The purpose of this study is to explore international business strategies to enter new markets using TNK-BP strategic alliance an example. Study will discuss the resource based view as well as institution based view from the BP’s point of view. Further, study will explore how some countries such as Russia and China have different approach towards western countries in international trade and business ethics.

1. A Study to Explore the International Business Strategy 1
A Study to Explore the International Business Strategy using TNK-BP Strategic Alliance as a
Case Study
Charm Rammandala
California Intercontinental University

2. A Study to Explore the International Business Strategy 2
Abstract
The purpose of this study is to explore international business strategies to enter new markets
using TNK-BP strategic alliance an example. Study will discuss the resource based view as well
as institution based view from the BP’s point of view. Further, study will explore how some
countries such as Russia and China have different approach towards western countries in
international trade and business ethics.

3. A Study to Explore the International Business Strategy 3
A Study to Explore the International Business Strategy using TNK-BP Strategic Alliance as a
Case Study
Firms been exploring markets beyond their home country for centuries. There are numerous
literature written on this dating thousands of years back. With the globalization efforts and
founding of GATT in 1948 & World Trade Organization in 1995, companies wanted to explore
opportunities in other regions and countries increased. Governments helped these efforts by
signing bilateral and multilateral agreements with strategically important countries (Norman
2012)
Unlike in the distance past, firms need to understand the opportunities in the international
market based on their product portfolio and resources. In the past as there were only few
countries and companies engaged in the world trade, most often trade efforts were profitable. In
today’s context this is hardly the case as competition in many industries are fierce. Evaluating
the industry relevant to the company and understanding the company strengths, firms can take an
informed decision as to how to move in to the international market (Peng 2013)
International market entry methods
It is vital for firms to strategically position themselves in the international market. First step
is to understand the reasons for moving to international markets. Firms explore opportunities in
international market for various reasons. Some of those reasons include, looking for new
customers, raw materials, cheap labour, other monitory and fiscal benefits such as lower taxes,
lower energy prices, host country subsidies (Peng 2013)
Some of the international market entry strategies are, Exporting, Franchising, Licensing,
Joint ventures, Strategic alliances & wholly owned. Out of the various entry methods, easiest,

4. A Study to Explore the International Business Strategy 4
cost effective and mostly used is method is to export goods. Franchising is another relatively
easy method to have international presence for a company. In licensing and franchising,
company gives the authority for a third party company to use company patented process,
products or trademarks and logos for a royalty fee. Joint ventures and strategic alliances are an
arrangement between two or more companies often based in different parts of the world, work as
a team to achieve a common objective. This form of arrangements help companies to work
together more closely and share the expertise and market intelligence. Wholly owned is the
riskiest market entry strategy as firm has to set up the business from the scratch and need to
allocate all the resources by themselves. However, this mode offers the most flexibility as there
are no partners and company could operate the way they wish (Peng 2013)
The importance of industry based view and resource based view in international trade
The firms who are interested in international trade needs to have an in-depth understanding on
two core aspects. First is the industry. This is called industry based view. It’s vital for a company
to have a deep understanding about the industry dynamics, its competition and technological
advances. The second aspect is to understand the firm strengths and weakness as well as
opportunities. This is known as resource based view.
The two viewpoints discussed above are known as international business strategies to assist
firms to evaluate on market opportunities and firm readiness to move in to international markets.
It is important for firms to understand the host country rules and regulations, market intelligence,
strengths and weaknesses of competitors, technology in use and more importantly customer
expectations. When the firm is aware of the market dynamics and opportunities, it can do an
internal analysis using tools such as SWOT and VRIO analysis. This helps to determine the firm
readiness for a such a move (Reed 2013)

5. A Study to Explore the International Business Strategy 5
From an industry based view, why strategic alliances are the frequent mode of entry for the
oil industry in Russia
According to the Russian law, foreign companies can establish their presence in the country
through a license office, limited liability company, a branch of foreign supplier, joint venture or
as a partnership. In essence this is same as many western countries and foreign companies are
welcome to operate using any form of market entry modes in Russia (Norman 2012)
When entering oil and gas industry in Russia, rules and regulations are somewhat stringent.
The foreign firm interested in Russian oil and gas industry expected to establish and maintain the
requisite technical, legal and business presence in Russia either directly or through an agency
arrangement. There are many legal and government procedures to follow and typically this
process takes over 6 months to complete. Government itself encourage companies who are
interested in investing in the industry to work with a local partner. Each step government
ministries get involved and this could be a daunting task for the foreign company if it decides to
do it themselves (Reed 2013)
From the industry based view, working with a Russian local partner is the most logical and
the safe mode for a foreign entity. Strategic alliances offer the flexibility of not binded by any
legal frameworks yet working with two or more firms complimenting and benefiting each
companies’ expertise. When we analyze the political, economic and legal environment of Russia,
it doesn’t make business sense to establish a wholly owned company as rules and regulations of
the host government as well as the home government could change any given time. If such a
situation occurs, impact to the firm’s assets and business operations could be significant.

