EmeringMultinationalsFromCEE_Final

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załącznik nr 3 do zarządzenia Rektora nr
7 z dnia 30 stycznia 2013 r.
Studium Licencjackie
Kierunek: International Economics
Specjalność: Economics of Central and Eastern Europe
Imię i nazwisko autora: Jakub Jarząbek
Nr albumu: 57230
Emerging Multinationals
from Central and Eastern
Europe
Praca licencjacka
napisana w Instytucie
Rynków i Konkurencji
pod kierunkiem naukowym
dr. Doroty Ciesielskiej-Maciągowskiej
Warszawa 2015

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Table of contents
Introduction.................................................................................................................................................. 4
Chapter I Definition, different types and determinants of Internationalization ........................................... 6
I.1 Definition of internationalization............................................................................................................ 6
I.2 Types of Internationalization .................................................................................................................. 7
I.2.1 Uppsala Model..................................................................................................................................... 7
I.2.2 Mixed approach – leapfrog effect...................................................................................................... 10
I.2.3 Born Globals...................................................................................................................................... 12
I.3 Determinants of Internationalization .................................................................................................... 13
I.4 Threats and barriers of Internationalization.......................................................................................... 14
Chapter II Importance of FDI..................................................................................................................... 17
II.1 History, determinants and World routes of FDI.................................................................................. 17
II.1.1 Introduction to FDI........................................................................................................................... 17
II.1.2 History of FDI flows......................................................................................................................... 18
II.1.3 Determinants of FDI......................................................................................................................... 21
II.2 Impact of new trends from emerging countries on World’s FDI routes.............................................. 22
Chapter III Different internationalization strategies based on industry, company size and the situation on
domestic and foreign markets .................................................................................................................... 24
III.1 Market Entry modes........................................................................................................................... 24
III.1.1 Different Entry modes..................................................................................................................... 25
III.1.1.2 Non-equity entry modes............................................................................................................... 25
III.1.1.2 Equity entry modes....................................................................................................................... 27
III.1.2 Determinants of entry modes .......................................................................................................... 28
III.2 Drutex S.A. as an example of Multinational Company from CEE, following Uppsala
internationalization model.......................................................................................................................... 31
III.3 Asseco Poland as an example of Multinational Company from CEE following Accelerated
traditional model of Internationalization.................................................................................................... 33
III.4 Medicalgorithmics as an example of Born global enterprise from CEE............................................ 35
Findings...................................................................................................................................................... 37
Bibliography............................................................................................................................................... 39
List of figures............................................................................................................................................. 41
List of charts............................................................................................................................................... 42

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Introduction
In the recent times of Globalization and liberalization of international trade,
Multinational Corporations – MNCs, are present in almost every aspect of our lives,
these huge companies employ millions of employees, operate in hundreds of countries
and their yearly revenues are bigger than we can imagine. According to a research report1
conducted by the Transnational Institute, 37 of the world’s 100 largest economies are
Multinational Corporations. Wal-Mart stores revenues in 2012 were comparable with
GDP of such countries like Poland, Argentina or Austria. Again according to data from
year 2012 by the Transnational Institute, 86,5% of Multinational Companies are based in
Industrialized world.
Observing that most of people still associate MNCs with Western-developed
countries, this thesis about MNCs from Emerging Markets in particular from the region
of Central and Eastern Europe – CEE, should disprove this outdated point of view. The
main aim of this thesis is to prove that MNCs from CEE possess not only promising
business potential but also bring competitiveness and innovation to global markets. In
order to be able to come into some interesting conclusions regarding the topic of the
thesis one should focus not only on analysis of theories and historical data but also try to
correlate them with practical examples from real-life economy.
The first chapter covers the analysis of different methods of enterprise
internationalization, the main idea behind this theoretical chapter was to show the
differences as well as common characteristics of already mentioned internationalization
methods. Apart from comparison of different internationalization patterns, one can find
there explanation of motives influencing the decision to become Multinational
Corporation. Last but not least this chapter covers the problem of possible threats and
barriers regarding the process of company internationalization.
In the second chapter there can be find explanation of the role of FDI in current
world, followed by in-depth analysis of trends regarding World’s FDI flows based on
comprehensive historical data.
1
“Annual State of Power report - State of Power 2014” The Transnational Institute, January 21, 2004, pp. 8

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Whole chapter is summarized with findings, commentary and forecast of future trends
regarding global FDI flows.
Last chapter is very important mostly due to its empirical nature.
After short theoretical introduction, there’s a final comparison of three main
internationalization processes as well as analysis of unique market entry mode
approaches, based on examples of companies from the region of CEE: Medicalgorithmics
innovative, high-tech medical devices producer, Drutex S.A. the biggest PVC window
producer in Europe and Asseco Poland S.A. the largest IT solutions provider listed on
Polish Stock Exchange and major player in the European software market. I decided to
choose three companies from completely different business branches and what is more
with different internationalization strategies as well as unique market entry modes, in
order to show that CEE region has a great business potential and cannot be considered
only as a cheap labor force region with outdated technology. I believe that these three
companies are a great example that companies from emerging markets can compete with
experienced, huge, Western corporations not only with price but also quality of products
and services as well as innovativeness of their offer.

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Chapter I
Definition, different types and determinants of
Internationalization
This chapter provides reader with theoretical overview of internationalization concept.
After analysis of three different internationalization methods reader should be able to identify
different patterns in internationalization, consisting of determinants behind choice of each
internationalization process, advantages, disadvantages, barriers and possible threats that each
method have.
I.1 Definition of internationalization
There are plenty of theories made in order to simplify very complicated concepts of
internationalization, however it is worth to note that most of them do not apply to practical
examples or are limited due to their theoretical nature. Unfortunately there is no such universal
theory of Internationalization that could be freely used to characterize every process of
Internationalization in every given case, “the existing literature does not seem to have reached to
an agreement on which conceptual framework and constructs should be used to explain firm’s
internationalization process.”2
Nevertheless one can agree on the fact that Internationalization
can be often described as “the process of increasing involvement in international operations”.3
That is why in this chapter I would like to focus on presenting just three of them, which seem to
differ significantly in regard to duration of the internationalization process, market entry mode
and many other factors.
In the past years the leading theory explaining the process of Internationalization was so
called Uppsala model, however with the fast paced development of the World and ever growing
process of globalization, Internationalization strategies had to adopt as well. That is why we can
2
Marina S. and Karlsen F. (2007), “The Born Global – Redefined. On the Determinants of SMEs Pace of
Internationalization”, 2, pp. 15
3
Welch L.S. and Loustarinen R. (1988), “Internationalization: Evolution of a Concept, Journal of General
Management”, 14 (2), pp. 36

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observe more and more companies that do not follow the traditional path of internationalization
and chose different ways of internationalization which developed in response to global trends
and changes.
I.2 Types of Internationalization
I.2.1 Uppsala Model
In 1970s two Swedish researchers Jan Johanson and Weidersheim-Paul from Sweden’s
Uppsala University introduced new model of internationalization called Uppsala Model or just
U-Model. Its name comes from name of the city where the University has a place. Uppsala
model is one of the leading theories of incremental Internationalization. Theory states that
companies in order to begin their global internationalization process first need to go through
certain steps on their domestic market. Furthermore when they begin their incremental
internationalization they often chose countries with relatively low psychic distance, which can be
defined as “the perceived degree of difference between two markets, in terms of differences in
language, culture and political system, which disturbs the flow between the firm and the
market.”4
This process can be observed at figure number I.1 Where the further from Market A,
the bigger the socio-cultural gap between countries is.
4
Sousa, C.M.P and Bradley, F. (2005) “Global markets: does psychic distance matter?” Journal of Strategic
Marketing, 13 (March), pp. 43-59

