Planting trees in the land of a million elephants: A comparative case study of entry strategies in the Laotian forestry sector

Fredrik Fogde & Henrik Dam

Student thesis: Master thesis

Abstract

The recent emergence of emerging market multinationals (EM-MNCs) and their road to internationalization is one of the main topics in contemporary International Business (IB) literature (Khanna and Palepu, 1997, 2004; Nachum, 2004; Ramamurti, 2004, 2008; Khanna et al., 2005; Luo and Tung, 2007; Peng et al., 2009)). As globalization continues to erode borders, both WMNCs and EM-MNCs are increasingly looking to emerging economies to consolidate resources in order to supply growing demand. An increasing amount of IB literature has in recent years been devoted to examining if EM-MNCs posit distinctive resources and capabilities that make them more adept at operating in emerging economies. This thesis aims at contributing to the above discussion within the context of the Laotian Forestry Sector (LFS), specifically the plantation sector aimed at producing different forms of pulp. This setting was interesting and worthwhile to study as it saw a rapid influx of both WMNCs and EMMNCs in early 2000s, all of whom had to navigate in one of the poorest countries in the world, with several market imperfections and structural weaknesses. The aim of this thesis was thus to conduct a comparative case study of three carefully chosen case companies, namely Aditya Birla, Stora Enso and Oji Pulp and Paper in order to shed light on the discussion currently ongoing within the IB literature. The thesis specifically looks at the dissimilarities in the different entry strategic aspects of each of the case firms, and subsequently seeks to discuss how these differences could be explained by the distinctive competitive advantages that each firm derived from their home country context. The analysis is embedded in a resource-based view approach, and made use of the institutional-based view to factor in the context-specific conditions that firms had to take into account when formulating their entry strategies. The chosen approach provides for several interesting findings. First, there was substantial evidence to support the proposition that the chosen EM-MNC possesses a competitive advantage stemming from a stronger focus on network based strategies. However, the notion that EM-MNCs would possess competitive advantages derived from an ability to transfer experience and knowledge from one weakly institutionalized environment to another found little support. Although emerging economies possess several similarities in terms of institutional structures and institutional weaknesses, local, in the sense of country-specific, knowledge was found to be important nonetheless. Second, the analysis also finds that although WMNCs may have fallen behind in terms of networking capabilities, both of the chosen WMNCs found ways of mitigating the problems often encountered in countries with weak institutions. Stora Enso appreciated the importance of local knowledge and resources, and contracted a local firm to whom they gave high levels of autonomy. The resulting model was one that thoroughly integrated CSR into the plantation model, something that may lead to a competitive advantage in the future. Oji on the other hand, opted for an entry coherent with modern IB literature (Meyer, 2009; Lasserre 2007; Peng & Meyer 2011), namely by entering through an acquisition to gain access to local resources, and so facilitating a swift entry. In summary, the analysis finds considerable support for the overlying proposition that firms’ entry strategies will be influenced by their home-country context. These findings contribute to the current IB discourse regarding the sources of EM-MNCs advantages by examples of how these advantages come into play in the LFS. Furthermore, the thesis gives an indication of the need for further integration of the resource-based view and the institution based view when explaining firm behavior in emerging economies. This is done by illustrating that there are certain resources and capabilities that firms either need to have, or need to acquire when entering an economy plagued by weak institutions. The findings may also have implications for prospective investors in the Laotian forestry sector, suggesting that a swift implementation may not always be the desired approach, but rather that an approach that incorporates local knowledge may be more beneficial. Finally, the findings of the analysis call for further research into a number of different areas: A more detailed analysis of the effect of one of the chosen country-specific resources of each case firm on its entry strategy; and a detailed analysis of how sustainable supply chain management and strategic CSR can develop into a competitive advantage for WMNCs when facing EM-MNCs in the global ar

EducationsMSc in Business, Language and Culture, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2012
Number of pages131