U p p s a l a   U n i v e r s i t y :   D e p a r t m e n t   o f   B u s i n e s s   S t u d i e s  

Internationalization  Motivations  of  Emerging  Market  Multinationals  Projected  From  the  Angle  of  Technological  Industry:  THE  2x2  MODEL              

Master  Thesis   2011  

08  Fall  

Authors  Baton  Mati  

Yue  Jimmy  Shi      

Supervisor  Martin  Johanson  

27-05-2011

 

Abstract  

 ii  

Abstract

Multinational corporations (MNCs) raised from emerging markets (EM) have drawn

enormous attention to the world in recent decades. These internationalization activities have

not only signaled characterized features of globalization, but also foreseen the future of

strengthened “latecomer” global position emerged from developing countries. However,

current studies have shown sufficient lack on research towards motivation behind EM

MNCs’ internationalization. Many current theories and models were followed by patterns

applied within those more developed countries. Nevertheless, EM MNCs appeared to hold

different motivations approaching to internationalization. Thus, this paper documents a series

of reasons that triggered EM MNCs to internationalize. In particular, studies carried out from

this paper have concluded into a 2x2 Model, which characterized that the EM MNCs’

internationalization motives are incorporated from two perspectives (institutional based and

resource based) into two approaches (asset seeking and opportunity seeking). Four case

studies of multinationals in technological industry from two emerging markets are included

in this paper, in order to attest validity of the 2x2 Model; these multinationals are Lenovo

(China), Haier (China), Arçelik (Turkey), and Vestel (Turkey). We believe that technological

industry is one of the most significant industries from emerging markets that is intensively

involved in international activities; the selected firms have shown devoted global strategies

and created certain size of impact in the global market, which is genuinely representative

towards our studies.

Key words: Emerging Markets, Internationalization, Multinationals, Motivations, 2x2 Model,

China, Turkey, Technological Industry,

 

Table  of  Contents  

 iii  

Table of Contents Abstract  ...................................................................................................................................................................  ii  Table of Contents  ...............................................................................................................................................  iii  1. Introduction  .......................................................................................................................................................  1  

1.1 Background  ................................................................................................................................................  1  1.2 Research Problems  ..................................................................................................................................  1  1.3 Purpose  ........................................................................................................................................................  1  1.4 Terminologies  ...........................................................................................................................................  2  

1.4.1 What do we mean by “Emerging Markets”?  .........................................................................  2  1.4.2 What do we mean by “Internationalization”?  ........................................................................  2  1.4.3 What do we mean by “Motives” or “Motivations”?  ...........................................................  3  

2. Literature review  .............................................................................................................................................  4  2.1 Introduction  ...............................................................................................................................................  4  2.2 Approaches  ................................................................................................................................................  4  

2.2.1 Asset-seeking approach  ................................................................................................................  4  2.2.2 Opportunity-seeking approach  ...................................................................................................  5  

2.3 Perspectives  ...............................................................................................................................................  6  2.3.1 Institutional based perspective  ....................................................................................................  6  2.3.2 Resource based perspective  .........................................................................................................  8  

2.4 Literature Conclusion: Prelude of 2x2 Model  ...............................................................................  9  2.4.1 Approaches vs. Perspectives  ....................................................................................................  10  

3. Methodology  .................................................................................................................................................  11  3.1 Research Strategy  .................................................................................................................................  11  

3.1.1 Why China and Turkey?  ............................................................................................................  11  3.1.2 Research Process  ..........................................................................................................................  11  

3.2 Case Selection  ........................................................................................................................................  12  3.3 Data Collection  ......................................................................................................................................  13  

3.3.1 Overview  .........................................................................................................................................  13  3.3.2 Nature of data  ................................................................................................................................  13  3.3.3 Reliability & Validity  .................................................................................................................  14  

4. Case Studies  ...................................................................................................................................................  15  4.1 China  .........................................................................................................................................................  15  

4.1.1 Lenovo  .............................................................................................................................................  15  4.1.2 Haier  .................................................................................................................................................  17  

4.2 Turkey  ......................................................................................................................................................  19  4.2.1 Arçelik A.Ş.  ...................................................................................................................................  19  4.2.2 Vestel Group  ..................................................................................................................................  21  

5. Analysis  ...........................................................................................................................................................  24  

 

Table  of  Contents  

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5.1 Approaches: Asset-seeking vs. Opportunity-seeking  ...............................................................  24  5.1.1 Asset-seeking  ................................................................................................................................  25  5.1.2 Opportunity-seeking  ...................................................................................................................  26  

5.2 Perspectives: Institutional based vs. Resource based  ...............................................................  27  5.2.1 Institutional based  ........................................................................................................................  28  5.2.2 Resource based  .............................................................................................................................  29  

5.3 Differences between China and Turkey  ........................................................................................  30  5.4 Consolidated review of the 2x2 Model  .........................................................................................  30  

5.4.1 Impact of perspectives over approaches  ...............................................................................  31  5.4.2 Approaches defining motivations  ...........................................................................................  33  

6. Conclusion  .....................................................................................................................................................  34  6.1 Limitations  ..............................................................................................................................................  34  6.2 Further research proposals  .................................................................................................................  35  

References  ...........................................................................................................................................................  36  Appendix  .............................................................................................................................................................  41  

Exhibit 1: Haier’s major oversea FDI  ...................................................................................................  41  Exhibit 2: Case studies comparison chart (Full View)  ....................................................................  42  

 

1.  Introduction  

 1    

1. Introduction

1.1 Background

The rise of MNCs from emerging markets gradually became a characteristic phenomenon in

today’s global economy. Studies of international business are also shifting its attention from

developed countries to developing countries imperceptibly. Current prevailing

internationalization theories and models are comprehensive, but most of which are done upon

research of firms in developed countries, who hold easier access to capital and have a more

liberal base of political and economic environment. While developing markets still have

difficulties into reaching these favorable market economy conditions, MNCs emerging from

developing countries may be urged to behave differently when they choose to go

international: the motivations behind the strategic decisions towards venturing into

international markets might propagate from different conditions as compared to firms from

developed markets.

1.2 Research Problems

1. What is the internationalization motivation behind emerging market multinational

corporations (EM MNCs)?

2. Are the motivations from emerging market multinationals to go abroad conformant

with theories established on developed market experiences, or EM MNCs are prone to

exceptional characteristics that can be used to define their internationalization

motivations?

3. Can we summarize the motivations into an effective model?

1.3 Purpose

The intention of our research is to find the motivation behind the internationalization of

MNCs from emerging markets, using case studies and integrated theory review. Even though

studies are shifting attention to emerging markets, there is still deficient research regarding

motivations behind EM MNCs internationalization. Acknowledging the rising importance of

their position in a global marketplace, there is a necessity to formulate a concentrated

analysis. This paper is intended to provide a focused direction of studies to draw attention for

researches hereafter to further develop this topic.

 

1.  Introduction  

 2    

1.4 Terminologies

The main focus of this paper is related to the motivations of multinationals from Emerging

Markets towards internationalization. Several terms used herein may have different definition

and create confusion, thus we are hereby clarifying these terms in order to establish better

understanding of our thesis.

1.4.1 What do we mean by “Emerging Markets”?

When targeting at Emerging Markets, we address countries that are experiencing economic

reforms towards market-oriented economies. These countries have come along structural

reforms and effectively transitioned from being developing countries. (Li, 2007) Emerging

Markets are big economies with broad markets and characterized by high growth rates and

increasing global political and economic importance. Due to the nature of our research, the

group of emerging market economies will not address smaller-sized developing countries, but

rather those that have created stability and confidence in their institutions to enable for free

flow of outward and inward investments. (Heakal, 2003)

1.4.2 What do we mean by “Internationalization”?

The subject focused most in this paper are international firms that originated from emerging

markets to exercise outward FDI1 in one or more foreign markets, and take efficient control

over company itself, along with value-added activities. Under such definition,

“internationalization” in this paper includes, but is not limited to, activities such as oversea

subsidiaries, distribution channels, point of sales, etc. Certain types of subject will be

excluded from our research due to the characteristic of our research target. We will not

consider large import and export companies within their home countries, as outward FDI are

not engaged. Companies with insignificant shares of oversea joint venture will be excluded

due to lack of efficient control over their units abroad. Fully state-owned enterprises are also

the exclusion from our research due to the reason that governmental policy may affect the

natural decision of firms, and consequently misdirect our research target. Lastly, our research

will not contain oversea investment due to certain financial purposes to solely or mainly aid

the headquarter in home country, such as company established in Cayman and Virgin Islands

for the purpose of tax evasion, as well as reverse investments. These companies do not

generate value-added activities through such internationalization process.

                                                                                                               1  FDI  –  Foreign  Direct  Investment  

 

1.  Introduction  

 3    

1.4.3 What do we mean by “Motives” or “Motivations”?

According to Cambridge Advanced Learner’s Dictionary, motivation is ‘the need or reason

for doing something’. While in this paper we are primarily focused on establishing these

motivations or reasons for firms to participate in events that are associated with foreign

markets, we take into account the relations between external factors and internal strategies of

a firm that leads them towards undertaking internationalization activities. For each firm, there

can be different internationalization motivation at separate stages within the firm’s growing

history. According to summarization from Preet S. Aulakh (2007), the internationalization

attempt can be generalized into three phases:

1. International expansion into other developing country markets;

2. International activities to participate in a global supply network of established

multinationals, specifically exporting;

3. Establish global network to compete in more developed markets, associated with

value-added products and services in global market (Mathews, 2006).

Our attempt of the analysis of motivation is lying more specifically on the third phrase,

summarizing the reasons of multinationals from emerging markets to rather compete on the

global market instead of their home markets.