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Figure I.1 Visualization of "psychic distance" phenomena
FDI (Foreign Direct Investment)
Mode
Market
No regular export
Independent
representatives
Foreign sales
subsidiary
Foreign production
and sales subsidiary
Market A
Market B
Market C
.
.
.
Market "N"
Increasingmarket commitment
Increasinggeographicaldiversification
Source: adapted from Forsgren and Johanson (1975, p.16)
According to Johanson and Wiedersheim-Paul the conclusive Uppsala model could be expressed
in 4 following steps:
Step 1: No regular export activities (sporadic export).
Step 2: Export via independent representative (export mode).
Step 3: Establishment of a foreign sales subsidiary.
Step 4: Foreign production/manufacturing.5
Step one of Uppsala Model indicates that company should operate mostly on its domestic
market, and sporadically export certain goods or services. Usually this is the very first contact of
enterprise with foreign markets. It can be characterized as non-regular, independent and trial
export activity. This step is very crucial for companies that never had any international
experience on foreign markets. It is performed by every company that follows this already stated
incremental strategy of internationalization because in order to develop ‘broad’ business
network, investigate target market trends, possess knowledge about current ‘level of market
5
Johanson, J and Widersheim-Paul, F. (1975) “The internationalization of the firm: four Swedish cases”, Journal of
Management Studies, October, pp. 305-322

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competition’, find out competitors strengths and weaknesses, the company need to go abroad
with its products or services even on the very low scale and most likely in non-regular short
periods of time. It is worth to mention that the first step of this model isn’t anyhow bound to any
long-term decisions thus overall costs of this process should be treated as minimal and in most
cases insignificant for the enterprise budget. Although the main aim of this step is to possess the
information regarding local competition and market trends, it shouldn’t be treated as a reliable
source of information for the company, due to problems and limitation that go on pair with
irregular export activities and lack of representatives or subsidiaries in the target market.
Step two of Uppsala Model is basically a natural aftermath of the first step. Companies
after probing business environment and building their own business networks decide to increase
their export usually via arranging a contract with an independent representative. It is still rather
safe process in terms of costs and company liability, however in this case company is bound with
contracts, which are usually short-termed, meaning that level of market commitment is
significantly higher than in the previous step. Reliability of information gathered during this
process is also notably higher than in the first step, however this mostly depends on our relations
with independent representatives and their willingness to cooperate with our company by sharing
their findings, market analysis and feedback from clients.
Third step involves much bigger potential benefits for the company as well as risks. This
process requires strong market commitment, usually large capital investments and frequent
supervisions by company’s executives from its headquarters. Unlike in the first two steps this
operation offers operational and strategic control that a parent company can exercise over its
subsidiary. Apart from strong controlling tools, company can implement its own business
solutions to the subsidiary, establish uniform operating processes such as financial,
administrative and security systems. Additionally company can develop joint marketing
campaign in case of low psychic distance between parent company’s country and its subsidiary’s
country. Reliability of information gathered during feedback processes is very high due such
operations as for example monthly feedback reports or regular visits of supervisors from
company’s headquarters. Unfortunately as it was already mentioned before this process often
requires high capital engagement, therefore it might turn out to be very tough and uncertain
decision for the company. Another issue worth noting is possible difficulty in finding reliable
workforce willing to adopt organizational culture of the parent company.

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Foreign production/manufacturing is the last step, which is also the most advanced and
with the highest level of market commitment. It requires even bigger capital as well as human
resources commitment. It is very risky undertaking, which has to be in-depth analyzed by the
most important of company’s representatives. At the cost of high capital and human resources
investment company gains extremely high level of control over newly established unit, as well as
great possibility to analyze market situation, and future trends. It is also worth to note that both
steps three and four benefit from the fact that “FDI offers better opportunities for information
capture than either licensing or exporting, since ownership of assets confers ownership of
information too.”6
Summary of four-step incremental strategy of internationalization
To sum up, Uppsala model is fairly popular internationalization model among enterprises due to
such aspects as:
 Relatively low risk of failure
 Long term process enabling enterprises to constantly alter their decisions and adapt to
foreign business environment or even withdraw from the market in case of failure
 Diversified operational costs
 Very low initial cost of starting operations on foreign markets
I.2.2 Mixed approach – leapfrog effect
Although majority of companies tend to follow the classical Uppsala model of
incremental internationalization, some of them tend to utilize only some of its aspects,
“leapfrogging” certain steps of incremental theory. The main cause for this phenomena is
constantly growing importance of worlds’ globalization, declining number of trade barriers,
relatively smaller ‘psychic distance’ between countries all over the world, which is caused by the
increasing process of “Westernization” of the whole globe simply meaning adopting Western
6
Ramamurti, R. and Hashai, N. (2011) “The future of Foreign Direct Investment and the Multinational Enterprise”
Research in Global Strategic Management Volume 15, pp. 216

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culture, habits and consumer preferences.
The natural benefit of such approach is much lower period of company
internationalization, allowing the enterprise to benefit from fully internationalized unit. Faster
presence on foreign markets allows company to react to market turbulences, changes in
consumer preferences and generally enables faster adaptation to various situations on the market.
However as it comes to disadvantages and possible issues with mixed approach of
internationalization, companies should be aware of so called ‘Shock effects’, which can turn out
to be a trap for unexperienced managers of entrant firms who usually take more precautions
when entering distant markets and spend more time on planning, since they are fully aware of
the significant “psychic distance”, but they fail to take those precautions while entering countries
that they perceive as having a close “psychic distance”.7
Even in the age of globalization the
socio-cultural diversity is still very strong among different nations, even in such a small
continent as Europe, we can come across countries what can be classified as High-context
cultures and on the other hand those who are Low-context, as we can see on the Figure I.2 socio-
cultural difference between such countries as for example: Italy, Greece, Portugal, Spain,
Bulgaria which are considered as High-context countries and Germany, Switzerland, Austria,
Sweden, Finland, Norway which are considered as Low-context countries is noticeable in almost
every aspect of daily human life.

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Figure I.2 Comparison of Low-context and High-context characteristics
Business/work
habits
Deal oriented ('quickly getting
down to business'), rewards
based on achivement, work has
value
Relationship oriented ('first you
make friend, then you make a
deal'), rewards based on
seniority, work is necessity
Beliefs and attitudes Egalitarian, challenge, authority,
individuals control destiny,
gender equity
Hierarchical, respect for
authority, individuals accept
destiny, gender roles
Mental process and
learning
Lateral, holistic, simultaneous,
accepting life's difficulties
Linear, logical, sequential,
problem-solving
Family and friends Nuclear familiy, self-oriented,
value youth
Extended family, other-oriented,
loyalty and responsibility,
respect for old age
Values and norms Independence, confrontation of
conflict
Group conformity, harmony
Food and eating
habits
Eating is a necessity, fast food Eating is a social event
Time consciousness Linear, exact, promptness is
vlues, time = money
Elastic, relative, time spent on
enjoyment, time = relationships
Sense of self and
space
Dress and
appearance
Explicit, direct Implicit, indirect
Informal handshackes Formal hugs, bows and
handshakes
Dress for individual success,
wide variety
Indication of position in society,
religous rule
General comparative characterisitcs of cultures
Characteristic Low-context/individualistic High-context/collectivistic
Communication and
language
Source: self-prepared material based on Svend Hollensen (2011, p.238)
I.2.3 Born Globals
In recent years analysis have recorded an increasing number of companies that do not
follow traditional incremental pattern in their internationalization process of an enterprise. In
contrast they focus at international markets or even global markets right from the beginning of
their existence.
“A born global can be defined as a firm that from its inception pursue a vision of becoming
global and globalize rapidly without any preceding long term domestic or internationalization
period.”8
7
Hollensen, S. (2011) “Global Marketing : a decision-oriented approach”, pp. 55
8
Oviatt, B. and McDougall, P. (1994) „Towards a theory of international new ventures” Journal of International
Business Studies, 25(1), pp. 45-64.

