Mario glowik charts_market_entry_strategies_july_2009

Mario Glowik, Market Entry Strategies, First Edition (2009)

Market EntryMarket Entry StrategiesStrategies

© 2009 Oldenbourg Wissenschaftsverlag Munich, Germany 1


Qualitative versusQualitative versus quantitative research

h dmethods



Qualitative versus quantitative research methodsSource: modified from Bungard et al. (2000)

Research Method Advantages

Quantitative Qualitative

▪ quantified research results

▪ data comparability and transferability

▪ flexible research methods

▪ open questions approach allowsdata comparability and transferability

▪ data objectivity due to quantified methods

▪ statistical and mathematical context

open questions approach allows

background information

▪ better reflects complex realitystatistical and mathematical context

▪ reasonable in cost and time

▪ more representative due to a larger

better reflects complex reality

▪ focus on relevant research issues

▪ contextual validitymore representative due to a larger

sample

contextual validity

▪ exploration of a new topic



Qualitative versus quantitative research methodsSource: modified from Bungard et al. (2000)

Research Method Disadvantages

Quantitative Qualitative

▪ less method flexibility

▪ fixed questions

▪ relatively expensive and time consuming

▪ interviewer’s profound expertise isfixed questions

▪ proposals allow for limited improvements

▪ lack of individual response

interviewer s profound expertise is

necessary concerning the topic of research

▪ no numerical indications possiblelack of individual response

▪ limited causation of research results

▪ highly quantified data do not reflect

no numerical indications possible

▪ subjective interpretation of results,

which depends on interviewerhighly quantified data do not reflect

specific circumstances in reality

which depends on interviewer



Environmental analysis yof the foreign target

marketmarket



Elements of the general external (macro) environment of a firmSource: Modified from Wheelen and Hunger (2004), and Schreyögg (2003)

Economic

•Gross domestic product (GDP) trend

•Unemployment rate

•Wage levels

•Interest rates•Interest rates

•State budget volume/surplus /deficit

•Foreign trade surplus or deficit

•Inflation rates

•Disposable income of consumers

•Stability of currency

•Debt-equity ratio




Technological

•Patents outcomes

•Industry cluster

•Industry innovation and productivity

•Telecommunication (Internet ) infrastructure•Telecommunication (Internet-) infrastructure

•Government spending on R&D

•Industry expenses for R&D

•Technology transfer from laboratory to market place

•Attitudes toward new technologies, automation, and rationalization

•Country specific industry focus (i.e., electronics, automotive)




Political-Legal

•Market versus central planned economy

•Democracy

•Stability of government

•Protection of capital and intellectual property rights•Protection of capital and intellectual property rights

•Corruption level

•Tax laws/ investment incentives

•Antitrust regulations

•Affiliation to political and economic organizations (WTO)




Sociocultural

•Age distribution of population

•Birth/death and growth rate of population

•Rate of family formations

•Regional shifts in population•Regional shifts in population

•Life expectancies

•Changes in lifestyle

•Attitudes toward minorities

•Education/ illiteracy

•Violence potential of the society




Ecological

•Environment protection laws

•Nature resources and exploitation

•Attitudes towards nuclear energy

•Consumption of bionomical productsConsumption of bionomical products

•Market penetration of genetically engineered food

•Protection of threatened species of animals



Industry environment of a television set manufacturer located in the European Union in 2008 Source: Adopted from Porter (1999)

Industry Rivalry

Danger of new Threat of technological Supplier: Customer:

▪ Major component

Danger of new market entrants:

▪ Firms from China,

gsubstitution:

▪ Organic Light Emitting Di l (OLED)

▪ High quality

Supplier:

supplier in China,Japan, and S.Korea

▪ R&D know-how

Taiwan and India Display (OLED)consciousness and price sensitiveness

▪ Market saturation▪ R&D know-howbundled in Asia

▪ Newly upcoming

▪ Market saturationin Western Europe

▪ Upcoming new industry cluster in Poland, Slovakia, and Hungary

markets in Central and Eastern Europe


g y p


Internationalization Theories



Relationship of the advantage categories and market entry strategies Source: Dunning (1980), Perlitz, (2004)

O hi I li i L i ifiAdvantage

Ownership specific

Internalization Location specific

Entry strategy Foreign direct investment

Available Available Available

Export Available Available Not available

International contracts Available Not available Not available



Firm and market internationalization degreeSource: Johanson & Mattsson (1988)

Degree of internationalization of the market

Degree ofHighLow

Degree of

InternationalizationThe Early Starter

The Late Starter

Low

of the firm

The Lonely The

Starter Starter

The Lonely International

The International among Others

High



Internationalization: conceptualization of an entrepreneurial process of behavior in timeSource: Jones and Coviello (2005)

The Entrepreneur • Level of innovativeness • Level of risk tolerance • Management

competence

Internationalization PerformanceThe Firm Internationalization Behavior (as a function of time)• Fingerprint patterns

f

Performance • Financial measures (market success) • Non-financial measures ( )

The Firm• Organizational structure

(organic vs. mechanic)

• Profiles (organizational learning)



Dimension of time in internationalization concepts researchSource: adapted from Hurmerinta-Peltomäki (2003)

LinearEvents unrepeatable

Current research assumptions on the internationalization

Uniqueness

Subjectivity

States

Novelty and

internationalization process of firms

Positivedirection

No fixed direction

j yysurprise

Objectivity

Non-uniqueness

Rearrangement of given factors

C li l

Events Events repeatable

uniqueness


Cyclical


Typology of new ventures.Source: Di Gregorio et al. (2008)

Extensive Cross Border Combination of

III. Cross Border IV. International Resource and MarketCombination of

Resources and IndividualsResource Integration Resource and Market

Combination

Domestic Combination of Resources and Individuals I. Domestic New Venture II. Accelerated

International Sales

Domestic Market O i i P d

Extensive Cross Border M k t C bi tiOpportunities Pursued Market Combination Opportunities Pursued



A summary of principal contents and major limits of the international product life-cycle theory

Model Representative scholars Year of

Principal contents of the model

Major limits of the model

Publication

Inter- Vernon 1966, market entry U.S.-economy perspective enational Product Life-C l

,1972

ythrough export and FDI depends on the product life-cycle position

y p pafter WWII ignores existence on tariff and non-tariff trade barriers as well as behavioral aspectsCycle position as behavioral aspects verification and generalization difficult neglects threat of substitution gthrough upcoming nations and their industries model became almost obsolete


obsolete


A summary of principal contents and major limits of the internalization theory

Model Representative Principal contents Major limits of the modelscholars Year ofPublication

of the model

Inter-nalization

Buckley & Casson 1976

focus on transaction costs as main impulse

disregard of ‘follow the customer’ phenomenonnalization

TheoryCasson 1976based on Coase 1937 and Williamson 1975

costs as main impulse for foreign market entry hierarchy versus market mechanism

l i MNE

phenomenon transaction costs are hard to quantify limited attention to behavioral

t ( t1975 explains MNE appearance because of organizational capabilities and market

aspects (e.g., customer preferences) ignores impact of entrepreneur and/or management on firmcapabilities and market

imperfections consideration of the ‘knowledge’ and ‘skill’ f t

and/or management on firm internationalization ignores tariff and non-tariff barriers, legal aspects, and tax

li [ b idi ] i th t t


factors policy [e.g., subsidies] in the target country


A summary of principal contents and major limits of the eclectic paradigm

Model Representative scholars Year ofPublication



Publication

Eclectic Paradigm

Dunning 1979, 1980, 1983,

consideration ofownership, location,

overlapping ‘conglomeration of variables’g , ,

1988, 1993, 1994, 1995, 1999, 2000, 2001

p, ,and internalization OLI elements multi-causal

i fl

hard to make concreterecommendations for the firm’s internationalization strategy

ti f ‘h2001 reasons influence the market entry strategy of the firm

assumption of a ‘homo oeconomicus’ limitations in analyzing theinfluence of tax incentives or subsidies which influence foreign direct investment decisions