 

2.  Literature  review  

 4    

2. Literature review

2.1 Introduction

The role of emerging markets in the economic scape of the last decades has experienced a

measurable increase. Rising from negligible players in global outward FDI in mid-1980s,

developing countries reached outflows of $133 billion in 2005, resulting in 17% of the

World’s total (UNCTAD, 2006). The development of these trends and the motives of the

internationalization offensive by EM MNCs were studied by various researchers (Mathews,

2006; Gaur & Kumar, 2010; Cuervo-Cazurra & Genc, 2008), claiming that the emergence of

EM MNCs is pushing for new models and theories.

2.2 Approaches

Historically, the main motivation for firms from developed countries towards

internationalization activities through typical Western models follows the path to expand an

existing domestic know-how or technology internationally (Aulakh, 2007). However, firms

from emerging markets tend to use internationalization process to reach certain benchmarks

or improvements to revamp itself, and to gain strength to compete in a broader market stage.

In a simplified comparison view, the motivation of firms from developed countries tend to

offer other countries what the firm has already had; on the contrary, firms from developing

countries tend to receive from internationalization what the firm does not have, or is not yet

capable of reaching. A broad summarization of motivations behind all EM MNCs’ approach

towards internationalization can be generalized into asset seeking and opportunity seeking

(Luo & Tung, 2007). Approaches in this paper are defined as the different aspects of drivers

that influence EM MNCs when they formulate internationalization motivations.

2.2.1 Asset-seeking approach

International business theorists have established that conventionally for a firm to successfully

establish international presence, it must already possess superior competitive capability,

resources, or know-how within its structure of firm-specific advantages (Chen & Chen,

1998). Whereas this idea holds true, the advances in globalization also brought forth the ever-

increasing role of relatively less competitive multinationals from developing countries, which

approached internationalization for different motives.

 

2.  Literature  review  

 5    

Firms from developed countries with rich experience in foreign markets usually belong to the

conventional internationalization theory, since these firms exploit their proprietary assets to

multiply or obtain markets other than their home market (Wesson, 1999). Such firms tend to

better utilize their resources and rely on their firm-specific advantage to enter new markets;

therefore, their approach to internationalization, which was initially suggested by Hymer

(1976), was an asset-exploitation approach. Yet, as Chen & Chen (1998) suggested, many

other researchers agree that the recent emerging market MNCs have provided new

perspectives as to the motivations and strategic choices of firms going abroad (Sutherland,

2009; Gaur & Kumar, 2010; Pradhan, 2010). These ideas support the approach that not all

firms engaged in international business have the avant-garde firm-specific position to take on

competitive challenges in a global marketplace. In fact, a rising number of emerging markets’

MNCs tend to internationalize exactly because of lacking resources, technology, or know-

how in their home market (Makino, Lau, & Yeh, 2002). These firms seek foreign markets in

order to gain knowledge and access to relevant resources, thus Dunning (1988) and other

researchers suggested that these firms belong to the asset-seeking approach.

Even though these two approaches seem to represent opposite motivations, they are not

mutually exclusive, but rather complementary. Gaur & Kumar (2010) suggested that as much

as emerging market MNCs are considered to be missing resources, they do have firm-specific

advantages, though of a different nature than developed country MNCs. Thus, even because

emerging market firms’ aim is to gain new resources abroad, they still exploit their unique

firm-specific advantage to establish competitiveness in foreign markets.

When it comes to asset seeking, emerging market MNCs see themselves as lagging behind

their developed countries counterparts, so cross-border expansion helps them to overcome

competitive disadvantages (Child & Rodrigues, 2005). The resources and capabilities these

firms seek for are usually hard to create or imitate, and commonly scarce in developing

countries. When EM MNCs internationalize, Deng (2007) agrees that they tend to focus on

fast access to strategic resources through mergers, acquisitions, or joint ventures, in order to

gain access to assets that “are available on better terms” to host-country firms than firms’

own indigenous market. (Wesson, 1999).

2.2.2 Opportunity-seeking approach

The idea of opportunity seeking can be traced back to early researches such as Schumpeter

(1934) and Kirzner (1973). Many developed country firms’ main motivations were partly

involved in exploring new opportunities abroad. Holm et al. (2009) has summarized that

 

2.  Literature  review  

 6    

proactive firms would eventually find and try various approaches to create opportunities

actively, and it would lead to broader range of customers, suppliers, products, technologies,

and furthermore, innovated techniques to organize the internal operations. Firms from

emerging markets too, share similar motivations in terms of opportunity seeking. Even

though each country of origin has its unique characteristics, the motivation to seek new

market opportunities is a common denominator among emerging markets’ MNCs (Luo &

Tang, 2007). The Springboard Model initiated by Luo and Tung (2007) suggested that MNCs

in emerging markets tend to use internationalization process as a conjunctive medium

(springboard) to achieve goals related to asset and opportunity seeking. Within the

springboard theory, specific opportunities available for emerging markets MNCs are not only

limited to increased company size and reputation, leveraged cost-efficient manufacturing

capabilities, and enhanced business diversification; opportunities that EM MNCs seek

through internationalization also reached to areas such as gaining preferential treatment by

both home country and foreign country’s governments, escaping from institutional or market

constraints, as well as to bypass trade barriers into developed countries (Luo & Tung, 2007).

2.3 Perspectives

So far, we have discussed the internationalization motives of Emerging Market MNCs from

asset seeking and opportunity seeking approaches. Even though theory behind MNC

motivation is comprehensive, our focus remains on developing countries. Within these

frames, researchers have come to acknowledge the importance of institutional and resource-

based perspectives as pushers of motivators for the developing market firm. Perspectives in

this paper are defined as relevant internal and external factors, which are directly or indirectly

associated with, or influence both approaches.

2.3.1 Institutional based perspective

From an Institutional perspective, firms operate within a social framework of norms, values

and taken-for-granted assumptions (Meyer & Rowan, 1977). From the time Meyer & Rowan

published the article, the conception of the firm’s environment remains similar. Its

significance to EM MNCs is even more pervasive: the political and economic ideology of

developing countries has long served as a motivator or even de-motivator for cross-border

ventures from EM firms. Within the institutional-view, we identify two groups of researchers,

focusing on economic-institutional and social-institutional analyses.

 

2.  Literature  review  

 7    

Economic-Institutional Analysis. The first group of researchers focuses on the role and the

interaction of the emerging firm within its institutional environment. Gammeltoft et al.

(2010) divided this environment in macro and micro levels; where macro would concern

government activities, whereas the micro would focus on firm’s internal operations. The

effects of macro-level activities in the forms of access to resources, preferential treatment or

subsidies are factors that motivate behavioral patterns of EM firms. The role of the macro-

level institutions by Demirbag et al. (2010) emphasized institutional influences of Turkish

MNC location choice. Motivators such as political constraint and, knowledge infrastructure

in host market are institutional influences that motivate EM MNCs to go abroad (Demirbag,

Tatoglu, & Glaister, 2010). Other papers support such claims, by addressing the main

motivators of internationalization as liberalization of home regulatory market, investment and

taxation incentives at the macroeconomic level. Other motivating influencers include the

effect of home environment as push factors2 and host environment as pull factors3 (Erdilek,

2008; UNCTAD, 2005). These home and host market factors can produce adverse motivation

reactions to EM firms, where firms tend to be prone to “institutional arbitrage” – where their

TCE4 logic of seeking efficiency in one side, and immature market conditions at home on the

other side lead them to strategically exit their home market rather than strategically enter a

host market (Boisot & Meyer, 2008). Furthermore, because emerging markets suffer from

underdeveloped institutional and market infrastructure, technology and the legitimacy

acquisition are major motivators for firm to internationalize in order to overcome the negative

image of country of origin label (Gaur & Kumar, 2010; Johansson, Ronkainen, & Czinkota,

1994;). Bartlett & Ghoshal (2000) suggests that the lack of international experience of EM

MNCs is a contributing factor that makes the country of origin a liability for these firms.

Social-Institutional Analysis. The second theoretical bloc focuses on the social-institutional

drivers of internationalization. Since the institutional theories according to this group focus

on the level of social definition of firms’ behavior (Oliver, 1997), there is an inclination to

relate the Uppsala model as a new trend that emerges from institutional drivers of emerging

market internationalization. EM FDI in the 80s was mainly directed towards other emerging

markets due to similarities in market demand and institutional structure, making firm-specific

skills appropriate (Cuervo-Cazurra & Genc, 2008). Later on, EM MNCs acknowledged this

                                                                                                               2  Home  environment  as  push  factor  –  when production costs rise in the home market, or firm’s stakeholders cross borders, forcing the firm to go global as well (Erdilek, 2008)  3  Host  environment  as  pull  factors – appears when foreign markets offer better growth opportunities and cost structure, access to natural resources and government incentives etc. (Erdilek, 2008; UNCTAD, 2005)  4  TCE  –  Transaction  Cost  Economics  

 

2.  Literature  review  

 8    

strategy’s limitations to face global competition, and lack of contribution to firm’s value

chain through learning processes (Guillen & Garcia-Canal, 2009). In order to develop these

resources, EM firms lean towards the opportunity-seeking approach, pushing them to enter

more developed markets for asset-seeking purposes (Cuervo-Cazurrra et.al., 2008; Guillen

et.al. , 2009). Building over this assumption, it can be concluded that knowledge acquisition

is both an institutional motivator for EM firms and critical element in the Uppsala model

(Johanson & Vahlne, 2009). According to Johanson & Valne’s model, firms should develop

institutional and market-level knowledge to succeed in internationalization activities. In fact,

evidence of Business Networks have been found in EM MNCs, in the form of Business

Groups, such as Chinese Haier or Turkish Arçelik (Yaprak & Karademir, 2010), which

allows these firms to use the Business Group’s networks and resources to better position in

foreign markets, and more effectively exchange market information and institutional

networks.

