International marketing entry strategies

One of the most important strategic decisions in international business is the mode of entering the foreign market. On the one extreme, a company may do the complete manufacturing of the product domestically and export it to the foreign market. On the other extreme, a company may do, by itself, the complete manufacturing of the product to be marketed in the foreign market there itself. There are several alternatives in between these two extremes. The choice of the most suitable alternative is based on the relevant factors related to the company and the foreign market.

In some cases, the alternatives available may also be limited. For example, the policy of some governments may not be very positive towards foreign investments. Several governments have a definite preference for joint ventures over complete foreign ownership. In some cases, the government may prefer foreign investment leading to import substitution to perpetual import of a product. Thus, in some cases, government policies may rule out the best alternative if the environment were free.

A company may or may not use the same entry strategy for all the foreign markets or for all the products. A company using different strategies for the same product in different markets or even different strategies for the same product line in a particular market is common. Ranbaxy, which has business in a large number of countries, has employed such strategies as exporting, licensing, strategic alliance, joint venture, wholly owned greenfield enterprise and acquisition for different products and different markets. Aurobindo Pharma has a wholly owned subsidiary and fifty-fifty joint venture in China. Aurobindo has gone for joint venture with a Chinese firm for the products which need retail marketing whereas for an intermediate product which is used in production by the Chinese joint venture, it set up the wholly owned subsidiary in China. Some foreign automobile companies in India manufacture the compact model or large volume models, but import either in CBU or CKD form, the premium models the small demands for which do not justify manufacturing in India.

Further, the operating mode may undergo changes over time as the business environment changes. For example, in the beginning the product may be exported but at a later stage it may be manufactured in the foreign country. It is also common that part of the production of the foreign market is exported to other countries, sometimes even to the home market. Several MNCs plan to use countries like India and China as exporting hub, particularly for basic models of products and products which are in the declining stage of the product life cycle in the developed countries.

Important foreign market entry strategies are the following

• Exporting 

• Licensing/franchising 

• Contract manufacturing 

• Management contracting 

• Turnkey contracts 

• Fully owned manufacturing facilities 

• Assembly operations 

• Joint venturing 

• Third country location 

• Mergers and acquisitions 

• Strategic alliance 

• Countertrade

Entry mode selection 

Entry mode is the specific path that a Transnational Corporation (TNC) chooses to enter a foreign market. While Damon's Grill and Sports Bar used franchising to enter the Panama market, Lucent Technologies preferred a contractual alliance (co-production) to minimize investment risks when it entered this market in the early 1980s. Similarly, GE (the United States) and Snecma (France) decided to form a joint venture to produce civilian jet engines, and Mercedes Benz (Germany) chose to establish a wholly owned subsidiary in Alabama to manufacture sports utility vehicles. Once the entry mode is selected, firms determine the specific approach they will use to establish or realize the chosen entry mode. Specific investment approaches include greenfield investments (building a brand new facility), cross-border mergers, cross-border acquisitions, and sharing or utilizing existing facilities. Modes of entry fall into three categories-trade-related, contractual or transfer-related, and investment-related entry modes- and vary with regard to the level of resource commitment, organizational control, risks involved, and expected returns.

A) Trade-related Entry Modes

Trade-related entry modes refer to foreign market entry through the purchase and sale of goods and services across national borders. Trade-related entry modes include exporting, entrepôt trade, and countertrade.

1. Exporting

Exporting is the first step in a firm's international venturing in which it maintains its production facilities at home and sells its products abroad. This requires relatively low investment and, therefore, carries low risk as well. The firm gains valuable expertise about operating internationally and specific knowledge concerning the individual countries in which it operates without having a very substantial presence in a foreign land. Exporting is both direct and indirect. Generally, it is a type of international entry open to virtually any size or kind of firm, whereas other types of entry modes tend to demand greater resources and involve more risks. Over time, accumulated experience with exporting helps a firm to consider more aggressive and involved forms of international venturing such as FDI.

Firms may export or import either goods or services. Goods are tangible products which can be seen; hence, goods coming into the country are termed visible imports and goods leaving the country are termed visible exports. The difference between the exports and imports is termed trade balance or balance of visible items.

Service exports and imports generate intangible non-product international earnings. A company or an individual earns through the export and import of services such as banking, insurance, travel and tourism-related services, which are intangible and personalized. Countries such as Greece and Norway earn significant amounts of foreign exchange from foreign cargo carried by ships owned by citizens of these countries. Similarly, tourism is a major foreign exchange earner for countries like the Bahamas and Mauritius.

