Plantaze

inter provincealisation OF SEE-FIRMS Final Group Report Table of content 1 1. 1 1. 2 1. 3 substructure . 1 Background translation . 1 search Purpose Structure of the Report 2 2 2. 1 2. 2 look METHODOLOGY. 2 knowledge Collection . 2 Data abridgment . 3 3. 1 3. 2 3. 3 CASE STUDY .. 6 Company Description (www. plantaze. com) .. 6 Internationalization Process. 7 Internationalization Motives 4 4. 1 4. 2 ANALYSIS AND INTERPRETATION 11 supposed Background .. 11 Application of the Uppsala computer simulation . 13 5 5. 1 5. 2 IMPLICATIONS AND LIMITATIONS . 4 Implications of the Study . 14 Limitations of the Study .. 15 6 7 8 CONCLUSION AND FUTURE RESEARCH . 15 REFERENCES .. .. 7 APPENDIX . 19 1 Introduction In this chapter the background of the f cultivate teaching will be presented, as wellhead as the purpose of the study will be stated, in the beginning an e actuallyplaceview of the structure of this report is tending(p). 1. 1 Background Description Today, many companies ta ke the abuse to establish themselves abroad. The motives for internationalisation be many. Perhaps the cornerstone grocery store is saturated, presence in a certain kingdom grants chafe to strategic resources or there are cluster effects to be explored in a particular(prenominal) region.The decision makers of the companies that are becoming international train different experience, are in different situations and handle different motives in front victorious the step into the international commercialize. (Masum/Fernandez 2008, 2) For the past some decades exploreers have been debating over actual theories and developing new theories of international work to explain why and how companies internationalize. Internationalization theories are explaining different internationalisation bear ones, which are taking place when companies expand across national borders.Ranges of internationalisation have been discussed in diverse investigations with the conclusion that the major(ip)(ip)ity of these modellings fail to explain internationalization behavior of various companies, however, this doesnt mean that they are non useful at all. (Pett 2008, 1) It is inappropriate to approach the internationalization process with break through commandmentting a schema. Without a worthy strategy the firm is well-nigh to fail in their internationalization. Formulating a strategy also involves deciding hen, how and which markets to enter. thither are several market entry modes a firm can choose from, such as exportinging, contractual relationships (licensing, franchising), as well as equity or ownership-based international business activities like FDI or collaborative acts. (Masum/Fernandez 2008, 2) 1. 2 Research Purpose The purpose of this study is to pee-pee a ruin spirit of the internationalization process of a SEE bon ton, particularly the usefulness of the main speculation the Uppsala manikin. 1 1. 3 Structure of the ReportThe report is divided in to six major parts Introduction, Research Methodology, Case Study, Analysis and Interpretation, Implications and Limitations, and our Findings and Conclusion. The mental hospital part contains the background description of the general topic and the research purpose. Followed by the Research Methodology part, where the research method acting, info collection and entropy analysis is described. Then the chosen union is presented in particular and their internationalization process and their motives for internationalization are discussed.In the Analysis and Interpretation chapter the theoretical background and to which extend the party followed the theory is presented, along with a broad discussion of the gathered empirical data. thither are also somewhat implications and limitations menti adeptd in the undermentioned chapter. In the conclusion there is a brief presentation of the findings as well as possible further research on the topic. 2 2. 1 Research Methodology Data Collect ion The data collected and used in this analysis has been mainly collected from websites and online databases. This actor that the method utilize was Desk Research.As depicted by name Desk Research is the research technique that is mainly acquired by academic session at a desk. It involves collecting data from existing resources and, compared to Field Research, is the cheapest and quickest option. Nevertheless, there is always the hassle of the validity, objectivity and credibility of the data lay out. There are basically two sheaths of desk research Internal Desk Research and External Desk Research. Whereas the former is being used completely in corporations or companies that possess an internal database, the last mentioned can be done by anyone.External Desk Research is the actual method that was used when gathering information about the follow, about the market and about a nonher(prenominal) countries. 2. 