Influence of Host Country Culture on Entry Mode & Success
1. BSP2005 PRESENTATION
C A S S A N D R A L O W E L A I N E T A N L I L I R O S A L I N D A P H A N
“Analyse The Influence Of An Asian Country’s
Culture On A South Korean Company’s Entry
Strategy And Success”
2. Q U E S T I O N B R E A K D O W NS A M S U N G E L E C T R O N I C S
• Founded 1938, South Korea: Now a leading
multinational electronics producer
• Product mix: Consumer Electronics, IT and
Mobile Communications and Device Solutions
E N T R Y S T R A T E G I E S
2 levels to success:
• Consistent profitability
• Increasing market share over a period of time
D E F I N I T I O N O F S U C C E S S
EQUITY
• Joint Venture*
• Wholly-owned
Subsidiary*
• Greenfield investment
NON-EQUITY
• Contractual Agreement
• Licensing
• Export
• Strategic Alliances
CHOICE OF
ENTRY MODE
• Degree of Control
• Resource Commitment
• Investment Risk
• Share of Profits
• Perception in Host Country
H O F S T E D E ’ S T H E O R Y O F
C U L T U R A L D I M E N S I O N S
POWER DISTANCE
UNCERTAINTY
AVOIDANCE
MASCULINITY
INDIVIDUALISM
TIME ORIENTATION
.460
.368
-.348
EXPL. VARIABLE BETA
Appetite for and comfort with
the ambiguous & foreign
LINK
Emphasis on achievement,
display of prestige
Conflation of self identity with
that of greater community
-
-
Pragmatic (Long-Term) vs
Normative (Short-Term)
Hierarchy, need for
establishment of structure
CULTURAL
DISTANCE
*Results from logistic regression of hypothesis that cultural distance (as measured by power distance, uncertainty avoidance and individualism) affects performance of the
firm. Source: Journal of Management and Marketing Research. R2
= 0.223
3. C O M P A R I N G C U L T U R E S
South Korea
China
India
S O U T H K O R E A
C H I N A
I N D I A
Power Distance
Uncertainty Avoidance
Long-Term Orientation
Masculinity
Power Distance
Uncertainty Avoidance
Long-Term Orientation
Masculinity
Power Distance
Uncertainty Avoidance
Long-Term Orientation
Masculinity
Individualism
Individualism
Individualism
ROOTS OF
CONFUCIANISM
• China shares South Korea’s Confucian roots,
hence both have similar levels of long-term
orientation.
• Cultural distance lies mainly in degree of
masculinity and individualism, with China
being highly collectivistic and greatly valuing
achievement
K E Y I N S I G H T S
• India’s cultural dimensions differ in Long-
Term Orientation, Uncertainty Avoidance,
Masculinity andIndividualism
• Notably, cultural distance stems mainly from
degree of individualism, with India being
significantly more individualistic in
comparison to China.
Cultural Distance
Cultural Distance
LOW-MODERATE
MODERATE-HIGH
• Observation thus far that greater geographical
distance may correspond to greater cultural
distance to to confluence of factors such as shared
history, religion
• Degree of individualism differs the most among all
three countries, especially between China and
India
• Masculinity in both China and India greater than in
South Korea
4. C H O I C E O F E N T R Y M O D E
MODERATE-HIGH
CULTURAL DISTANCE
LOW-MODERATE
CULTURAL DISTANCE
C H I NA I ND I A
E NTR Y MO D E C H O S E N: JO I NT V E NTU R E
INVESTMENTRISK:
RESOURCE COMMITMENT:
DEGREE OF CONTROL:
SHARE OF PROFITS:
PERCEPTION: S T I L L P E R C E I V E D A S S O U T H
K O R E A N B Y H O S T C O U N T R Y
C O N S U M E R S
• HIGH UNCERTAINTY AND
RISK POSED
• MODERATE UNCERTAINTY
AND RISK POSED
5. • Selection and Concentration
• High quality targeting top 5%
S A M S U N G I N C H I N A
• Secured production bases via Joint
Venture in Tianjin in 1992 to take
advantage of lowwages
C H IN A
• Established correspondence system
with trade representative offices -
firmed up its footholds in Beijing and
Shanghai,secured footholds for trade in
other major cities such as Dailian,
Guangzhou and Qindao.