A) Direct Export

Direct export is the sale of goods produced within the organization in a foreign market. In the initial stages, the sales department may simply handle foreign sales in addition to domestic sales and when the business grows sufficiently, a separate department or division is set up to handle sales in a foreign market. Further growth may warrant the setting up of a separate sales company which imports goods in its own name from the parent company and sells in the local currency.

B) Indirect Export

Indirect export is the sale of goods in foreign lands through different kinds of export, commission agents, or intermediaries. Export intermediaries are third parties that specialize in facilitating imports and exports. Their services may be restricted to limited services, such as transportation, documentation and customs claims, or they may perform more extensive services, including taking ownership of foreign-bound goods and marketing and financing functions. Typical export intermediaries, such as an export management company (EMC), are intermediaries that act as its client's export department. Small firms may use an EMC to handle their foreign shipments, prepare export documents, and deal with customs offices, insurance companies and/ or commodity inspection agencies. EMCs are generally more knowledgeable about the legal, financial, and logistical details of exporting and importing and, thus, free the exporter from having to develop in-house expertise. Exporters can also use the services of export agents, such as manufacturer's export agents who sell in a foreign market on behalf of the manufacturer; export commission agents who make overseas purchases for their customers; and export merchants who buy and sell for their own accounts. The use of these services comes in exchange for a commission. It also has the drawback of giving the firm very little direct exposure to the foreign market and has the additional risk of loss for the agent if the exporter begins to tap alternate markets.

Goods being traded are quoted at specific terms of sale or terms of price. These terms of sale are conditions stating the rights, responsibilities, costs, and risks borne by both the exporter and importer. These terms have been harmonized and defined by the International Chamber of Commerce as standards, and, thus, are widely used in export transactions. Some of these terms of price include:

• Free on board (FOB): A term of price in which the seller covers all costs and risks up to the point where the goods are delivered on board the ship in a designated shipment (export) port, and the buyer bears all costs and risks from that point on. This means that the buyer is responsible for the insurance and freight expenses in transporting goods from the shipment port to the destination port.

• Free alongside ship (FAS): A term of price in which the seller covers all costs and risks up to the ship at the designated shipment (export) port. The buyer bears all costs and risks thereafter, including the loading of goods.

• Cost, insurance and freight (CIF): A term of price in which the seller covers the cost of the goods, insurance, and all transportation and miscellaneous charges to the final destination port in a foreign country.

• Cost and freight (C&F): This term of price is similar to CIF except that the buyer purchases and bears the insurance.

Export managers should also be familiar with key documentation in exporting. The key documents frequently used include the letter of credit, the bill of lading, the bank draft, the commercial invoice, the insurance certificate, and the certificate of origin. A letter of credit (L/C) is a contract between an importer and a bank that transfers liability for paying the exporter from the importer to the importer's bank. A bill of lading (B/L) is the document issued by a shipping company or its agent as evidence of a contract for shipping the merchandise and as a claim to ownership of the goods.

2. Entrepôt trade

Entrepôt trade refers to the import of goods for the purpose of re-exporting them. Goods imported are simply re-exported without further processing to another nation from a special zone or port. For instance, in the Gulf region, Bahrain was traditionally the major centre for the re-export of goods, a position now occupied by the free trade zone of Dubai in the United Arab Emirates, which is now an important centre for re-exporting goods to Iran and the countries that constituted former southern Russia. Hong Kong also played the role of the entrepôt (a trade post where merchandise can be re-exported without paying import duties) by intermediating trade between China and the rest of the world. It distributed a large fraction of China's exports at a much higher rate than their initial rate while entering through the net of customs, insurance, and freight charges.

3. Countertrade

Countertrade is a form of trade in which a seller and a buyer from different countries exchange merchandise with little to no cash or cash equivalents changing hands. In the context of international trade, it often involves the substitution of developing-country goods for foreign exchange to enable purchases from the developing country and is, therefore, also viewed as a form of flexible financing or payment in international trade. Informed estimates suggest that countertrade accounts for about 20 percent of world trade. Countertrade takes the form of five distinct types of trading arrangements: 

• Barter

• Counter purchase

• Offset

• Buyback

• Switch trading

a) Barter 

Barter is the oldest form of trade and involves the direct and simultaneous exchange of goods between two parties without a cash transaction. Barter trade occurs between individuals, between governments, between firms, or between a government and a firm, all from two different countries. 