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Born globals – BG, are often described as small and medium enterprises with less than
500 employees and its annual sales under $100 million. Another characteristic feature of BGs is
their reliance on cutting-edge technology in the development process of their innovative
products, unique solutions or services. Additional distinctive aspect of BGs is that they are
usually managed by entrepreneurial geniuses and visionaries, who are able to perceive world in
completely different way and impose their ideas and solutions to their competitors.
Due to development of advanced communication technology and ever growing
globalization, companies started to perceive world as smaller, accessible, thus the psychic
distance which was the main obstacle for companies following traditional internationalization
approach has diminished. It is still highly dependent on market situation, level of technological
and economic development of target country. The BG companies tend to choose niche markets,
however to be honest examples can be found in all industries. What is characteristic they all
implement new technologies for development of completely unique products or new way of
doing business, and as a result of it, they are becoming competitive against already existing
players on the market. As it was already mentioned BGs emerged not only due to technological
advancement, abolished trade barriers (reduction of tariff and non-tariff barriers to trade and
creation of trading blocs), cost drivers (economies of scale) and last but not least competitive
drivers (convergence of practices, global networks) but due to such market drivers as
convergence of consumer behavior, global customers,9
decreasing cultural gaps (in other words
shrinking ‘psychic distance’) and lack of demand for goods and services based on cutting edge
technology (in case of many Multinationals from Emerging Markets but also in case of
Multinationals from advanced, developed economies: ”The domestic demand is too small (even
in large countries) for these very specialized products. These new market characteristics are to a
high degree caused by some basic changes in technology. New production process technology
implies that small-scale operations may also be economically sound.”10
I.3 Determinants of Internationalization
Some of determinants of internationalization have been already mentioned in previous
points of this paper, however in order to provide reader with clear and memorable insight in this
9
Yip, G.S. (1989) “Global Strategy…In a world of nations?”, Sloan Management Review, Vol. 31, No. 1, pp. 29-
41.

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matter I will point out some of the main reasons that trigger internationalization of companies.
To make it even more transparent I divided them into two groups:
Proactive determinants:11
 Economies of scale
 Foreign market opportunities
 Technology competence
 Managerial urge
 Willingness to expand company’s operations
 Profit and growth goals
Reactive determinants:
 Exceeding capacity of domestic market for company’s goods and/or services
 Lack of demand and technological advancement of domestic market for company’s
goods and/or services based on cutting-edge technology
 Competitive pressures
 Unsolicited foreign orders
I.4 Threats and barriers of Internationalization
Thinking of possible threats and barriers for internationalization process of a company one
must mention trade barriers which are still the main obstacle for liberalization and
internationalization of world’s trade. Already mentioned in this paper shock effect should be also
taken into consideration especially for the companies that do not follow incremental process of
internationalization, it is so mostly due to the fact that the shorter the process of
internationalization is, the smaller are the chances of appropriate market adaptation.
10
Madsen, T.K. and Servais, P. 1997. “The Internationalization of Born Globals: An Evolutionary Process”,
International Business Review, Vol. 6, No. 6, pp. 561-583.
11
Albaum, G., Strandskov, J., Duerr, E. and Dowd, L. (1994) “International Marketing and Export Management”
(2nd edn.) pp. 31.

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Apart from that one can indicate several important internal barriers that could burden
company internationalization initiation such as:12
 insufficient finances
 insufficient knowledge
 lack of foreign market connections
 lack of export commitment
 lack of productive capacity to dedicate to foreign markets
 cost escalation due to high export manufacturing, distribution and financing expenditures
 management emphasis on developing domestic markets
Proceeding to threats that every firm can face during the process of internationalization, I
divided possible threats into three categories: General market threats, Commercial threats and
Political threats.
General market threats:13
 competition from other firms in foreign markets
 language and cultural differences
 difficulties in finding the right distributor in the foreign market
 differences in product specification in foreign markets
Commercial threats:
 exchange rate fluctuations in case of contracts made in a foreign currency
 delays and/or damage in the export shipment and distribution process
 difficulties in obtaining export financing
Political threats:
 foreign government restrictions
12
Hollensen, S. (2011) “Global Marketing : a decision-oriented approach”, pp. 61-62

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 national export policy
 lack of government assistance in overcoming export barriers
 high value of the domestic currency relative to those in export markets
 high foreign tariffs imposed on imported products
 complexity and entanglement of trade documentation
 civil strife, revolution and wars disrupting foreign markets
 confusing foreign import regulations and procedures
Summary of chapter I:
Analysis of three different internationalization methods indicates that choice of
internationalization method is not only dictated by company willingness, but most likely by
many other internal and external factors. In other words, it is not company that chooses the right
internationalization process but the factors such as: local business environment, geographical
location, budget, competition that determine company decisions, thus one can come to a
conclusion that companies from Central and Eastern Europe will struggle with completely
different issues and will focus on different key factors determining choice of internationalization
method than companies from advanced/developed economies such as for example Western
European countries.
13
Hollensen, S. (2011) “Global Marketing : a decision-oriented approach”, pp. 64-65

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Chapter II
Importance of FDI
This chapter shows how over the past century the Foreign Direct Investment flows have
been changing. Additionally it explains what was the cause of such directions and its
implications on global market situation. Share of worldwide stock of outward FDI for various
years can be treated as an indicator of global investment trends, and how they developed over a
timespan of over 100 years. In the end of the chapter, there can be find analysis of current data
for Emerging Countries with the explanation of new Up-market trend in global investment
patterns.
II.1 History, determinants and World routes of FDI
II.1.1 Introduction to FDI
During the past decades Foreign Direct Investment has grown significantly, even more
rapidly than trade flows. One view of FDI is that it has tight bonds with the local economy, and
therefore it stimulates the development in the host country. The impact of FDI is expected to
have a two-dimensional effect on host country economy.
First, through capital accumulation in the host country, FDI is expected to boost
economic growth by encouragement of incorporation of new inputs and foreign technologies in
the production function of the host country14
and secondly FDI is expected to increase the level
of knowledge in host country through labor training and skill acquisition.15
14
Borensztein, E., Gregorio, J. and Lee, J-W. (1998). “How does foreign direct investment affect growth?”, Journal
of International Economics, 45, 1, pp. 116.
15
De Mello, L.R. (1999). “Foreign direct investment in developing countries and growth: a selective survey”, The
Journal of Development Studies, 34, 1, pp. 16.