A summary of principal contents and major limits of the location concepts

M d l R t ti P i i l t t M j li it f th d lModel Representative scholars Year ofPublication



ub cat o

Location Concepts

Tesch 1980Hill 1998

location and demand factors differ

empirical studies about the relative influence of location

Porter 1999 in connection with traditional international

between countries and influence the competitiveness of enterprises

factors with regards to foreign direct investment decisions are problematic to perform difficult to consider allinternational

trade theories: Heckscher-Ohlin 1952

enterprises firm’s foreign direct investment incentive depends on country

difficult to consider all relevant factors due to its high complexity pays less attention to the

A. Smith 1776 specific location factors

‘follow the customer’ phenomenon



A summary of principal contents and major limits of the diamond model




Publication

Diamond Porter 1990 firm the meaning of competitive Model

competitiveness influenced by country-specific conditions

g padvantage is empirically hard to quantify some model assumptions are rather speculativeconditions

some firms have better prerequisites for successful

rather speculative lacks precise recommendations under which circumstances a firm gains competitive advantage

international business activities than others because of home market surroundings

g p g neglects other countries and their impact on the home country with respect to the firm’s competitiveness and vice versa


market surroundings competitiveness and vice versa


A summary of principal contents and major limits of the Uppsala model

Model Representative Principal contents Major limits of the modelModel Representative scholars Year ofPublication



Uppsala M d l

Carlson 1966F &

due to a lack of f i k t

physical distance is perceived diff tl b tiModel Forsgren &

Johanson, Johanson & Wiedersheim

foreign market knowledge firms internationalize incrementally from

differently by operating managers panel focus on large Swedish firms restricted to the initial stages of

both 1975y

physically and culturally close foreign business market to

di t t t i

ginternationalization reactive character leaving little room for entrepreneurial choice

h d t l f ll fimore distant countries stepwise and orderly utilization of outward-going international

hard to apply for very small firms or very large MNE


g gbusiness operations


A summary of principal contents and major limits of the Uppsala model




Publication

Uppsala ‘psychic distance’ internationalization is not Model is defined in terms

of factors such as differences in language culture

always linear and a continuous process, firms have the opportunity to recall their foreign engagement

Johanson & Vahlne 1977

language, culture, political systems etc. focus on

their foreign engagement the concept concentrates on experimental learning through commitment decisions but

experience, knowledge, and learning

ignores imitative learning and the phenomenon of new ventures born global



A summary of principal contents and major limits of the network approach

fModel Representative scholars Year ofPublication



Publication

Network Model

Johanson & Mattson

assumption that a firm’s changing

empirically hard to test due to the complexity ofModel Mattson

1988Kogut & Zander 1993

firm s changing internationalization situation (international

to the complexity of international networks and their influencing variables need for industry-specific

Hohenthal 2001Björkman & Forsgren

business success or failure) is a result of its positioning in a network of firms

insights which is difficult to realize from an ‘outsiders perspective’

Forsgren 2000

a network of firms or institutions and their connections to each other







Publication

Network Model

Hakansson & Johanson

networks are a set of relationships

tends to focus on oligopoly markets and rather larger firmsModel Johanson

2001Matthews 2002

of relationships between suppliers, manufacturers, merchandisers and

markets and rather larger firms deemphasizes opportunistic behavior of the network partner

customers within long-term business relations knowledge transfer

research results (e.g., through case studies) are hard to generalize; predictions tend to be vague knowledge transfer

within the networks has particular importance

to be vague







Publication

Network Model

competitive advantage through

empirical research tends to supply ‘spotlights’ of network

Johanson & V hl 2003Model advantage through

dynamic capabilities fostered in

supply spotlights of network structures longitudinally fact finding research is expensive and

Vahlne 2003

networks emerging global economy as networks of

time consuming further research concerning ‘firms repositioning in the network over time’ throughnetworks of

interlinked firmsnetwork over time through longitudinally research necessary



A summary of principal contents and major limits of the international new venture (born global), entrepreneurial, and time concepts




Publication

Inter- Oviatt & rapid concepts tend to focus on national New Venture (Born

Mc Dougall 1994, 2000Jones & Coviello 2002

internationalization after inception fostered by the entrepreneur’s

small firms research tends to focus on the owner or key decision maker model is influenced by(Born

Global), Entrepren-eurial and

Coviello 2002, 2005Zahra et al. 2000

entrepreneur s behavior (risk awareness, innovativeness and

model is influenced by sociological, psychological and business aspects, which leads to an enormous complexity and

Time Concepts

managerial competence)

lacking systematic







Publication

Inter- Sharma & internationalization empirical verification is difficult national New Venture (Born

Blomstermo 2003Bell et al. 2003

as a systems perspective of the firm, environment and entrepreneur

p hard to get a standardized and structured model length of time horizons is interpreted differently(Born

Global), Entrepren-eurial and

2003Hurmerinta-Peltomäki 2003

entrepreneur success in international business is dependent upon

interpreted differently

Time Concepts

Young et al. 2003

p pthe embedding of the entrepreneur in cross-border institutional structures


structures






Publication

Inter-national

DiGregorio et al 2008

internationalization is not always a

impact of a particular event of time during internationalizationnational

New Venture (Born

al. 2008Gabrielsson et al. 2008

is not always a linear and forward going process but rather highly

time during internationalization process is difficult to prove role of individuals have to be analyzed in conjunction with (

Global), Entrepren-eurial and Time

g ydynamic and cyclical as a reflection of time

y jtheir networks

Time Concepts



I t ti l k tInternational market entry modes



E.P.R.G. scheme and marketing conceptsSource: adapted from Wind et al. (1973)

Phase Phasecontents

Firm focus Managementpolicy

Marketingconcepts

Ph 1 Eth t i H Eth t i E tPhase 1 Ethnocentric Homemarket

Ethnocentricstrategy

Export marketing

Phase 2 Polycentric Target Polycentric Internationaly gcountry

ystrategy marketing

Phase 3 Regiocentric Regional geographic

Regiocentricstrategy

Multinationalmarketinggeographic

focus on several target markets

strategy marketing

Phase 4 Geocentric Worldmarket Geocentricstrategy

Transnationalmarketing



Market entry decision process

First step: Setting strategic priorities

Four basic strategic determinants

1. Degree of hierarchical control

2. Market entry rapidity

3. Proximity to the market

4. Investment risk




1. Degree of hierarchical control

Are tight or loose control mechanisms for foreign operations required?