2.3.2 Resource based perspective

Apart from the institutional perspective, the motivations can also be indicated from the view

of resource-based perspective. Under resource-based view, a firm is treated as a 3-in-1

structure: resources, skills, and capabilities (Wernerfelt, 1984). The motivation for a firm to

look over the international market, is somewhat based on the decision of either developing its

resources, skills, and capabilities internally or purchasing externally (Yaprak & Karademir,

2009). Resource selection and accumulation affects both internal decision and external

strategic factor of the firms (Oliver, 1997). In the respect of such philosophy, an international

transactional relationship is established, due to the fact that firms cannot possibly or

efficiently generate all necessary resources internally (Zacharakis, 1997). Thus, the resource-

based view has grown into a so-called resource-exchange theory: where firms offer

competitive advantages in exchange for receiving benefits in order to supersede competitive

disadvantages. Relatedly, diversified firms under the same group are able to benefit

themselves by sharing tangible or intangible assets among each other (Chang & Hong, 2000).

The competitive advantage of such firm’s resources should be sustainable and consistent in

order to guarantee future expansion of the firm in a global standard (Oliver, 1997).

Looking over to MNCs from emerging markets, the need for resource exchange is even more

obvious. According to Dunning’s eclectic paradigm (1988) of international production,

resource and capability advantage within home country is considered as one of the most

significant gains for firms in the international level. Such effect particularly reflected in those

emerging markets with rich natural resources, such as countries in Latin America (Cuervo-

 

2.  Literature  review  

 9    

Cazurra, 2007). On the contrast, emerging market MNCs can gain resources that they

particularly lack of during the internationalization process. It is being argued that many

superior technologies are controlled and exercised within developed countries, and developed

countries tend to have wider and deeper technology pools than developing countries. This

leads firms from emerging markets to go abroad and seek desired resources through mergers

or acquisitions (Cuervo-Cazurra, 2007; Lall, 1983; Nelson, 1993). Thus, the resource-based

view extends the importance of asset seeking behavior on emerging firms as a motivational

pattern for internationalization processes when the firm is seeking assets out of its home

market.

2.4 Literature Conclusion: Prelude of 2x2 Model

There is no doubt that many researchers have focused on the motives of internationalization

processes for emerging market firms. So far, different theories tend to converge on their

focus on the particularities of emerging markets and their environments. Throughout

summarizing and addressing these theoretical perspectives regarding the internationalization

motivations of emerging market firms, we concluded a “two-by-two” (2x2) Model (Figure 1),

which is constructed by two approaches (asset seeking and opportunity seeking) and two

perspectives (institutional and resource-based). Whereas EM firms’ motivation approaches

have been loosely grouped as either asset seeking or opportunity seeking, a clear pattern that

EM firms choose is still argued upon. Even though there is a lack of comprehensive study

tailored to emerging markets, theories propose that EM firms seek asset and opportunity in

foreign markets by both exploiting their firm-specific advantages home, yet still seeking

Figure  1:  2x2  Model

 

2.  Literature  review  

 10  

advantages such as brand image and more challenging and advanced institutional

infrastructure abroad. Better support for these perspectives has been reached by literature

while studying both institutional and resource-based views in light of asset-seeking or

opportunity-seeking. Theories emphasize the importance of the institutional environment for

the emerging market firm by viewing its economic and social aspects. The resource-based

view on the other hand, has gained theoretical importance due to lack of matching strategic

resources with knowledge infrastructure in emerging markets, providing opportunities for

firms to exchange firm-specific advantages in order to alleviate their disadvantages.

2.4.1 Approaches vs. Perspectives

Motivation belongs to psychological and cognitive studies that are defined through

qualitative research methods and theoretical patterns. During the course of depicting the

principal motivations that lead firms from emerging markets to internationalize, we organize

the literature review mainly through motivation approaches and perspectives (See Figure 1).

When we address the theoretical approaches henceforth, we imply on the distinctive views

that researchers have on firm’s motivations, more specifically approaches to motivations has

a similar meaning to the aspects or types of motivations that affect the behavior of emerging

market firms, be those motivations to seek assets or opportunities abroad. On the other hand,

the theoretical perspectives, for the purposes of this paper, will condense the theoretical

views on the conditions that influence firms’ motivations. By mentioning perspectives, we

target the incidences or circumstances that may affect emerging market multinationals’

decisions towards both approaches. The correlations within the 2x2 Model should shed light

to the specificities of emerging market firms; evaluations of which will be discussed through

the case studies herein.

 

3.  Methodology  

 11  

3. Methodology

3.1 Research Strategy

Motivation is a study of managerial behavior, which sometimes cannot be solely determined

or analyzed by numbers and statistics. In order to serve the purpose of our study, we decided

to take a qualitative approach as a primary research method, and target mainly on two

countries from emerging markets - China and Turkey. Each could possibly represent relevant

economies around the peripheral geographical area, thus deliberating Asia and Eastern

Europe, two continents where the idea and the impact of emerging markets was the strongest.

3.1.1 Why China and Turkey?

Selecting these countries was not coincidental, considering the economic implications they

represent. According to World Bank (2010, 2011) both countries have undertaken efforts to

reforms, and succeeded largely into switching to market-based economies. As China is a part

of the BRIC5 economies, its internationalization behavior coincides with the other three. In

the same way, Turkey is considered as the ‘next eleven’ – post-BRIC group of prospective

economies that would rival developed countries in the future (Goldman Sachs, 2007). Thus,

from a functional deduction, international organizations and economists have largely agreed

on the idea that emerging markets can be grouped as the ‘BRICs’, the ‘next 11’ and other

developing markets. We believe that by focusing on China and Turkey, we will effectively

illustrate the two influential groups of emerging markets, and provide a complete picture on

the effects and causes of these two country groups’ internationalization processes.

Considering that other developing markets have a lesser impact on the world economy, we

set our primary focus on markets that have already reached some level of economic maturity.

3.1.2 Research Process

In order to gain greater understanding on the specific purposes of this paper, we reckoned

that case studies of successful internationalized companies could possibly provide an

enhanced view of our study. By summarizing the existing theories and models from previous

academic studies, and examining case studies from each country mentioned above, it allows

us to define the distinctive motivations from emerging market MNCs. Furthermore, the

information generated from our study can help support a new framework or model that tends

to be more valid and reasonable. Our research strategy can be summarized into a process

shown in Figure 2.

                                                                                                               5  BRIC  –  Brazil,  Russia,  India  and  China  

 

3.  Methodology  

 12  

 

Figure  2:  Research  Process  

The analysis part through the case studies focused on comparing and contrasting the cases, in

order to pinpoint similarities and differences among the studied firms. The data generated

through analysis also gave sufficient support and validity to our proposed model. Due to the

fact that case studies give a current representation of firm behavior towards

internationalization, analyzing the model through the cases should provide important

practical insight into internationalization motives of EM MNCs.

3.2 Case Selection

Case study is an essential part of this project, whereas the examples shown in the case studies

can possibly provide better and more persuasive evidence to exhibit the specific motivation

this project is studying upon. During the case selection process, we felt the need of a focused

industry in order to provide a more precise point of view. This way enables us to study the

motivation of internationalization from EM MNCs in a relevantly micro measure, and later

reflect the core ideology into a macro extent. One of the most important reasons for us to

choose technological industry is simply because of the common interest of consumers

worldwide. Technological industry around the globe suits a universal environment because

the products and services provided are highly similar from country to country. Thus,

internationalization process is widespread and relatively prevalent within the technological

industry.

We have chosen Chinese and Turkish companies to complete our case studies. Both countries

share the similarities of mass production in technological goods in the recent decade. As

desired destination for outsource from many developed countries, Chinese and Turkish

technological firms have equipped the skills over the years to produce and distribute

technological goods and services substantially. However, more and more significant

examples of firms from these developing countries have stepped onto the stage of global

market lately, which has triggered the world’s attention dramatically. Thus, these firms make

very interesting cases to determine EM MNCs internationalization motives.

Summarization   New  Model   Case  Studies   Analysis  

 

3.  Methodology  

 13  

Four company case studies from China (Lenovo, Haier) and Turkey (Arçelik, Vestel) were

selected. Our objective in selecting these cases is to aim at MNCs in technological industry

from China and Turkey that had recognized internationalization history, which can be best

representing the motivations under unique condition of each country. Selected cases have

significant appearances within our literature collection. Sufficient published studies have

whelmed over these firms, which provides fundamental support to our paper.

3.3 Data Collection

3.3.1 Overview

Our selected cases are regarded as recognized multinational firms from emerging markets,

thus the companies should have obtained certain size of influences publicly. This means that

many existing articles, studies, or journals are available to be used as reference to our case

studies. The theoretical nature of our paper is based on cross-referencing existing theories

and models with findings from firms in our cases. This makes the data collection

requirements to be bounded with theoretical opinions of other researchers, who have studied

Internationalization of EM firms. Company data needed to establish the cases are thus

available in other studies, company profiles, corporate and annual reports, as well as other

secondary sources. Since firms’ motivations are created over a period of time, and are factors

of changing environmental conditions, data provided from these sources are very important to

create an understanding of firms’ behavioral pattern over the years. It could possibly improve

the insight that these case studies provided to our project.

By comparing the findings of the company data with theoretical sources, we can check the

validity of our findings and make efficient use of secondary data. The findings of this

research method would then be benchmarked to the existing theories and models, in order to

create a unique internationalization model for the motivation of emerging markets’ MNCs.