Barter may be the oldest form of trade but it is certainly not obsolete. For example, France shipped 138,067 tons of soft wheat to Cuba during the first quarter of 2001, half of which was through the wheat-for-sugar barter arrangement under which French trading companies purchase sugar and agricultural commodities from Alimport, Cuba's government-run food trading company. 

Other examples of barter trade in the present century have been the exchange of Iranian oil for New Zealand's lamb and of Argentine wheat for Peruvian iron pellets. 

As firms using barter run the risk of having to accept goods that may be difficult to market or earn a satisfactory profit margin from, it is important for a party to ensure that the products have a large demand in its own market. 

The Brazilian government entered into a barter deal with South Korea's major shipbuilders and the state-run oil developer Korea National Oil Corporation (KNOC). The arrangement essentially had Korea, the world's largest shipbuilders, providing Brazil with drill ships or floating production, storage, and offloading platforms in return for stakes in its oil fields in the Santos area, which KNOC would manage.

b) Counter purchase

A counter purchase is a reciprocal buying agreement whereby one firm sells its products to another at one point in time and is compensated in the form of the other's products at some time in the future. Unlike barter, which involves a single contract, a counter purchase agreement usually involves three separate contracts-the sales contract, the purchase contract, and the protocol contract. The protocol contract serves as a protection contract, which explains what each party will do and what each party should expect.

Examples of this type of arrangement include the Russian purchase of construction machinery from Japan's Komatsu in return for Komatsu's agreement to buy Siberian timber. In another agreement, PepsiCo had an arrangement in Russia where PepsiCo sold the concentrate for Pepsi-Cola which was then bottled and sold in that country. In return for this, PepsiCo had exclusive exporting rights for Russian Vodka in the Western markets. In a later agreement between the two parties, it was agreed that PepsiCo would buy at least 10 Russian-built freighters and tankers to be leased out in the world market through a Norwegian partner.

Counter purchase is more flexible than barter since the volume of trade transacted does not have to be equal. Final settlement could be done through cash or by setting up an escrow account. Escrow is a contractual arrangement according to which an independent, trusted third party receives and disburses money and/or documents for the transacting parties. The word is derived from the old French word escroue, meaning a scrap of paper or a roll of parchment; this indicated the deed that a third party held until a transaction was completed.

c) Offset

An offset is an agreement whereby one party, usually the importer, requires that a portion of the materials, components or semi-manufactures be purchased in the local market. Unlike counter purchase wherein exchanged products are normally unrelated, products taken back in an offset are often the outputs processed in the original contract. The exporter often sets up a manufacturing assembly. For example, the Shanghai Aircraft Manufacturing Corporation of China entered into an arrangement for the purchase of jets from the Boeing Company, using its proceeds from manufacturing the tail sections of the jets for Boeing. Offset is particularly popular in sales of expensive military equipment or high-cost, civilian infrastructure hardware. General Dynamics Corporation sold several hundred F-16 military jets to Belgium, Denmark, Norway, and the Netherlands by agreeing to allow those countries to offset the cost of the jets through co-production agreements whereby 40 per cent of the value of the aircraft was produced in these countries.

d) Buyback

Buyback or compensation arrangement occurs when a firm provides a local company with inputs for manufacturing products (mostly capital equipment) to be sold in international markets, and agrees to take a certain percentage of the output produced by the local firm as partial payment. A buyback agreement involves two contracts including the sales contract and the purchase contract. In a buyback arrangement, the equipment supplier gets a cash portion in addition to the goods. 

For example, a steel producer might send its goods to a foreign company which would use the steel to manufacture a product such as shelving. The steel producer would then buy back the shelves at a reduced price, in effect partially paying the manufacturer with the raw steel. 

Buybacks help developing-country producers upgrade technologies and machinery and ensure after-sale service. Chinatex, a Shanghai-based clothing manufacturer, and Japan's Fukusuke Corporation arranged a buyback whereby the latter sold 10 knitting machines and raw materials to the former in exchange for one million pairs of underwear to be produced on the knitting machines.

e) Switch Trading

Switch trading is an arrangement in which a third party is brought in to sell products which may not have a direct market in the developed country.

