ENTRY INTO FOREIGN MARKET

Entry into Foreign Market

Entry into Foreign Market

Appropriate mode of entry for Cameron International Corporation to pursue in Myanmar

Entry into a foreign market via direct investment can prove very costly, hence the majority of successful international service firms with wholly owned operations, tend to be larger companies that hold substantial resources”. Companies such as Cameron International Corporation that offer a range of consultancy services, are more likely to establish a wholly owned operation in foreign markets rather than choosing an alternative mode of entry. One of the main reasons behind selecting foreign direct investment as the preferred entry mode is that for firms such as Cameron International Corporation, the creation of a wholly owned operation can be limited to merely establishing a local office, which frequently involves minimal fixed overheads (for example the Cameron International Corporation Sydney office). Even switching costs for firms such as Cameron International Corporation may be comparatively small when setting up wholly owned offices, because the true value-generating assets in firms such as Cameron International Corporation are often the people (and people are relatively mobile). In cases where full control can be acquired at comparatively low cost, establishing wholly owned operations is commonly the preferred option over other entry modes.

It may be argued that companies, who purely adopt the strategy of establishing branch offices in foreign markets, do not consider alternative entry modes. The establishment of Cameron International Corporation subsidiaries in Dubai and Hong Kong was a decision fundamentally derived as a by-product of winning specific project contracts (including Cathay Pacific and Saudi Arabian Airlines). However this approach may not necessarily the best approach for Cameron International Corporation to adopt in all foreign markets in the future. Setting up a wholly owned operation is the most direct form of market entry; however it often can demand a high level of resource commitment and represent a high level of risk.

Since wholly owned operations give firms complete control of activities in foreign markets, they are described as full control modes. In all other entry modes, a firm generally has to share control with external entities (shared-control modes). A full control mode of entry can sometimes be preferred by firms in order to avoid the disadvantages inherent in shared control modes (e.g. partner conflicts, partners becoming competitive, partners having different business perspectives etc). However, for services firms where integration into a foreign market entails large-scale investments in physical facilities (hospitals, hotels, airlines etc), the ownership of overseas facilities can require considerable resource commitment, risk and switching costs.

The decision for a service firm such as Cameron International Corporation to set up a wholly owned operation will be influenced by the following:

The type of service offered by the firm (e.g. whether the service allows a wholly owned subsidiary to be set up by merely establishing an office, or whether large scale investment in physical facilities is required

The level of finance and resource commitment required to establish the wholly owned operation

The perceived risk involved from the firm's ...