International Market Entry Mode Analysis

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This paradigm has been theorized by John Dunning in its International Production and the Multinational Enterprise book published in 1981. It assumes that any multinational company (MNC) faces three main issues: Whether to export ,licensing or to make foreign direct investment. OLI is an abbreviation of Ownership advantage, Location advantage and Internalization advantage. Used for the first time by Stephen Hymer, the notion of Ownership advantage means a specific advantage of the MNF, transferable in the world, which allows it to cover the costs related to its internationalization (Hymer identifies 4 types: language barriers cultural, ignorance of the law and local demand, possibility of discrimination against the MNF, operating costs subsidiaries…show more content…
"Or" What organization we should adopt to maximize the specific benefits of the firm and benefit from the specific advantages of the chosen location? "This part is based on the premise that markets are imperfect and sometimes nonexistent. So by creating its own internal market, the multinational firm earns some advantages. It therefore has an interest in internalizing, so choose the most effective mode of…show more content…
Indeed, setting up abroad through FDI is only possible if the three specific advantages (O, L and I) are united. However, if the cost advantage at the The location does not exist in the presence of two other benefits O and I, the firm prefers to export to foreign markets. The sale of license will choose the most favorable if it holds an advantage at the O industry; Dunning (1988). However, this theory is still marked by its purely microeconomic approach to the question of the location and the absence of macroeconomic analysis in terms of comparative advantages of countries (Kojima, 1990). Furthermore, in approaches to Hirsch and Dunning, the choice of market entry mode results from a simple static trade-off between costs and benefits, reducing the analytical framework of localization. This theory is also criticized by the lack of strategic interactions between firms in isolated choices made by these firms without taking account of the actions and choices of local and foreign competing firms. However, Dunning (1993) itself has attempted to go beyond the static framework of its model for a dynamic approach to the eclectic theory, considering the evolution over time of three types of benefits O, L and

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