3.3.2 Nature of data

During the research phase for the companies, we have intensively gathered information from

company websites, news agencies, and market reports regarding to our cases and the

technological industries in Chinese and Turkish markets. The principal data collection will be

secondary in nature, since we are interested in the firms’ internationalization processes

scrutinized from a theoretical perspective, as well as various interpretations of any

internationalization activity that our studied firms have undertaken in order to formulate a

 

3.  Methodology  

 14  

more reliable research paper. During our research, we also found it important to solicit

secondary data from other external sources such as UNCTAD, chambers of commerce, and

statistical institutions etc., to better contribute to the comprehensiveness of the paper.

With regard to retrieving primary data from the firms studied in the case section of the paper,

under a cost benefit analysis deliberated, we decided that cost implications were outweighing

the benefits of their outcomes. This analysis was influenced primarily through three

circumstances: time and money limitations, feasibility of longitudinal-study feedback, and

availability. First, conducting a theoretical research is time consuming as it is; establishing

contact to conduct interviews and observations would put further pressure on the schedule

and compromise data quality itself. Then, interviews and observations would give us a

current overview of firms’ internationalization rather than the entire process, and since

motivation is a longitudinal study, secondary data add more value to this paper’s validity.

Finally, EM MNC officials are hard to reach as opposed to secondary data that have already

addressed areas of interest in our case study.

3.3.3 Reliability & Validity

Regarding secondary data used while conducting the literature review and the case studies,

several methodological measures were considered to establish data validity and reliability.

There have been numerous similar studies on the internationalization of the firms; yet more

limited data exists targeting the motivations of EM MNCs specifically. A supplementary

analysis of data from published academic sources is conducted, soliciting relevant

information from these articles regarding motivations of EM firms to internationalize. Being

the most used form of secondary data qualitative analysis according to Heaton (2008), this

meta-analysis also emphasizes on reliability of sources, since these papers are published in

respected journals worldwide.

The international scope of this research, and the theoretical focus also influenced our choice

of secondary data. Saunders et al. (2009) acknowledge that researches requiring national or

international comparisons would find secondary sources as major contributors towards

answering research questions. They also suggest secondary data importance on case study

formulation. In order to ensure that validity of these data is not compromised, we have

scanned through or read numerous research articles prior to selecting the most valid ones for

our paper. These articles were selected with strict search criteria relevant to the focus of our

research, in order to efficiently target this focus and sustain data collection validity.

 

4.  Case  Studies  

 15  

4. Case Studies

4.1 China

Chinese economy during 1950s and 1960s was predominantly planned and controlled by the

government. All businesses were state-owned enterprises (SOEs), whereas private-owned

enterprises (POEs) were strictly considered as illegal. In 1978, a phenomenal “open door”

policy initiated by Chinese government revolutionized the country’s economic perspectives.

The reform has brought POEs legalized, and provided extraordinary opportunities for

Chinese people to own and self-manage businesses. Even though POEs receive limited

government support, they can exercise more freely and expand quicker than SOEs, who

hinder heavily under extensive government regulations (Biediger et al, 2004). The “open

door” policy attracted enormous amount of inward FDI within China, as well as modern

technology, advanced management styles, and global perspectives from many developed

economies. Today, after three decades of incredible economic growth, the trend in China has

gradually switched the direction from inward FDI to outward FDI, alongside a “go global”

policy in 2002 by Chinese government to encourage business with specific capabilities and

know-how to operate abroad and set up China Investment Corporation (CIC) (Brainard &

Fenby, 2007).

4.1.1 Lenovo

Lenovo is a Chinese-based multinational computer technology corporation, which was first

established in 1984 at Beijing, China, with 11 IT specialists and an investment of RMB 20

million (USD 3 million approximately) from Chinese Academy of Science Institution of

Computing Technology. Today, the company is globally notable in computer product

development, manufacture, and marketing, as well as IT related services. Lenovo is generally

accepted as one of the most significant example of Chinese-based MNC, due to the

remarkable acquisition of IBM PC Company Division (PCD) in 2005 (Associated Press,

2005).

Lenovo’s internationalization trend was caught at the “go global” period. At that time,

Lenovo, as a successful Chinese POE, was already the largest manufacturer of personal

computers in China, with approximately 30 percent of market share and USD 24 billion

annual sales. However, the core business of the company was suffering from extensive

competition from other leading foreign PC brands in China, such as Dell, Hewlett-Packard

(HP), etc. These foreign ‘intruders’ posted serious threat to Lenovo, who witnessed the

competitors’ sales force in China become stronger each year. Dell’s shipment increase

 

4.  Case  Studies  

 16  

reached 63% in 2003, and Lenovo only gained 15.1%. Some of these competitors even

reached certain institutional contracts with the government. Under such pressure, the

management team in Lenovo felt that critical action must be taken in order to place the

company in a healthy business environment. There were two choices for Lenovo: the

company could continue its low cost structure and make parts or products for other Original

Equipment Manufacturers (OEMs) in large volume; or to form an expansion to sell branded

products to other regions such as Europe and North America, thus open a new source of

customer group.

The result of both choices could lead Lenovo into complete different directions. According to

Lenovo’s founder and chairman Liu Chuanzhi, Lenovo’s low cost strategy could not be

maintained as a long-term strategy, due to cost in China was rising in a hasty pace. Such

strategy would suffer significantly from other low-wage countries such as Malaysia,

Thailand, and India. At the moment, Lenovo faced limited domestic expansion, and 30

percent share of Chinese PC market cannot satisfy a visionary corporation like Lenovo;

therefore, the company was obligated to break the ceiling and search for a new expansion

strategy. At this point, the USD 200 billion global PC market posed a huge potential for

Lenovo (Liu, 2007). Liu mentioned that businesses from developed countries often take

global expansion as one of the critical aspects of business strategy, and Chinese company

should behave the same way. Liu’s initial motivation was inspired by successful

internationalized MNCs in Aisa, such as Sony of Japan, Samsung of Korea, and Haier of

China. Accordingly, Lenovo was committed in global strategy, aiming at transforming its

low-cost products into premium global brands.

Liu mentioned several difficulties Lenovo was facing in order to go abroad, which includes

global brand recognition and presence, as well as human talents to manage and operate a

global corporation (Liu, 2007). Regardless of the product quality from Lenovo, there is a

dubious perception around the globe that “Made in China” products are equal to “Made

Cheap” goods (Biediger et al, 2004). Such perception could hold back Lenovo’s international

development dramatically, and make it even more difficult to receive global brand

recognition that Lenovo was very much needed. However, Liu believed in an old Chinese

idiom, which says, “There will be light at the end of the tunnel”. If the obstacles can be

analyzed from a different angle, they might become opportunities the company can benefit

from.

In 2005, Lenovo successfully acquired IBM PCD for USD 1.75 billion, who was also

suffered from heavy financial trouble (Associated Press, 2005). Lenovo was granted the

 

4.  Case  Studies  

 17  

permission to use IBM brand for 5 years to market the new lines of ThinkPad, one of the

most famous notebook PC line from IBM. Formal Lenovo CEO Yang Yuanqing concluded

three most important improvement that IBM PCD brought to Lenovo after the acquisition: 1)

both brands were focused on innovation and premium quality, thus the acquisition pushed

Lenovo into a high-tech global brand image without changing its primary ideology; 2) With

the access to IBM PCD’s diversified products, management skills, and geographical point of

sales, Lenovo is now developed into a global company with global perspectives and

international channels; 3) Lenovo’s existing platform of procurement and manufacture

processes have enhanced efficiency for the new company (Tu, 2005).

Yang’s summarization highlighted that the acquisition has brought mutual benefit to both

Lenovo and IBM. In other words, Lenovo realized the goal of internationalization through the

purchase of IBM PCD, while IBM has consolidated its strength through Lenovo’s resources.

Zhou Weikun, CEO of IBM China, described the acquisition as forming the strength of both

companies to achieve new target on reaching better service, improving quality, enlarged

quantities, and leaner cost management (Tu, 2005). IBM has gained advantage to access to

lower end customer group through Lenovo’s low cost structure. IBM’s chairman and CEO,

Samuel J. Palmisano, also stated in an open letter to the employees of IBM, that the main

motivation of the acquisition was not to sell the PC business, but to establish a strategic

connection in China through Lenovo; in return, IBM has provided opportunity for Lenovo to

become a strong MNC, and supporting Lenovo with IBM’s technology, management skills,

marketing and sales channels.

4.1.2 Haier

Another representing case of internationalization in China would be Haier Group. Comparing

to Lenovo, Haier has started its internationalization process a lot earlier, and it owns

extraordinarily significant position in most part of the world today. However, Haier Group is

partially state-owned, which in some way, it may misdirect our research purpose in order to

find the motivation. On the other hand, the internationalization process of Haier was

symbolic enough to represent a very Chinese way of thinking towards internationalization;

Haier’s global strategy has set up successful examples for various newly internationalized

companies from emerging markets, and it is also widely spread in studies regarding to EM

MNCs. Therefore, we are taking Haier as a case study in order to provide extra validation

towards our analysis.

 

4.  Case  Studies  

 18  

Haier is a Chinese based multinational company producing home appliances including

refrigerators, air conditioners, washing machines, and televisions. The company was

established in the 1920s under the name Qingdao Refrigerator Plant. During the 1980s, Haier

suffered from huge debt, and was forced to perform a complete corporate restructure, which

turned the company towards an entirely new organizational era; its internationalization

process was also followed by this era. The company was officially renamed as the Haier

Group in 1992, after the turnaround from its financial troubles. Haier currently owns the

largest market share in white goods category across the whole world, with 6.1 percent share

in 2010 (Jones, 2010).