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Figure II.1 Source and destination of FDI.
Developing country
Destination of FDI
North-North
FDI
North-South
FDI
(Down-market FDI)
South-North
FDI
(Up-market FDI)
South-South
FDI
(Mostly down-market FDI)
Cell 1
Cell 4
Cell 2
Cell 3
SourceofFDI
DevelopedcountryDevelopingcountry
Developed country
Source: self-prepared material based on: Ramamurti, R. and Singh, J., (2009), Emerging Multinationals in Emerging
Markets, pp. 6.
II.1.2 History of FDI flows
To simplify the history of FDI flows I divided this section into five parts, pre-World War
II period, post-World War II period, 1980s period, 1990s period and current situation. Current
situation of countries from Central and Eastern Europe will be outlined in the further points of
this paper.
Figure II.2 Share of worldwide stock of outward FDI, various years
Years
1914 1969 1980 1990 2006 2010 2014
Europe 93,0% 43,2% 41,1% 49,5% 56,1% 41,4% 23,3%
USA 6,0% 55,0% 37,7% 24,3% 16,7% 20,3% 24,9%
Japan 0,0% 1,3% 3,4% 11,2% 3,7% 4,1% 8,4%
Emerging countries 0,0% 0,0% 12,7% 8,3% 15,1% 25,0% 34,6%
Other countries 1,0% 0,5% 5,1% 6,7% 8,4% 9,2% 8,8%
Source: self-prepared table based on data from Ramamurti, R. and Singh, J., (2009) Emerging Multinationals in
Emerging Markets, pp. 15. and data from UNCTAD (2015)

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Chart II.1 Share of worldwide stock of outward FDI, various years
Source: self-prepared line chart based on data from Ramamurti, R. and Singh, J., (2009) Emerging Multinationals in
Emerging Markets, pp. 15. and data from UNCTAD (2015)
Pre-World War II and post-World War II periods
In the pre and post-World War II period, the majority of world’s FDI flowed from one
advanced economy to another (Cell number 1 in Figure II.1) this is pretty understandable
because as it was already explained in the previous sections, the main reason for
internationalization resulting in Foreign Direct Investment, is willingness to expand company’s
operations and necessity to deal with exceeding capacity of domestic market for company’s
goods and/or services, both of them are characteristic for mature economies in other words for
developed countries. According to data from figure II.2, the World’s outward share of Foreign
Direct Investment for USA and Europe corresponded to approximately 99% of World’s shares in
pre-WWII period and 98% of World’s shares in post-WWII period. However it is important to
distinguish the difference between pre-WWII period and post-WWII period, in the first one,
USA committed to only 6% of shares on the other hand Europe had more than 90% of World’s
shares. The reason for this was mostly due to low international activity of American enterprises,
which changed drastically after World War II.
In the post-WWII period the dominant role of USA called the “Golden Age” for U.S
economy caused its enterprises to invest a lot of capital in foreign countries, mostly due to the
implementation of Bretton Woods system of which USA was the biggest beneficent. Change
from 6% up to 55% of World’s shares in Outward Foreign Direct Investment in case of United

20
States of America is the best proof for this statement.
Streams of international finance that were to major extend speculative were decreased by
avoiding and limiting them via central banks. This caused the international flows of investment
to go into foreign direct investment.
In the 1960’s the FDI flows were not only developed countries-developed countries (see
cell 1 in Table II.1) but also a Down-market FDI from developed countries to developing
countries (see cell 2 in Table II.1).
In this period emerging countries also known as developing countries increased their inward FDI
rather than outward FDI.
1980’s period
The collapse of Bretton-Woods system in 1970’s caused the liquidity crisis which caused
foreign governments no longer to accept the dominant currency, in this case US dollars, at the
previously established rates. The natural aftermath of this, was the depreciation of dollar value
and The US was no longer the dominant economic power it had been for more than two decades.
By the mid-1960s, the European Economic Community and Japan had become international
economic powers. (This trend can be observed while analyzing Figure II.2, US outward FDI
shares started to decline and Europe and Japan started to increase their shares in World’s OFDI.)
Another crucial fact for this paper, was the major increase in the contribution of Emerging
countries in World’s OFDI. This process can be represented by Cell 3 in Figure II.1, developing
countries started their foreign activities which were mostly down-market FDI, particularly
among group of developing countries. This process increased both inward and outward FDI of
developing countries since they cooperated mostly with each other.
1990’s period
This period reinforced strong Japanese and European position on global markets, and
weakened the US position. This period was very important not only due to historical changes
that took a place in 1990’s but also economic changes. 1990’s was the period of changes in
Central and Eastern Europe, Poland has initiated the Revolutions of 1989 which resulted in Fall
of Communism in Central and Eastern Europe but also in Communist states. “In the pre-
transition period the parent companies of the MNCs from emerging markets were state-owned

21
enterprises, primarily State-run foreign trade organizations. Their foreign affiliates were mostly
located in developed market economies, according to estimates published between 1977 and
1990.”16
It is worth to note that after the transition from centrally planned economies to free-
market economies, the OFDI of countries from CEE decreased, it might be very surprising since
opening of economies should increase both Inward FDI as well as Outward FDI, however in this
case OFDI declined significantly. “After 1990, former socialist TNCs were facing several
constraints that dried up their liquidity and their capacity to finance their affiliates abroad. Most
foreign affiliates became under-capitalized and could not survive without new capital transfers
from parent companies between 1990 and 1993. Some socialist TNCs went bankrupt while some
others were taken over by usually foreign private investor. They slowed down their outward FDI
dramatically and, in some economies in transition (such as Slovenia), firms almost ceased
investing abroad.”17
Current period
Analyzing recent situation on global investment markets, it does not take long to observe
a long-term trend that had its origins in 1990s and gradually continued up to the recent times (see
chart II.1) share of Emerging countries in worldwide stock of outward FDI over last 25 years
increased from 8,3% up to 34,6% making the group of Emerging countries the biggest OFDI
contributor on the global scale. One could observe that after a phase of long down-market
relation between so called North and South, the roles has been reversed, nowadays up-market
FDI is a fact. Explanation of this process lays in fast development of Emerging countries,
transfer of know-how and technology from developed to developing countries and last but not
least decreasing of trade barriers and worldwide liberalization of trade.
II.1.3 Determinants of FDI
Bruce A. Blonigen and Jeremy Piger from National Buraeu of Economic research, who
based their research of Determinants of FDI on Bayesian approach and data from years 2000’s
16
Andreff, V. (2003), “The newly emerging TNCs from economies in transition: a comparison with Third World
outward FDI”, pp. 77.
17
Svetlicic, M. (1997), “Outward foreign direct investment by Central European economies and restructuring”, in
K. Macharzina, M.–J. Oesterle, J. Wolf, eds., Global Business in the Information Age, Proceedings of the 23rd
Annual EIBA Conference (Brussels: European International Business Academy)

22
come to interesting conclusions regarding the determinants of FDI. According to the results of
their work the most relevant factors that determine cross-country FDI patterns are:18
 Geography besides pure distance
 Multilateral trade openness
 Bilateral trade openness
 Cultural distance
 Business costs and tax policies
 Communications infrastructure
 Financial infrastructure
 Legal and political institutions
II.2 Impact of new trends from emerging countries on World’s FDI
routes
The transformation from socialism to capitalism was the main factor that enabled
countries from Central and Eastern Europe to become competitive, multinational and innovative.
“The transition process of the Central and Eastern European (CEE) countries has led not only to
the growing attractiveness of these economies for inward foreign direct investments but also
contributed to the emergence of outward foreign direct investment (OFDI) from that region.”19
As previously mentioned OFDI of CEE countries declined after system transformation, however
it didn’t take long for those countries to start some development moves.
Economic recovery took place in most of CEE countries by 1993-1994, these economies became
more stabilized after succeeding in controlling inflation and decreasing their fiscal deficits.
In fresh economic environment that has been established in CEE countries, entrepreneurial
determination resumed enough to trigger an investment boom in the domestic economy (Increase
in Inward Foreign Direct Investment) and after several years enabled companies to invest abroad
(Increase in Outward Foreign Direct Investment).
“A new wave of outward FDI took place in the de novo private sector, and old firms – either
privatized or still state-run resumed their foreign investment business, primarily in
18
Blonigen, B. and Piger, J. (2011), “Determinants of Foreign Direct Investment”, pp. 42.
19
Ciesielska-Maciągowska, D. (2014) “Polish Foreign Direct Investments – trends, patterns and determinants”,
The Macrotheme Review, 3(1)A, pp. 221.

