Entering a foreign market requires careful study of the existing factors. This is because for any business to flourish, the environment must be conducive for investment. Myanmar, formerly Burma, has been isolated from international arena due to its style of leadership. The country has over the past years be under military rule kind of a leadership. Although the country is rich in oil and gas, the wealth belongs to only a few elites. In addition, the levels of corruption are intolerable. Further, there are many rebel groups in the country. All these factors notwithstanding, the country seem to have taken a new direction by electing a new leader whose strategy is to negotiate with rebel groups. Entry into such a market thus requires careful analysis and investigation. Cameron International Corporation (CIC) has decided to adopt Foreign Direct Investment (FDI) as opposed to contractual agreements. This paper seeks to analyze some of the institutional and risk factors, VRIO, cultural issues, whether invest directly or make contracts, some of the possible joint ventures, the difficult issues and the strategies.
Institutional and Risk Factors
There are many factors that would determine the direction that CIC takes in business. Institutions that are directly linked to business are like the legal registration, judicial processes, governance and related issues. Since the country has been in a state of near-anarchy for ages, it is expected that some institutions are still rigid. For instance, it has been observed that corruption cases are very high yet investigation bodies are not as effective as expected. This is likely to affect business in a negative way. For instance, registration of business may require that business leaders give kick backs to government officials in order that they may secure contracts or licenses. In addition since resources are held by a few minorities, it is likely that even the media is controlled. These malpractices in management of public resources and governance of the country pose several risks to the entire country.
Some of the risk factors include the reemergence of the rebel groups, polarization of ethnic groups against each other, outbreak of civil wars, reverting to military rule, bad politics among others. From the international scene, the government or earlier regimes have been accused on human rights violations as well as genocide allegations. These issues are likely to affect the populations of the country and also lead to pretests thus effect the business transactions. There having been cases of slavery, child labor, human trafficking, sexual violence against the women and forces labor, the company must be very careful on how to treat the employees from the country. Otherwise, this may lead to legal suits against the company; they must be handled in line with international and domestic human rights precepts.
VRIO is a business framework that is used in the achievement of its wider strategic objectives. It is usually used to do the internal analysis of the company. According to Peng, VRIO is an acronym that stands for Value, Rarity, Imitability and Organization. The first aspect of value has to do with the organization can actually exploit an opportunity. It also encompasses the ability of a firm to deal with external threats. With regard to CIC, there is no doubt that Myanmar has a great deal of oil and gas resources. Considering the past experience, the company has adequate capability to exploit them. Moreover, external forces would depend on their nature and severity.
Myanmar is a culturally diverse country. Culture encompasses beliefs, practices, language, religion, arts, attitudes, world view among other aspects. Understanding cultural variables is an important tool in success in any kind of business. This is because cultural knowledge leads to informed product development strategy. Some of the cultural variables worth noting in the context of CIC are the religious inclinations, linguistic differentiation and ethnic differentiation. Perhaps the most significant cultural variable to make use of would be linguistic characteristics of the people residing in the country. Linguistic competence is important because it makes business communication easier. The country is composed of several languages and dialects. Moreover, the official language of the country is Burmese (Dittmer, 2010). It also happens to be the mother tongue of the country. This simply means that the country has a great sense of national pride.
The cultural thought of the country is based on oriental’s view of the world. This means that religions like Buddhism, Hinduism and Islam play an important role in the lives of the people there. Moreover, the country is predominantly Buddhism. Due to the strictness of Buddhism and its persecutions, it has led to people running away from the country in fear of being persecuted perhaps to death. This is an important business consideration since employees would most probably be affected by such events if they occur. Above all, cultural issues relating to subsistence and livelihoods must be given much weight lest the company does not get the right personnel for its work.
The second aspect may pose a challenge to the company. This is because the resources in Myanmar are in the hands of a few elites. Next, on the issue of imitability, the company scores highly because its products cannot easily be replicated by other companies. Finally, CIC has the capacity to exploit the opportunity that is presented in Myanmar. This is because its profits can enable the company to effectively fund the establishment of the foreign branch. It is also justified by the fact that the company has the relevant divisions for specialization purposes such valves and measurement, Compression systems, Drilling and Production systems and Measurement systems.
FDI or Subcontracting
With the rising levels of globalization, companies have striven to produce global products. In some cases, companies locate different divisions of their production in different countries. It could also be a case where companies establish fully operational branches with all divisions of production. This has usually been seen as the ideal FDI. Over the past years, CIC has been known to expand globally through subcontracting. This involves situations in which a company gives the responsibility of running its affairs to another company, usually the subcontracting firm. The major disadvantage with subcontracting is that the main company is not able to control the operations of the sub-contracted company. As a result, the delivery of service or quality of product may be affected. Having been in the business of subcontracting for quite a long period of time, CIC will now choose FDI over subcontracting.
Joint Venture Partners
Having explored the situation in Myanmar, there are a variety of possibilities for CIC. According to Paul (2011), in its FDI, the company may also choose to come together with other companies to make joint ventures. However, this may be formed in cases where the companies do not have enough capital to run; therefore, they may share assets and other inputs as well as revenues that come from their common business. In this case, CIC may also decide to form joint ventures. However, this joint venture must be with a company in the same industry. This makes it easy to strike a good formula for sharing the revenues. However, CIC should only engage in such an arrangement for a finite time as it learns the market in Myanmar.
Greatest Difficulties and Strategies
Having been a war-torn country for many decades, businesses should not rule out the possibility of recurrence of conflict in the country. There is no doubt that the rebel groups may not have been fully satisfied with the post-Thien deals; and if they were, government failure to deliver the promises may lead the country back to the state of civil war. If this happens, CIC’s business would be negatively affected. Unfortunately, the company may not be in a position to actually influence the politics of the country and determine which leader takes up office. Moreover, the company may indirectly support the democratization process through funding the civil society groups involved advocacy.
In penetrating the Myanmar market, the company may also face some institutional challenges to do with legal registration. It has been shown that indeed, the country’s public systems are very corrupt. Leaders in such positions may require kick backs in order to give out licenses. Moreover, although there has not been a quite well established legal system, the election of a new leadership is an indication that a reliable judiciary could be set up. Through the court system, the company would be able to iron out issues of corruption.
Perhaps the third most difficult issue would be the performance of the company against the economic odds of the country. Myanmar has been registering one of the lowest economic growths in the region. In order to deal with the unfair economic performance of the country, the company may consider either outsourcing a good number of its services, engaging in joint ventures or at the point of segmentation, focus on the more productive sub-sector or population.
Penetrating a foreign market is not always an easy thing. This perhaps becomes more difficult if the host country is not peaceful and does not support an investment climate. The CIC chooses to invest directly as well as consider other investment options. The purpose of this paper was to analyze some of the institutional and risk factors, VRIO, cultural issues, whether invest directly or make contracts, some of the possible joint ventures, the difficult issues and the strategies. After doing the analysis, it was found out that that although the country is not the best investment destination; it has a lot of potential that needs to be tapped by forming sound economic and business ventures.