Like many other developing countries, the internationalization process of Haier started with

export from its plant in Qingdao, China. With a goal to build a global brand, Haier

established production facilities in numerous countries from 1996 (See Exhibit 1 for Haier’s

major oversea FDI in Appendix). In year 2000, Haier’s global facilities reached export

volume of USD 420 million to more than 160 countries and regions, established over 40,000

sales network points internationally (Liu & Li, 2002).

The motivation of Haier’s internationalization process was determined from the angles of

internal and external driving forces, according to the academic case study of Haier by Liu &

Li (2002). One of the major internal driving forces for Haier is the intense competition in

China among foreign brands such as Electrolux, Siemens, GE electronics, and Whirlpool.

The company faced the threat of these foreign brands to become major players in China, thus

a global strategy would suitable for a healthy growth for Haier. From a view of the TCE,

home appliance’s transportation costs are above affordable. If Haier would remain as a

Chinese based exporter, these shipping costs would post huge price disadvantage for the

company. At this point, oversea subsidiaries could be able to solve such hassle to keep

competitive cost advantage for Haier on the global stage. Furthermore, some subsidiaries can

even help reduce or avoid tariffs in certain region, such as North American shipments from

Haier’s plant in the USA.

On the other hand, home market constraint is one of the external driving forces for Haier to

set its global strategy in motion (Liu & Li, 2002). As being said, intense competition among

foreign brands leads Chinese home appliance market to be saturated. With continuous drop in

market share, Haier found overseas expansion as an alternative solution to the market

constraint. Furthermore, with the partial ownership of Chinese government, Haier’s

internationalization was strongly encouraged by the government. Under such aspect, Haier

received various ‘green light’ and institutional support, including the opportunity to establish

 

4.  Case  Studies  

 19  

a financial company in order to finance Haier group in better terms; such act is difficult for

other Chinese companies to achieve due to institutional restrictions.

4.2 Turkey

Turkey has emerged from a prolonged period of political unrest, much like many developing

countries in Eastern Europe. Even after embracing democracy and undergoing significant

economic and political reforms, Turkish government struggled to sustain the rapid economic

growth with its deficient infrastructure. The main players of the emerging Turkish economy

were initially low-skilled based, where traditional agriculture and textile sectors dominated

the employment levels. Still, due to effective reforms and EU agreements (1963 EU-Turkey

Association Agreement; 1995 EU-Turkey Customs Union Agreement), more high-skilled,

capital-intensive industry sectors have developed: mainly automotive, construction and

technological industries. After a financial crisis in 2001, Turkey further adopted significant

fiscal and financial reforms and took initiative into privatizing state enterprises. The impact

was positive, where Turkey saw a strong growth era amounting 6% annually until 2009,

when the Global Crisis caused a slowdown in growth.

Even though Turkish inbound FDI has suffered some cutbacks due to the recent global

financial turmoil, EU still remains the biggest FDI investor and receiver for Turkey. Though

investor suspicions have not yet vanished regarding country’s high account deficit, unstable

policy-making, and fiscal imbalances, Turkish firms have found governmental support into

going global. Having a Customs Union with the European Union enabled firms to have

improved access to free flow of industrial goods and a strengthened Intellectual Property

Rights protection. Technological industries finally had open access to developed markets, and

the Customs Union Agreement guaranteed a preferential treatment of Turkish goods relative

to those produced in other non-EU countries.

4.2.1 Arçelik A.Ş.

Arçelik was founded by Vehbi Koç in 1955 as a sub-unit firm under Koç Holding in Turkey.

Koç Holding remains one of Turkey’s biggest companies, ranking 273rd in Global Fortune

500 (CNN Money, 2010). Thanks to its strong brands, its sales amount for 7% of Turkey’s

GDP and 8% of its total exports. Arçelik is Koç Group’s flagship firm, where 57% shares are

controlled by Koç Group, 18% by Burla Group, and 25% are traded at Istanbul Stock

Exchange. It employs 17,000 people on its 11 production facilities in Turkey, Romania,

 

4.  Case  Studies  

 20  

China and Russia, serving consumers in over 100 countries worldwide with its 10 brands.

Arçelik A.S. has achieved its goal to become the third largest household appliances company

in EU, a market leader in Turkey and Romania, as well as second leading player in UK with

15% market share (Arcelik A.S., 2009).

Bonaglia and Goldstein (2007) characterized Arçelik as a latecomer MNC, due to the fact

that its internationalization started in 2000s, after decades of partnership with European

firms. Based on its latecomer status, Arçelik was able to adopt best practices and

technologies to address changing market demands more efficiently than its established rivals

in international markets, especially concerning greener energy. (Bonaglia and Goldstein,

2007). Its first international efforts dated in the 1980s, when the firm started exporting to

neighboring countries. The institutional environment in Turkey was a considerable

economical and entrepreneurial detriment of Arçelik’s cross border operations. When Turkey

reached tariff reduction agreements with the then-European Community, the firm updated its

strategic objectives into reaching new technologies in the European markets. After

dominating the national market share, Arçelik’s international reach expanded initially to the

US in 1988, and 9 years later to the EU, through OEM contracts with Sears and Whirlpool

respectively. These contracts gave Arçelik the economies of scope to specialize its production

and gain technological access to invest in its R&D, but prevented the firm from selling

similar products under its own brands in these markets. Thus, Arçelik’s initial global ventures

were largely focused on developing competitive technological levels in order to position

itself strategically as a properly established and trusted global brand. Erdilek (2008)

suggested that in spite of Arçelik and with other Turkish MNCs being latecomers to

industrialization, such status makes joint ventures and OEM common initial

internationalization strategies, because these firms tend to minimize risks and access superior

strategy at the same time while establishing presence in foreign markets.

Over the decade, the firm’s reorganization led to a more proactive and direct approach to its

internationalization process. Again, the fluctuations in the institutional political and economic

environment when EU Agreement on Customs Union was signed in 1995 in one side, and

financial crisis that erupted in 2001 in the other side, both played a role in Arçelik’s

internationalization. In 2006, after increasing the shares to 72% in BEKO Elektronik, Arçelik

A.S. decided to launch its Original Brand Manufacturer (OBM) strategy and enter European

markets with its own brand. Because Arçelik is difficult to pronounce and remember in other

languages, the firm decided to market its white goods and TVs under the BEKO flag.

 

4.  Case  Studies  

 21  

Even though the firm tapped on exploiting its latecomer advantages, its success in

international markets was challenged by country of origin label. Bartlett and Ghoshal (2000)

warn that liabilities of origin are largely psychological factors that arise due to the lack of

well-established international experience, misplaced knowledge of firm’s capabilities, or

market threats. Since the country of origin label in Arçelik’s case was considered a liability

rather than an asset, Arçelik/BEKO during the last decade underwent a serious streak of

acquisitions of notable EU brands such as Altus and Arstil Mobilya in Turkey, Flavel and

Leisure in UK, Blomberg and Grundig in Germany, Arctic in Romania, Elektrabregenz in

Austria. The effect was visible, because the internationalization of brand identity made

BEKO a truly international brand, as consumers through Europe often fail to identify the

Turkish origin of Arçelik/BEKO products. These actions assisted Arçelik to build brand

awareness and trust, while at the same time focus on developing specialized products from a

pooled R&D and a safer legal protection of their property rights (Luo & Tung, 2007).

Having established its accelerated internationalization model (Bonaglia, Goldstein &

Mathews, 2007) by entering the developed markets of the EU and its two production plants in

Turkey and Romania, Arçelik exploited its empowered brand to strengthen its position in

neighboring developing countries in Balkans, Middle East, the ex-Soviet Turkic States and

more importantly Russia. At this development stage, Arçelik’s production facilities in Russia

(2006) and China (2007) were motivated rather from a market expansion and revenue

generation objectives than seeking new assets or technologies in these markets. These

ambitious ventures in two of the BRIC countries established the intentions of Arçelik A.S. to

replicate its European international experience in a more global marketplace; because last

decade’s progress was rather a good start than an accomplished goal.

4.2.2 Vestel Group

Drawing a similar pattern of business organization, Vestel also belongs to transnational

business group, which holds the name of its founder, the Zorlu Group. Established in 1950s,

Zorlu Holding quickly expanded from textile to electronics, energy production and real estate

services. The Zorlu conglomerate, with Vestel as its flagship company for more than a

decade, sustained the position of a Turkish pioneer on exporting into new markets, topping

the list of Turkish firms as one of the biggest exporters. (ISS Corporate Services, Inc. , 2010)

Vestel was thus founded in 1994, setting its objective to employing extensive R&D efforts in

order to provide high-quality products. Its customers are grouped into 3 principal categories.

The A-brands are prominent global manufacturing brands for which Vestel produces

 

4.  Case  Studies  

 22  

premium goods, such as Panasonic, LG, Sharp, JVC, Toshiba, Hitachi and Sanyo. The B-

brands are retailers like Carrefour for which Vestel has OEM contracts operated under thin

margins, considerable volumes, and high competitive structure. The last group is the OBM

sales under acquired brands in EU or own brand in Turkey and neighboring countries. (Ilman,

2009) Because deals with OEM and ODM6 partners have established competitive pressure

for new technologies; this last decade saw a change in the approach of international markets,

where the company started developing technology and products under its own name. Vestel

opened its first production plant outside Turkey in order to reach new markets for its branded

goods. By establishing its Russian plant, Vestel would penetrate the Russian market along

with other CIS7 countries, while staying out of European markets in order not to compete

with its partners for whom Vestel produces OEM goods. In his dissertation, Ilman (2009)

observed that Vestel’s market expansion had initially started in Europe, then continued in the

regions around Turkey, while only recently has the firm ventured into new markets that are

geographically more distant (Ilman, 2009). This pattern serves to overcome technology and

brand name deficiencies by acquiring companies and experience in Europe prior to

establishing own brand presence in home market and psychically close countries as a

springboard for a more international expansion.