The answer should consider issues such as

• protection of intellectual property rights,

• strategic market importance,

• degree of market experience,

• local government regulation, and

• the firm‘s resources (e.g., human or financial).




2 Market entry rapidity2. Market entry rapidity

Fast or delayed foreign market entry?

The answer should consider issues such asThe answer should consider issues such as

• the need to follow a key customer,

• the threat of fast technological product substitutionthe threat of fast technological product substitution,

• first mover advantages through a pioneer strategy,

• latecomer advantages through delayed market entrylatecomer advantages through delayed market entry,

• intensity of competition,

• huge investment costs requiring large sales volumes andhuge investment costs requiring large sales volumes, and

• the risk of losing control due to hasty entry activity or incorrect partner selection.




3. Proximity to the market

Is close or distant market proximity necessary?

Th h ld id i hThe answer should consider issues such as

• similar or different product design and service expectation of local customers,customers,

• market volume and growth forecasts,

• transportation lead time and costs (e.g., bulky products),transportation lead time and costs (e.g., bulky products),

• desired local image building of the firm,

• socio-cultural issues difficult to evaluate from a distance, andsocio cultural issues difficult to evaluate from a distance, and

• foreign government rules (e.g., import tariffs and, investment incentives).




4. Investment risk

Is the firm able to cope with the investment risk?

Th h ld id i hThe answer should consider issues such as

• internal and external financial resources,

d t t it ti• dept to equity ratio,

• product margin,

ti h i f t d t i t t• time horizon of expected return on investment,

• expected reactions of local competitors, and

k t f t (t d i )• market forecast (turnover and margins).



Market entry mode categorization

S d t E l ti f k t t lt tiSecond step: Evaluation of market entry alternatives

1. Contracting (market mechanism)

2 C ti (h b id f )2. Cooperation (hybrid forms)

3. Wholly owned subsidiary (hierarchy)




1. Contracting (market mechanism)

• indirect export (goods and services),(g )

• direct export (goods and services),

• licensing (intellectual know-how and property rights),

• franchising (business concept),

• contract manufacturing (goods and services),

• management contract (intellectual, engineering and management know-how), and

• turnkey contract (intellectual, engineering and management know-how).




2. Cooperation (hybrid forms)

• strategic alliances and

• international joint ventures.

3. Wholly owned subsidiary (hierarchy)

• overseas branch network and

• a wholly owned manufacturing subsidiary.



Market entry modes

I di t d di t t• Indirect and direct export

• Overseas branches

C t t f t i• Contract manufacturing

• Licensing

F hi i• Franchising

• Strategic alliances

I t ti l j i t t• International joint ventures

• Turnkey contracts

M t t t• Management contracts

• Wholly owned subsidiary



Market entry modes

Indirect and direct export

• export: sale of goods or services outside the country of productionp g y p

• indirect exports: transactions to a domestic exporting company or to a domestic branch of a foreign importer

• direct exports: relation with the customer abroad.



Market entry modes

LicensingLicensing

• contractual transaction

• there is an owner of knowledge assets (intellectual or industry know how)there is an owner of knowledge assets (intellectual or industry know how)

• ‘sells the right’ to use the assets

• licensor transfers, but does not give up, the ownership of the know-howlicensor transfers, but does not give up, the ownership of the know how

• the licensee

- takes entrepreneurial riskstakes entrepreneurial risks

- undertakes financial investments in facilities for material procurement,

manufacturing, marketing, sales and distribution of the goods and a u actu g, a et g, sa es a d d st but o o t e goods a d

services.



Market entry modes

Franchising

• contractual agreement between a franchisor and usually many franchisees

• sales of a proven business concept

• franchisees: typically small business owners

• right to commercialize goods or services under franchisor’s’ established brand name (market goodwill)



Market entry modes

Franchising

• franchise system combines,

- the advantages of research, and development activities

- and economy of scale potentials offered by the franchisor with the local

geographical knowledge, cultural sensitivity and entrepreneurial talents of the

franchisee



Market entry modes

Contract manufacturing

1. outsourcing components (pre-assembly)

2. finished products (final-assembly)

3. complete manufacturing process (full-assembly)

(original equipment manufacture (OEM))



Market entry modes

Management contracts

• a firm uses some of its personnel to assist a firm in a host country for a certain period of time against a specified fee

• keep the operations going until local management is trained

• an essential part of management contracts includes the qualifications of personnel in the host countrythe host country



Mutual obligations of management contractsSource: adopted from Foscht / Podmenik (2005)

Management contract cooperation

Contractingfirm

Managedfirm

fees

know howknow-how



Mutual obligations of management contractsSource: modified from Foscht / Podmenik (2005)

Contracting firm functions: Managed firm functions:

management responsibility

granting entrepreneurial know-how

payment of fees

take over of business risks

granting operational good-will

serving network relations

input of business objectives: financial,manufacturing, and human resources

g

share of experience learning capabilities



Market entry modes

T k t tTurnkey contracts

t k ti d i t t t t j t i f i t• turnkey operation: a company designs, constructs, starts-up a project in a foreign country (e.g., building of a power plant) and qualifies local personnel

• turnkey operation: attractive for firms with specific engineering and/or complexturnkey operation: attractive for firms with specific engineering and/or complex technological process know-how

• the BOT (build, operate, transfer): variation of the turnkey operation

• the firm operates the facility for a fixed period of time

• during this operating period, the company earns back the investment, plus a profit



Market entry modes

Strategic alliances

• agreements between two or more participating organizations to strengthen their mutual competitive position and to fulfill business objectives that are rather long term orientedp p j g

• access of strategically relevant resources

• formal difference compared to a joint venture: a strategic alliance is typically a non-p j g yp yequity cooperation (partners do not commit equity) and partner firms remain legally independent



Market entry modes

Strategic alliances

Main purposes of strategic alliance building

1. strategic alliances facilitate entry into a foreign market (partnership with a local firm)firm)

2. an alliance, supposing it runs well, is a way to bring together complementary skills and assets

3. bundle access to similar customer segments

4. establish a technological industry standard



Market entry modes

International joint venturesInternational joint ventures

• two or more legally independent organizations decide to undertake a common• two or more legally independent organizations decide to undertake a common business and create a new enterprise as a legal entity

• an equal joint venture: each party contributes the same amount of financial investment

• a majority joint venture secures control of strategic decisions



Market entry modes

International joint venturesInternational joint ventures

• same industry and similar value-added activities (horizontal joint venture)same industry and similar value-added activities (horizontal joint venture)

• different stages of the industry value-added chain (vertical joint venture)

• diversified business activities (conglomerate joint ventures)diversified business activities (conglomerate joint ventures)

• Definition of an international joint venture:

- at least one parent organization is headquartered outside the venture‘sat least one parent organization is headquartered outside the venture s

country operation

- the venture has a significant level of operations in more than one countrythe venture has a significant level of operations in more than one country



Market entry modes

Reasons for instability in international joint venturesReasons for instability in international joint ventures

1. opportunistic behavior at least of one partner1. opportunistic behavior at least of one partner

2. management redirects strategic focus or changes key objectives

3. partners renegotiate contracts (e.g., on technology transfer or management)3 pa t e s e egot ate co t acts (e g , o tec o ogy t a s e o a age e t)

4. reconfiguration of the venture‘s ownership and control structures

5. uncertain managerial roles g

6. diverse cultural backgrounds of the partners

7. relationship with each parent company (e.g., limitation of their authority)p p p y ( g , y)

8. lack of mutual trust

9. major technological product developments not noticed


j g p p


Market entry modes

Overseas branches

• representative office or sales branch in the foreign target markets

• the lowest form of financial involvement in the category of foreign direct investment.



