Methodology used for research
The literature review for the first article (Egan, 1996) discusses countertrade or modern barter as a widely common and realistic trading mechanism which replaces conventional modes of payment with full or partial payment in goods. Egan (1996) mentioned about the fact that the various forms of countertrade have been well documented and it is widely accepted that countertrade is an important means by which to have a differential advantage over competitors (Colin Egan, 1996). Perhaps there is truth to the assertion that history repeats itself as may now be find in financial methods applies.
Egan (1996) said noted the present strong incentive for the use of countertrade in modern times and the present abundant opportunities as demanded by economic conditions. He was aware of the intensified incentive with the drive to deepen differential advantage in the global recession that has produced worldwide excess capacity and fierce competition in many markets. Egan (1996) emphasized about he emerging markets of the former COMECON economies, where there is huge, covert and incipient demand for goods that may be included within the range of basic infrastructure items to newly allowed high technology transfer.
Citing strong evidence that this demand is being exploited, the author found good reason for the use of countertrading. As to technology transfer, there are the cases of complicated offset deals that shape the boundaries where there is both countertrade and the more traditional market providing the route of foreign direct investments (Colin Egan, 1996). Egan (1996) mentioned about countertrade opportunity having arisen in the appearance of new long-term markets such as Central and Eastern Europe, where hard currency is in acute short supply and where import demand is very much strong.
Also mentioned was the opportunity for less risky and more profitable countertrade that has grown in recent years with the same to have given specialist bankers, brokers, buyers and lawyers to lessen countertrade risk previously arising most noticeably in insufficient company expertise and complexities in disposing of goods acknowledged and received as payment in countertrade transactions (Colin Egan, 1996). As for the literature review of the second research article, it may be mentioned that Koch, A. (2001) suggested about the comprehensive, in-depth studies of the market/market entry mode selection processes that have been rare.
What these indicate of course appears to confirm the reality of principle of case to case basis. A demonstration that the approach and forms of the MEMS practice are context-dependent is represented by several authors as cited by Koch, A. (2001). On the basis of empirical evidence acquired from merely a few countries and industries, it may stated that this may just show an insufficiency of proof when one’s purpose is to seek an enhancement of market and entry mode selection. In the developing his work, the author clarified that the decision process model presented in the paper has considered a comprehensive literature review (Koch, A.
2001). In discussing, the literature review of the third research article, Al Janabi, M. (2006) narrated an overview that in Morocco, an interbank foreign exchange market which was set up in May 1996 to enable commercial banks to buy and sell foreign currency at market rates. It was interesting to note about the previous foreign exchange rates that were fixed (on a daily basis) by Bank al-Maghrib (the central bank). Most foreign exchange transactions for current account purposes were however liberalized in 1993, but have made capital movements to remain restricted.
Al Janabi, M. (2006) added the possibility of maintaining the fixed foreign exchange system against a composite basket of currencies dominated by the Euro over the next couple of years. Said decision was found to have been helpful in generating macroeconomic stability and keeping inflation at low levels. 2. 2 Methodology used for research Basically the methodology involve the use of qualitative for the all of the research articles but the for the third article the quantitative research in addition was used in the design of a model for accomplishment of the purpose of the model.
2. 3 Findings and conclusions of the studies For the first article, Egan (1996) concluded that findings have been presented in a manner suggestive about the countertrade incidence that its type and usage have evolved from a context of expediency to one which now includes complicated market servicing routes. He added that about the argument that pace of change has gone faster, largely, but not exclusively, as a result of market renaissance in the former COMECON economies.
Citing empirical support, he narrated about the notion that firms which have moved from a countertrade orientation of corporate advantage towards one of mutual advantage have done to be basically brought about the result of experience and recognition of the increasing sophistication of countertrade buyers (Egan, 1996). The article thus sees the latter development in many international markets and the inherent complexity of countertrade deals, with the argument that that first mover advantages will be more beneficial to those companies that will take a longer term perspective and to those that will be responsive to country and customer needs.
The second article on the other hand, stated about the paper’s broad discussion of factors influencing the MEMS process which brought some deeper significance to companies planning internationalization in their strategies. The authors discovered following: “That overseas market selection and market entry selection should be regarded as parts of the same decision process; that MEMS process is influenced by a larger variety of the external and internal environment factors than commonly acknowledged by theory; that a systematic approach to this process will improve the quality of resulting decisions; and .
that to increase content validity of its models, theory needs to integrate findings of various narrow studies. ” (Koch, 2001). Al Janabi, M. (2006) concluded that trading risk management unit is responsible for monitoring all risks related to proprietary trading and that the market risk of a trading position is the risk of experiencing changes in the value of the position due to unexpected changes in the market variables or factors that affect the valuation of the position such as the level of currency market(s) or individual foreign exchange rate.
It was further found that these market variables that affected the value of a trading position are referred to as market risk factors. Given certain special conditions when changes in market risk factors are normally distributed, it was asserted that the VAR can be calculated using the variance/covariance approach. Al Janabi, M. (2006) explained that for VAR limits-setting and daily trading risk measurement purposes these assumptions are made for the sake of simplifying the calculation process.
However, for an emerging market environment, he emphasized the need to supplement the variance/covariance approach with other analysis such as stress-testing and simulation analysis. Al Janabi, M. (2006) reminded that this is done with the objective of estimating the impact of assumptions that are made under the VAR approach and that similarly, the effects of illiquidity of trading assets, in emerging markets, must be addressed with more intelligently and should be brought into existence within the VAR framework (Al Janabi, 2006). 2.
