multinationalization

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multinationalization
Ronald M. Rivas, PhD
Associate Professor
Canisius University
Buffalo, NY 14208
[email protected]
Presented at Workshop
Internacional
Universidad del Pacífico, Lima, Perú
June 21st, 2013
Motivation
Rise of MNCs from Latin America
South-South FDI represents one third of all FDI going
to developing countries.
Companies from Argentina, Mexico and Brazil that
were dominant multilatinas in the 1990s, were joined
by emerging multilatinas from Chile, Colombia,
Venezuela and Peru in the last two decades
Multinationalization
Multinationalization is the process of
international expansion other than exports,
such as franchising, JV or foreign direct
investment (FDI)
Multinationalization of Developed
countries MNCs is explained by the
incremental internationalization model
and the eclectic paradigm
Global Latinas vs other MNCs
How different is the multinationalization
process of companies from emerging
economies (Peru) and what strategies are
used more prevalently by such
multinationals?
Restaurant Name
Type of Cuisine
Astrid y Gastón
Osaka
El Otro Sitio
Tanta
Brujas de Cachiche
Alfresco
La Mar
Segundo Muelle
Pardos Chicken
Las Canastas
Roky’s
La Caravana
Bembos
China Wok
Fusion
Fusion
Peruvian food
Peruvian food
Peruvian food
Peruvian seafood
Peruvian Seafood
Peruvian Seafood
Roasted Chicken
Roasted Chicken
Roasted Chicken
Roasted Chicken
Peruvian Burgers
Peruvian-Chinese
Juices and
sandwiches
Roasted Chicken
Fast food (US
MNC)
Fast Food
(US MNC)
Fast Food (US
MNC)
La Gran Fruta
Norky's
Pizza Hut &
Burger King
McDonald’s
KFC
Restaurants
in Perú
number
Restaurants
abroad
number (d)
Net
Sales (c)
US$ mn
Employee
s number
Foreign
Countries
with FDI
1
1
1
4
1
1
1
3
14
6
51
5
40
22
7
2
5
2
4
2
7
4
4
1
2
1
3
36
1.5
n.a.
n.a.
1.8
1.4
n.a.
n.a.
n.a.
1.7
n.a.
1.7
2.5
17.4
3.5
42
n.a.
n.a.
70
52
n.a.
n.a.
n.a.
13
n.a.
55
220
745
320
7
1
1
2
1
1
5
3
3
1
2
1
2
6
4
1
n.a.
n.a.
1
42
14
1
11,925 a
n.a.
23.4
n.a.
2,355
1
n.a.
10
32,478
6.0
600
n.a.
46
37,080 b
30.7
2,000
n.a.
Domestic Business Model
Time to start multinationalization: Global Latinas
Source: Cuervo Cazurra (2008) Journal of International Management
Time to start multinationalization: Global Latinas
Time to start multinationalization: Global Latinas
Time to Start
Multinationalization
AVERAGE= 90 YRS
1st Century
of Globalization:
1820 – 1913
UK WINNER
Time to start multinationalization: Global Latinas
Time to Start
Multinationalization
AVERAGE= 90 YRS
1st Century
of Globalization:
1820 – 1913
UK WINNER
Time to Start
Multinationalization
AVERAGE= 47 YRS
Inter-War Period:
Global Isolationism
1914 - 1945
Time to start multinationalization: Global Latinas
Time to Start
Multinationalization
AVERAGE= 90 YRS
1st Century
of Globalization:
1820 – 1913
UK WINNER
Time to Start
Multinationalization
AVERAGE= 47 YRS
Inter-War Period:
Global Isolationism
1914 - 1945
Time to Start
Multinationalization
AVERAGE
= 18 YRS
2nd Century
of Globalization:
1950 – now
USA WINNER
Time to start multinationalization: Peruvian
Multinational restaurants
Source: Rivas & Mayorga (2011) Revista Innovar
Time to start multinationalization: Peruvian
Multinational restaurants
Pro-market reforms
1990 - now
Time to start multinationalization: Peruvian
Multinational restaurants
Time to Start
Multinationalization
AVERAGE= 22 YRS
Pro-market reforms
1990 - now
Time to start multinationalization: Peruvian
Multinational restaurants
Time to Start
Multinationalization
AVERAGE= 22 YRS
Time to Start
Multinationalization
AVERAGE= 5 YRS
Pro-market reforms
1990 - now
Location to start multinationalization: Global Latinas
Source: Cuervo Cazurra (2008) Figure: Location of Multinationalization
Location to start multinationalization: Global Latinas
1st FDI to
Different Markets in Culture & Economy
1st FDI TO
Similar Markets in Culture & Economy
Location to start multinationalization: Peruvian
Multinational restaurants
Source: Rivas & Mayorga (2011)
Location to start multinationalization: Peruvian
Multinational restaurants
1st FDI to
Different Markets in Culture & Economy
1st FDI TO
Similar Markets in Culture & Economy
Franchises by domestic business model
Source: Rivas & Mayorga (2011)
Franchises by destination: Premium Niche
Source: Rivas & Mayorga (2011)
Franchises by destination: Low Cost Leaders
Source: Rivas & Mayorga (2011)
Legitimacy strategy and Multinationalization
• Gastronomy---the traditions and practices of eating
socially valued food--- forms part of the intangible
cultural heritage of a nation.
• Four entries (out of 298) of the UNESCO 2012
Intangible Cultural Heritage List relate to gastronomy:
• The Gastronomic Meal of the French;
• Traditional Mexican Cuisine -ancestral, ongoing
community culture, the Michoacán paradigm;
• The Mediterranean Diet; and
• Gingerbread Craft from Northern Croatia, all
inscribed in 2010 (UNESCO, 2012).
Franchises by Destination: Start in Peru.
Strategy of Heritage reinterpretation
Central
America &
Caribbean
6%
Northern
Region of
Latin
America
3%
Source: Rivas & Mayorga working paper
Number of
restaurants
in North
America
1%
EuropeLatin
1%
Asia
0%
Southern
Region of
Latin
America
89%
Franchises by Destination: Start in USA.
Strategy of Heritage Preservation
Southern
Region of Africa; 0,2%
Asia; 5,7%
South
America;
15,8%
Northern
Region of
South
America; 5,3%
North
America;
45,6%
Source: Rivas & Mayorga working paper
Australia;
0,3%
Central
America &
Caribben;
4,5%
Europe-Latin;
19,5%
Europe-North;
2,7%
EuropaOther;
0,5%
Geographic Diversification: Start in Peru.
Strategy of Heritage reinterpretation
4REGION
5%
5REGION
0%
3REGION
6%
2REGION
17%
1REGION
72%
Source: Rivas & Mayorga working paper
Geographic Diversification: Start in USA.
Strategy of Heritage preservation
5REGION
0%
1REGION
96%
Source: Rivas & Mayorga working paper
4REGION
0%
3REGION
1%
2REGION
3%
Conclusions
Peruvian restaurant multilatinas have a substantial
delay between the year funded and the first
Foreign restaurant.
However, multinationalization increased
exponentially after the implementation of promarket reforms in the 1990s.
We found that they expand both to countries with
proximate as well as to countries with distant
psychic distance.
These findings are at odds with the gradual
internationalization model.
Conclusions
Institutional change:
Increased Market Integration.
Reduced transaction costs for domestic
firms, which benefited domestic firms over
multinationals competing in the host country.
Reinterpretation of Gastronomic Cultural
Heritage.
Type of Business model and Legitimacy
strategy affects FDI diversification.

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