Market entry modes

Wholly owned subsidiary

• describes an enterprise that owns all of the capital invested abroad such as procurement, R&D l d ti f ilitiR&D, sales, or production facilities

• the firm either sets up a new operation (start-up or greenfield) in the foreign target country or it acquires an established firmcountry or it acquires an established firm

• there are two different types of acquisitions:

- horizontal acquisition: a firm acquires another firm in the same location of thehorizontal acquisition: a firm acquires another firm in the same location of the industry chain

- vertical acquisition: a firm acquires the supplier or distributor



Market entry modes

Wholly owned subsidiary

• acquisitions offer the firm the opportunity to develop capabilities and expertise by acquiring new knowledge from the acquisition partner

• in contrast to acquisitions the establishment of a firm through a greenfield investment• in contrast to acquisitions, the establishment of a firm through a greenfield investment (foreign start-up) entails building an entirely new organization



Market entry mode grouping based on four decision determinants

degree of hierarchical controllow high

indirect export direct export

li /f hi i

contracting low

high

licenses/franchising

em

arke

t

apid

ity

contract manufacturing

t t i lliforeign direct

investment mity

toth

e

kete

ntry

ra management contractsturnkey contracts

overseas branch network

strategic alliancesIJV

investment

prox

im

mar

k

cooperationmanufacturing

plant high

l i t t i k hi h

low


low investment risk high


An overview of strategic decision determinants of the market entry modes: indirect export

Market entry mode

Entry rapidity

Degree of hierarchical control

Investment risk

Proximity to the market

Strategy recommended for the firm if

Potential strategic risks

Indirect export

high low low low no experience in foreign trade

dependency on agent’s expertise p g

rather simple products with rudimental after

g p commission costs divided loyalties of middleman / agentrudimental after

sales service new market potentials abroad

middleman / agent trade barriers high transportation costspotentials abroad

compensation of low seasonal sales i th h k t

transportation costs in case of bulky products


in the home markets


An overview of strategic decision determinants of the market entry modes: direct export

Market entry mode

Entry rapidity


Investment risk




mode control market the firm if

Direct export

high low low low less experience in foreign trade

trade barriers high p g

elementary pre-and after sales service

gtransportation costs in case of bulky productsservice

new market potentials abroad

compensation of

bulky products language / cultural challenges compensation of

low seasonal sales in the home

challenges unfamiliar market


markets environment


An overview of strategic decision determinants of the market entry modes: licensing

Market Entry Degree of Investment Proximity Strategy Potential strategicMarket entry mode

Entry rapidity


Investment risk




Licensing high low low low lack of financial or organizational resources

licensee may damage reputation risk of technology

technological fast developing industries

gycopy by licensee royalty fees lower than value ofindustries

fast market entry and penetration desired

than value of technology transfer limited experience curve/ economies ofdesired

foreign direct investment too

curve/ economies of scale effects of licensor licensee becomes


risky competitor


An overview of strategic decision determinants of the market entry modes: franchising

Market entry mode

Entry rapidity


Investment risk




mode control market for the firm if

Franchising high low low low economies of scale realization

franchisee may harm reputation

fast market entry and penetration

p partner’s disagreements overpenetration

desired sales of a business concept

over objectives foreign partner selectionbusiness concept

instead of a single product or service

selection financial stability of the partner



An overview of strategic decision determinants of the market entry mode: contract manufacturing

Market entry mode

Entry rapidity


Investment risk




mode control market for the firm if

Contract manufac-

medium low-medium

low-medium

medium cost-competitive

loss of manufacturing involvement and

turingp

markets saving logistics cost

control reputation damage (i e quality workinglogistics cost

expansion of capacities and product

(i.e., quality, working conditions) communication complexityand product

penetration worldwide

complexity know-how transfer to local firm


foster new competitor


An overview of strategic decision determinants of the market entry mode: management contracts

Market entry mode

Entry rapidity


Investment risk




control market for the firm if

Management contracts

medium medium medium medium specified managerial

foster potential competitor g

and/or technological expertise

p countries with uncertain local governmentsexpertise

market entry when local government

governments policy and fragile legal environment

lack of educatedgovernment restrictions expected

lack of educated staff in the target country



An overview of strategic decision determinants of the market entry mode: turnkey contract

M k t E t D f I t t P i it St t P t ti l t t iMarket entry mode

Entry rapidity


Investment risk




Turnkey contract

medium medium medium medium specific engineering and complex t h l i l

lack of qualified human resource

l i th t ttechnological process know-how availability (i.e.,

pool in the target country relation with host

building of an environment friendly power plant or public

governments which are usually located in politically and

water distribution and/or cleaning facilities)

economically rather fragile countries


)


An overview of strategic decision determinants of the market entry modes: strategic alliance

Market entry mode

Entry rapidity


Investment risk




mode control market the firm if

Strategic alliance

medium low-medium

low-medium

medium bundle of strategic resources

partner selection

mutual strengthening of competitive position

know-how transfer opportunisticcompetitive position

through complementary skills

opportunistic behavior reputation damageskills

set of technological i d t t d d

damage synergy effects below

t ti


industry standards expectation


An overview of strategic decision determinants of the market entry modes: international equity joint venture

M k t E t D f I t t P i it St t P t ti l t t i i kMarket entry mode

Entry rapidity


Investment risk




Inter-national equity

medium medium medium medium risk sharing combined market entry

partner selection know-how transfer opportunistic behavior ofequity

joint venture

market entry joint activities (e.g., R&D,

)

opportunistic behavior of the partner unclear ownership

marketing) economies of scale

structures create confusion risk of unbalanced

combination of complementary resources and

efforts of the partner firms minor synergy effects partner firm may


skills y

become competitor


An overview of strategic decision determinants of the market entry modes: overseas branch network

M k t E t D f I t t P i it St t d d P t ti lMarket entry mode

Entry rapidity


Investment risk




Over-seas branch

low high high high experience in international business large foreign market

unfamiliar environment and marketing policiesbranch

network large foreign market complex products differentiation strategy by l l i / lti

marketing policies increased communication

dlocal service/ consulting advanced after-sales network necessary

and coordination investment

proximity to local customers and their design and communication

volume language and cultural


preferences challenges


An overview of strategic decision determinants of the market entry modes: wholly owned manufacturing plant

