
(Description)…..
 Contractual Entry Model
(Description)…..
 Strategic Alliances Model
(Description)….
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Entry
Modes
Trade
Related
Contractual
Mode
Investment
Related
Strategic
Alliances

 Investment Related Model
(Description)………
2.5 Online Retailing
 Description of the concept of online retailing
 Layers of online retailing
2.7 Competitive Dynamics and Porter’s Five Forces
Description of Porter’s five forces of competition
 Bargaining power of buyers:
 Bargaining power of suppliers:
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Figure 1: Porter's Five Forces of Competition
 Threat from new entrants:
 Threat from substitute products:
 Industry rivalry:
2.7.1 Porter’s five forces for competition
2.7.1.1 Critiques of Porter’s five Forces
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2.8 Repositioning and Porter’s Generic Competitive Strategies
 Description of Generic Strategies
 Selection Generic Strategy from amongst available strategies
 Application of the Generic Strategy
Figure 2: Porter's Generic Strategy
2.8.1.1 Critiques of Porter’s Generic Competitive Strategies
2.9 Competitive Responses and World Responses
Description of online retailing business growth worldwide basis.
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2.9 Internationalizing Barriers
MNE while expanding its business in Australia might face the following barriers…(Description)
 Cultural Issues
 Legal and Political Issues
 Financial Issues
 HRM Issues
 Communication and Coordination Issues
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International
Expansion
Barriers
Cultural
Issues
Legal and
Political Issues
Communicatio
n and
Coodination
issues
HRM issues
Financial
Issues

2.10 Literature Gap
Though a number of scholarly articles are present for physical businesses expansion, very few
online retailing store formats are available.
2.11 Research Question
“How does the entry of foreign online retailer impact the incumbents in host country’s
retail sector: The competitive dynamics and word response to Amazon’s entry into Australia’s
retail sector.”
References
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