What have multinationals from emerging markets done differently in their international expansion? How have they learnt from the initial flow of investment from developed markets?
Professor Andrei Panibratov’s exhaustive book on corporate globalization, International Strategy of Emerging Market Firms, examines the historical past of multinationals’ expansion. But it does not stop there. His research as deputy director of the Center for the Study of Emerging Market and Russian Multinational Enterprises at St. Petersburg University now focuses on the ebb of foreign investments made by multinationals from emerging markets.
From the 422 pages of Andrei Panibratov’s book, and in particular the 35 pages of bibliographical references, one thing is clear: Andrei Panibratov likes to read. His book offers systematic reviews , and comparative appraisals of the various socio-economic models that have been proposed to help explain globalization (more on this in forthcoming Issue 57). So, as he asks in his introduction, “Why read yet another book on international business?” Panibratov offers several reasons:
* his stronger focus on international expansion by multinational companies from emerging economies;
* a broader scope of analysis to include not just China (as do many other studies), but also Brazil, Mexico, Russia, Nigeria, etc.
Before Andrei Panibratov jumps into the meat of examining the international forays of the second generation of emerging market firms, he lays down substantial theoretical groundwork, culled from his experience at St Petersburg University, and from the numerous past studies cited in the bibliographical notes.
Entry modes – No risk or with risk?
Established research into international business points to three separate entry modes, which companies typically take sequentially, as they test the international waters. The first is export, oft the first exposure to foreign markets and their different ways of doing business. Exports enable companies to get a first taste of foreign opportunities, and often witness the pitfalls. As Panibratov points out (page 18), there are direct exports (from supplier to customer direct), and there are indirect exports (via distributors, agents, or other intermediaries, whether located in the home or the host country).
The second entry mode is via contractual arrangements, for example via licensing or franchising. Although still a low-risk proposition, contractual deals do signify a longer-term interest in multinational business, yet demonstrate the desire of the home company to avoid risky investments in the host country(ies). On the licensing front, international magazines such as Elle or Playboy illustrate the low-risk, low-investment approach to foreign markets.
As for franchises, McDonald’s remains the role model, with the company not owning the fixed assets of most of its foreign restaurants. Franchising is also the chosen expansion model for businesses that wish to have a strict business model adapted to foreign lands. Panibratov also mentions management contracts and turnkey projects, specialized forms of international business often applied to industrial projects, or to situations where foreign ownership is restricted.
Third and last, Panibratov lists entry modes that require financial investments. Companies leave the area of “investment light” (page 22), to confront the realities of taking risks abroad. This foreign direct investment (FDI) is one of the major sources of capital flows to emerging markets since 1990, and typically is channeled either via greenfield investments or via acquisitions of existing companies.
Determinants of entry modes
Why do companies go international? And what factors influence their choice of entry mode? For Panibratov, organizational, cultural and transaction cost variables all have their role to play. Among the most influential criteria are investment size, technology intensity, degree of foreign experience, market growth and cultural distance, to name a few. When French hotel group Accor chose to expand in 1972, it chose Belgium and Switzerland, culturally and geographically close countries to its French home base. For Russian Sberbank, the first international toeholds were ex-Soviet republics such as Kazakhstan or Belarus.
Stay tuned for more
Given the depth of the material in the book, we will publish four instalments of which the first three cover theoretical aspects, while the last article will focus more on the numerous case studies:
* in this issue we’ll look at the entry modes for companies going abroad;
* in Issue 57 we’ll look at ownership modes;
* in Issue 58 we’ll look at how globalization models have evolved over time;
* in Issue 59 we’ll see how globalization models were affected by the international forays of companies from emerging markets, namely the BRIC quartet of Brazil, Russia, India and China.
Title: International Strategy of Emerging Market Firms: Absorbing Global Knowledge and Building Competitive Advantage
Author: Andrei Panibratov
Professor Andrei Panibratov is Professor, Department of Strategic and International Management, and Deputy Director, Center for the Study of Emerging Market and Russian Multinational Enterprises at Graduate School of Management at St Petersburg University. Professor Panibratov’ research and teaching area concentrate on internationalization of emerging economies’ firms, outward FDI from Russia, and Russian multinationals. Andrei is the author of a number of books and books’ chapters, several case studies, and many articles published in Russia and abroad. His recent book – Russian Multinationals: From Regional Supremacy to Global Lead, published with Routledge in 2012 – discusses the rise of Russian multinationals, examines Russian multinationals’ activities in key sectors, analyses the relationship between Russian multinationals and the Russian government and concludes by assessing how Russian multinationals are likely to develop in future. Another book of prof. Panibratov – «International Strategy of Emerging Market Firms: Absorbing Global Knowledge and Building Competitive Advantages» – published with Routledge in 2017, is dedicated to the key emerging economies – Brazil, Russia, India, China (BRIC), and also to other developing economies. This book presents theoretical foundations and detailed case studies of emerging multinationals’ activities and explains how emerging market firms accumulate and exploit market knowledge to develop competitive advantages while operating globally. Andrei serves as a board member of several leading international academic journals on international business and emerging markets.
Professor Panibratov holds his MBA degree from University of Wales (UK), PhD in Economics degree from the St. Petersburg State University, and Doctor in Economics degree from Moscow State University of Management. Andrei has visited professors’ training programs and development workshops at Haas School of Business UC Berkeley and Texas A&M University (USA), HEC-Paris (France), Aalto University School of Management (Finland), ECCH (France, Singapore) and WACRA (UK, Canada). Andrei was participating in consulting and research projects for World Bank (USA), UMIST (UK), City University of New York (USA), Aalto University School of Economics and Tampere University of Technology (Finland), European and Russian companies.
Professor Panibratov has sound teaching experience in Russian MNEs and emerging markets. He developed four new courses on emerging markets (including Russia) and their firms (including Russian MNEs) and has been teaching it in the GSOM programs and in a number of Russian and international universities and business schools since 2009. He is also a regular presenter or keynote speaker in research seminars and conferences around the world.
Professor Andrei Panibratov was nominated and elected as the National Representative of Russia and the Board Member of the European International Business Academy (EIBA) in the EIBA General Assembly in Vienna in December 2016. This is the first time when Russia’s representative appears at the EIBA Board. The appointment was made based on the EIBA Board recognition of the outstanding results of Professor Andrei Panibratov in the development and promotion of EIBA ideas and research directions among Russian scholar, and also with the respect to his important contribution in the IB studies in the context of Russia. Election of Professor Andrei Panibratov as of EIBA National Representative and Board Member is an outstanding opportunity for Saint Petersburg University to increase its international recognition and to bring Russian business and management scholars to the IB research agenda.
Click here for more details: http://gsom.spbu.ru/en/gsom/faculty/fulltime/panibratov/