Market entry mode

Entry rapidity


Investment risk




mode control market firm if

Wholly-owned

low high high high advanced experience in

unfamiliar environment and

manu-facturing plant

international business local cost advantage

work ethics coordination complexity

subsidies or tax incentives large foreign

legal aspects investment volume language and a ge o e g

market potentials heavy and bulky products

a guage a dcultural challenges severe response of local firms


products of local firms


Case studies



European television set market 1990-2011 without Turkey and Russia (sales in million units – 2009 and 2011 are forecasts) Source: DisplaySearch (2008) and market research by the author

30

35

40

20

25

30

on T

V U

nits

hipm

ents

5

10

15

Mill

io Sh

0

CRT 28 36 37 26 10 3 0,5

PDP 0 0 0,4 2 3 5 6

1990 1998 2003 2005 2007 2009 2011

LCD 0 0 1 9 26 34 38

Projection 0 0,5 0,3 0,3 0,1 0 0

OLED 0 0 0 0 0 0,1 1


Year


East European television set market volume including the non-Asian part of Turkey and Russia segmented by major technologies in million units (2007 record and 2008-2012 forecast)S Di l S h 2008Source: DisplaySearch, 2008

20Million Units

141618

81012 PDP TV

LCD TVCRT TV

246

CRT TV

02

2007 2008 2009 2010 2011 2012



Conglomerate diversification structure of Samsung (status April 2008)Source: Author based on various company documents, verified by Park, N.

Samsung Group Chairman:Chairman:

Mr. Lee

Chairman Office

M hi & El t i T d & Fi i l N fit

Office

Machinery & Chemical Industries

Electronics Industries

Trade & Services

Financial Services

Nonprofit Organizations



Strategic business units of SamsungSource: Author based on various company documents (status April 2008)

Machinery & Chemical Industries

S S Sams ngSamsung Heavy

Industries

Samsung Techwin

Samsung Total Petrochemicals

Samsung Fine

Chemicals

Samsung Petrochemicals

Samsung BP

Chemicals




Electronics Industries

S S S S S SSamsung Electronics

Samsung SDI

Samsung Electro-

Mechanics

Samsung Networks

Samsung Corning

Precision Glass

Samsung SDS




Trade & Services

Th ShillSamsung Corporation

Samsung Engineering

Cheil Industries

Samsung Everland

The Shilla Hotel & Resorts

Cheil Communications

S1 Corporation




Financial Services

S S Fi S Sams ngSamsung Life

Insurance

Samsung Fine & Marine Insurance

Samsung Securities

Samsung Investment

Trust

Samsung Card

Samsung Venture

Investment




Nonprofit Organizations

S S SSamsung Medica Center

Samsung Economic Research Institute

Samsung Advanced Institute of Technology

Samsung HR Development

Center

Samsung Foundation of Culture

Samsung Welfare

and Ho-Am Foundation

Samsung Lions

Samsung Press

gy



Samsung Group net sales 1999-2007 (2007 forecast)Source: Annual Reports

Samsung Group - Net sales

150

200

lars

100

lion

Dol

l

0

50Bill

200720062005200420032002200120001999

Year



Samsung Group net income 1999-2007 (2007 forecast)Source: Annual Reports

Samsung Group - Net income

0

15

lars

5

10

lion

Dol

l

0

5

Bil

200720062005200420032002200120001999

Year



Samsung Electronics net sales 1999-2007Source: Annual Reports

Samsung Electronics - Net sales

125

150

lars

50

75

100

llion

Dol

l

0

25

50

Bil

200720062005200420032002200120001999

Year



Samsung Electronics net income 1999-2007Source: Annual Reports

Samsung Electronics - Net income15

ars

5

10

lion

Dol

la

0

5

Bill

200720062005200420032002200120001999

Year



Organization of Samsung ElectronicsSource: Author based on various company documents (status April 2008)

Samsung Electronics

Division

S SSamsung Electro

Mechanics

Samsung Corning

Precision Glass

Samsung SDI

Samsung Electronics

Samsung Networks

Samsung SDS



Strategic Business Units of Samsung ElectronicsSource: Author based on various company documents (status April 2008)

Samsung Electro Mechanics

• Electronic ComponentsElectronic Components

Samsung Corning Precision GlassSamsung Corning Precision Glass

• Printed circuit board for TFT-LCD

• Cathode Ray Glass Tube Bulb and Colored Glass for TFT LCD• Cathode Ray Glass Tube, Bulb and Colored Glass for TFT-LCD




Samsung SDI

• Cathode Ray Tube

• PDP

• Secondary Cell

• Plasma DisplaysPlasma Displays

• OLED

Samsung ElectronicsSamsung Electronics

• Device Solution Network (Memory Chips, Semiconductor, TFT-LCD)

T l i ti N t k (C ll l Ph T l S t )• Telecommunication Network (Cellular Phones, Telecom System)

• Digital Media Network (CTV, Monitor, Computer, Camcorder)


• Digital Appliance Network (air-conditioner, refrigerator)



Samsung SDS

• Computer Software Network

• Support Activity

• System Solution

Samsung Networks

• Support Activity

• Telecommunication Service



Samsung’s vertical integration of television set assemblySource: Author, based on company documents

R & DPrimary

Components Supply

TV-Display Manufacture

TV-Set Fabrication

Trading Company

Samsung Research and Development C t

Samsung Electro-Mechanics:

Samsung SDI:

C th d

Samsung Electronics:

LCD Pl

Samsung Corporation:

S lCenters

Samsung Design

Electronic Components

Cathode Ray Tube (CRT)

LCD-, Plasma-, CRT-, Projection TV

Sales Intermediates

Representative es gCenters Samsung

Corning: Screen Glass

Plasma Panel

OLED

LCD-Panel Production

Semiconductor

ep ese a eOffices e.g., Teheran, Istanbul, MGlass OLED Semiconductor

for LCD-TVMoscow

Backward Integration Worldwide Network Forward Integration


Backward Integration Worldwide Network g


Expansion of Samsung Electronic’s worldwide factory network Source: collected by the author as exhibited at Samsung Electronics main entrance hall in Seoul, South Korea

Region Country Plant Establ. Products

Asia Korea Suwon, Kyonggi-do 1969 CTV, DVDP, video, microwave oven, y ggwashing machine, camcorder, MP3, air conditioner

Asia Korea K mi Comple 1 1980 PABX printerAsia Korea Kumi Complex 1, Kyongsangbuk-do

1980 PABX, printer

Asia Korea Kiheng Complex (R&D), 1980 Semiconductor, TFT-LCD, vending g p ( ),Yongin-gun, Kyonggi-Do

, , gmachine,

America Mexico Samsung Mexicana S.A. 1988 CTV, monitor, HHPde C.V. (SAMEX), Tijuana

Asia Thailand Thai Samsung Electronics Co Ltd (TSE) Sriracha

1988 CTV, washing machine, refrigerator, air conditioner microwave oven


Co., Ltd. (TSE), Sriracha air conditioner, microwave oven



Region Country Plant Establ. ProductsRegion Country Plant Establ. Products

Asia Korea Kwangju Complex 1989 refrigerator, vacuum cleaner, di hi tvending machine, motor

compressor

Asia Malaysia Samsung Electronics Malaysia 1989 Microwave oveny g y(M) SDN, Bhd (SDMA), Port Klang