23
neightbouring countries”20
By that time many countries from CEE started their negotiations for accession to the European
Union, which required harmonization of FDI regulations and laws with European standards in
this matter. It can be considered as another factor which helped to develop consistent increase in
both IFDI and OFDI.
“In Poland as well as the other CEE countries there is still a huge disproportion between the
stock of the inflow FDI and the outflow. In 2012 the stock of inward FDI in Poland reached 48%
which was close to the EU average and much lower than in other CEE countries such as
Hungary (82%), the Czech Republic (69%) and the Slovak Republic (60%).”21
Slightly lower results of Polish inflow and outflow FDI are in my opinion caused be the fact that
Poland is the biggest country among CEE group and its internal market is much greater than
internal markets of other CEE countries, thus this might explain relatively low percentage value
of inward stock FDI. Nevertheless both inward and outward FDI from all CEE countries
constantly increases both as nominal and as percentage of GDP values.
I believe that this trend is going to continue for many years making countries from CEE
more competitive and finally they will become not only beneficiates of IFDI but also of OFDI.
Another promising fact is that countries from CEE begin to specialize in high-technology and
innovation, which is fostered by increased government spending on Research & Development
but also many European projects helping new EU members to become innovative not only in
Europe but also on global scale.
Lastly there can be distinguished a new trend in Inward Foreign Direct Investment, many
CEE countries encourage or in some cases demand not only the investment itself but also
transfer of know-how which is very crucial in current business environment.
All of these factors contribute to new trend of up-market FDI flow which is flow of Foreign
Investment from developing countries such as CEE countries to already developed countries (see
cell 4 in Table II.1).
20
Jaklic, A. and Svetlicic, M. (2001). “Does transition matter? FDI from the Czech Republic, Hungary and
Slovenia”, Transnational Corporations, 10(2) (August), pp. 67-74.
21
Ciesielska-Maciągowska, D. (2014) “Polish Foreign Direct Investments – trends, patterns and determinants”,
The Macrotheme Review, 3(1)A, pp. 221.

24
Chapter III
Different internationalization strategies based on
industry, company size and the situation on domestic
and foreign markets
In the last part of this paper reader can find not only theoretical concepts of market entry
modes but also show on the example of three different companies from the Region of Central
and Eastern Europe different internationalization strategies, market entry modes and finally
different motives that determined their decisions to become MNCs.
III.1 Market Entry modes
Selection of entry mode during the process of enterprise internationalization is very
important decision, company need to be sure that the chosen method is going to be the most
beneficial and cohesive with company’s policies, strategies and future goals.
Therefore, “selecting the most appropriate entry mode is a long-term strategic decision of the
utmost importance for a small, rapidly internationalising firm”22
. To have an idea of the most
characteristic factors taken into consideration while choosing the right entry mode, it is advised
to have a closer look into point III.1.2. Again as in case of internationalization, the recent process
of increased globalization, liberalization of trade and technological advancement, caused a shift
from traditional gradual entry modes to modern accelerated entry modes.
Hedlund & Kverneland (1985) provide evidence of new trend in the process of
internationalization and claim that: “the establishment and growth strategies on foreign markets
are changing towards more direct and rapid entry modes than those implied by theories of
gradual and slow internationalization processes”23
.
Of course it is still only a trend and traditional slower entry modes are still a very common
22
Agarwal, S. & Ramaswami, S. (1992) “Choice of foreign market entry mode: Impact of ownership, location and
internalization factors” Journal of international business studies, Vol. 23 No. 1 pp. 14
23
Karlsen, S. (2007) “The Born Global – Redefined. On the Determinants of SMEs Pace of Internationalization”
pp. 47

25
practice especially in case of entering an unsafe market so that the company could diversify the
high risk associated with risky markets.
Moreover it is worth to note that more established exporters will often take into consideration
completely different aspects while choosing the entry mode than the companies that just started
their business activities.
Various entry modes possibilities illustrate vast differences in case of resource commitment, the
degree of risk associated with the process of market entry and finally diverse degree of control,
which are all dependent from the choice of market entry mode.
III.1.1 Different Entry modes
In this section I am going to write about different types of entry modes which I have
categorized to Non-equity entry modes, and Equity entry modes.
I’ve categorized them by equity criterion in order to show that in most cases the non-equity entry
mode is burdened with much less risk than in case of Equity entry modes, mostly due to the fact
that Equity entry modes require high capital commitment, thus one can observe that companies
following incremental strategy of internationalization like Uppsala-Model will most likely start
their internationalization process with non-equity entry mode such as for example (exporting via
independent representative) in order to minimize the risk of expansion failure.
On the other hand recently popular Born Globals will certainly start their process of
internationalization by choosing one of many Equity entry modes which as I already stated are
burdened with higher capital commitment and higher risk of failure.
III.1.1.2 Non-equity entry modes
Export via independent representatives
Exporting via independent representatives offer a solid way for a company to indirectly
sell their goods, usually the independent representatives sell products from variety of suppliers,
thus the company retain little or no control over the products whatsoever. Additionally
independent representatives often offer already well-established distribution chain and product
presentation. It is why it is considered as one of first starting activities for companies which
follow traditional incremental internationalization process, because it bears little risk, requires
small financial commitments, and finally offers limited feedback from the market, which can

26
encourage company to further business activities, which would require more capital
commitment.
Export via sales representatives
In case of exporting via sales representatives such as Agents or Consignees, the exporter
retain most of control over the products such as product pricing strategy, however it is important
to keep in mind that unlike in case of exporting via independent sales representatives, exporter
bears the responsibility for goods until they are sold. As in comparison to indirect exporting,
selling via sales representatives offer more control over the product and the process of selling,
but on the other hand making the process more risky and requiring more financial commitments.
Franchising
Franchising is a great opportunity for a company with already well established brand
name and business model. With a minimum of financial commitment company can expand
overseas and utilize its winning business formula, moreover the fact that franchisees’ profits are
completely dependent on their ability to sell products, there is no need for further motivation,
many franchisees will possess much bigger knowledge about local market, thus making it even
easier for the franchisor to expand abroad. In most cases franchisees follow an unified pattern,
which has been established by the franchisor, which increases the chances of success of all units.
As it comes to disadvantages of franchising, one must mention that franchisor’s income is only a
part of real profits that each franchisee is generating. After the end of contract between
franchisor and franchisees, which is usually 10 years, the franchisees can make use of acquired
know-how and become competitors for franchisor in the future.
Licensing
Again as in the case of franchising, entering a market via licensing is a good example of
low-capital commitment and low-risk entry mode. Licensing is a contractual transaction where
the licensor offers intellectual property assets such as for example patents, technology, know-
how, managerial skills, trademarks and many more to a foreign company which is the licensee,

