Whether or not Adidas fits this description is a matter for debate. Internally, how it is run, Adidas is still very much a Germany company. But its products, marketing, and production are certainly transnational in nature. Given that these are the key areas where Adidas operates in new markets – in terms of market entry – a case can be made that the transnational framework makes sense here.
Alcacer, Dezso & Zhao (2013) discuss the factors that contribute to MNE location decisions. They begin by pointing out that most of the existing literature focuses on firm location and characteristics on location choices, and that these variables may have insufficient explanatory power with respect to how transnational enterprises make location decisions. After all, these decisions are inherently marketing decisions, so while home country location will certainly play a role, there are clearly going to be other factors. They argue that there are oligopolistic tendencies in industries characterized by transnational competition. This is certainly the case in athletic footwear and apparel – operating at the transnational scale is inherently limiting and there are very few companies that can compete at that level. This by its nature creates a de facto oligopoly, save for the presence of low-end competitors that form an entirely different rung on the competitive ladder.
These authors examine what they consider the three primary equilibrium strategies, avoid, collocate and stronger-chases-weaker. Avoidance is fairly evidence – seeking out markets where there is less competition. We know that in a true oligopoly there are few opportunities for profit, but if a company can find a market where no such competition exists, it can extract monopoly rents, at least temporarily. Collocation sees companies entering the same markets at roughly the same time – there is no particular competitive advantage extended in this situation, but rather it is an extension of the pre-existing oligopoly. Stronger-chases-weaker is basically the natural continuation of the avoidance strategy. A company that is extracting monopoly rents in a market can expect the dominant players to enter that market, bringing to that market the oligopoly conditions that exist elsewhere.
Nachum and Song (2011) argue a couple of things. First, they argue that different forces influence expansion versus contraction for MNEs. Then, accepting this proposition, they explore how the different businesses in which a company operates will influences its market entry decisions. If one thinks about how this applies to the athletic footwear and apparel industry, a company that specializes in soccer might prefer to focus attention on nations where that sport is most popular. As an example, such a company might prefer to target Brazil among the BRICS because soccer is the dominant sport there. It is not a particularly major sport in China or India, so even though those countries are much larger than Brazil, they would not be the first choice market. South Africa might be the weakest of the BRICS for a company specializing in soccer – while soccer is a very popular sport there, this is mainly among poorer people who might prefer cheaper tekkies.
An MNE, Nachum and Song point out, can be viewed as a portfolio of businesses, and those businesses have interdependencies. In this business, those interdependencies will typically manifest in the distribution side. While marketing different products may be siloed, distribution will not be in most places, so whether there is a good fit with existing businesses, or whether there is opportunity to develop a portfolio of businesses instead of just one might dictate market entry choices. In the above example, the soccer-forward company trying to choose between China and India for market entry would look at…
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