Introduction
Foreign marketing refers to the decision that a company or an organization undertake to either export their products to a different country; have a direct investment in a target country or have a partnership with another firm in the targeted company. Any company that operates in more than one country qualifies to be an international company. The idea of being an international company may be prestigious to any investor and attractive to upcoming industries. Important to not however be that before successful internationalization there must be planning, persistence and purpose. It is crucial to first do an analysis of the size and opportunities offered by the target country. The firm should also be big and well established in the country of origin before it considers venturing into a foreign market. If after this analysis the firm considers moving to a foreign country then it has to make a definite decision after considering the location, time and mode of entry. This report presents a case of Johnson & Johnson Company, MNE, and Nike Company, MNC.
Johnson & Johnson Company
John & John company was founded in 1986 and is headquartered in New Jersey and New Brunswick. The company has a corporate equity ownership with Dow Jones industry average. It is a multinational company which mainly manufactures medical equipment. In 2011 it had worldwide sales of $65 billion. It has 250 subsidiary companies located in over 57 countries and its products sale in 175 companies worldwide.
Britain, Germany, France, South Africa and India are some of the major foreign countries where Johnson & Johnson have found a wide market (Torres, 2011). The political stability in this countries and the good attitude towards American investors made it is for Johnson and Jonson to be established. These countries also have streamlined procedures for foreign investments which made it easy and efficient for Johnson & Johnson to get in the market.
All the mentioned favorite foreign markets for Johnson and Johnson have well established world-class universities which ensure that there is continuous research. A lot of research and innovations in pharmaceuticals are being made in India hence the country offers Johnson & Johnson firms opportunity to also develop.
The geographical location of these foreign markets is also very conducive. They have well developed infrastructures such as roads, electricity, airlines and industries. This makes it easy for the firm to transport their products into the market efficiently. These countries have also not suffered from major natural disasters in the history, which could have presented with major threats to Johnson & Johnson Company (Hill & Jones, 2012).
Most of these countries are developed and even South Africa and India, which could still be regarded as developing countries, have a very good market for Johnson & Johnson products (Dierick & Coo, 2009). The products are affordable to the citizens and it is also accepted.
Liabilities of foreignness for MNES
There are various challenges that face multi international enterprises that are emerging and wish to internationalize. Such liabilities can be explained in two models; the institution view and the resource based views. In order to understand the institution based view it is important to first define what an institution is. An institution can be defined as a societal structure that create and maintain rules governing a wide group of people. Institution based view is therefore a model that argues that the planned decision of a firm is widely affected either positively or negatively by a number of institutional factors. This view also suggests that the success of a company is not only based on its resources and plans but also relies more on the strategic choices and its interactions with the major institutions and organizations.
According to Institution based model therefore multi-international enterprises can faces major liabilities if the institutions in the target countries make rules that are not favorable to the investors. Example of such a situation is when there is over taxation in for foreign investments. Another challenge that multi-international enterprise could easily face is lack of a good strategic plan that embraces the rules and norms of the target country, which could result to repulsion by the foreign institutions (Murray et al, 2012).
The resources based view on the other hand holds that internationalization strongly relies on firm specific intangible assets. Initial arguments of the motivation internationalize originated from the view that firms have useful resources that make them more competitive after going abroad. Since the ownership of these resources is specific to the firm it gives them monopolistic advantage in that sector hence they are able to gain much profit which cater for the cost of internationalization (Wolff & Pett, 2007). Resource based is widely used to analyze if a specific firm considering internationalization will thrive in the foreign country.
Basing on this view, multi-international enterprises are at a disadvantage to internationalizing if they lack the specific intangible assets (innovations, good brand names, management know how and technological capabilities) necessary for internationalization. Emerging firms that have not been well established and have little experience are even more disadvantaged because they cannot offer the necessary competition in the foreign market (Qian & Li, 2004). If the firm cannot offer this assists then it may not be able to curb the high cost of establishing the firm in another country. This can certainly lead to high-income loss for the firm during the initial stages.
Analysis of NIKE; A multi-international corporation.
NIKE is one of the American multi-international corporations involved in the design, development, manufacturing and global marketing and sales of footwear, apparel, equipment, accessories and services. It was founded by Bill Bowerman and Phil Knight in the year 1964 and has its headquarters in Beaverton, Oregon, United States (Zaltman et al, 2003). Some of its subsidiary companies include Converse, Hurley international and NIKE Canada Corporation.
NIKE mostly uses equity entry strategy mostly when entering a foreign market. When NIKE was entering India for example it became the predominant majority stake holder. Lakhani and M&B are some of the companies in India which design and market NIKES products. The corporation has also acquired several companies amongst them Starter and Umbro. For purposes of specialization in its major products it however decided to sell some of this subsidiary companies it had acquired. Umbro for example was sold in the year 2012.
The foreign market for NIKE mainly includes Western Europe- United Kingdom, North America and the Great China. North America is the biggest market for NIKE accounting for 40% of its revenues. The company is the market leader in the North America athletic footwear market with nearly 60% market share.
Before entry to a specific country, NIKE makes a strategic plan and analyses the market of the targeted country. For example NIKE entry in China was based on the fact that China has an attractive market for NIKE’s products hence it provided a significant growth opportunity. There was also a rise of China’s new middle class which was hungry for western gear and individualism, NIKE took this opportunity to venture into the market The rapid economic growth in china make it possible for more people to afford the NIKE products since it is affordable.
NIKE is categorized as an enthusiastic internationalizer in that it had a lot of products which could not match the available local market. It entered the Chinese market after making contracts with the Chinese legal institutions for foreign investments immediately after Liu Xiang became the country’s first Olympic medalist in the short distance event. NIKE entered as a joint venture and immediately stated making advertisement of its products.
Conclusion
With global market competition, internationalization has become a major concern for many emerging firms. As much as a firm can be attracted to expand to a given country it is important to begin with proper analysis of the foreign market and then to strategize on when and how to enter. If out of haste a firm decides to venture into a foreign market then it becomes susceptible to suffer major losses. Johnson & Johnson and NIKE are just an example of multi-international corporations in United States of America which have really expanded and profited in foreign markets due to their ability to plan and strategize well.
References
Dierick, I. and Coo, K. (2009). Asset stock accumulation and sustainability of competitive advantage. Management Science, 35(12): 1504-1511.
Peng, M. W. (2014). Global strategy. Mason, Ohio: South-Western.
Qian, G., & Li, L. (2002). Multinationality, global market diversification and profitability among the largest U.S. firms. Journal of Business Research, 55(4), 325-335.
Torres, J.A. (2011). Market Strategies, Analysis, Competitive Intelligence and Challenges in Entering the Chinese Market. Retrieved from:http://search.proquest.com.proxy1.ncu.edu/docview/817185180/13DCE411BB11D727A02/8?accountid=28180Wolff, J. A., & Pett, T. L. (2007). Learning and small firm growth: The role of entrepreneurial orientation. Academy of Management Proceedings, 1-6.
Zaltman, G., Duncan, R., & Holbeck, J. (2003). Innovations and organizations. New York: Wiley & Sons
Murray, J., Ju, M., & Gao, G. (2012). Foreign Market Entry Timing Revisited: Trade-Off Between Market Share Performance and Firm Survival. Retrieved from: http://proxy1.ncu.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=78323271&site=eds-live
Hill, C. W. L., & Jones, G. R. (2012). Strategic Management. Cengage Learning.