4 Implications of the above studies to your selected cases The implication of the findings in the first research article on the selected case of Iran (Case Study 1- The Cs of counter trade) who has adopted counter trade as a strategy is to allow Iran to learn in where it falls as a reactor or initiator of the strategy and whether the parameters of the research has application to it. If indeed Iran could be considered as initiator of counter trade, it can take advantage of the knowledge the finance method for further improving its business.
The implication of the findings in the second research article on the selected case of Foster’s – ‘from beer headaches to wine hangover’ of Australia is that Foster’s may find the conclusion of the article very much applicable whether it has basis to acquire another company through merger and acquisition after failing in the first one. The paper found overseas market selection and market entry selection should be regarded as parts of the same decision process.
As to whether Foster’s considered this in earlier acquisitions that has caused the company serious loses, this paper believes it did not because the case facts indicated only it was their lack of success domestically and after losing in some investment mistakes that had caused the company to merge or buy the company of wine company which was different from its original industry of beer brewery. It was also found in the article that MEMS process is influenced by a larger variety of the external and internal environment factors than commonly acknowledged by theory.
As for Foster’s it was a sufficient reason to engage in another business if there failure in original business. In other words, what was not profitable must be left behind. But how could one be sure that one is going into another business that was not studied a not analyzed? Had Foster’s applied the principle here of selecting market it might have anticipated about the glut in the production of grapes and thus it could have prevented itself from an uninformed decision in making the major acquisition of a company engaged in wine.
The author of third article had itself provided practical implications of the research which indicated that key foreign exchange trading risk management methods, rules and procedures that financial entities, regulators and policymakers should consider in setting up their daily foreign exchange trading risk management objectives which are to be examined and adapted to the specific needs of emerging markets, such as in the context of the Moroccan foreign exchange market.
In explaining the possible implication of the research, Al Janabi, M. (2006) also mentioned about originality/value of the paper in filling a gap in the foreign exchange risk management literature especially in the emerging markets perspective. As to whether the result of these researches has an effect on selected case, this researcher believes that much will depend on whether will China to listen to the argument.
It was provided in the case facts that China has maintained pegging its Yuan currency to fixed exchange rate with the US dollars since 1994 and to convince China of the need to daily foreign exchange trading risk management objectives would sound not relevant at least for the moment that it sells more goods to US and US having sold at China. 2. 5 Implications of the above studies in the organizations’ market entry mode selection behaviour and international sourcing strategies studied for Assignment 1.
The findings in the first article on counter trade detail the importance of counter trade as a way of expanding business. The companies A and B that are talked about in the Assignment no 1 are essentially into internationalization business in terms of both export and import. The finding is especially relevant to them if they could become the initiators in the use countertrade since the latter are found to be aggressively gaining competitive advantage and they also use the strategy to for the promotion of wider corporate growth.
It was indeed indicated in the findings about countertrade having promoted a long-term relationship of mutual benefit and enhanced our corporate image among decision makers. The implication of conclusion in the Second article is that it could the help companies A, B and C to look at their present strategies and if there is something to learn from the findings which include the fact that overseas market selection and market entry selection should be regarded as parts of the same decision process.
As to implication of the findings from the third article, companies A , B and C may have to be reminded about the risk of internationalization of business that includes daily foreign exchange trading risk management objectives which must be examined and adapted to the specific needs of emerging markets as found in the article (Al Janabi, M, 2006) 3. Conclusion It may be concluded that there is much to learn from the three research articles as far their effects or implications on selected cases are concerned as well as organizations’ market entry mode selection behaviors and international sourcing strategies studied for Assignment 1.
Since relevant research updates the status of knowledge, companies are advised to update from the result of these to afford them at least of the strategies that will consider in internationalizing their business. 4. Bibliography Al Janabi, M. (2006) Internal risk control benchmark setting for foreign exchange exposure, Journal of Financial Regulation and, Compliance, Vol. 14 No. 1 Andersen, O. (1997). Internationalization and market entry mode: a review of theories and conceptual frameworks. Management International Review, 37 (2), 27-42 Case Study 1 – Three Cs of Counter trade, Chapter 13, Export market management (pp.
335 -337) Case Study 2 – Foster’s – From beer headaches to wine hangover, Chapter 12. International trade and firms market entry strategies Case Study 3 Chapter 9: The foreign exchange market (PP. 231 -235) Choi, et. al (1999) A Note on Countertrade: Contractual Uncertainty and Transaction Governance in Emerging Economies Journal of International Business Studies, Vol. 30 Egan (1996) Strategic orientations towards countertrade opportunities in emerging markets International Marketing Review, Vol. 13 No. 4__ Gionea, John. International Trade and Investment: An Asia Pacific Perspective, McGraw Hill, 2nd ed.
Hennart (1990) Some Empirical Dimensions of Countertrade; Journal of International Business Studies, Vol. 21, 1990 Koch, A. (2001) Selecting overseas markets and entry modes: two decision processes or one? , Marketing Intelligence & Planning 19/1 [2001] 65±75 Koch, Adam J. (2002), Factors influencing market and entry mode selection: Developing the MEMS model, Marketing Intelligence & Planning, Vol. 19, Iss. 5 Mirbach (1990) Now Trends in Countertrade; OECD Observer, Vol. a, 1990 Rexha, Nexhimi & Miyamoto, Tadayuki (2000), International sourcing: A Australian perspective, Journal of Sup
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