Riku Laanti The University of Adelaide, Business School The University of South Australia, International Graduate School of Business 25.9.2009 (work in progress)
Abstract (working paper) The argument is that for MNCs from smaller countries and/or emerging markets it is more natural to look for input from their foreign subsidiaries than for MNCs from the largest markets, which are more inclined to aim for control and global strategies. This may also result as a competitive advantage with regards to the internationalisation of these types of companies. SingTel from Singapore will be used as a case study to illustrate this issue.
Riku Laanti Phd submitted (Aug 2009), the University of Adelaide MBA (Finance) and MSc (International Business), Helsinki School of Economics Lecturer (casual), the University of South Australia, IGSB - MBA IB and Competitive Strategy courses since 2006 in Australia, offshore and online Lecturer (casual), the University of Adelaide, Business, School, International Management III Senior Consultant, International Business and Strategy (previously worked 13 years in the telecommunications industry, e.g. director in Telia) Fred McDougall Professor and Deputy Vice-Chancellor (Academic), the University of Adelaide Dr. Georges Baume Senior Lecturer, Business School, the University of Adelaide
Management International Review Two international journal articles: Laanti et al. (2009) How well do traditional theories explain the internationalisation of service MNEs from small and open economies? Case: National telecommunication companies Management International Review. Vol. 49 No. 1. Laanti et al. (2007) The globalization strategies of business-tobusiness born global firms in the wireless technology industry Industrial Marketing Management, Vol. 36 No. 8, pp 1104-1117. Two refereed international research book chapters E.g. Laanti et al. (2009) Evolving value networks and internationalisation of national telecommunications companies from small and open economies, in In Lee (ed.) Handbook of Research on Telecommunications Planning and Management for Business, Hershey, PA: IGI Global. pp. 173-193. Several refereed international conference papers e.g. AIB, EIBA, ANZIBA, ANZAM Reviews (ad-hoc) MIR, Journal of World Business, ETRI Journal Two edited books; several conferences
Globalisation/regionalisation developments Internationalisation strategies/processes International organisation strategies Born globals Internationalisation of services / ICT industries / sports Internationalisation of SMOPEC Firms (Small and Open Economies) some similar challenges with EE MNCs Industry value chains / value networks (e.g. ICT industry) The Resource-based view & internationalisation Cross-cultural management Qualitative research methods Case teaching
Internationalisation strategies of companies in service industries: A study of national telecommunication operators from small and open economies (SMOPECs) A multidisciplinary study International Business and Strategy A multi-case study Telstra from Australia SingTel from Singapore Sonera from Finland Telia from Sweden
Globalisation factors Industry specific factors Home country specific factors Company specific factors Internationalisation strategies Manufacturing Companies Business Service Companies Retail Service Companies Born Globals (Manuf.&Service) Network Service Companies Product strategy Operation strategy Market strategy Organisation strategy Host country specific factors
International processes of the case companies deviated in many areas from those suggested by traditional theories, especially their market strategies. Several industry specific characteristics played an important part in this - they further enhanced many challenges common to internationalising companies from smaller countries (see also Laanti et al., MIR, 2009) Although organisation strategies were mainly multidomestic ones, some evidence of successful transnational organisation strategies were observed at the later phases of the internationalisation processes
Based on Bartlett and Ghoshal (1992, 1998) - typology International Multinational (instead the term Multidomestic was used in the study, e.g. Harzing, 2000) Global Transnational
Majority of revenues generated internationally E.g. Optus significantly larger than SingTel s domestic operations No presence in several major markets (except with B2B operations) Many (most) FDI were JVs preventing an efficient global organisation strategy Active search and import of ideas between different country organisations as well as from other country organisations back to the home country - key characteristics of a transnational organisation Combined incumbent and challenger strategies Incumbent s cost management, technical capabilities Challenger s sales and marketing capabilities, and customer focus Cross-pollinated ideas E.g. Bridge alliance to share information and develop mobile communications products Learned from other markets, including developing markets, e.g. prepaid Composition of the Board of Directors and Top Management team *Many quotes by the interviewees (SingTel senior managers) demonstrated support for these findings. The quotes were not included in this public version of the presentation, but will be included in the final version of the paper.
