The strategies of DNMEs entering into emerging markets

Abstract

India is one of the fastest-developing markets in the world and represents since the 90s a very attractive market for foreign entrants. According to the World Bank, India has an average GDP growth rate of 7.53% during the last ten years (2004-2009) compared to the 2.67% world average rate. This represents the second highest growth rate in the world after China, which counts with a 10.22% rate. Information disclosure in China is often difficult and therefore, information from Consequently, we believe that India is a good choice . The purpose of this study is to evaluate ten cross border mergers and identify what reasons some of these firms were able to successfully integrate and what may have been the causes of some failures or difficulties to others. We have chosen these ten firms based on the following criteria: The merger happened more than 12 months prior to this study. The information about the merger is publicly available and up to date. The foreign firm was acquiring or partnering with the domestic Indian firm. In order to collect information on these firms we chose to collect information from both public news and reporting sources and the published information on the corporation’s websites. This way we were able to review both the ideology of the firm and the market analyst’s views on the acquisition or joint venture. This allowed for our analysis to review not only the thought process of the firm but also the market’s reaction to the action, which may possibly provide a more reasonable insight into the success or failure of the decision. The most important findings are rather counterintuitive: Smaller firms are more successful than larger firms, and firms entering more open emerging markets have less success. Other findings are that success is greater with earlier entry, greater control of entry mode, and shorter cultural and economic distances between the home and the host countries. Importantly, with or without control for these drivers, firms have less success in India than in China.