6. A Study to Explore the International Business Strategy 6
One of the main reason western companies such as BP interested in doing business in Russia
is due to large reserves they possess within their territories. Russian firms always in look out for
attracting latest technology to the industry and strategic alliance is an excellent strategic
framework for all parties to work together (Norman 2012)
Complimentary resources and capabilities of TNK & BP from the stand point of resource-
based view
When discussing the TNK-BP joint venture in Russia, it is clear that each company was
looking for the expertise of others firm for the growth of the company. As discussed in an earlier
chapter, resourced base view helps each firm to determine its own capabilities and limitations.
This knowledge helps to determine the best strategies to grow the business in terms of whether to
expand to overseas markets and what type of entry strategy to pursue (Reed 2013)
TNK is a combination of three different entities and all three are Russian firms. They have the
necessary know how on how to navigate the local legal and regulatory frameworks. This is a
very important aspect of the business when it comes to Russia. BP is one of the leading player in
the oil market and their know how in the latest technologies to extract oil from the fields and
distribute is an industry leading and well known. Both companies have their own strengths in and
off the field hence coming together as a team using strategic alliance is mutually benefitting both
companies.
The formal and informal rules governing oil and gas industry in Russia
Russia is a relatively new player to the open market concept after being a socialist country
for over 70 years. They opened the markets in 1991 after falling of Soviet Union but rules and
regulations governing foreign trade were tightened in 1998 after the financial crisis. To make

7. A Study to Explore the International Business Strategy 7
matters further worse, Russia and Western countries always on the edge over political, economic
as well as ideological reasons. These attributes become very important factors to remember when
discussing business dealing between western companies and Russian companies.
From the institution based view, BP needed to be aware the political dynamics as well as the
TNK expectation and ambitions when forming the strategic alliance. If BP did the relevent due
diligence, they would have realized the extent of political influence in the Russian market. While
it is a strategically significant move to tie up with Russia’s second and third largest oil producers,
BP ignored the scenario what would happens if one firm object to the deal. This short coming
brought the Russian government in to the picture and created a difficult situation for BP. In
essence, politics is presence in all Russian business activities formally as well as informally
(Norman 2012)
How to advice BP as an ethics consultant on episode 1 & 2
It is important to be sensitive to geo political differences in different regions and countries in
the world. It’s important to look in to business practices, ethics and norms when looking in to
industry based view in the preliminary stage prior to move in to a country. While working on the
business strategy, part of it should be planning and prevention of ethical issues and how to
handle it if something goes wrong (Brett 2013)
One of the first steps to take an BP ethics consultant is to outline a set of principles covering
ethical conducts, employee behaviors and best practices to follow all parties involved. This will
help to have a common understanding on how to operate, explain what is acceptable to
everybody in the organization. It is also important to understand the terms and conditions of the

8. A Study to Explore the International Business Strategy 8
strategic alliance between BP and TNK and honor the partnership contract even if it is not the
best strategic move for the company in terms of finance and revenue.
Russia’s political motivations, allies and interests are significantly different from the West. Two
companies from two different countries coming together bound to create some news and by
taking a long term view on the new alliance, BP needed to communicate its position on
expanding the business, management structure, employee benefits and perks to avoid
unnecessary grievances and production holts Faelten 2016)
If I were an arbitrator which side should I take in both episode 1 and 2
Looking at the details of the episode 1, it is evident that the reasons for disagreements
between Russian forms and BP were due to lack of communication and not going in to details
about the extent of the business practices and interests. BP as a company from the Western world
has certain obligations to be bound by rules and regulations of world bodies as well as US
government. Russia might be obliged by the world bodies but not necessarily follow the
directions of US government on whom to do business with or not. Failure to discuss such a
scenario at the inception left both parties involved to interpret the company business goals from
two different points of view (Brett 2013).
As a firm, TNK-BP’s primary motive is to increase the revenue and improve the shareholder
value. If this means working with countries and governments which western world frown upon,
that is a secondary issue for the company. Essentially when working with countries which has
restrictions against them, profitability is high as competition is low. This was a motivation for
TNK partners. As an arbitrator I would recommend BP to work with TNK to work out the
differences and open up channels to have better communication. If this means in short term,

9. A Study to Explore the International Business Strategy 9
working with countries which have questionable reputation, then that would be part of the deal
(Brett 2013)
Episode 2 also a classic example of BP’s failure to adhere to the contract with TNK and
looking for opportunities to maximize the market reach by joining Rosneft who is a competitor
to the TNK-BP. It is an important aspect of the business negotiation to agree on the partners’
interests and business practices (Faelten 2016). In this episode it is very much clear that BP tried
to take the advantage of the situation and put their initial partnership in a disadvantage position
by coming to an understanding the Rosneft.
Conclusion
In 2003 BP and AAR entered in to a joint venture agreement to jointly explore oil reserves in
Russia and Ukraine. This strategic alliance known as TNK-BP and became the 3rd
largest oil
company in the world. Due to the lack of communication and mistrust between the Russian
partners and BP, there were grievances from the inception of the strategic alliance and this was
escalated to the point where media as well as the governments had to intervene. Russian
government was much more aggressive and eventually BP had to come to terms with the ground
reality and compromise in several fronts to be able to continue to work with TNK and gain and
retain the access to Russian oil reserves.

10. A Study to Explore the International Business Strategy 10
Reference
Brett, J (2013) Negotiating Globally: How to Negotiate Deals, Resolve Disputes and make
Decisions across Cultural Boarders. Journal of International Business Studies. Retrieved from
gala virtual reference library: http:/galegroup.com (10/08/2016)
Faelten, A (2016). Why Deals Fail: And how to rescue them. San Francisco, McMillan
Norman, J (2012). The Oil Card: The Global Economic Warfare in the 21st
Century. Irwin,
McGraw-Hill
Peng, M (2013). Global Strategy. New York, Pearson
Reed, S (2013). In Too Deep: BP and the Drilling Race that Took it Down, New York, Person