E H S El t i 1989 CTV itEurope Hungary Samsung Electronics Hungarian Co., Ltd. (SEH)

1989 CTV, monitor

Asia Korea Onyang Complex, Asan-gun, 1990 SemiconductorAsia Korea Onyang Complex, Asan gun, Chungchongnam-do

1990 Semiconductor

Asia Indonesia P.T. Samsung Electronics 1991 VCR, ODD


Indonesia (SEIN), CiKarang



R i C t Pl t E t bl P d tRegion Country Plant Establ. Products

Asia China Hulzhou Samsung Electronics Co., 1992 AudioLtd., Hulzhou (SEHZ)

Asia China Tianjin Samsung Electronics Co., Ltd. (TSEC)

1993 VCR, DVDP(TSEC)

Asia China Shandong Samsung Telecommunications Co Ltd (SST)

1993 Fax, printerTelecommunications Co., Ltd. (SST), Weihai

Asia China Samsung Electronics Suzhou 1994 SemiconductorSemiconduction (SESS), Suzhou

Asia China Tianjin Tongguang Samsung Electronics Co Ltd (TTSEC)

1994 CTV


Electronics Co., Ltd. (TTSEC)




Asia Vietnam Samsung Vina Electronics Co., 1995 CTV, monitorLtd. (SAVINA), Ho Chi Min

America U.S.A. Samsung Austin Semiconductor L L C (SAS)

1996 DRAML.L.C. (SAS)

Asia Korea Kumi Complex 2, Kyongsangbuk-do

1996 Cellular phone, optical cable componentKyongsangbuk do cable component

Asia China Tianjin Samsung Electronics Display Co., Ltd. (TSED)

1997 Monitor

Asia Korea Chonan Complex, Chungchongnam

1997 TFT-LCD





Asia Korea Hwasung Complex, Hwasung, Kyonggi-do 2000 Semiconductor

Asia China Tianjin Samsung Telecommunications C (TSTC) Ti ji

2001 HHPCompany (TSTC), Tianjin

Asia Philippines Samsung Electronics Manufacturing Corporation (SEPhil) Calamba

2001 ODDCorporation (SEPhil), Calamba

Asia China Shanghai Bell, Samsung Mobile Communications Co., Ltd. (SSM), Shanghai

2002 CDMA, BSS, SYS

Asia China Samsung Electronics LCD Suzhou Co., Ltd., Suzhou

2002 LCD




Region Country Plant Establ. Products

Asia China Shenzhen Samsung Kejian Mobile Telecommunictions Technology Co., Ltd.

2002 HHP

(SSKMT)

Europe Slovakia Samsung Electronics Slovakia (SESK), Glanta

2002 CTV C/MGlanta

Asia Korea Tangjung Complex (Sony) Asan, Chungchongnam-do

2004 TFT-LCD



Samsung’s worldwide network of product design unitsSource: Samsung Electronics Annual Report 2005, p. 52

Samsung Design Europe (London)

Samsung Design Milan (Milan)

Corporate Design America (San Francisco)

Corporate Design Center

(Seoul)

Samsung Design China (Shanghai)

L.A. Laboratory (Los Angeles)

Samsung Design Japan (Tokyo)



Net sales of Sony Group 1999-2007 in million dollarsSource: Author based on annual reports

Sony Group - Net sales

60.000

70.000

80.000

ars

30.000

40.000

50.000

illio

n D

olla

0

10.000

20.000Mi

200720062005200420032002200120001999

Year



Net Income of Sony Group 1999-2007 in million dollarsSource: Author based on annual reports

Sony Group - Net income

1 2001.4001.6001.800

ars

6008001.0001.200

illio

n D

olla

0200400600

M

200720062005200420032002200120001999

Year



Organization of Sony Group (status January 2008)Source: Sony Corporation

Sony Groupy pChairman & CEO Howard Stringer

Fi i lElectronics Game Pictures Financial Services

Others



Strategic Business Units of Sony Group (status January 2008)Source: Sony Corporation

Electronics

• Sony Electronics

- Audio

- Video

- Televisions

- Information

- Communication

- Semiconductor

- Components

- Other Products




Game

• Sony Computer Entertainment

- Game Console

- SoftwarePictures

• Sony Pictures Entertainment

• Motion Pictures

• Television Programming

• Other Products




Financial Services

• Sony Life InsuranceSony Life Insurance

• Sony Assurance

• Sony BankSony Bank

• Sony Finance International




Others

• Sony Music Entertainment (Japan)

- Music Content

• Sony Music Entertainment

- Music Publishing

• Sony Communication Network

- Network Service

• Animation Products

• Sony Marketing



Sony Electronics - net sales 1999-2007 in million dollarsSource: Sony Annual Reports

Sony Electronics - Net sales

50.000

60.000

70.000

llars

20.000

30.000

40.000

Mill

ion

Dol

0

10.000

20.000

200720062005200420032002200120001999

M

200720062005200420032002200120001999

Year



Sony Electronics - net income 1999-2007 in million dollarsSource: Sony Annual Reports

Sony Electronics - Net income

2.000

2.500

ars

500

1.000

1.500

illio

n D

olla

500

0

500

200720062005200420032002200120001999

Mi

‐500

Year



Sharp net sales 1999 to 2007Source: Sharp financial and annual reports 2003-2007

Sharp - Net sales

20 000

30.000

SD

10.000

20.000

Mill

ion

US

0

200720062005200420032002200120001999 200720062005200420032002200120001999

Year



Sharp net income 1999 to 2007Source: Sharp financial and annual reports 2003-2007

Sharp - Net income1.000

SD

500

Mill

ion

US

0

200720062005200420032002200120001999 200720062005200420032002200120001999

Year



Sharp Organization (status January 2008)Source: Author based on firm documents

Sharp

C / I f ti P d t El t i C tConsumer/ Information Products Electronic Components

Audio/Visual and Communication

Equipment

Home Appliance

Information Equipment

LSIs LCDsOther

Electronic Components



Strategic Business Units of Sharp (status January 2008)Source: Author based on firm documents

•LCD TVs •DVD Player

Audio/Visual and Communication Equipment

•Color TVs

•TV/VCR Combo

•VCRs

•Facsimiles

•Digital Broadcast Receiver

•1-Bit Digital Audio Products

•Phones

•Mobile Phones

•CD Component Systems

•MD Players

•PHS Phones




Home Appliance

•Refrigerators •Air Purifiers

•Steam Ovens

•Microwave Ovens

•Dehumidifiers

•Humidifiers

•Air Conditioner

•Washing Machines

•Kerosene Heaters

•Electric Heaters

•Vacuum Cleaners •Small Cooking Appliances




Information Equipment

•PCs •Electronic Cash Registers

•PDAs

•Mobile Communication Handsets

•LCD Monitors

•Information Display

•Electronic Dictionaries

•Calculators

•PC Software

•FA Equipment

•POS Systems

•Handy Data Terminals

•Ultrasonic Cleaners




LSIs

•CCD/CMOS Imagers

•LSIs for LCDs

•Micro-computers

•Flash Memories

•Combination Memories

LCDs

•TFT LCD Modules

•Duty LCD Modules

•System LCD Modules




Other Electronic Components

•Solar Cells •Optical Pickups

•Components for Satellite Broadcasting

• Terrestrial Digital Broadcast Tuners

•Optical Sensors

•Optical Communication Components

•RF Modules

•Network Components

•Regulators

•Switching Power Supplies

•Laser Diodes

•LEDs

•Analog ICs



Sharp’s network relations with Japanese firms in Europe (LCD TV manufacture)Source: Author, designed based on various company related business information sources

