Entry into Foreign Market; the Case of Cameron International Corporation entry into Myanmar
Introduction
In business, it is always important to look at new areas where more investment can be carried out. This is usually important since it opens an organization to new opportunities. Seizing business investment opportunities is always a good idea for business managers to think about. It helps in ensuring that an organization gains more profit as well as get diversified.
Foreign markets are usually a good consideration. This is because most of these markets are usually not saturated with many companies in certain industries. For example, Myanmar, formerly Burma is one place where there is an opportunity for investment. With the reversal of the strict rules regarding investment, an organization can benefit a lot from the available business opportunities. Myanmar is known to be rich in oil and gas products; thus Cameron International Corporation should get more encouraged to venture into the market. This should be carried out cautiously, bearing in mind the several barriers to international trade. The risks involved in entering into foreign markets should be well analyzed to ensure that the organization can make it in the Myanmar market. It is important to carry out a VRIO analysis on the resources of Cameron International Corporation to ensure that the best information is gathered necessary for entry into the foreign market of Myanmar. Business options such as subcontracting as well as joint ventures should be considered. This is because they give an organization an opportunity to trade or carry out business activities in the most efficient way.
Institutional and Risk factors to be considered for entry into foreign market of Myanmar
Entry into foreign market is usually subject to consideration of certain factors. These factors may be institutional and risk related. One institutional factor to consider is whether the organization has the capability to diversify into the new market. This is necessary since it determines the way forward for the organization. This is done by looking at the budget of an organization at a given point in time. This gives the management of an organization an opportunity to tell whether the organization’s books are capable of supporting the entry into new markets. In the case of Cameron International Corporation, revenues of $6,134.8 million (FY 2010), net profit of $562.9 million (FY 2010) and an operating profit of $858.5 (FY 2010), is good enough to support such plans. This places the organization in a good position to excel in its plans. With these figures for the institution, only allocation is needed for the project to kick off smoothly. The other institutional factor to consider here is whether the organization has the required experience to operate in a new market. For Cameron International Corporation, this is not something to worry about. This is because the company is already operating in 100 countries across the globe. This means that the necessary experience is available to carry out with business activities comfortably. It means that the systems for carrying out international business are well developed.
In terms of risk considerations, Cameron International Corporation has to go through a lot of analysis. There are several risk areas where the organization should be able to look at the prevailing situation. Strategic risk is one of the things that the organization should look at. This touches on the capability of an organization to come up with strategic decisions capable of bringing proper response to causes of risk. Political risk is the other consideration necessary to make. Political risk is usually related to the political landscape in an organization. This measures the effects of political instability and decisions on the success of an organization. For Cameron International Corporation, this is an area to put more emphasis on. This is because even though the decade’s long policy of isolation imposed by the ruling military regime has been reversed, the political history is not impressive. This calls for proper planning with inclusion of contingent measures to curb any emerging instability as well as decisions (Thompson, 2001). Environmental risk is the other major consideration to make. The fact that the company operates in the oil and gas sector makes this consideration relevant. The fact that the company has ever handled a failed project in the Transocean BP rig calls for serious environmental consideration. This is because the impact on the citizens will determine the success of the company in the new foreign market. Economic risk is also worth looking at. This covers the ability of the host country to sustain healthy trade environment. This involves the consideration of the country’s economic policies. For Cameron International Corporation, it is important to bear in mind that Myanmar has not been performing well policy wise. However the changes which have taken place in recent past are capable of bring hope in the trade environment. The best thing to do is going ahead with the entry but with a solid plan on how to go about the challenges. All these risks should be managed in a way which makes the company better placed in the market. Risk management is an integral part in gaining competitive advantage in a market (Porter, 2008).
VRIO Analysis
VRIO analysis is one of the useful tools of analysis in business. VRIO analysis is usually useful in evaluating the resources of an organization (Pahl & Ritcher, 2009). This analysis tools looks at the financial resources, Human resources, Material resources and Nonmaterial resources of an organization. The non material resources include knowledge and information in an organization. VRIO stand for Value, Rareness, Imitability and Organization. All these values are usually measured in terms of the resources of an organization. Value measures how costly are the resources of the organization. Rareness addresses how rare an organization’s resource is. Imitability addresses the extent to which the resource of an organization can be imitated while organization looks at the way an organization is set with relation to the resource and whether an organization can use the resource in a good way.