27
in return the licensor receives either one-time payment or royalty payments which are calculated
as a percentage of sales. “Royalty rates range from one-eight of 1 percent to 15 percent of sales
revenue.”24
Licensing provides many advantages for a company, one of them is the possibility to
avoid certain trade barriers, another one is of course minimal resource commitment
requirements, and finally relatively low both political and economic risk. On the other hand
relatively low income, loss of control over the intellectual property and the fact of sharing
company’s R&D secrets might make some companies reluctant to use this entry mode.
III.1.1.2 Equity entry modes
Greenfield Investment
Greenfield Investment is a wholly owned subsidiary, which is established from complete
scratch. Such entry mode is one of the most capital intensive entry modes, and as with other
equity entry modes Greenfield Investment entails high risk for the investing company. One of
the most important characteristics of Greenfield Investments is that they offer full control over
the company operations, additionally all profits go to the enterprise. Apart from obvious
advantages of such entry mode, many companies turn out to be reluctant to this market entry
mode due to very high risk associated with the full ownership. Full ownership means that
company need to carry the responsibility for all potential losses, additionally company need to
establish business network, marketing strategy and many other important factors on its own.
Equity Joint Venture
JVs are considered to be a very good entry mode for companies entering foreign markets,
especially emerging markets which requires specific local market know-how and already
developed business network. Equity Join Ventures can be categorized in accordance to equity
stake: majority, fifty-fifty and minority ventures. JVs provide moderate profits for the company
as well as retain relatively high level of control, making it a desired entry mode for many
Multinational Companies. In some markets this entry mode is the only choice since in some
industries Wholly Owned Subsidiaries are forbidden for foreign capital. The biggest
disadvantage of this entry mode is, paradoxically, our business partner, which can turn out to be
24
“Licensing may be quickest route to foreign markets.” Wall Street Journal, September 14, 1990, Sec. B, pp. 2

28
conflictual or even toxic for the company operations.
Mergers and Acquisitions
Companies which decide to enter a market by M&A entry mode, can benefit from
various advantages that this entry mode provides. Firstly as compared with other equity entry
modes, M&A provide a rapid access to the local market. Secondly it is a great way to acquire
well-known brand name, which will shorten to process of establishing a new brand name and
dramatically cut-down the marketing costs. Additionally it can be an excellent mode to acquire
know-how, patents and business network. Coming to possible disadvantages of Mergers and
Acquisitions one must mention the corporate culture differences of two companies that can turn
out to be counterproductive for a company. Another common disadvantage of such entry mode,
is overpayment for the acquired company.
III.1.2 Determinants of entry modes
As usually there is plenty of different motives which influence decision of market entry
mode. In our case I decided to categorize them into external which are environment-specific
criteria and internal, which are company-specific criteria.
External determinants:25
 Market Size and Potential
As it comes to external determinants of market entry mode, size of the target market, and
its maturity, usually are considered as the most influential factors taken into
consideration while deciding about the choice of market entry mode. In most cases
mature markets validate high-capital investments, since they usually offer stable, well-
developed business environments additionally they are commonly associated with
relatively low level of risk. On the other hand developing markets, often are
characterized as markets with relatively low competition, insufficient infrastructure and
either political or economic instability. Commonly preferred entry mode in such cases is
one of non-equity entry modes such as for example indirect exporting or licensing.
25
Hotabe, M. and Helsen, K. (2010) "Global Marketing Management", pp.pp. 294-299

29
 Risk
Another important factor taken into consideration by every company is the Risk factor.
Risk reflects the current situation on the market, and relates to instability in both
economic and political environment. The greater the risk factor is, the more reluctant to
high capital commitments the company is. Companies In order to minimize the risk
associated with instable markets often choose low-cost market entry modes, that enables
the company to gather market information and create their business network with for
example potential distributors or clients.)
 Openness
Country openness for foreign investors is another crucial determinant, which of course
cannot be omitted while choosing the right entry mode. Many countries differ
significantly in terms of Business law, the great example is China where in certain
industries investors may be restricted or even prohibited to set up a Wholly Foreign-
Owned Enterprise, thus they need to choose for example Join Ventures entry mode
between foreign investor and the Chinese company.)
 Competitive Environment
This is another important factor, which may influence the market entry modes decisions.
In some cases cooperation with our competitors may turn out to be beneficial for both
companies, causing a Synergistic Effect also known as “2+2=5-effect”, which not only
merges the value of both firms, but also provides additional value. Popular entry mode
among companies which want to benefit from this entry mode determinant is Mergers &
Acquisition.
 Cultural Distance
Depending on how two countries differ in terms of culture, companies which follow
traditional incremental internationalization method, would most likely choose one of the
non-equity entry modes in order to gather some market information, and gradually
increase their commitment to the market, trying to build as vast business network with
local representatives as it is only possible.
This process takes at least 4 steps and is considered rather a long process which aims

30
mostly to reduce potential risk of market entry failure. In case of BGs as long as there
will be a niche for certain goods in given market, they will enter it no matter how big the
cultural gap is.
 Local Infrastructure
By term local infrastructure it is meant not only transportation network but also
communication and distribution system. In general companies are rather reluctant to high
capital commitments in countries with relatively low level of local infrastructure. On the
other hand they are more eager to invest more capital to countries with well-developed
local infrastructure.
Internal determinants:26
 Company Objectives
Firm objectives are a main determinant influencing the choice of market entry mode.
Depending on firm plans and aspirations, companies that have limited ambitions will
usually choose entry mode that require a minimum amount of capital and human
resources capital, for example licensing. As opposed to companies with limited
ambitions, firms with high aspirations, will most likely choose entry modes that offer
them both flexibility and control, which are necessary in order to achieve their aims.
An equity entry mode such as for example greenfield investment would be highly
recommended in this case, in order to meet the flexibility and control criteria.
 Company control and protection of know-how
Some Multinational Companies would like to retain certain degree of control over its
foreign operations. It can be achieved by following this pattern: “To a large degree,
the level of control is strongly correlated with the amount of resource commitment:
the smaller the commitment, the lower the control.”27
In other words, company need
to face a trade-off between the amount of resource commitment that they are willing
to make and the degree of control over their foreign operations that they are willing to
retain.
26
Hotabe, M. and Helsen, K. (2010) "Global Marketing Management", pp. 294-299
27
Hotabe, M. and Helsen, K. (2010) "Global Marketing Management", pp. 297

31
 Target market potential and company flexibility
An entry mode that seems to be proper in current situation, doesn’t have to be
attractive in a five, ten or fifteen-year period. Local business environment, changes
continually, meaning that in a ten-year period there can be hundreds of new
competitors, additionally customers constantly change their preferences, they become
more demanding as well as their price and product quality awareness is becoming
higher, the more mature the market is. It is why companies should also focus at
achieving high level of operational flexibility, in order to meet the market needs. It is
especially crucial in emerging economies which are developing in a much greater
pace than already established economies. Choosing one of non-equity market entry
modes wouldn’t be a bad choice, since they offer much more flexibility, due to lower
capital commitment requirements.
III.2 Drutex S.A. as an example of Multinational Company from
CEE, following Uppsala internationalization model
History and company profile:28
Drutex S.A. is a Polish company that recently become the European leader in PVC
windows production as well as their distribution. The firm has been operating on the Polish
market since 1985. However what is interesting, company has launched its first production line
for PVC windows Drutex in 1994. In 1999 the company implemented the production line for
aluminium woodwork. In the period of 2000-2002 the company invested in development of the
production capacity and launched several new woodwork production lines. In 2002 DRUTEX
introduced the production of wooden windows and doors, what widened the product portfolio of
the company. Since 1st of July 2003 the company converted its legal form into joint-stock
company and since then has been operating under the name Drutex Joint Stock Company.
Currently Drutex is the biggest manufacturer of PVC woodwork in Europe. In its offer the
company has not only windows but doors and facades made of aluminium and wood. Drutex is a
modern company which focus on constant development of its production centers as well as on
widening the distribution channels thanks to its huge transportation fleet consisting of over 160

