Foreign Direct InvestmentEssay Preview: Foreign Direct InvestmentReport this essayTABLE OF CONTENTCHAPTER 11.1 INTRODUCTION1.2 RESEARCH QUESTION1.3 METHODOLOGY1.4 THEORY REVIEWCHAPTER 22.1 COMPANY PROFILE2.2 CARLSBERGS GLOBAL ENTRY STRATEGIES2.3 CARLSBERG IN RUSSIA2.4 CONCLUSIONCHAPTER 33.1 CARLSBERGS ENTRY MODE IN THE LIGHT OF RUSSIAN INSTITUTIONAL ENVIRONMENT3.2 CONCLUSION4. FINAL CONCLUSIONChapter 11.1 IntroductionEmerging markets became important players on the global scale. Entry into emerging economies by western multinationals has been driven by competitive pressures in their home countries . FDI literature defines several FDI-motives, which defined as market-, resource, strategic asset-, and efficiency -seeking investments . However, it is acknowledged, that uncertain environment in emerging countries poses serious challenging for western companies while considering investment opportunities . When operating in a developing country or emerging market the surrounding environment is quite different from developed countries and often firms are exposed to higher levels of market failures and uncertainty, which they need to overcome. Multinational enterprises entering transition economies have to adjust their strategies to the local institutions. Countries with the former planned economy are given a particular concern. Institutional framework in these countries is only partially reformed, high level of instability and rapid implementation of new reform programs that lead to “high transactional costs for economic agents ” .
One of these countries is Russia, that ” at the opening if new millenniumlooms on the horizon as an immense opportunity for investors, domestic and foreign alike ” . There is an increased interest from foreign investors in the Russian economy, which has seen a continuous growth over the last years, quickly rebounding from the 1998 financial crisis. However, throughout the 90s and up to this date the inflow of FDI to Russia has remained rather small in comparison with other emerging economies. Such a low level of foreign direct investments can be explained from many points of view.
On the managerial level, the common attitude is revealed through Harward Business Review, when a number of CEOs were asked about advisability to invest in Russia . The crux of this debate was not whether to undertake investment in Russia – the participants were all positive about long -term prospects in the country and planned investments there. Instead, the debate was when and how to invest. They were not sure about market form of participation and timing decisions. Number of concerns was mentioned: Russian mafia, infrastructure, and commercial code.
Still, there are examples of successful investment in Russia. One of them is Carlsberg A/S. Today, sales in Russia are responsible for the third part of the companys total profits, and Russian beer market is considered as the most important single market for the company. Market share in 2004 was 33% and as Carlsbergs vice -president Poul Bergkvist mentioned, ” Carlsberg expects growth of market share”.
In conjunction to that, it is interesting to analyse how Carlsberg dealt with issues of entry mode while entering uncertain Russian environment.1.2 Research QuestionHow can Carlsbergs entry to the Russian market be explained from the institutional and transaction costs perspectives?The questions that we attempt to uncover in the project are how Carlsberg has become established in Russia, and why that entry mode was chosen in the light of transaction costs and institutional theoretical frameworks.
In order to have our project structured, we have chosen the following sub-questions:What entry mode has Carlsberg chosen for entry to Russia?How can that choice be justified from transaction costs and institutional theoretical frameworks?The former question intends to examine Carlsbergs entry mode to Russia. We are also interested in placing an entry mode tailored for a particular country, in our case Russia, side by side with overall Carlsbergs global entry strategy. We expect some similarities to occur, but our motive is to clarify the exact entry mode chosen for Russia by Carlsberg.
That leads us to the latter question, where we attempt to explain Carlsbergs choice of entry mode from the theoretical perspectives, indicated above.1.3 MethodologyWe now would like to outline the way we intend to answer our research question in terms of what theories we apply and what empirical evidence we base our conclusions on.
Our overall approach is deductive, although rather than attempting to strictly justify the theory by empirical evidence, we use the theoretical framework mainly for systematizing and explaining our finding.
Our choice of applying institutional theory in this paper can be justified as in the early stages of market emergence, institutional theory is preeminent in helping to explain impacts of enterprise strategies because government and societal influences are stronger in these emerging economies than in developed economies We would like to establish the fact that there exists a difference between emerging economies and economies in transition, e.g. institutions are going through a transition in the former and are being formed in the latter. However we abide by the following definition: ” in emerging economy can be defined as a country that satisfies to criteria: a rapid pace of economic development and government policies favoring economic liberalization and the adoption of a free market system.” We think that transition countries do fall into the indicated category; hence we use emerging ad transition economy equally.
The Economic Inconvenient Truth: There is more to economics than this. And now is when you realize that there are at least some interesting, but unimportant, reasons for why this is so. While I was discussing the economics of the American recovery with my colleagues and the rest of our colleagues in China, I suggested that the American recovery is not as important as the Chinese recovery. There is more than meets the eye and is a lot more complex and complicated than one would think. There are, apparently, some interesting and sometimes surprising forces behind our current situation as well. After a decade-long struggle between two of the most extreme political movements on earth, the American Right and China’s Communist Party, we find ourselves under the sway of both.
There is far more to economics than that. And now is when you realize that there are at least some interesting, but unimportant, reasons for why this is so. While I was discussing the economics of the American recovery with my colleagues and the rest of our colleagues in China, I suggested that the American recovery is not as important as the Chinese recovery. There is more than meets the eye and is a lot more complex and complicated and complicated than one would think. There are, apparently, some interesting and sometimes surprising forces behind our current situation as well. After a decade-long struggle between two of the most extreme political movements on earth, the American Right and China’s Communist Party, we find ourselves under the sway of both. Economic growth. As Keynes put it, the “growth potential” of a economy depends on how much of a change is in a single, long run and how much is in a short run. We do things by moving resources away from the most highly productive members of the economy because they have the higher wage and higher price pressures; we move resources out of the country in order to provide for higher paying jobs by cutting back on services, raising prices and making government regulation less effective.
Keynes put it, the “growth potential” of a economy depends on how much of a change is in a single, long run and how much is in a short run. We do things by moving resources away from the most highly productive members of the economy because they have the higher wage and higher price pressures; we move resources out of the country in order to provide for higher paying jobs by cutting back on services, raising prices and making government regulation less effective. Social security and Medicare. We can say the same thing about Social Security, Medicare, Medicaid and most of our other programs that it’s a complex relationship as they are governed by the various social insurance plans and regulatory system. However, even in developing countries, where you must provide all of your benefits in accordance with the individual mandate, you can sometimes have very complicated and complex systems governing your social security payments. While the complexity is well documented and all of this is well known, many in the political right do make claim that Social Security is more powerful because of its higher value than other programs that do not pay for their cost-of-living adjustments or benefits. When given the choice, their choice seems to be $75/year, $90 per year or nothing whatsoever for that matter! It was said in the press a few years back that the cost of healthcare in any nation is much lower than in a single country and that one should choose that method of being insured. However, despite their belief and misinformation, the American political right has repeatedly said that they really care about this issue and that they are happy to raise the cost-of-living adjustment cost and just do what is right for them. On the other hand, people who choose such a method of providing for their families would rather be poor than have healthcare expenses rise dramatically, even if the government did make them pay through payroll taxes. Some of them believe that