Except expanding its market reach on a more global landscape, Vestel has also achieved into

enforcing its OEM and brand products with an extended network of R&D centers worldwide.

By starting its internationalization with its research department first, Vestel has effectively

sought to develop necessary firm-specific advantages in order to preserve its competitiveness,

while keeping the production costs down by maintaining low cost conditions in the home

market. The firm’s institutional environment has allowed it to have a natural competitive

advantage over Far East competitors because of the Customs Union between Turkey and EU,

geographical proximity to EU markets, and tax advantages in CIS countries through its

establishment in Russia.

While Vestel continues to offer OEM products in EU, and exports to 127 countries

worldwide, the firm has focused its branded internationalization efforts in proximate

emerging countries markets. Yaprak and Karademir (2010) adhered to the importance of

business group affiliation of Vestel brand for its accelerated internationalization since the

1990s. Building over experiences from other Zorlu Group affiliates and related knowledge

spillover, Vestel sought new markets for different strategic motives. Markets such as ex-

Soviet States, the Middle East, North African and South Asian countries provided Vestel with                                                                                                                6  ODM  –  Original  Design  Manufacturer  7  CIS  –  Commonwealth  of  Independent  States  

 

4.  Case  Studies  

 23  

an opportunity to exploit its R&D advancement, technological capabilities and quality

standards into penetrating these markets and establishing a positive brand image. In order to

better reach these goals, Vestel recently acquired Velfrost brand, along with Finlux and

Luxor - companies with recognized and respected image in Northern Europe and Russia.

Seeking to further improve its brand, Vestel’s ventures with Graetz and Telefunken serve to

strengthen Vestel’s position in EU markets.

These ventures also play an important role into transferring a positive brand image to the

markets where Vestel sells under its own brand name. Furthermore, the company was an

early participant of Turkish Government’s Turquality program that offered incentives to

firms that contributed to the improvement of Turkey’s country of origin label image. (Tac &

Aglargoz, 2007)

Having established a strong global market position in televisions as well as a growing

influence in white goods production, Vestel can also take advantage of economies of scale.

This adds another important preferential benchmark factor vis-à-vis Asian competitors,

especially when targeting European markets, giving Vestel the competitive edge into

successfully establishing its own international presence. With revenues generated from

international activities reaching USD 2.4 billion or 77% of its entire production, Vestel is

trying to establish itself as a serious contender for global market share.

 

5.  Analysis  

 24  

5. Analysis

5.1 Approaches: Asset-seeking vs. Opportunity-seeking

Approaches from the 2x2 Model are corresponding to the main motivation for EM MNCs

towards internationalization. These motivations are, as mentioned in the model, asset-seeking

and opportunity-seeking. Theoretically, conditions that influence EM firms to go abroad

would most likely to land in one of these two approaches. Indubitably, firms’ motivations

often appear too complicated to be categorized solely within one of the approaches. Many

firms’ motivation consist both asset-seeking and opportunity-seeking with different degree of

needs suitable for the firm itself. However, different firms could value one approach over

another, depending on the nature and condition of the firm’s attempts and expectations from

its internationalization process. In other words, some firms are more of asset-seeking-type

firms, while some are more of opportunity-seeking-type.

The following chart summarized the approaches of all four firms from the case studies, and

categorized into asset-seeking and opportunity-seeking:

Approaches

Asset-seeking Opportunity-seeking

Lenovo

- Acquisition of IBM to establish global brand recognition and presence;

- Management skills and human talents in order to match a global standard and perspectives;

- More advanced technology to transform its low-cost products into premium global brands.

- Wider range of international customer base comparing to the limited market within domestic market;

- More point of sales in different region open new opportunities to create diversified products;

- Increased chances to access into new marketing and sales channels.

Haier

- Establishment of foreign subsidiaries and international sales network broaden the firm’s market flexibility;

- New technology acquisition and management skills through M&A and joint ventures.

- New markets create essential opportunity to solve firm’s financial constraint;

- New ventures in a bigger realm of global market to avoid domestic market constraint;

- New organizational structure to help the firm to exist from a financial troubled position.

Arçelik

- OEM (Sears and Whirlpool) partnerships to develop technology and know-how;

- Aggressive series of brand acquisitions in developed EU countries to gain access to new resources and capabilities;

- Presence in developed markets to help establish strong & positive brand image.

- Latecomer MNC status made them flexible to address changing market needs more effectively and exploit rivals’ established market positioning, as well as target niche markets;

- Penetrate the market with OBM strategy using the BEKO brand image in European countries;

- Enter emerging markets by exploiting the created brand image in EU;

- Offer highly competitive products at lower costs by exploiting their relatively superior technology and adoptability in other emerging markets.

Vestel - Pooled R&D in developed markets to develop superior products;

- Exploit mass production abilities to produce for retailer OEMs under thin margins and highly

 

5.  Analysis  

 25  

- Capitalize on OEM standards of quality with world-class brand contracts to develop know-how competencies;

- Filing for patents and intellectual property protection in safer and more regulated European legal and business environment to safeguard inventions.

competitive market;

- Use firm-specific advantages of cutting-edge technology and positive brand image to enter emerging markets geographically close to Turkey with its own brand;

- Strengthen the position in emerging markets through acquisitions of brands with respectable image in those markets.

5.1.1 Asset-seeking

When comparing four technological firms from two different emerging markets, we have

found unique similarities within their approaches towards asset-seeking. The asset that these

firms seek through internationalization can be generalized into Market Flexibility, Global

Brand Recognition, and Capability.

Market Flexibility. Firms from emerging markets tend to have the similarities of having a

saturated domestic market. Their performances within domestic markets are somehow

constrained by many limitations or extensive competition. Both Lenovo and Haier

experienced rigorous competition in China by the establishment of foreign brands, and their

threat to take over Chinese market. Their contribution into internationalization are the

existing strategy to end the constraints and exploring newer and bigger markets abroad. The

flexibility also reaches the point where firms can be able to seek protection of its valued

assets, like Vestel’s approach to secure inventions under safe and regulated European legal

environment.

Global Brand Recognition. Prior to internationalization, many firms have already established

a fair degree of brand recognition within their own country. However, in order to become a

global firm, international brand recognition is considerably compulsory. Of all four firms we

have studied, global brand recognition is one of the main targets to seek through

internationalization. With improved brand image and strong recognition, EM MNCs can

better present themselves in developed markets. Mergers and acquisitions are usually the

strategies for EM firms to enhance and accelerate global brand recognition; such behavior

can be identified in the significant acquisition of IBM PCD from Lenovo.

Capability. Conceptually, EM MNCs have the desire to seek through developed countries for

new technology and particular skills that is hard to imitate, because it is evidently proper to

say that firms from developed countries are more equipped with newer and deeper

technology pool than developing country firms. Some technology or skills are not as easy as

 

5.  Analysis  

 26  

take-and-go; they certainly require long-term practice and orientations. When EM MNCs

establish alliances with firms from developed countries, they create convenient progress

towards obtaining new technology and skills such as management styles and R&D

techniques.

5.1.2 Opportunity-seeking

Opportunity-seeking approach can be found momentous for firms from emerging markets to

create, learn, and explore through internationalization process. The characteristics of

emerging markets often appear to limit certain opportunities to develop within domestic

market, especially due to institutional reasons. In such respect, EM firms tend to search

abroad for extensive range of opportunities. From our case studies, we can identify three

types of opportunities that all four cases presented seek through: New Market Exploration,

Advantage Exploitation and Exploration, and Diversification.

New Market Exploration. The concept of ‘new market exploration’ is relatively similar to

“market flexibility” in asset-seeking approach. Such notion emphasized that firms from

emerging markets were faced with domestic market constraint and competition, which

consequently leads them to seek new market outside their own country. ‘New market

exploration’ in opportunity-seeking approach particularly focuses on the opportunities

created by new market, and the actions for firms to seek such opportunity. Relatively,

internationalization can enable firms to create opportunity in the new markets, which allowed

firms to expand towards a new range of customers, suppliers, products, etc.

Advantage Exploitation and Exploration. Firms from emerging market are usually equipped

with certain competitive advantages before becoming internationalized; some advantages

may be obscure within domestic market, but appear to be significant in foreign markets. Such

notion can be noticed particularly in EM MNCs, as these firms usually have rich resource

availability or enormous cost advantage over those firms from developed markets.

Internationalization has empowered opportunities for these EM MNCs to exploit such

competitive advantage into foreign markets as latecomers. Additionally, through

internationalization, firms tend to receive new capabilities and technology to develop

advanced skills as new competitive advantages.

Diversification. The international market provides a possible platform for EM MNCs to

achieve diversification. With new technology acquired through internationalization, firms can

be able to form horizontal diversification to introduce new products and services competitive

to a global standard. Firms like Arçelik are able to introduce new lines of products or brands

 

5.  Analysis  

 27  

such as BEKO; therefore successfully transforming themselves from OEM to OBM

producers. They effectively use similar technologies, capabilities, and resources across the

whole company internationally, forming concentric diversification (Helms & Cengage,

2006). Firm’s diversification can enhance global reputation and strengthen international

market position; moreover, headquarters in emerging market can be able to benefit from such

innovations as well.

5.2 Perspectives: Institutional based vs. Resource based

The perspectives sketched under the 2x2 Model shed light over the factors of external

environment and firm based internal strategic standings of Emerging Market firms. Whereas

both external and internal events of a firm interact into aligning these firms’

internationalization motivations, both perspectives included in the model are equally

important into establishing the conditions for firms to consider internationalization processes.