32
vehicles. In October 2014 DRUTEX completed the construction of the first stage of the
European Centre for Woodwork, the new production hall doubled Drutex capacity and extended
its product range. The construction of the second phase of the EWC, growth dynamics and its
courage in terms of the implementation of multi-million investments confirms company’s
leading position on the global windows and doors market. Moreover, new production halls
enable company to extend its distribution network, which already consists of business partners
around the world, i.e. - Europe, the US, Mexico, Australia and the Middle East.
Company internationalization model and market entry modes:
Drutex S.A. is following incremental internationalization model since its beginnings.
After years of operation on Polish market Drutex started irregular exports of its products initially
to the closest markets. After the period of irregular exports, company had its first international
experience, the next move of Polish company was a decision to export via independent sales
representatives. The key determinant for this decision was relatively low risk of this entry mode
as well as low financial costs. Entering German market had its explanation from the
geographical, cultural and market potential point of view. German market is a mature market, the
competition is very tight, however offering product for much lower price simultaneously with
comparable quality, determined the success of this company. Nowadays Drutex exports its
products to nearly all European countries, United States and Australia. Recently the company
started its operations in Mexico and it plans to extend its operations to the Middle East, so one
could observe that “psychic distance” and generally speaking cultural distance turned out to be
more important than geographical distance. Additionally it is clearly visible that company was
extending its operations mostly to countries which are considered to be stable.
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33
III.3 Asseco Poland as an example of Multinational Company from
CEE following Accelerated traditional model of
Internationalization.
Asseco S.A. is the biggest Polish IT company and the fifth largest IT company in Europe
in terms of software volume sold. Asseco Poland consist of many partnerships and had grown
rapidly in the past decade, being present in over 40 countries and employing over 17,000
employees worldwide.
Asseco is present on Polish market since 1980s. Its main field of business activity is
production and development of computer software as well as offering IT services. Asseco is the
dominant IT software and solutions supplier for Polish banks (over 50% of polish banks are
supplied by Asseco), but not only, Asseco provides its products and services to a large variety of
sectors such as: Insurance, public administration, electricity, telecoms, healthcare and even
International Organizations such as European Union or North Atlantic Treaty Organization.
Initially Asseco followed some steps which are characteristic for Uppsala model,
however the longer the company operated on the Polish market, the more aggressive strategy it
has been adapting. Asseco started its operations by firstly establishing a strong local position
through various Mergers & Acquisitions and then, decided to expand its operations to neighbors
markets, which is understandable from the traditional internationalization strategy point of view.
Till 2010 Asseco Poland focused on improving its position at the European IT market by various
acquisitions of European IT companies.
In 2010 Asseco Poland decided to acquire Israel’s Formula Systems, which is a holding
company established in 1980s. Formula Systems is listed on Tel Aviv Stock Exchange as well as
on NASDAQ Global Markets. By this acquisition Asseco Poland not only entered two Stock
Exchanges, but also expanded its global presence and strengthened its position on markets where
it already was present, all this due to the fact that Formula Systems operated in Israel, United
States, Canada, India, Japan, Germany, Netherlands, France and Hungary.
Adam Góral, President and CEO of Asseco Poland who holds 10% of company shares,
explained: "The acquisition of Formula Systems is our first step in building a truly global
position of Asseco. The Formula Systems Group provides us with access to unique know-how
and the world's leading innovations. We are entering very promising markets. Today we open
the door to global clients who have been out of our reach so far."30
In 2012 Microsoft proposed Asseco Poland to jointly work on development of a power
industry solution. Jarosław Szymaniuk, Director of Sales to Industry and Utilities Sectors at the
Polish division of Microsoft explains: “Our cooperation was necessary in order to create a
comprehensive offering for power companies because no single supplier possessed a technology
that would satisfy all the essential needs and requirements of the industry. Therefore, Microsoft
29
http://www.asseco.com/company/company-profile/, 2015-08-12 Time: 13.00
30
http://asseco.com/press-room/?year=2010, 2015-08-12 Time: 14.30