B) Contractual Entry Modes

Contractual or transfer-related entry modes are those associated with transfer of ownership or utilization of specified property such as technology or assets from one party to the other in exchange for royalty fees. They differ from trade-related entry modes in that the user in a transfer-related mode "buys" certain rights for the use of property such as technology from the other party. These modes are extensively used in technology-related or intellectual/ industrial property rights-related transactions. This category includes entry modes like international leasing, international licensing, international franchising, and turnkey projects.

1) International leasing

International leasing is an agreement in which the foreign firm (lessor) leases out its new or used machines or equipment to the local company (often in a developing country). International leasing arises largely because developing-country manufacturers (lessee) do not have financial capability or lack foreign currency to pay for the equipment. In many cases, the leased equipment sits idle, but is in good operational condition, thus having a market in developing countries. 

In this mode, the foreign lessor retains ownership of the property throughout the lease period during which the local user pays a leasing fee. The major advantages of this mode for TNCs include quick access to the target market, efficient use of superfluous or outmoded machinery and equipment, and accumulation of experience in a foreign country. 

From the local firm's perspective, this mode helps reduce the cost of using foreign machinery and equipment, mitigates operational and investment risks, and increases its knowledge and experience with foreign technologies and facilities. In the late 1970s, Japan's Mitsubishi leased 100 new and used heavy trucks to Chinese companies in industries such as conduction, mining, and transportation.

2) International licensing

International licensing is an entry mode in which a firm (the licensor) grants to another firm (the licensee) the right to use any kind of expertise, know-how, blueprints, technology, and manufacturing designs for a specified period of time in exchange for a royalty fee to market and manufacture the licensed products in the licensed territory. 

Licensing allows the licensee to produce and market a product similar to the one the licensor has already been producing in its home country without requiring the licensor to actually create a new operation abroad. In the current context, brand names may also be licensed, as is done in the fashion industry. 

For example, Pierre Cardin, the fashion designer, licenses the use of his name for a broad range of products including clothing, skis, floor tiles and cigarettes. He is known all over the world due to his penchant for stamping his name on everything from golf clubs and frying pans to binoculars and orthopaedic mattresses. While most designers content themselves with fragrance, accessories and underwear, Cardin has amassed more than 800 licensees around the world, and earns royalties on Pierre Cardin luggage, ceramics and cooker hoods. Similarly, in the publishing industry, magazines such as Cosmopolitan, Playboy and Newsweek are published under licensing agreements in different languages in different parts of the world.

Licensing may be of the following types:

• Exclusive licensing: An exclusive licence is the right to produce or market a product using specific technology in a given geographical region only.

• Non-exclusive licensing: A non-exclusive licence does not give exclusive rights to a specific technology to a single firm. It may have to be shared with other firms in the same region.

• Cross licensing: Cross licensing is a reciprocal agreement in which intangible property is transferred between two parties. Thus, both parties are simultaneously the licensor and licensee.

Generally, a TNC may use international licensing to:

• Earn an income from its technical expertise and experience, and maximize the returns of its R&D effort. It also helps in the firm's organizational learning as it is able to acquire reciprocal benefits from foreign expertise, research, and technical services.

• Penetrate markets that are inaccessible due to trade barriers or to make an initial foray into foreign markets through a low-risk, low-effort route. This helps it to explore sources of raw materials or components, and pave the way for future investment.

• Supplement limited domestic capacity and management resources for serving foreign markets, or develop market outlets for raw materials or components made by the domestic pany.

• Build goodwill and acceptance for its other products or services, which holds it in good stead for the future.

Some of the advantages of international licensing are:

• A licensor can reap the benefits of exploiting innovative technology by expanding abroad without any additional investment.

• It involves less risk than the investment mode of entry. Even if market conditions become very adverse, the maximum that the licensor stands to lose is their technical fee.

• The licensee also benefits through the technical collaboration as they are able to upgrade their technical capability and improve their competitiveness in the global market.

Some of the disadvantages of international licensing are:

• The licensor often faces difficulty in maintaining satisfactory quality control over the licensee's manufacturing and marketing operations, which can damage their trademark and reputation.

• Very often, a licensee ultimately becomes a competitor, especially if the original licensing agreement does not specify the regions within which the licensee is allowed to market the licensed product. 

