Mode into the Russian
This paper endeavors to offer a discussion on the mode of entry Hummel Sports Wear Company would use to get into the Russian market which is turbulent and unpredictable (ACA Sports 2009 also Hummel international 2008). The Russian market is also characterised by distribution-based FDI (i. e. foreign direct investment) (Prasad and Ghauri 2004: 38). On the other hand, Hummel is a Denmark sportswear company that deals in the production of tracksuits, football strips, sportswear bags, team wear and football kits among other sportswear items. It was established in 1923 and it currently operates in more than forty countries worldwide.
It has established distribution channels in these countries where it operates. Introduction Entry into a market depends on the way the market operates and whether the economic situation is turbulent or orderly or depending on whether the firm has knowledge about the market or not (James 2007). Companies entering the market in transitional economies which are characterized by turbulent domestic contexts have one task to undertake. Hummel might also find it more desirable and feasible to form its own networks for distribution and supply of boots.
However, it must be taken into consideration that the Russian market is quite turbulent and therefore not much predictable (Zheberlyaeva 2001). This means that the process of search and discovery that most firms would apply in such situations is likely to end up with a surprise for Hummel Sports Wear. Given the fact that the conditions in the market change at a rapid rate, and the fact that the knowledge is not perfectly distributed in the Russian market, discovery would work better. Analysis The entry into the Russian market requires a firm to rethink on the issue of inetrnalisation.
This implies that Hummel has to consider the issue of global networking and formation of strategic alliance as vital parameters for the sake of establishing distribution channels and market command (Margarita 2003). As a consequence of a principal component analysis, there are major components which act as driving force for companies that wish to make a foreign direct investment into the Russian market. A major factor that would be imperative for the success of the firm that wishes to enter into the Russian market is to consider the distribution channels and knowledge of details of selling in the particular market (Doherty 1999).
Knowledge is one of the goods that cannot be transferred across the markets. Acquiring distribution channels would do a great good to the firm especially if it can combine the acquisition of the distribution systems with relevant production facilities, gain access to information networks, acquire time-honoured brands and then complement all that with well developed resources to match the resources are unable to move across markets (Prasad and Ghauri 2004: 23).
Hummel Sports Wear will most likely be affected by market turbulence, the influence of internationalisation, and its activities in the market, its knowledge and commitment about the market. Never the less, the effect may not be so huge given that it made a good move in 2004 when it gained a contract with All Sport (UK largest Sports wear chain). This assures it a good distribution strategy (Ministry of Foreign Affairs of Denmark 2004). Firms that enter foreign markets time and again are faced with unplanned situations which may not have been predicted in advance.
Thus the entry mode is complicated further where the firm is entering a turbulent economy like the Russian case where a firm is likely to face radical uncertainty. This implies that the firm must endeavour to discover the unknown information behind the uncertainty. The firm must understand how the activities in the Russian market are related to the knowledge acquired and commitment towards succeeding meaning that it should deeply rethink the internationalization process (Ramaswami and Agarwal 1996). Market Turbulence in the Russian economy
Russia faced instances of hyperinflation in the early 90’s resulting from institutional changes made in Eastern Europe (Dickenson and Hill 1999). The changes led to disintegration of economic plans as well as the planning authorities and an ultimate liberalization of prices. This tremendously affected any firms’ costs and revenues. Such an economy that resulted did not cater for the competition or co-operation of firms (Proost and Morbee 2008). There were however changes in market governance which made firms to re-evaluate their sets of exchange partners, rethink the distribution channels and business position.
These are part of the challenges that face Hummel plus the fact that the firm should expect to have conflicts with the Russian firms (e. g. Columbia Sportswear Company LLC); an instance which has been identified as commonplace and which seemingly increases the turbulence in the market further. Meyer (2001: quoted in Stephenson 2007) argues that institutional changes in the Russian economy which led to great uncertainty in the market and an ultimate unsatisfactory institutional framework. Foreign trade in Russia was liberalised thus making more foreign firms to gain entry into the market (Sennikov and Lomov 1999).
The end result of this market setup was a more complex market structure with heightened competition given that most foreign firms have had a tendency of changing customers to counter the effect of the institutional changes. However, such adjustments cause more turbulence (Andersen 1997). The resultant setup also led to weakened business relationships since firms were disappointing each other and the business tended to shifted towards barter trade (Stephenson 2007). Summary and conclusion
Hummel Sports Wear needs to undergo through a process of gradual learning through the market since the value of experiential learning or knowledge would not be substantial to offer any help in the turbulent market or economy (Myers and Alexander 2000 also Larimo 2002). Through the process of gradual learning, the firm would be forced to assess and evaluate distribution networks, the distribution of income and political atmosphere (more so the capability or ability of a given political regime to remain in power- which most probably have a considerable impact on the licensing agreements, distribution networks and supply of materials).
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