These perspectives address the institutional based and resource based conditions as separate

modules, yet theoretically these perspectives are not at all mutually exclusive. EM MNCs are

highly dependent on their institutional environment of home and host countries, just as much

as they depend on the continuous flow of resources and capabilities to build firm specific

advantages or supersede the disadvantages they may incur when undertaking cross-border

activities.

In the chart drawn below, the perspectives that affected the four case study firms are

underlined, grouped into institutional based and resource based respectively.

Perspectives

Institutional-based Resource-based

Lenovo

- “Open door” policy allowed establishment of POEs, and enhanced global perspectives of Chinese firms;

- “Go global” policy encouraged firms to go abroad;

- Intensive domestic competition among foreign brands triggered firms to search for new markets.

- Opportunities to receive new and more advanced technology through international expansion;

- Existing platform of procurement and manufacture processes create possible cost advantages among global competition;

- Improve management skills by benchmarking international best practices of developed market firms.

Haier

- Threat of foreign brands taking over domestic market;

- Government support to carry out a more concrete internationalization strategy;

- Shipping cost disadvantage in home appliances is solved by overseas subsidiaries;

- A fair distribution of existing resource into global market to allow resource exchange;

- Superior technology received from international joint ventures that satisfy the need to become a global brand.

 

5.  Analysis  

 28  

- Foreign subsidiaries can help reduce or avoid regional tariffs.

Arçelik

- State reforms and EU-Turkey bilateral agreements increased competitiveness in home market and liberalized tariff barriers to enter European markets;

- Turkish trade deficit, financial crisis and political instability acted as a push factor from home market;

- Country of origin label liability urged the firm to access new brands through acquisitions.

- Proximity to developed EU market companies made possible for access to new resources through M&A and knowledge spillover;

- Cost advantage over EU rivals provided for useful resource-exchange measure to supersede its brand-name disadvantage;

- Affiliation to Koç Holding Business Group helped the firm to utilize group’s experiential bundle and reduce opportunism through Business Group’s internalized structure.

Vestel

- Affiliation into government based Turquality program to promote international ventures of Turkish firms, added incentives to internationalize;

- Customs Union between EU and Turkey provides a natural competitive advantage over Far East competitors.;

- International production plant in Russia has provided transaction cost efficiencies within Russia and CIS countries through tax advantages.

- Affiliation to Zorlu Group helped the firm to build over the experiences of other Group’s affiliates and exchange valuable resources internally within the Business Group.

5.2.1 Institutional based

Benchmarking all four multinationals from the table above, we observe that firms from both

emerging markets are faced with some similar institutional characteristics. While indicating

factors on external environment, these characteristics focus on Governmental Incentive

Programs, Subsidiary-based Tax Leverages and Deregulation of Home Markets.

Governmental Incentive Programs. All four firms from Chinese and Turkish markets have

been beneficiaries of some kind of governmental programs to promote international ventures

of domestic firms. While Lenovo and Haier found the Chinese Government’s ‘go global’

policy helpful to build their international perspectives, Turkey promoted its Turquality

program to award home firms that undertook international activities, which affected both

Arçelik and Vestel. Firms from both countries also found the country of origin label as an

impediment that they sought to fix in cooperation with their respective governmental

programs.

Subsidiary-based Tax Leverages. Foreign markets are not always geographically proximate

or within common economic organizations for EM firms. Haier subsidiaries have supported

the firm’s ambitions to expand globally, yet keeping the tariffs low by being present in

different regions. In much the same way, Turkish firms have established their production

 

5.  Analysis  

 29  

subsidiaries in Russia, to take advantage of tax leverages when they target Russian and CIS

States. This characteristic is assumed typical of emerging markets, since their political and

economic development stages have yet to establish multilateral agreements and affiliations

into such economic organizations.

Deregulation of Home Markets. Theoretically, the development stage of emerging markets

suggests that these markets have undergone serious reforms, and have succeeded into

deregulating their home markets. These institutional achievements have opened these markets

to increased competition from a multitude of firms, both home-based and foreign. The

presence of strong branded multinationals has pushed Lenovo to seek new markets in order to

spread the intensity of competition in a more global arena. The transition to more effective

market-based economies has created the ground for the transformation of firms towards a

more international nature.

5.2.2 Resource based

The nature of the technology-based industries stresses the importance on controlling valuable

but rather tacit assets, in the form of intellectual property and competitive know-how. From

this perspective, technology-related firms from emerging markets are considered to have an

underdeveloped resource base in their home market, pushing them to seek these resources

abroad. When concerning resource-based perspective in the light of internal firm level

factors, similarities drawn from the studied firms can be categorized into M&A to Access

Technology and Cost Advantage Opportunities.

M&A to Access Technology. Internationalization theories suggest that Mergers and

Acquisitions are models that latecomer MNCs use as a springboard to reach their more

mature rivals. All EM MNCs studied in the cases belong to the latecomer MNC group. The

case firms have undertaken M&A activities to gain access to new technologies and

innovations, such as Lenovo’s acquisition of IBM PCD, as well as Arçelik and Vestel’s

acquisitions of numerous European brands. Establishing their presence in these markets

through brand acquisition also lowers the opportunism related to the legal protection of

intellectual property assets.

Cost Advantage Opportunities. Low cost labor and mass production are characteristics that

represent all four firms. This cost-efficient structure has enabled these firms to develop firm-

specific advantages they need to exchange for brand awareness and international market

share disadvantages. Even though R&D activities are concentrated in developed countries, all

four firms have proactively tapped these markets by establishing international subsidiaries in

 

5.  Analysis  

 30  

order to maintain competitiveness with established brands from developed countries. Being

on par with technology, the cost advantage structure gives EM MNCs an important advantage

when targeting international markets.

5.3 Differences between China and Turkey

The analysis above, presented overwhelming similarities among studied firms when assessed

against the approaches and the perspectives from the 2x2 Model. Yet, during the course of

compiling the cases, we also noticed that the Chinese and Turkish markets had some

differences, presumably because of the size of their markets. Even though both countries

share similar economic development patterns, the size of the Chinese market appears to be

more attractive for foreign firms to invest. These firms establish production subsidiaries in

order to take advantage of low cost labor and unique market expansion opportunities in

China. Thus, the first difference between the markets was found to be the size of foreign

competition covering home market shares – case study firms from Turkey enjoyed less

competition and a safer home market than their Chinese counterparts. Another difference

found is that generally, when Chinese firms go abroad and acquire well-established brands,

they tend to use this to enter developed markets whereas Turkish firms will use their acquired

brand image to target markets from other emerging markets. It can be summarized that both

differences have a common denominator: the physical size difference of these markets.

Further differences exist, but appeared to be less relevant for our analysis.

5.4 Consolidated review of the 2x2 Model

We have discussed both sections of the 2x2 Model separately thus far, using lessons learned

from the firms presented in the case study section. Figure 3 summarizes the analysis, giving

insight into the logical flow from perspectives’ influence on approaches, and finally towards

motivation generation.

 

 

5.  Analysis  

 31  

 

Figure  3:  Consolidated  view  of  2x2  Model  

 

5.4.1 Impact of perspectives over approaches

Theoretical perspectives that affect EM MNCs play an important role on firms’ strategic

decision-making process to undertake internationalization processes. The socio-economic

patterns of the institutional based perspective underline influential circumstances in the form

of governmental infrastructure and incentives, as well as knowledge base development stage

in home markets.

Impact of perspectives over Asset-Seeking Approach

Firms from emerging economies are faced with less developed markets than their global

rivals, both in terms of external and internal factors. As such, when it comes to assessing the

asset-seeking approach, institutional and resource based perspectives are both influential

factors. First, institutional elements such as the liberalization of home regulatory markets, tax

incentives and host market pull-factors, offer EM firms preferential conditions to develop

specific assets they cannot reach in their home markets by going abroad. Since governmental

reforms increase the home market competitiveness from foreign firms, EM MNCs find other

institutional tools (incentives, country affiliation in economic organizations) to apply on

 

5.  Analysis  

 32  

internationalization, in order to build new competencies and assets to remain competitive in

their home market, as well as to expand its presence elsewhere. For instance, Arçelik’s asset

seeking approach was assisted by tariff reduction agreements, which created unique

opportunities for the firm towards EU markets. OEM contracts with Whirlpool, and own

R&D centers opened gateways for Arçelik to reach innovative technology. From these

perspectives, addressing technology infrastructure in developed EU markets as a pull factor,

the company has established advanced technology, progressive R&D and also market

knowledge through OEM contracts.

Second, resource-based factors focus on the transactional efficiency of developing resources

and capabilities internally, as well as deciding when this efficiency makes it more logical to

acquire necessary resources from external sources. In our cases, the technological skills were

sought as more efficient to be acquired through brand acquisitions of developed countries’

firms than generated entirely internally. For example, global brand recognition as an

important asset can be difficult for many EM MNCs to obtain during their

internationalization process. Lenovo sought through this very precious asset with the help of

acquiring recognized and respected world-class brand, the IBM PCD.

The external environment of all firms plays an important role on firms’ decision making, but

in the case of emerging countries, the shifting market conditions and technological skills

scarcity suggest the importance of perspectives towards asset seeking approach.

Impact of perspectives over Opportunity-Seeking Approach

On the other hand, opportunity-seeking behavior is also closely interrelated to the prevalence

of resources that EM firms control internally, as well as the institutional environment that

influences firm’s internationalization efforts. From the resource-based perspective, the

resource-exchange theory (Chang & Hong, 2000) suggests that EM MNCs use their

competitive advantages to gain the benefits to minimize their competitive disadvantages. The

use of firms’ competitive advantage for leverage into tapping new resources and skills abroad

explains the EM MNC approach to seek opportunities by exploiting their established position

or resource-based competitive advantage. For instance, International subsidiaries of Haier

have helped reducing heavy tariffs and shipping costs in certain geographical areas. Along

with the cost advantage Haier has already equipped in domestic market, Haier has replicated

its competitive advantages abroad in order to deal with the disadvantages of brand awareness.