J O I N T V E N T U R E E N T R Y
C O R R E S P O N D E N C E
S Y S T E M
P R E M I U M P O S I T I O N I N G
1992
199X
199X
1996 • Samsung Investment Corporation
established
I N V E S T M E N T C O R P
ASPECT IMPACT
HIGH POWER
DISTANCE
• Required formality of high status assigned to
Samsung’s Chinese leaders
MOD-HIGH
UNCERTAINTY
AVOIDANCE
• Compounded Samsung’s lack of localisation
LOW
INDIVIDUALISM
• Collectivistic nature of Chinese society prove
treacherous when homegrown brands such as Xiaomi
began to match Samsung in quality,but were
preferred as they were homegrown
• Premium positioning further alienated lowerincome
consumers from the brand
LONG-TERM
ORIENTATION
• Early into its entry,Samsung made sure to form Guan
Xi through establishing correspondencesystems
HIGH
MASCULINITY
• Samsung catered to the growing need forprestige
among China’s higher-income segment throughits
premium positioning
LOW-
MODERATE
CULTURAL
DISTANCE
• Samsung could have involved more equity and control
in its entry mode
• Entering via Joint Venture retained its perception as
South Korean
6. S A M S U N G I N I N D I A
• Coincidence with Era of Liberalisation
• 51:49 JV with RSCPL
• RSCPL later became wholly-owned
subsidiary
• Strategic tie-up with Syscon, a leading
global distributor and retailor of
electronic brands.
• Improve on customer service for greater
customer retention
F A V O U R A B L E E N T R Y
C O N D I T I O N S
S T R A T E G I C T I E - U P S
P R I C I N G S T R A T E G Y
F O S T E R I N G C U S T O M E R
R E L A T I O N S H I P S
• Adopted positioning of high quality at
affordableprices
1995
200X
2012
2014
2015
• Introduced products previously
manufactured indigenously
M A K E F O R I N D I A
IN D IA
ASPECT IMPACT
HIGH POWER
DISTANCE
• Required formality of high status assigned to
Samsung’s Indian leaders
• Samsung addressed this with its strategic tie-ups
MODERATE
UNCERTAINTY
AVOIDANCE
• Dovetailed with Samsung’s move to forge customer
relationships and ”Make for India”
HIGH
INDIVIDUALISM
• Indian consumers did not excessively viewSamsung
as an outsider,which benefitted Samsung
LONG-TERM
ORIENTATION
• Did not affect Samsung significantly
MODERATELY
HIGH
MASCULINITY
• This dovetailed with Samsung’s strategy of quality,
but at affordableprices in India
MODERATE-
HIGH
CULTURAL
DISTANCE
• Dovetailed with Samsung’s entry mode (Joint Venture)
due to lower involvement and thus risk
7. C O M P A R I S O N S U M M A R Y
CHINA
Initial success was not sustained
MARKET SHARE
INDIA
Continued success
MARKET SHARE
Market share dropped from 19.9% to9.7% comparing
1Q2014 with1Q2015, which saw Apple, Xiaomi and
Huawei usurp Samsung from its dominant spot.
Samsung has been consistently the dominant
player inthe Indian Smartphone Vendor Market.
19.9% 9.7%
MARKET
SHARE
MARKET
SHARE
8. C O N C L U S I O N
High Power Distance & Uncertainty Avoidance in both countries
Samsung built relationships with local corporations and entities
Greater degree of
collectivism
Chinese supported home
brands vs Samsung
Disparity in Samsung’s ability to maintain dominant
market share was due to cultural aspect of individualism
Samsung entered via
Joint Venture, and kept
its branding
Samsung entered via Joint
Venture and kept its
branding
LOWERCULTURAL
DISTANCE
GREATER CULTURAL
DISTANCE
Greater degree of
individualism
Indians focused less on
supporting home brands
To what extent does culture of the host
country influence Samsung’s entry strategy
and success?
