Japanese And Chinese Market Entry Strategies In The European Market

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In the spring of 2018, the German Newspaper WirtschaftsWoche published an article with the title „European industry under China´s thumb”, which very well reflects the growing fear of Chinese domination over the European economy within political, economic and academic circles at the time. This declaration of fear of China, or rather of Chinese businesses threatening to take over Europe and its business world, is hardly the first time that Europeans have felt substantially threatened by an emerging economic power from Asia. During the 1980s, western academics warned the public about Japan becoming a major economic power and a threat to the West. This fear however appeared to be unfounded as the years passed.

The research interest in this thesis has grown out of an interest in recent Chinese economic activities in the European Union and the extensive, and often sensational, media coverage of the topic. The obvious similarities between the voiced threat of an East Asian nation taking over Europe in the 1980s and the current news coverage, as well as the special focus on technology-intensive sectors of the economy provide fertile grounds for comparison. Further, the concerns of European policy makers over their relationship with the East Asian business world, given the expansion of East Asian MNEs in the European technology sector, spark further interest in the topic. The question arises whether there is in fact evidence that Chinese high-technology firms are following similar or distinct patterns of market entry strategies compared to Japanese high-technology firms, decades earlier, in their approaches to entering the European market and gaining access to valuable European technology. With the help of an eclectic framework derived from different streams of internationalization research, this thesis, therefore, arrives at the following research question: What similarities and differences can be observed in the international market entry strategies of Japanese and Chinese high-technology MNEs in the European Market?

Internationalization can very broadly be defined as “the process of increasing involvement in international operations”. Internationalization processes can be explored on various levels of analysis: country-level, industry level, organizational level or at the level of the individual entrepreneur.

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At the country-level and developed from the trade theory of Heckscher-Ohlin, Vernon (1966) introduced “International Product Life-Cycle Theory”, arguing that products are subject to predictable changes, that information flows are restricted across borders and that this affects internationalization strategies at the firm level. Foreign production becomes a strategy to gain ownership-specific advantage over rivals. The model further assumes that the production process is characterized by cycle changes over time, economies of scale and divergent tastes in different countries. Entry into a foreign market is described as a process, which involves a specific pattern of successive stages. Product-life cycle theory is important for studying market entry, as it develops the idea that country-level conditions influence strategies at the firm level. This later becomes the basis for the classic internationalization school of the Uppsala, essentially planting the idea of process patterns of internationalization and associating locational advantages with firm strategies. Based on the “Flying Geese Model” by Akamatsu (1962), the concept of latecomer dynamics puts forward the notion, that countries who suffer from their status as “latecomers”, may choose an early entry strategy to profit from “fast-follower industrial dynamics” and “fast-follower innovation” and enter new markets at an accelerated pace compared to western firms. Firms from emerging economies are more likely to experience a relative disadvantage in the global business environment compared to their developed economy counterparts and therefore will seek to enter developed economies to develop globally competitive knowledge bases and to acquire technological capabilities. The concept of latecomers to the international business stage hence describes firms, who enter new markets with the intent to “catch-up” with the know-how and technology of firms from more strongly developed economies. They seek to develop their own business environments, improve international competitiveness and to operate in global markets. Since East Asian countries are the root of latecomer studies, this perspective needs to be included.

The industry-based view focuses on competitive advantage and the competitive position of a countries’ industry in the global market. An industry is defined as a cluster of firms who share similar organizational structures, strategies regarding their products, missions and value-added activity. The industry environment directly influences the competitive position and market entry strategies of the firms within the industry and therefore should be considered next to country-level factors of internationalization. In his “Diamond Model of International Competitiveness” Porter isolates threats and opportunities for firm internationalization and develops a framework for analyzing the attractiveness of a countries’ industry. Industry specific factors of Porter’s model deal with industry structure, industrial policies and industrial competition (Porter, 1990). Understanding internationalization at the industry level is important because firms adopt global strategies, which match domestic industry conditions.

The firm-level institutional view emerged from organizational theory and focuses on the processes within the organization, such as learning. The most prominent framework of the institutional view, the Uppsala Internationalization Process Model (UIP), is rooted in Carlson (1966). Carlson argued that firms expanding abroad are shaped by uncertainties and that foreign risk and control over foreign operations are central parts of firm internationalization, which would later lead the way to Johanson and Wiedersheim-Paul (1975)’s observation of gradual internationalization. In the model, a firm chooses the location of a foreign market entry, and the degree of its commitment to the new market according to its perceived liability of foreignness in the new market. Perceived liability of foreignness is essentially shaped by the possession or lack of local market or institutional knowledge. Firm-level views are more suitable to study possible firm strategy variance than industry-based views, as they argue that firms within the same industry have different resources and therefore may adopt different strategies.

The issue of internationalization is highly complex, as demonstrated in this short review of internationalization. Country level factors, industry factors and organizational factors of the firm all influence the market entry strategies of internationalizing firms. Wu and Zhao (2007) built a framework based on the entry of strategies of Chinese high-technology firms, suggesting that industry structure& characteristics and country factors play together, additionally influenced by firm-level factors. In the thesis, this framework will be supplemented by the mainstream views of internationalization literature, to construct a suitable eclectic framework for market entry strategies of East Asian firms.

This thesis seeks to establish observable similarities and differences in the international market entry strategies of Japanese and Chinese high-technology MNEs in the European market. Analysis is based on the case-study approach, a suitable method to analyze differences, similarities, and patterns of internationalization processes. Cases are selected for their comparability regarding industry type, products type, company age, ownership structure and experience in the European market, as demonstrated in Zahra, Ireland, and Hitt (2000) and Rhee (2008). The two firms selected for analysis are Daikin Industries, Ltd. and Midea Group. Both firms have been selected because they are major players in the home appliance industry, both fulfill the conditions of being private companies, as well as having established a presence in the European market previously.

To this aim of comparing the selected cases, country, industry, and firm level data is collected from databases, annual company reports, press releases, company websites, secondary literature etc. Using the collected data, each case is analyzed based on the eclectic framework constructed on the foundation of internationalization literature, discussing country-, industry- and firm-level factors for each selected firm. The results are then compared regarding their differences and similarities. After presenting the findings of the analysis, results will be discussed in terms of their suitability with mainstream internationalization frameworks, in terms of the shortcomings of analysis and in terms of the need for further research.

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Japanese And Chinese Market Entry Strategies In The European Market. (2020, July 15). WritingBros. Retrieved March 29, 2024, from https://writingbros.com/essay-examples/internationalization-of-east-asian-high-technology-mnes-comparing-japanese-and-chinese-market-entry-strategies-in-the-european-market/
“Japanese And Chinese Market Entry Strategies In The European Market.” WritingBros, 15 Jul. 2020, writingbros.com/essay-examples/internationalization-of-east-asian-high-technology-mnes-comparing-japanese-and-chinese-market-entry-strategies-in-the-european-market/
Japanese And Chinese Market Entry Strategies In The European Market. [online]. Available at: <https://writingbros.com/essay-examples/internationalization-of-east-asian-high-technology-mnes-comparing-japanese-and-chinese-market-entry-strategies-in-the-european-market/> [Accessed 29 Mar. 2024].
Japanese And Chinese Market Entry Strategies In The European Market [Internet]. WritingBros. 2020 Jul 15 [cited 2024 Mar 29]. Available from: https://writingbros.com/essay-examples/internationalization-of-east-asian-high-technology-mnes-comparing-japanese-and-chinese-market-entry-strategies-in-the-european-market/
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