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International Strategy of B&Q - Assignment Example

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International Strategy of B&Q

B&Q is the number one DIY retailer in Europe and the third largest in the world, with more than 60 stores opened internationally, including B&Q Beijing, which is now the largest B&Q store in the world.
Based on literature a firm has to make two initial decisions for facing internationalization process, i.e. equity and non-equity entry modes (See figure 1). Entry mode is an institutional arrangement that makes possible the entry of firm's products, technology, human skills, management or other resources into a foreign country (Root 1994). On this level, the key issues when making a decision on entry modes are those that refer to the macro-level factors of the target country, such as country-risk, cultural differences or potential for growth (Pan and Tse, 2000). The influence of these factors on the choice of entry mode will show up in the commitment of resources that the firm is willing to undertake in the international market and the strategic flexibility they wish to maintain in order to face up to unforeseen changes in the environment (Pan and Tse, 2000).
On the second level of analysis, managers would do well to evaluate the different modes of entry, taking into consideration the degree of control they wish to exercise over international activities. The factors that should be analyzed at this level are related to micro-level characteristics such as those that determine the risk of dissemination or improper appropriation of assets and the firm's strategy. Both factors will determine the degree of control the firm should exercise on international operations in order to maintain its competitive advantage and favour coordination between units that are geographically widespread (Harzing, 2002; Pan and Tse, 2000).
Figure 1: Two-level model of analysis for the choice of entry modes

Source: Pan and Tse (2000)
In the specific case of B&Q, its process of internationalization is clearly dominated by the equity entry modes (degree of control) such as Greenfield, mergers and acquisitions. We have to understand acquisition as the purchase of a stock in an already existing company in an amount sufficient to confirm control. A firm can acquire a foreign company for many of several reasons: product diversification, the acquisition of specific assets, the sourcing of raw materials, or other products for sale outside the host country or financial diversification (Root 1994). A Greenfield investment is a start up investment in new facilities. Such an investment can be wholly owned or a joined venture. The first ownership is a 100% in this alternative. It is usually complex, needs negotiations and takes a lot of time (Hitt et al. 2003). Merger is the process when two or more company joint to become one entity through a purchase acquisition or a pulling of interests (See Table 1).
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The annals of business history report that for every successful market entry, about four entries fail. Inexperienced start-ups suffer some of these disappointments, but so do many sophisticated corporations (Horn et. al., 2005). Therefore, the choice of entry mode constitutes one of the most critical decisions for international strategy success…
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