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Regional Multinationals and the Korean Comestics Industry

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Author Info
Chang Hoon Oh (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
Alan M. Rugman (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

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Abstract

This paper analyzes the market penetration and expansion strategy of cosmetics and toiletries multinational enterprises (MNEs) in South Korea from the perspective of regional strategy as developed recently by Rugman. We find that MNEs have different market entry and expansion strategies in the home region and in the foreign region. Home region MNEs (Japanese MNEs in this case), in general, utilize their firm-specific advantages (FSAs) better than foreign region MNEs (European and MNEs from the Americas in this case). Due to differences in transaction costs, home region MNEs exploit downstream FSAs while foreign region MNEs develop upstream FSAs. Market similarity also leads to a greater incentive to operate in the home region rather than in foreign regions. The home region effect significantly increases the likelihood of entry into foreign markets as the host country’s “diamond” significantly affects the market entry strategies of MNEs.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2007-11-oh-rugman.pdf
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Publisher Info
Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2007-11.

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Date of creation: 2007
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Publication status: Forthcoming in Asia Pacific Journal of Management
Handle: RePEc:iuk:wpaper:2007-11

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Related research
Keywords: regional strategy; market penetration; cosmetics industry; double diamond; South Korea;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Shih-Fen S Chen & Jean-Francois Hennart, 2002. "Japanese Investors' Choice of Joint Ventures Versus Wholly-owned Subsidiaries in the US: The Role of Market Barriers and Firm Capabilities," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 33(1), pages 1-18, March. [Downloadable!] (restricted)
  2. Alan M. Rugman & Simon Collinson, 2005. "Multinational Enterprises in the New Europe: Are They Really Global?," Working Papers 2005-12, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
  3. Chang Hoon Oh & Alan M. Rugman, 2006. "The Regional Sales of Multinationals in the World Cosmetics Industry," Working Papers 2006-20, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
  4. Erin Anderson & Hubert Gatignon, 1986. "Modes of Foreign Entry: A Transaction Cost Analysis and Propositions," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 17(3), pages 1-26, September. [Downloadable!] (restricted)
  5. Alan M. Rugman & Alain Verbeke, 2004. "A Perspective on Regional and Global Strategies of Multinational Enterprises," Working Papers 2004-19, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
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  6. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132. [Downloadable!] (restricted)
  7. Gatignon, Hubert & Anderson, Erin, 1988. "The Multinational Corporation's Degree of Control over Foreign Subsidiaries: An Empirical Test of a Transaction Cost Explanation," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(2), pages 305-36, Fall.
  8. Alan M. Rugman & Simon Collinson, 2004. "The Regional Nature of the World’s Automotive Sector," Working Papers 2004-23, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
  9. Bruce Kogut & Udo Zander, 1993. "Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 24(4), pages 625-645, December. [Downloadable!] (restricted)
  10. Peter J Buckley & Mark C Casson, 1998. "Analyzing Foreign Market Entry Strategies: Extending the Internalization Approach," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 29(3), pages 539-561, September. [Downloadable!] (restricted)
  11. Alan M Rugman & Alain Verbeke, 2003. "Extending the theory of the multinational enterprise: internalization and strategic management perspectives," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 34(2), pages 125-137, March. [Downloadable!] (restricted)
  12. Alan M Rugman & Alain Verbeke, 1992. "A Note on the Transnational Solution and the Transaction Cost Theory of Multinational Strategic Management," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 23(4), pages 761-771, December. [Downloadable!] (restricted)
  13. C Patrick Woodcook & Paul W Beamish & Shige Makino, 1994. "Ownership-Based Entry mode Strategies and International Performance," Journal of International Business Studies, Palgrave Macmillan Journals, vol. 25(2), pages 253-273, June. [Downloadable!] (restricted)
  14. Davidson, William H., 1983. "Market similarity and market selection: Implications for international marketing strategy," Journal of Business Research, Elsevier, vol. 11(4), pages 439-456, December. [Downloadable!] (restricted)
  15. Rugman, Alan M, 1986. "New Theories of the Multinational Enterprise: An Assessment of Internalization Theory," Bulletin of Economic Research, Blackwell Publishing, vol. 38(2), pages 101-18, May.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mike Peng, 2007. "Celebrating 25 years of Asia Pacific management research," Asia Pacific Journal of Management, Springer, vol. 24(4), pages 385-393, December. [Downloadable!] (restricted)
  2. Simon Collinson & Alan Rugman, 2007. "The regional character of Asian multinational enterprises," Asia Pacific Journal of Management, Springer, vol. 24(4), pages 429-446, December. [Downloadable!] (restricted)
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