Institutional factors also play an important role when firms seek opportunities through

internationalization. Governmental programs to promote foreign activities of firms such as

 

5.  Analysis  

 33  

Chinese ‘go global’ policy or Turkish ‘Turquality’ offer an influential push for EM MNCs

that seek to exploit their capabilities to expand their activities globally. For example, Vestel’s

internationalization process was landed during the period when the Turkish government

subsidizes domestic companies to establish international presence with its ‘Turquality’

policy. Along with such institutional encouragement, the acquisition of brands like Velfrost,

Luxor and Finlux has gained capabilities such as management skills and technology

advancement. From such institutional and resource based perspectives, Vestel’s

internationalization process was able to take advantage of governmental support programs to

build superior capabilities, and achieve its goal of global brand recognition.

While these governmental programs have direct positive effects, political constraints and

tariff obstacles in home country can also act as push factors from home, when firms tend to

establish foreign subsidiaries to achieve efficient production or distribution channels. Thus,

the institutional factors originating from both home and host markets play an important role

on the EM firms’ motivation to seek opportunities abroad.

5.4.2 Approaches defining motivations

The theoretical approaches defined in the 2x2 Model underline two dimensions that EM

MNCs take as motivations to internationalize. Both of these paths are prevalent in the

internationalization process of EM firms, though some firms have tendencies to lean more

towards asset-seeking and some other towards opportunity-seeking. The institutional and

resource-based perspective that influence each of these approaches are merely a crossroads

that EM firms choose to drive through using the approaches as a steering wheel to reach

strategic decisions consolidating all these factors that influence their motivations.

Even though the model defined the motivation approaches as asset-seeking and opportunity-

seeking, a firm can go both ways. The study of motivation is not an exact science, and is

prone to change along with changes that come from the bottom of the 2x2 Model – the

perspectives, and move its way up. EM firms have ever-changing market conditions and

asynchronous development stages. As such, observing the motivation approach that influence

firms’ internationalization decision varies over time, but generally falls into one of the

categories, either asset-seeking or opportunity-seeking.

 

6.  Conclusion  

 34  

6. Conclusion

The study on motivation of emerging multinationals towards internationalization is a

behavioral topic susceptible to changing market conditions and firms’ experiences. Within

this paper, we have focused our research on how these motivations are triggered, and towards

what approaches these motivations lead EM MNCs when they undergo internationalization

process. Defining factors and conditions that impact motivations constitute a complex and

esoteric issue, studied and discussed over by several researchers (Dunning, 2006; Bonaglia,

Goldstein & Mathews, 2007; Gammeltoft et al., 2010; etc.) However, in response to the

questions raised in the introductory section of the paper, we have summarized that indeed EM

MNCs are affected by unique institutional and resource factors in their home markets. In

order to best capture an eclectic, yet simplified explanation of internationalization

motivations of EM MNCs, the 2x2 Model summarizes the theoretical insights into two

perspectives, namely the institutional and resource-based ones, which influence the

motivation pattern of the firm towards two approaches, asset-seeking and opportunity seeking

(figure 3). Understandably, emerging market environment is ever changing towards reaching

the developed stage, which means that the motivations of emerging market firms may also

change constantly. The 2x2 Model platform efficiently deals with channeling these changes

in one of its perspectives, affecting the approaches as well. The role of the 2x2 Model is not

to describe how EM MNCs internationalize, but rather provide the internationalization

researchers an idea on the factors that push the internationalization motivations of these

firms, and how these firms direct these motivation influences throughout their decision-

making.

6.1 Limitations

An extensive amount of existing studies, theories, and models have been used within our

research, but the information included is still considered selective, and assumed to best serve

our topic purposes. We acknowledge that interviews and firm observations are

complementary assets to better validate the information of our cases, but in spite of limited

budget and resources, we reasoned that interviews would add more costs than benefits to our

paper, as explained in section 3.3.2.

The 2x2 Model initiated from this paper is a simplified summarization and elaboration based

on a series of existing studies, in order to provide a perception to easily understand a complex

subject. Therefore, further development into deeper and more complicated material became

 

6.  Conclusion  

 35  

limitation for this paper to carry out. Our personal backgrounds and established networks

have also restricted us to provide perceptions only from China and Turkey, which excluded

emerging markets from other parts of the world, especially those with rich natural resources

in Latin America, who have persistently shown vigorous internationalization activities around

the globe today.

6.2 Further research proposals

Motivation is a complicated subject, thus it gives enormous potential for further development

of this topic, as well as the 2x2 Model. The validation of a model needs continuous

validation, examination and exploration; therefore, we hope that the future of the 2x2 Model

can be attested with more firm studies, broader geographical specification, and different

industry analysis. Furthermore, since internationalization motives have important influences

towards strategic actions thereafter; we are looking forward to future studies that can address

proper techniques to elaborate motivations into effective strategies within EM MNCs.

 

References  

 36  

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Appendix  

 41  

Appendix

Exhibit 1: Haier’s major oversea FDI

Year Location Product Mode 1996 Indonesia Refrigerator Joint venture

1996 Philippines A/C, Refrigerator Joint venture

1998 Malaysia A/C, Refrigerator Joint venture

1999 Iran A/C Joint venture

1999 USA Refrigerator Greenfield

2000 Bangladesh A/C, Refrigerator Joint venture

2001 Pakistan A/C, Refrigerator, Washer Greenfield

2001 Italy Refrigerator Merger

Source from Liu & Li (2002)

 

Appendix  

 42  

Exhibit 2: Case studies comparison chart (Full View)

2x2 Model C

ase

Stud

ies

Approaches Perspectives

Asset-seeking Opportunity-seeking Institutional-based Resource-based

Lenovo

- Acquisition of IBM to establish global brand recognition and presence;

- Management skills and human talents in order to match a global standard and perspectives;

- More advanced technology to transform its low-cost products into premium global brands.

- Wider range of international customer base comparing to the limited market within domestic market;

- More point of sales in different region open new opportunities to create diversified products;

- Increased chances to access into new marketing and sales channels.

- “Open door” policy allowed establishment of POEs, and enhanced global perspectives of Chinese firms;

- “Go global” policy encouraged firms to go abroad;

- Intensive domestic competition among foreign brands triggered firms to search for new markets.

- Opportunities to receive new and more advanced technology through international expansion;

- Existing platform of procurement and manufacture processes create possible cost advantages among global competition;

- Improve management skills by benchmarking international best practices of developed market firms.

Haier

- Establishment of foreign subsidiaries and international sales network broaden the firm’s market flexibility;

- New technology acquisition and management skills through M&A and joint ventures.

- New markets create essential opportunity to solve firm’s financial constraint;

- New ventures in a bigger realm of global market to avoid domestic market constraint;

- New organizational structure to help the firm to exist from a financial troubled position.

- Threat of foreign brands taking over domestic market;

- Government support to carry out a more concrete internationalization strategy;

- Shipping cost disadvantage in home appliances is solved by overseas subsidiaries;

- Foreign subsidiaries can help reduce or avoid regional tariffs.

- A fair distribution of existing resource into global market to allow resource exchange;

- Superior technology received from international joint ventures that satisfy the need to become a global brand.

Arçelik

- OEM (Sears and Whirlpool) partnerships to develop technology and know-how;

- Aggressive series of brand acquisitions in developed EU countries to gain access to new resources and capabilities;

- Presence in

- Latecomer MNC status made them flexible to address changing market needs more effectively and exploit rivals’ established market positioning, as well as target niche markets;

- Penetrate the market with OBM

- State reforms and EU-Turkey bilateral agreements increased competitiveness in home market and liberalized tariff barriers to enter European markets;

- Turkish trade deficit, financial crisis and political instability acted as a push factor from home market;

- Proximity to developed EU market companies made possible for access to new resources through M&A and knowledge spillover;

- Cost advantage over EU rivals provided for useful resource-exchange

 

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developed markets to help establish strong & positive brand image.

strategy using the BEKO brand image in European countries;

- Enter emerging markets by exploiting the created brand image in EU;

- Offer highly competitive products at lower costs by exploiting their relatively superior technology and adoptability in other emerging markets.

- Country of origin label liability urged the firm to access new brands through acquisitions.

measure to supersede its brand-name disadvantage;

- Affiliation to Koç Holding Business Group helped the firm to utilize group’s experiential bundle and reduce opportunism through Business Group’s internalized structure.

Vestel

- Pooled R&D in developed markets to develop superior products;

- Capitalize on OEM standards of quality with world-class brand contracts to develop know-how competencies;

- Filing for patents and intellectual property protection in safer and more regulated European legal and business environment to safeguard inventions.

- Exploit mass production abilities to produce for retailer OEMs under thin margins and highly competitive market;

- Use firm-specific advantages of cutting-edge technology and positive brand image to enter emerging markets geographically close to Turkey with its own brand;

- Strengthen the position in emerging markets through acquisitions of brands with respectable image in those markets.

- Affiliation into government based Turquality program to promote international ventures of Turkish firms, added incentives to internationalize;

- Customs Union between EU and Turkey provides a natural competitive advantage over Far East competitors.;

- International production plant in Russia has provided transaction cost efficiencies within Russia and CIS countries through tax advantages.

- Affiliation to Zorlu Group helped the firm to build over the experiences of other Group’s affiliates and exchange valuable resources internally within the Business Group.