Relatively smaller role of the domestic market > Push to internationalise/less lateral rigidity to internationalise Relatively less resources domestically > Relatively more willing to invest in competence centres internationally Higher TNI Less resources to invest in FDI > More JVs rather than whollyowned subsidiaries > Very centralised global strategies not feasible These types of MNCs more attractive as foreign investors, especially in industries which are strategically important for host countries less threatening investors
Some examples of the compositions* of the Board of Directors and Top Management teams of selected MNCs Many of the following companies are considered global, but still seem to have very ethnocentric approach, at least with regards to their top management positions Among the three mobile phone manufacturers, Nokia has been the most transnational and geocentric in its staffing SingTel s approach in its top management composition is relatively geocentric and reflects its transnational strategy
Mitsubishi Board of Directors: 20 x JAP Top Management: 54 x JAP etc...
Toyota Board of Directors: 26 x JAP Top Management: 46 x JAP, and 3 x other nationalities (as Country Managers?)
Motorola Board of Directors: Top Management: 9x USA
Ericsson Board of Directors: SWE, SWE, SWE, USA, UK, SWE, SWE, USA, SWE, SWE Top Management: 13 x SWE
Nokia Board of Directors: FIN, USA, FIN, IND, FIN/USA, GER, FIN, SWE, USA, FIN, FIN Top Management: FIN, FIN, AUS, FIN, USA, NOR, FIN, FIN, USA, FIN, FIN, FIN
ABB Board of Directors: GER, BRA, USA, CH, FRA, GER, SWE Top Management: BEL, SCO, GER, FRA, IND, CH, CH, SWE, FIN, SWE
SingTel Board of Directors: TH, SG, IND, USA/CHI, AUS, SG, IND, SG, SG, USA(?) Top Management: SG, SG, SG, SG, SG, SG, SG, NZ, AUS, SG, SG
Appendix: Definition Small and open economies (SMOPECs) Small and open economies include countries such as Austria, Denmark, Finland, Ireland, New Zealand, Portugal, Norway, Sweden, and Switzerland, who have integrated themselves with the world economy by lowering or eliminating their trade barriers (Kirpalani and Luostarinen, 1999; Benito et al., 2002; Maitland and Nicholas, 2002b; Merrett, 2002). The broader definition includes also medium-size countries such as Australia and newly industrialised countries such as Hong Kong (Maitland and Nicholas, 2002b). Although Australia is already a medium-sized country with regards to its population, its companies face similar challenges in their internationalisation than companies from other SMOPECs (Liesch et al., 2002; Dick and Merrett, 2007). The inclusion of small newly industrialised Asian countries, such as Hong Kong and Singapore, can also be warranted based on their development levels and free economies
Appendix: Data Sources for the Case Studies Interviewees / informants Company reports Other company material News paper articles: local News paper articles: global (economics and business) Academic journal articles and case studies Books or book chapters SingTel Sonera Telia Telstra Senior level managers and ex-senior level managers who have been responsible for internationalisation strategies (including ex-ceos, COOs, Strategy Directors) A few middle level managers and/or corporate communication personnel provided background information and material. In addition, a seminar participation in which a CEO was presenting, and some calls/emails with other ex-ceos of the case companies Annual Reports; Press releases Presentations; Key Lines Magazine E.g. Strait Times; Business Times Singapore; Washington Post SE Asia Annual Reports; Press releases Presentations E.g. Kauppalehti; Taloussanomat; STT Factiva search (e.g. The Economist, WSJ) A few (e.g. SingTel/HKT merger) SingTel (2004) The SingTel Story: 125 years of telecommunications in Singapore A few Turpeinen (1996) Sonera History Vennamo (1999) Pekka, Posti ja Sonera Tainio (2003) Sonera - Rise and Fall of Finance-driven Internationalisation Annual Reports; Press releases Presentations; TeliaSonera World E.g. Dagens Industri A few (e.g. Telia/Telenor merger) Annual Reports; Press releases Presentations E.g. Australian Financial Review A few (e.g. Telstra Clear, Telstra vs. Optus) Australian Parliament (1996) To Sell or Not to Sell?: consideration of the Telstra Statistics ITU; TAS, etc. ITU; The Ministry of ITU, etc. ITU; ACCC; ABS Transportation Other sources, e.g. Government organisations, regulators, international organisations (e.g. ITU), vendors, competitors Internet articles, other informants