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| Physical |
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| Technological |
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| Organizational |
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| Intangible Resources | ||
| Human |
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| Innovation and Creativity |
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| Reputation |
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| Organizational Capabilities | ||
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For Cameron International Limited, the resources are quite valuable. This means that there is need for proper planning to ensure that the resources of the company are able to come up with proper management of the value from the available resources. The level of imitability of the company’s resources is low. This means that the company is capable of coming up with a good plan to use the uniqueness of the resources. The resources are not rare. The fact that they are valuable and available means that the company experiences equality in competition. The best thing with the company is that it has organization. This means it has a setting which is capable of supporting the resources of the company. With the analysis, the entry is supported
Cultural issues to consider while entering Myanmar
Cultural issues are known to be very important to consider in business. Many a times, cultural differences have been found to affect international trade. It is always important to go through the cultural differences so as to put an organization on the right path towards success. Cameron International Corporation should consider the impact of family tie in Myanmar. Myanmar is known to have citizens who value their families so much. Therefore, it is important to put the value of family in the plans of the company as it enters the international market. Also the value for proper etiquette in this part of the world is quite amazing. Therefore, as the company sets itself to enter this market, it should put proper consideration in the etiquette area. This should be a major consideration in the process of planning marketing and other promotional procedures for the company. The level of men and women in the society should also be considered. In this part of the world, the men and women are not equal. Men are ranked higher than women. This means that the corporation should bear this in mind so that it may handle the society without hiccups related to the position of men and women in the society of Myanmar. It is also important for Cameron International Corporation to consider the many ethnic groups in Myanmar. The country’s government recognizes about 135 ethnic groups. The organization should be able to value all these groups equally so that it may be in good books with the market. It is also important to plan on employment in terms of the country’s culture. In Myanmar, division of labor is usually based on gender. Therefore, it is important to plan recruitment on the basis of the roles of the two sides of gender in the country.
FDI or Subcontracting
In business, it is always important to take risk. The risk takers have been identified as the most successful people in the world (Wetherly & Otter (2008). It is important for Cameron International Corporation to go for the high returns in the most risky FDI. This should be supported by the many disadvantages of subcontracting. One of the things that should make the company shun subcontracting is the fact that high costs are involved. For example labor costs are higher in subcontracts. The other reason why the company should avoid subcontracting is the aspect of indirect liability. Certain subcontractors are not able to carry out things in the required way. This may cause mistakes which might lead to liability. This is because subcontractors do not have the interest of the company at heart. The other issue concerns quality. The subcontractors may not perform to the extent which FDI would. This means that quality and customer service may not be up to the required standards.
Joint venture partners the company should approach
If the company engages in FDI, it should go into joint ventures with companies in the marketing, distribution as well as exploration. The companies in these areas will help Cameron International Corporation in growing easily in the market. This is because the experience and systems already in the companies will help Cameron International Corporation in kick starting its operations with ease. The company should issue 15% to the joint venture partners.
Conclusion
Strategic management should be applied to ensure that the organization succeeds in achieving its objectives in the foreign market of Myanmar. This should be supported by engaging in corporate social responsibility activities. This is necessary since Myanmar is known to be weak in terms of societal development. It is worth noting that corporate social responsibility engagements are good for public relation purposes of an organization (Idowu & Filho, 2013). Proper risk management should also be carried out to ensure that all is in control. The simplicity and clarity associated with the VRIO analysis should be maximized on to ensure that Cameron International limited succeeds in making a smooth entry.
References
Idowu, S. & Filho, W. (2013). Global Practices of Corporate Social Responsibility. Springer.
Pahl, N. & Ritcher, A. (2009). VRIO Analysis – Idea, Methodology and A practical Approach, Grin Verlag.
Porter, M. (2008). Competitive Advantage: Creating and Sustaining Superior Performance, Simon & Schuster.
Thompson, L. (2001). Understanding corporate strategy. London: Thomson Learning.
Wetherly & Otter (2008). The business environment. Oxford: Oxford University Press.
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