Japanese LCD-component LCD-TV final assembly in LCD-module p pmanufacturer in Poland supply cluster

Toland Tokai Okaya

yEurope demand clusterfabrication

Sharp Electronica SAToland Tokai Okaya Manufacturing (metal frames)

Tensho (plastic elements) Sharp L G

Sharp Electronica SA, Spain

Tensho (plastic elements)

Nitto Denko Corp., (polarizing films)

SharpŁysomice (Poland)

Loewe, Germany (Sharp holds 29 % of

capital)(polarizing films)

Sumika Electronic Materials (polarizing films, light Supporting industries in Poland

Orion, Poland ( g g

diffusion panels)Supporting industries in Poland,

e.g., Kimoto Co. Crystal Logistics and NYK Logistics

vertical supply chain




LG.Philips LCD production network in 2007Source: LG. Philips LCD

LG Phili LCD P d tiLG.Philips LCD Production Network

Europe Asia

Wroclaw, Poland Nanjing, China

Gumi, S. Korea

Paju, S. Korea



LG.Philips LCD sales network in 2007Source: LG.Philips LCD

LG.Philips LCD Sales Networkp

Europe AsiaAmerica (U.S.A.)

Tokyo, JapanPlanoSan JoseWillich, Germany o yo, Japa

Osaka, Japan

Taipei, Taiwan

a o

Glendale Heights

Cary

Sa Jose

Santa Clara

Westlake Village

, y

Istanbul, Turkey

Shanghai, China

Hong Kong, China

Sh h Chi

Lincolnshire

Clearwater

R l i h

Austin

Houston

Ol th Shenzhen, China

Singapore

Raleigh

Bohemia

Olathe

Gibsonia

Skaneateles


Skaneateles


LG Phili LCD ti l i t t d l h i ti iti i E ( t t F bLG.Philips LCD vertical integrated value chain activities in Europe (status February 2008)Source: Author, based on various firm-related data

Korean LCD-component LCD-TV final assembly inLCD-moduleKorean LCD component manufacturer in Poland supply cluster

Heesung Electronics Co

LCD TV final assembly in Europe demand cluster

LCD module fabrication

LG El t iHeesung Electronics Co. Ltd. (back light units)

LG Innotek Co Ltd LG Philips LCD

LG Electronics Poland

LG Innotek. Co. Ltd. (electronic components)

D Yang Electronics

LG.Philips LCD(Kobierzyce,

Poland)Philips

Hungary

D. Yang Electronics (plastic injection)

Oh Sung Display Co. Ltd.

Toshiba Poland

g p y(case tops and cover

bottoms)





Network embedment of LG.Philips LCD (status February 2008)Source: Author, based on various firm-related data

Toshiba Japan

TCL China19.9 % investment in Poland

LG.Philips LCDestablished 1999

Toshiba JapanKodak U.S.A.

Alliance

Strategy

1999

Royal Philips

NEG JapanAlliance Network

The Netherlands LG Electronics

South Korea

Skyworth China

HannStar Taiwan



LG.Philips LCD net sales 2001-2007 in million dollarsSource: LG.Philips LCD Annual Reports

LG Philips LCD - Net sales

15.000

20.000

rs

10.000

Mill

ion

Dol

la

0

5.000

M

0

2007200620052004200320022001

Year



LG.Philips LCD net income 2001-2007 in million dollarsSource: LG.Philips LCD Annual Reports

LG Philips LCD - Net income

1.500

2.000

s

500

1.000

ion

Dol

lars

0

500

2007200620052004200320022001

Mill

i

‐5002007200620052004200320022001

Year



LG Phili Di l t l t i f th i d 2002 t S t bLG.Philips Displays net sales versus net income for the period 2002 to September 2005 Source: LG.Philips Displays Annual Reports

4.000

5.000

2.000

3.000

Mill

ion

Dol

lars

0

1.000

2002 2003 2004 2005 Jan-Sep

M

-2.000

-1.000

Net sales Net income



TCL Corporation organization chart Source: TCL China

Board of Supervisors

Board of Directors

TCL CorporationSupervisors

TCL TCL Real Estate & Logistics TCL Home TechneTCLMultimedia

TCL Communication

Real Estate &Investment

Logistics and Service

TCL Home Appliance

TechneElectronic Group



Strategic Business Units of TCL CorporationSource: TCL China

TCL Multimedia TCL Communication

•Digital Technology

•Global R&D

•Communication

•Alcatel Unit

•Home Network

•Strategic Purchasing and Supply

•Sales & Marketing

•Global Operation Center

•Global Supporting Departments




Real Estate & Investment Logistics and Service

•Real Estate & Co.

•Industry Real Estate

•Information Industry

•Online Educational Technology

•Industry Holdings

•Joint Venture Enterprises

•Import & Export Co.

•Speed Distribution Platform

•Finance Corporation

•Industry Academy Management Co.

•KoYoo Online Co.




TCL Home Appliance Techne Electronic Group

•Air Condition

•White Household

•Flat Panel Project

•Shenghua Industrial

•Small Home Appliances Division

•Lighting Division

•High Frequency Electronic

•Display Technology

•Nanyang Electrical Equipment Co.

•Refrigeration Equipment

•Optical Disk Division

•Hyper-Power Batteries

•LED Division



TCL regional brand strategy Source: TCL Company Information



TCL China Group. Turnover, gross profit and profit (loss) from operating activities for the period 1999- 2007 in million dollarsSource: Annual reports 2000-2008

4000

5000

3000

4000

Turnover

2000

Gros s Profit

0

1000

Profit/(Los s )

-1000

0

1999 2000 2001 2002 2003 2004 2005 2006 2007

Profit/(Los s )from operatingactiv ities


1999 2000 2001 2002 2003 2004 2005 2006 2007


Television set business related market entry activities by TCL China in Europe for the period 2002-2008Source: Author, designed based on company information material

LCD TV OEM Agreement with Philips signedPhilips signed 2007 Joint Venture

TCL-Thomson Electronics (TTE)

Liquidation of TTE Europe 2007

TTE absorbed by TCL China wholly owned

TCL China

( )established 2004

2007 ysubsidiary, 2008

Acquisition of Schneider, Liquidation of

Strategic

Acquisition of Schneider, Germany, inclusive trademark, R&D and manufacture 2002

Liquidation of Schneider’s operations and transfer to China 2005

Partnership agreement with LG.Philips LCD signed 2006


signed 2006


Matsushita (Panasonic) Group net sales 1999-2007 in million dollarsSource: Annual reports 2001-2008

Matsushita Group - Net sales

70.00080.00090.000

ars

30 00040.00050.00060.000

llion

Dol

la

010.00020.00030.000

Mil

200720062005200420032002200120001999

Year



Matsushita (Panasonic) Group net income 1999-2007 in million dollarsSource: Annual reports 2001-2008

Matsushita Group - Net income

2.000

3.000

s

‐1.000

0

1.000

200720062005200420032002200120001999ion

Dol

lar

‐3.000

‐2.000

1.000

Mill

i

‐4.000

Year



Matsushita (Panasonic) organization in 2008Source: Matsushita

Matsushita (Panasonic)

AVC Home Components Mats shita Electric Other BusinessAVC Networks

Home Appliances

Components and Devices

Matsushita Electric Works PanaHome

Other Business Domains



Strategic Business Units of Matsushita (Panasonic) in 2008Source: Matsushita

AVC N t kAVC Networks

• AVC:- Panasonic AVC Networks Companyp y

• Fixed-line Communication: - Panasonic Communications Co., Ltd.

