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4 - Entry mode selection

Published online by Cambridge University Press:  05 March 2016

Alvaro Cuervo-Cazurra
Affiliation:
Northeastern University, Boston
William Newburry
Affiliation:
Florida International University
Seung Ho Park
Affiliation:
China Europe International Business School, Shanghai
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Summary

INTRODUCTION

Once the manager has selected the country that provides the best opportunities and identified the sources of advantage to be transferred and the mechanisms that ensure the transfer happens, the next step is to select the mode of entry that best enables the firm to access the complementary resources that it is not transferring across countries to be able to have a fully functioning operation in the host country. We look at how to do this in this chapter. Complementary resources are resources that support the resources that are a source of advantage but that are not sources of advantage in themselves. For example, a firm's source of advantage may be its technology, and the marketing function may be merely a complement, enabling the firm to sell the technology to its customers. However, if the company lacks complementary resources, it is disadvantaged, because this deficiency will detract from the advantage created by other resources as the company does not have a fully functioning operation abroad. In our previous example, if the firm has a poor marketing function, it may serve its customers poorly and detract from the advantage provided by the technology as customers look for other products that, although not as technologically sophisticated, are better adapted to their needs.

One additional challenge with complementary resources is that because they are not perceived as a source of advantage, their analysis is often neglected. The usual assumption regarding complementary resources is that they can be obtained from external vendors when the need arises. However, in some cases, complementary resources are not readily available, and the lack of them can call the overall success of the foreign expansion into question. This appeared to be the case behind the acquisition of the French firm Thomson by the Chinese electronics firm TCL Corporation (TCL).

OPENING CASE: TCL ACQUISITION OF THOMSON

In November 2003, TCL International Holdings combined with the French firm Thomson and became the world's largest producer of television (TV) sets, making 18 million a year, 6 million more units than Sony. Thomson owned 33 percent and TCL 67 percent of the combined firm, which became known as TCL-Thomson Electronics (TTE). Unfortunately, this provided the Chinese firm with the wrong complementary resources in a rapidly changing industry.

Type
Chapter
Information
Emerging Market Multinationals
Managing Operational Challenges for Sustained International Growth
, pp. 61 - 87
Publisher: Cambridge University Press
Print publication year: 2016

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