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Submitted by florinj on July 17, 2006
Category: Business
Words: 1906 | Pages: 8
Views: 261
Popularity Rank: 38,356
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Expanding Abroad
As a company looks to expand into international markets, it is essential that its entry strategy is based on the firm’s larger strategy. The company should know what advantages may be gained by expanding into a new country and what competitive advantages it already has which it can bring to the new market. A company must also frame any decision to enter a foreign market in the risks associated with the market.
Under the communist regime, the Soviet Union had taken complete control of the oil industry. Through its structure and rules, the government managed to create tremendous market inefficiencies. With the decline of the centrally-planned economy, the oil industry started opening up to foreign investment. As is consistent with the theory of location-specific advantages, foreign firms were very attracted to the opportunity to combine their unique assets (technology, capital, know-how, etc.) with access to the oil located in Russia. But with this opportunity came tremendous risks. With no legal frameworks, state-owned enterprises, and an instable political system, companies had to weigh the advantages to be gained to the risks they took on by entering the market.
Phibro
Phibro’s strategy when entering the Russian oil market was to try to take advantage of being a first mover. As a new, smaller firm within the large oligopolistic structure of the oil industry, Phibro’s move was risky but potentially necessary to in order to move itself to a better position within the market. By moving into Russia first through a joint venture with VNG, Phibro hoped to gain access to a significant source of a scarce input, crude petroleum.
One of the main reasons for moving into a new market is that a company has specific expertise to share to allow it to gain a competitive advantage. While Phibro certainly had capital to contribute to any venture, its expertise in the oil...
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