34
embarked on a partnership with Asseco, which has a well-established leading position in the
market of IT solutions for the utilities sector. The rationale behind such cooperation seems pretty
clear given that almost 60 percent of all electricity bills in Poland are generated from the
proprietary billing systems implemented by Asseco. Owing to the above and a truly open
approach, Asseco and Microsoft decided to integrate their IT solutions in order to provide the
suppliers of electricity with an integral technology tailored to their needs,”31
It only shows how well established and dominant position Asseco Poland has, not only in Poland
but in Europe, and according to their future plans also at the worldwide scale.
Asseco Poland cannot be categorized either as a company, which follows incremental
strategy and either as a Born Global. It is a company that seems to benefit from both those
internationalization methods. As it was already said in previous chapters of this paper, due to
abolishment of trade barriers, ever growing globalization and development of technological
advancement, many companies decided to choose more rapid and direct market entry modes.
Asseco Poland during the first years of its operations followed rather safe and incremental
strategy, it could be justified by the fact that Poland was in a very weak economic position after
the transition from centrally planned economy to capitalism, thus many companies were rather
reluctant to ambitious and risky expansion operations. However by the time of Polish accession
to the European Union we could observe a breakthrough in the behavior of polish companies.
Asseco Poland is the best example of it, unknown Polish company started acquisition of over a
dozen European IT companies and finally in 2008 it became Europe’s fifth-largest software
vendor by revenue. Then Asseco Poland decided to enter global market via acquisition of
Israel’s Formula Systems, which has been by that time well-established global IT supplier.
Summarizing, the Asseco Poland can be considered as a company which follows
accelerated incremental internationalization model. It’s main market entry mode is Mergers &
Acquisitions, which allows rapid market presence and takeover of know-how as well as local
business network.
31
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35
III.4 Medicalgorithmics as an example of Born global enterprise
from CEE
Medicalgorithmics is a young Polish Multinational Company, which has been established
in year 2005, by two Polish scientists-entrepreneurs. Early years of their business operations
were most likely focused on development of their unique technology and raising funds for
company development. Fortunately for the company they managed to attract two investors: New
Europe Ventures, and BIB Seed Capital. Their main field of study was the innovative device
called PocketECG which was and still is by today the most technologically advanced remote
arrhythmia monitoring system in the World.
Initially company tried to find partners and demand for their goods and serviced on their
domestic market, however Poland turned out to be still not as technologically advanced market
as mature Western markets. Company was forced to look for foreign markets right from the
beginning of it business operations. In 2009, distribution of PocketECG at U.S market has been
allowed by American Food and Drug Administration (FDA). Since that time company focused at
direct exporting of its innovative product. In 2010 the company exported the majority of its
goods to United States, additionally Medicalgorithmics decided to extend its offer by
programming services and outsourcing of telemedical services.
Recently company still considers United States as its target market, however via
licensing and many non-equity Joint Ventures company allows its business partners to resell
their main product PocketECG for the share in sales in return. As for the future strategy
company declared a plan to build another fabrics producing its PocketECG in order to meet the
constantly growing demand for its product, additionally company is considering various numbers
of acquisitions all over the world.
Medicalgorithmics is an example of a company that become Multinational right from the
beginning of its existence, additionally its products are considered to be of highest quality and
innovativeness, thus making Medicalgorithmics a Born Global enterprise. Main determinant for
32
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36
its internationalization strategy was already mentioned lack of demand and technological
advancement of domestic market for company’s goods and services based on cutting-edge
technology.
Speaking of entry mode that Medicalgorithmics based its process of internationalization
one cannot distinguish single market entry mode. Company in order to keep their presence on
foreign markets had to adopt several entry modes, initially direct exporting, followed by
licensing, non-equity Joint Ventures, strategic alliances and of course acquisitions.
Figure III.1 Comparison of determinants and motives influencing choice of internationalization strategy,
presented on the example of 3 companies from Central and Eastern Europe
Chosen
internationalization
method
Determinants of entry mode Chosen entry mode
Asseco Mixed Approach
Market size and potential,
company objectives
Initial difficulties in finding the
right distributor in the foreign
market
Competitve business environment
Lack of demand for high-tech
products and services
Lack of foreign market connections
Main determinant of decision to
internationalize
Threats andbarriers
Drutex
Medicalgorithmics
Willingness to expand company's
operations
Foreign market opportunities Uppsala model
Cultural distance, geographical
location, risk, flexibility
Born Global
Market openess for innovative
solutions, local infrastructure
Mergers & Acquisition
Export via independent
representatives
Multiple entry modes, both non-
equity as well as equity
Summary of Chapter III:
In order to understand different motives influencing decisions made by each company it
is advised to have a look at Figure III.1, on first sight one can notice that each company not only
decided to choose different internationalization method, but the whole process behind the
decision was completely different. Most likely there are hundreds of factors determining the final
decision of internationalization, however by analyzing just some of them, we can obtain
interesting findings as well. Asseco Polska as an example of company following a Mixed
Approach of internationalization strategy, decided to become international company mostly due
to its willingness to expand its business operations to foreign markets, on the other hand
Medicalgorithmics’ decision to become international company was rather a consequence and the
necessity of situation on its domestic market, where there was no demand for its innovative
products and services. Same applies to the choice of market entry modes, for Asseco Poland the
main determinant in decision of market entry mode choice was the target market size and
potential it possessed. In case of Medicalgorithmics choice of entry mode was dictated again by
their unique field of business operation and innovativeness of products they offered. This short
example explains how individual the process of enterprise internationalization and market entry
mode choice are.

37
Findings
Following paper focuses on proving that despite still major development and economic
gap between advanced Western economies and countries from Central and Eastern Europe,
MNCs from CEE possess not only promising business potential but also bring competitiveness
and innovativeness to global markets.
Analysis of Foreign Direct Investment shows that share of developing countries in
World’s Outward Foreign Direct Investments not only grew once, but it can be considered as a
trend, thus making it no longer neglectable by scientists and economists.
Example of previously explained Drutex S.A. company shows that company from the
CEE region can become a leader in such a vast market as Europe. Moreover Drutex doesn’t
seem to be satisfied by the fact of being a leader in only one market, Drutex constantly seeks
new markets and ways to improve quality and standard of its products, as well as is working hard
on bringing completely new products to its portfolio.
International success of Asseco Poland not only illustrates that company from CEE
region can achieve success on global scale, but also in high-tech industry. But what is really
crucial about Asseco is that it is becoming equal partner for such a Multinational giants as
Microsoft Corporation showing that companies from region of Central and Eastern Europe are
not only distinguished by relatively low price of goods and services but also innovativeness of
products and business solutions.
Medicalgorithmics on the other hand shows that after accession of Poland to European
Union, companies from Central and Eastern Europe can equally compete all over the world due
to uniform trade agreements and liberalization of trade law. Additionally Medicalgorithmics
represents a good example of recent trend in global markets, that companies from high-tech
industries don’t need to follow incremental strategy of internationalization, instead they can
focus on accessing foreign markets right from the beginning of their business operations. In
other words they are becoming a Born Global companies.
Another interesting finding about already mentioned case study is that every company no
matter of its country of origin, business model or branch of business, can achieve international
success and eventually become a Multinational Corporation. However such company first need
to prepare in-depth analysis of potential target markets, short-term business objectives as well as
long-term strategy. In such analysis choice of internationalization method is perhaps the most

38
crucial aspect for every company, since once wrongly chosen internationalization strategy can
become not only a financial loss for a company but in case of smaller firms, it can turn out to be
deadly for their business existence. Finally choice of market entry mode is of great importance as
well. In both cases while choosing the appropriate internationalization strategy and entry mode,
it is highly recommended to take into consideration all possible threats, barriers, advantages and
disadvantages of each strategy, always having in mind the domestic market environment from
which company starts its business journey. Simply meaning that companies from different
regions and even from different economies should prepare such analysis in accordance to its
home country situation. Such pre-internationalization analysis might not only bring financial
profits for the enterprise, but it can provide the right path for the company to become
Multinational leader in its business sector.
Summarizing, companies from Central and Eastern Europe are still in a different starting
position in comparison to those from developed countries. Despite the fact that enterprises from
Western economies possess greater capital, easier business connections and better local business
environment, enterprises from Central and Eastern Europe are becoming more present on global
markets, and what is interesting about it, they are present in various industries, even in high-tech.
It is worth to note that it is not a norm, even though the number of Multinationals from Central
and Eastern Europe is growing year by year it should be treated as a trend. Same applies to
internationalization strategies of companies from the region of CEE, most of them follow
traditional incremental internationalization strategy. Born Global enterprises and companies that
follow accelerated incremental strategy are much less frequently observed, however as it was
already said, the number of companies that abandon traditional internationalization strategies is
growing.

39
Bibliography
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SMEs Pace of Internationalization”, 2, pp. 15
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Swedish cases”, Journal of Management Studies, October, pp. 305-322
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1. “Licensing may be quickest route to foreign markets.” Wall Street Journal, September 14,
1990, Sec. B, pp. 2
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21, 2004, pp. 8
Internet:
1. http://www.drutex.pl/en/about-us/history.html, 2015-08-10 Time: 19.20
2. http://www.asseco.com/company/company-profile/, 2015-08-12 Time: 13.00
3. http://asseco.com/press-room/?year=2010, 2015-08-12 Time: 14.30
4. http://asseco.com/press-room/?year=2012, 2015-08-12 Time: 17.00
5. http://www.medicalgorithmics.com/pl/?page_id=13, 2015-08-12 Time: 22.00

41
List of figures
Figure I.1 Visualization of "psychic distance" phenomena.......................................................................... 8
Figure I.2 Comparison of Low-context and High-context characteristics ................................................. 12
Figure II.1 Source and destination of FDI.................................................................................................. 18
Figure II.2 Share of worldwide stock of outward FDI, various years........................................................ 18
Figure III.1 Comparison of determinants and motives influencing choice of internationalization strategy,
presented on the example of 3 companies from Central and Eastern Europe............................................ 36

42
List of charts
Chart II.1 Share of worldwide stock of outward FDI, various years.......................................................... 19

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