• Mobile Communications: - Panasonic Mobile Communications Co., Ltd.

• Automotive Electronics: - Panasonic Automotive Systems Co., Ltd.

• Systems Solutions:Systems Solutions: - Panasonic Systems Solutions Company - Panasonic Shikoku Electro. Co., Ltd.




Home Appliances

• Home Appliances Household and Equipment: pp q p- Home Appliances Group - Matsushita Home Appliances Company

Li h i• Lightning: - Lightning Company

• Environmental Systems:Environmental Systems: - Matsushita Ecology Systems Co., Ltd.




Components and Devices

• Semiconductors: - Semiconductor Company

• Batteries: - Matsushita Battery Industrial Co., Ltd.

• Electronic Components: - Panasonic Electronic Devices Co LtdPanasonic Electronic Devices Co., Ltd.

• Motor Company




Matsushita Electric Works PanaHome

• Matsushita Electric Works, Ltd.

• PanaHome Corporation

Other Business Domains

• Panasonic Factory Solutions Co., Ltd.

• Matsushita Welding Systems Co., Ltd.



IPS Alpha Technology Co., Ltd. interlinked companies and their interlocking financial investment structures (status May 2008) Source: Designed by the author based on various firm information sources

IPS Alpha Technology Co., Ltd. LCD Module Joint Venture

Development Bank Hitachi DisplayMatsushita

Canon 24.9 %5% 45% 50%

24,9%

of Japanp y

Hitachi 50.2 %75% 60%100%

Pioneer Plasma

Kenwood

Toshiba Matsushita LCD Display JV

Matsushita Plasma Display Panel

JVC

36,8%

17%Kenwood

LG.Philips LCD, PolandToshibaToray

JVC25% 40%

19,9%


Poland


Network grid of major network players operating in the television set industry (research status October 2008)Source: Author

Hitachi Thomson

Samsung

Toray Matsushita TCLChina

Samsung

PhilipsJabilPioneer

LG Electronics

SkyworthToshibaBilateral Network Relation

Tohoku-Pioneer

AU Optronics

Wuxi

Fujitsu

Sharp

Sanyo

SonyStrategic component supply

Joint R&D

LoeweChungwha

Orion Shared R&D, manufacture and distribution


Others (‘exchange of information’)


A comparative overview of strengths and weaknesses of Asian versus European firms operating in the television set industrySource: Interview outcomes of Korean respondents in September 2007

Resource Asian originated firm in European originated firm in the the television set industry television set industry

Strengths • cost competitiveness • located in a market with relatively high purchasing power of consumers

• technological leadership

• eagerness, firm loyalty, discipline and mutual team

high purchasing power of consumers (access to attractive distribution channels)

discipline and mutual team support of the employees

• speed in product

• strong brand awareness and marketing skills

p pcustomization

• creativeness of staff

• long experience in global business operations


operations


A comparative overview of strengths and weaknesses of Asian versus European firms operating in the television set industrySource: Interview outcomes of Korean respondents in September 2007

Resource Asian originated firm in the television set industry

European originated firm in the television set yindustry

Weaknesses • oversupply capacities • manufacturing costs

• suitable marketing and access to distribution channels in overseas markets such as

• focus on individual and personal life instead of firm destinyoverseas markets such as

Europe

• English language problems of

destiny

• less firm loyalty

staff

• limited experience with other lt


cultures


The joint venture lifetime of TTE Corporation (TCL China and Thomson)

1. Initial Phase 2. Mature Phase 3. Transformation Phase

Equity joint venture of Thomson and

Incremental increase of

Complete take over of jointof Thomson and

TCL China (‘partnership of equals’)

increase of strategic decision power by TCL China

over of joint venture operations by TCL China full control

2004 2007



The joint venture lifetime of LG.Philips LCD (LG Electronics and Philips)


Equity joint venture of Philips

Incremental increase of shares Majority control

b LG El t iventure of Philips and LG Electronics ‘LG.Philips LCD’

increase of shares and strategic decision power by LG Electronics

by LG Electronics (JV renamed: ‘LG Display Co.’)

1999 2008



The joint venture lifetime of LG.Philips Displays (LG Electronics and Philips)


Equity joint venture of Philips

Incremental increase of shares

Following joint venture bankruptcyventure of Philips

an LG Electronics ‘LG.Philips Displays’

increase of shares and strategic decision power by LG Electronics

venture bankruptcy, establishment of an independent Korean firm: ‘LP Displays’

2001 2007



International vertical chain network of LG.Philips LCD

Asian originated TV assembler LCD-module TV gsupplier in Poland

in Polandmanufacturer in Poland

assembler in Europe

LG Innotek

D Y

Philips, Hungary

LG Electronics, Mława

TVP AOCD. Yang

Heesung

LG.Philips LCD, Kobierzyce

Toshiba, United Kingdom

TVP AOC, Gorzow

Toschiba, Heesung

Oh Sung

Kobierzyce

JVC, BolesławiecOh Sung

backward

Bolesławiec

I t ti l ti l l h i forward


backward International vertical supply chain forward


International vertical chain network of Sharp

Asian originated TV assembler LCD-module TV gsupplier in Poland

in Polandmanufacturer in Poland

assembler in Europe

Toland Tokai

T h

Loewe AG, Germany

OrionTensho

Nitto Denko

Sharp, Łysomice

Sharp Electronica,

Spain

Orion, Łysomice

Jabil Circuit IncNitto Denko

Sumika

pJabil Circuit Inc., Kwidzyn

Sumika

backward I t ti l ti l l h i forward


backward International vertical supply chain forward


Television set component manufacturing sides of Asian consumer electronics firms in Poland, Hungary, Czech Republic and Slovakia (status October 2008)Source: Author based on firm related information material

KwidzynGdańsk

Torún

y

MlawaGorzów

POLANDWarszawa

KobierzyceBoleslawiec

PrahaCZECH REP KrakówPlzń

Hranice

Nitra

HUNGARY

SLOVAKIA

REP.

JászfényszaruHUNGARY

Székesfehérvár



Thank you for considering my book.

Any comments and proposals are highly appreciatedappreciated.

Please feel free to contact:

E-mail: [email protected]

© 2009 Oldenbourg Wissenschaftsverlag Munich, Germany

Documents

Mario glowik charts_market_entry_strategies_july_2009