International Business: Entry Modes Used By Huawei (Essay Sample)

INTERTIONAL BUSINESS
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There are different diverse market entry modes that a firm can opt for while penetrating the international market. The choice of entry method is determined by the nature of the industry, institutional views, and the resource availability (Terpstra, 2012). It is also affected by the level of development in the host country regarding technological advancement and the political stability as well as good will. Huawei is a multinational company dealing in information and communications technology (Cavusgil, 2014). It is based in China. China is one of the growing economies of the world which in 2011 saw abolishment on most restrictions on service industry such as telecommunications. Huawei was established in 1987 and has its headquarters in Shenzhen, China. Huawei is a leading telecommunications firm in China and since expanded internationally setting up institutes in almost every part of the world. Some of the entry methods used by Huawei in the penetrating international market include joint-venture methods, export mode, and contractual methods. PepsiCo, on the other hand, is an American multinational company dealing in soft drinks whose headquarters is in New York. It was established in 1965 and currently operates in over 200 countries worldwide. PepsiCo has penetrated the world markets despite the stiff competition it offered by Coca-cola. Unlike Huawei, PepsiCo has used penetration modes such as franchising and exporting. This shows that different firms use different entry modes and this paper seeks to establish the factors that determine the choice of entry modes by comparing entry modes employed by Huawei and PepsiCo.
Huawei
There are two main factors that influenced the entry modes for Huawei. These were the firm and environmental factors. Firm factors encompass the experience of the firm, strategies employed and the firm-specific advantages. Environmental factors include political, socio-cultural, economic and level o competition. By extension, the government policies of China, firm size, and the corporate policies influenced the choice of the entry mode (Wu and Zhao, 2007).
The industrial characteristics of telecommunications also had a great influence on the entry mode choice for Huawei. Information and technology (ICT) products have unique characteristics as compared to other industries, for example, ICT products are dependent on network and cannot work without network. The network has a responding effect when responding to the competition in the market. In ICT industry there are numerous balance points known as zero points in which a firm has to break first so as to penetrate an international market. Huawei's penetration to international markets is largely based on the industry features and the host market environment marked by numerous emerging technologies that enabled Huawei to crack through the balanced points. Huawei was also keen in choosing an entry mode that would easily break the balance points, and for this reason, Huawei adopted different entry modes in different markets of the world (Wu and Zhao, 2007).
The fact that China is a developing nation also had an implication for the choice of entry modes used by Huawei. High technology products from developing countries usually experience barriers when entering a developed country. For this reason, Huawei had to keep on demonstrating the technological advancement levels of the host country from time to time.
Entry modes used by Huawei
As mentioned earlier, Huawei used different entry modes in different countries. First, Huawei used joined venture mode in penetrating Russian market. Huawei merged with Russia Telecom and Beto Konzern with the Beto-Huawei to develop the telecommunication market. Huawei chose this mode because of the advantages it enjoyed in terms of research that would help in developing the firms that it merged with since they had the potential of growth but lacked knowledge. Second, Huawei used export entry mode to penetrate Asia, Africa, and South America. This method was chosen due to the distance from the host country and due to the characteristics of export mode such as low dissemination risks, highly flexibility, and low resource allocation (Wu and Zhao, 2007).
Lastly, Huawei employed contractual entry mode for West Europe, North America, and other countries. These are developed countries, and Huawei had to enter into contracts with the existing companies such as Marconi in Europe which could help Huawei sell its products in Europe as Huawei helped Marconi sell their products in China (co-sales mode). Other contractual methods used are co-research and franchising (Wu and Zhao, 2007).
PepsiCo
Contrary to Huawei, PepsiCo's choice of entry modes were less influenced by the environmental factors because of the experiences gathered through the host country. This is attributed to the fact that PepsiCo originates from a developed country. Rather, the entry mode choices were influenced by the level of competition in the industry. PepsiCo experiences tough competition from Coca-cola which is already a well-established firm worldwide, and PepsiCo had to explore entry modes that would enable penetrate the already dominated market. Soft drinks industry in which PepsiCo operates in is quite simpler as compared to telecommunications in which there is interdependence between products and network. This, therefore, means that socio-cultural factors in the international market have little influence on the entry mode applied by PepsiCo as in the case of Huawei in which socio-cultural factors can influence network that affects the products. PepsiCo applies almost the same entry modes in different countries which contrast with Huawei's idea of using different entry modes in different countries. This is further attributed to the host country which has the impact on the capital availability to a firm and thus can set up its plants in a foreign country. This is not the case for a firm from a developing country.
Entry modes used by PepsiCo
PepsiCo employs franchising, joint venturing and exporting. Similar to Huawei, PepsiCo entered the Russian market through forming mergers with Mabel cookies and Lucky snacks. However, PepsiCo chose this method so as to enjoy the advantages of competencies and infrastructure which is opposite to Huawei's case in which the mergers in the new country had fewer competencies although they had good infrastructure. Joint venturing was also used in Brazil and Argentina among other countries. Unlike Huaw...