For example, in the 1960s, Radio Corporation of America (RCA) licensed its cutting-edge colour-television technology to a number of Japanese companies including Matsushita and Sony. RCA considered licensing a good strategy for earning a return on its technical know-how in the Japanese market without the costs and risks associated with FDI. However, Matsushita and Sony quickly assimilated RCA's technology and used it to enter the US market and to compete directly against it. As a result, RCA is now a minor player in its home market, while Matsushita and Sony have a much bigger market share.

• A local licensee may benefit from improvements in the licensor's technology, which it could then use to enter the TNC's home market.

• A firm's management and marketing know-how cannot be licensed like its technological know-how. While a firm may license its manufacturing process to a foreign firm, it cannot do the same for the way it conducts business, including how it manages its processes and markets its products. For example, Toyota is considered a business leader in the global auto industry due to its management and organizational know how, which has been developed over years. Competitive advantages that come from skills embedded in the organizational culture are difficult to codify and capture in a licensing contract. Thus, as Toyota moves away from its traditional exporting strategy it has adopted a strategy of FDI rather than licensing to penetrate foreign markets.

3) International franchising

International franchising is an entry mode in which the foreign franchisor grants use of the intangible property rights, such as trademark or brand name, to the local franchisee. It usually includes strict and detailed instructions on how to carry out the business operation and often includes production equipment, managerial systems, operating procedures, advertising and promotional materials, and even loans and financing. Franchising originated in the 1850s when Isaac Singer provided detailed instructions about his sewing machine in order to popularize it. Examples of franchising include McDonald's, Kentucky Fried Chicken (KFC) and Subway in the fast-food industry, hotels such as the Hilton Hotels, and business services such as the UPS Store.

Compared to licensing, franchising involves longer commitments, offers greater control over overseas operations, and includes a broader package of rights and resources, which is why service TNCs such as KFC often elect franchising, whereas manufacturing firms often use licensing. The franchisee operates the business under strict instructions from the franchisor and is bound under contract to follow the procedures and methods of operation laid down in the contract. In exchange for the franchise, the franchisor receives a royalty payment that amounts to a percentage of the franchisee's revenues. For example, Burger King and McDonald's require the franchisee to buy the company's cooking equipment, burger patties, and other products that bear the company name.

Some of the advantages of international franchising are:

• It allows the franchisor to maintain consistency in its products in different markets. 

• It is a low-risk and low-cost mode of entry, which ensures a quick global presence for the firm.

• It provides a fast and easy avenue for leveraging assets such as a trademark or a brand name for a global presence. For example, McDonald's has been able to build a global presence quickly and at a relatively low cost and risk by using franchises.

Some of the disadvantages of international franchising are:

• The franchisee may harm the franchisor's image by not upholding its standards

• Even if the franchisor is able to terminate the agreement, some franchisees still stay in business by slightly altering the franchisor's brand name or trademark.

Hence, the main differences between licensing and franchising are:

• Franchising refers to a transfer of the total business function, whereas licensing is a transfer of just a part of the business, such as transfer of right to manufacture or right to distribute a single product or process.

• Unlike licensing, franchising gives the company greater control over the sale of the product in the target market, since the franchisor has the right to revoke the franchise if the franchisee fails to abide with the stipulated rules and procedures.

• Licensing is common in manufacturing industries, whereas franchising is more common in service industries where the brand name is more important.

4) Turnkey projects

A turnkey project, also called build-operate-transfer (BOT), is an investment in which the entire design and construction of an operation is done by a foreign investor who hands it over after completion, for management to a local team. It entails the export of technology, management expertise, and capital equipment. In return for completing the project, the investor receives guaranteed periodic payments. BOT is useful for very large-scale, long term infrastructure projects, such as power generation, airports, dams, expressways, chemical plants, and steel mills, which require special expertise. Therefore, they are administered by large construction firms such as Bechtel Corporation (the United States), Hyundai Motor Company (Korea), or Friedrich Krupp (Germany). Large companies sometimes form a consortium and bid jointly for a large BOT project. Iran's first BOT power plant, the 900 MW combined cycle/gas-fired Parehsar project was launched in 2001 through an international consortium consisting of Italy's Sondel, Germany's Dillinger Stahl (DSD), and Iran's Mapna International.

