Previous

Part - III

Out of the above specified entry modes for MNCs, the most preferred ones are Greenfield investment, Acquisitions and Joint Ventures with local partners (referred later as JVs).

Entry strategy of an MNC is the most important aspect of their FDI and it includes the entry mode, timing and location. The entry mode decision of a firm is guided by three important aspects: -

• The quantum of risk that a MNC is willing to take.

• The nature and importance of resources that firm is seeking.

• The extent of control desired by the company over the entity in the host country.

On the basis of these three aspects the three entry mode of FDI can be ranked as:

3. Factors Determining the Choice of Entry Mode

We will list down and discuss the factors that are most important and have the maximum impact on the choice of entry mode made by an MNC, and will also look at the ways these factors change in the changing world of today and their further impact.

We will further draw appropriate inferences on the basis of the primary study that we had conducted on our sample of Indian listed companies. Our initial samples consisted of 70 MNCs out of which we selected 37 countries from different sectors, out these 37 companies 11 are Americans, 19 are Europeans, 7 and Japanese and 1 is a Korean company. These companies were first classified into successful and unsuccessful on the basis of their Economic Value Added (EVA).

Next

* Contributed by: -
Abhishek Gupta & Anurag Ghuwalewala,
PGP-2, Batch 2003-2005,
IIM Bangalore.