• Samsung’s entry strategy was influenced by cultural
distance and individual cultural dimensions.
• Samsung’s success was influenced by cultural distance
and individual cultural dimensions, which further implies
that choice of entry strategy affects success as well.
Host
Country
Culture
Entry
Strategy
Other
Factors
Success
If Samsung had entered China via greater equity means,
e.g. wholly-owned subsidiary / greenfield investment,
Chinese consumers would have perceived itto be less of
an outsider brand
9. O T H E R F A C T O R S
COMPANY
FACTORS
COUNTRY
FACTORS
INDUSTRY
FACTORS
• Size & Resources
• International Experience
• Product & Value Proposition
• Governmental Involvement
• Economic Climate
• Homogeneity of Country
Other Factors Influencing Entry Strategy And Success
• Competitive Forces
• Industry Maturity
10. R E C O M M E N D A T I O N S ( 1 / 2 )
ASPECT RECOMMENDATION
High Power Distance Respect hierarchy
High Uncertainty Avoidance Avoid making products too foreign / unfamiliar
High Individualism Localize sufficiently to assimilate into localidentity
Long-term Orientation Build relationships with locals
High Masculinity Position as premium
High Cultural Distance Apply experience from experiencein lower culturaldistance countries
S U S T E N A N C E S T R A T E G Y
SITUATION RECOMMENDATION
High (Low) Cultural Distance Joint Venture (Wholly-owned Subsidiary)
Prior Experience In International Market Wholly-owned Subsidiary
Lack Of Complementary Resources And Local Market Knowledge Joint Venture
Large Company Size Wholly-owned Subsidiary
High Desired Level of Control Wholly-owned Subsidiary
Intention to increase market share Wholly-owned Subsidiary
Unfavourable Business Environmentof Host Country Joint Venture
Unfavourable Institutional Environmentof Host Country Joint Venture
High Market Share and Growth Rate Wholly-owned Subsidiary
E N T R Y S T R A T E G Y
11. R E C O M M E N D A T I O N S ( 2 / 2 )
C H I N A S P E C I F I C R E C O M M E N D A T I O N S
#1: Joint Ventures in Chinaare not always the golden solution
• Lack of control where control is crucial
• Governmentinfluences partner selection
• Differentmotivations and incentives
• Empirical evidence shows thatWholly-owned Subsidiaries are
more profitable
#2: Local competitors are fierce and rise quickly
#3: Governmentalissues and pressures
• Foreign investmentandentry is restricted to certain industries, as
deemed favourable to Chinaby the governing authorities
• Avoid Chinaif product is easily imitable
#4: Long-Term Commitmentis key
• Research shows that50% of the companies thatinvestin China
expect profitability only in thelong term. And firms thatdo not know
the Chinesemarketunderestimate theinvestments needed to enter
the market.
G E N E R I C R E C O M M E N D A T I O N
#1: Expand in an increasinggeographical radius to gain experience
12. BSP2005 PRESENTATION
C A S S A N D R A L O W E L A I N E T A N L I L I R O S A L I N D A P H A N
Thank you for your attention!
BSP2005 Presentation
Tutorial E01, Group8, Week 11
Total number of slides excluding cover page, thank you & appendix: 10
13. A P P E N D I X : S A M S U N G P R O D U C T M I X
CASSANDRA LOW ELAINE TAN LI LI ROSALINDA PHAN
14. K O R E A N S U C C E S S S T O R I E S I N C H I N A
15. A P P E N D I X : C A S E S T U D I E S
CASSANDRA LOW ELAINE TAN LI LI ROSALINDA PHAN
S U C C E S S F U L C A S E S U N S U C C E S S F U L C A S E S