In 2001, Frankfurt Airport Corporation from Germany was awarded a BOT contract by the Philippine government for the construction of the third passenger terminal at the Ninoy Aquino International Airport. It then formed a contractual joint venture, named Fraport AG, with Philippines International Air Terminals Co., to construct this project. The Metro Rail Transit Corporation (MRTC) in the Philippines also signed a turnkey agreement for railway projects, with a consortium comprised of Mitsubishi Heavy Industries, Sumitomo Corporation, and EEI Corporation.

C) Investment-related Entry Modes

In contrast to trade-related and transfer-related entry modes, investment-related entry modes involve ownership of property, assets, projects, and businesses invested in a host country. Foreign investment takes two forms: foreign direct investment and foreign portfolio investment.

1) Foreign direct investment

Foreign direct investment (FDI) as a mode of entry refers to long-term investment in the productive assets of a company for the purpose of control. FDI-related entry modes are contribution than both trade- and transfer-related choices. The country making the FDI is more sophisticated than trade-related modes, and involve higher risk and longer-term called the home country and the country receiving the FDI is called the host country. FDI may entail the setting up of a new productive facility called greenfield investment or it could be done through a merger or an acquisition of an existing enterprise. 

2) Foreign portfolio investment

Foreign portfolio investment (FPI) is investment in financial instruments such as stocks and bonds through the stock exchange and other financial markets only to earn a return on the investment. To understand FPI, one must be familiar with portfolio theory. Portfolio theory describes the behaviour of individuals or firms which invest in large amounts of financial assets in search of the highest possible risk-adjusted net return. Fundamental to this theory is the idea that a guaranteed rate of return, for example, 9 per cent per year fixed over the next five years, is preferable to a rate of return which is higher on an average but fluctuates over time, that is, an average of 9.5 per cent per year but with high volatility during the five-year period. The variability of the rate of return over time is referred to as the financial risk in portfolio investment. The key task of portfolio management is to reduce the variability or risk of a group of stocks so that the variability of the whole is less than that of its parts. If it is possible to identify some stocks whose yields will increase when the yields of others decrease, then, by including both types of securities in the portfolio, the portfolio's overall variability will be reduced. This is why the crux of this theory is known as "putting eggs in different baskets rather than one basket”.

The differences between FDI and FPI are:

• FDI is done to gain controlling interest or ownership in a foreign company, whereas FPI as a mode of investment is only targeted at earning returns from the investment.

• FDI is considered a more stable form of investment as it involves a long-term commitment in terms of funds. FPI is more volatile and can exit easily, since it is done through investment in the financial markets.

• FDI brings with it the spillover effects of technology and managerial expertise, leading to a more competitive environment and increased consumer welfare. FPI, on the other hand, helps to increase both the width and depth of host-country financial markets and, thereby, contributes to financial development.

Foreign entry: An evolutionary process

Traditional theory views international entry not as a one-step action but rather an evolutionary process involving a series of incremental decisions during which firms increase their commitment to a foreign market by shifting from low- to high-commitment entry modes. Although some firms may bypass some steps or speed up the entire process, most TNCs follow the learning curve of accumulating competence, knowledge, and confidence in the international entry process. They move sequentially from no international involvement to export to overseas assembly or sales subsidiaries (sub-contracting, branches, or franchising) to overseas production via contractual or equity joint ventures (they also move from minority to majority equity positions), and, ultimately, to overseas penetration and integration through wholly owned subsidiaries or umbrella companies. Increasing levels of involvement in foreign markets relate to a firm's accumulation of experiential and local knowledge.

Large and experienced TNCs may combine several entry modes at the same time. For instance, selecting between an equity joint venture and a wholly owned subsidiary is not necessarily an either /or decision. Sometimes a local partner has a strong distribution network or operates in a restricted sector that is attractive to a foreign investor. In such situations, foreign companies can, for instance, surround their wholly owned subsidiary production operation with equity joint ventures that supply resources, or market and sell their products in the host market.

Siemens AG did exactly that in Brazil, where it owned four wholly owned manufacturing plants surrounded by seven joint ventures with either local firms or other TNCs such as Robert Bosch GmbH or Philips as supply bases, and had 13 sales and service branch offices throughout the nation in 2001. However, increasing interconnectedness of the global economy, coupled with increasing investment flows into developing countries, has led to the emergence of a new breed of TNCs from the periphery, which views the global market as its natural home form the day it is born. These small to middle-sized firms from various industries skip the evolutionary path by leapfrogging and moving into the global arena through mergers/acquisitions straight away.