2 Data Analysis First of all, it has been unconquerable to go w ith the federation Plantaze. Afterwards, a huge amount of data about the companys history, strategy and current situation has been gath2 ered directly from their ordained website, plantaze. com. Moreover, detailed information about their products and production process has been found here.Additional financial and statistical information was found on the website of the Montenegro Stock Exchange (MNSE), montenegrobreza. com, where the company is listed and traded. Normally, looking and meddlesome for data in online databases is very expensive. Fortunately, there has been access to the WU network, where many online databases are available for the research. A dous, Factiva and some some other(a)s have given supplementary data about the companys contrary subsidiaries for example that were non that clear in the places looked before.Actually, the main difficulty was finding data about the companys operations abroad. For that reason it was obligatory to get in contact with the Plan taze company in order to get more accurate data on their internationalization process. The people were kind enough and shared some very important positions and dates that stainless the information pool that was needed. In order to work on the Excel sheets, economic, semipolitical and geographical data on the countries in which the Plantaze company is directly or indirectly doing business were needed.For this, the official websites of the specific countries governments and other websites of some important international organization like the World Bank or the CIA World Factbook were used. before experienceing to write about the companys past, present and future situation in the company description, articles from the press about the company and its operations were read. Also a look at various customer reports and trade association reviews about the company were necessary, so that an objective and closer insight to the true chain of the analyzed company could be provided.Psychic Distance Psychic quad is delineate as movers such as differences in langu term, culture, political systems, etc. , which disturb the flow of information between the firm and the market. Psychic quad chain refers to economic, geographical and cultural surmount. (Johanson/Wiedersheim-Paul 1975, 308). Hofstedes model of cultural dimensions from 1970s as one of the source theories that could be used to explain observed differences between cultures, has become an internationally recognized standard and major resource in cross-cultural studies. The original theory identified four cultural dimensions for distinguishing cultures Power remoteness dimension (PD) focuses on the gradation of inequality between people with and without power in community individualization dimension (IDV) refers to strength of interpersonal connections and share of responsibility among people Uncertainty Avoidance Index (UAI) measures degree of tolerance towards uncertainty and unknown situations and Masculinity (MAS) referring to gender differentiations and inequity in society.After some more researches Hofstede added a fifth dimension long-term orientation (LTO) which relates to how much society values long-term devotion to tralatitious values and in the 2010 a sixth dimension Indulgence versus restraint defining the attitude of society towards gratification of basic and natural human needs related enjoying life and having fun. (mindtools. com 2012) The following reckons were used for this case study The geographical quad is an important factor to calculate transportation cost from the production quick-wittedness in Montenegro to the sales markets abroad.The go steady was calculated by measuring the air line keep from Podgorica (Montenegrin great) to the capital of the reference country. It is the close important figure for Plantaze as it is a mainly exporting company. So this factor was overweighed against all the other chosen factors. The cultural distance consis ts of the above-mentioned dimensions, power distance, uncertainty avoidance, individualism, and masculinity. Regarding to Hofstede the differences of the dimension of country A and the reference country, i. e. Montenegro, are calculated in a first step.This difference has to be square and divided by the variance of the unanimous spectrum of countries. Cultural distance in exporting is important because of the classic nature of the product. Drinking fuddle is something that is embed in the national culture, thus making the cultural distance a factor that needs to be taken into consideration. Furthermore for marketing and communication reasons the cultural distance between two countries can make a company change the strategy. 4 It was calculated by using the Kogut and Singh-FormulaWhen calculating the internationalization process of the company regarding only the subsidiaries and the joint venture the cultural distance variable gains importance. Because entering a market in this wa y, by greenfield investment, a company has to think and act on a long-term level. The countrys culture can be decisive in whether the own company will be successful or not. The drink distance measures the wine inspiration per capita of a nation compared to Montenegro. This figure is relevant because it would make no sense for a wine producing company to enter a market that scores low.As already mentioned wine consumption is something that is highly linked to the nations culture and their drinking habits. That is why this is a relevant figure. To calculate the wine distance, the same formula as above has been used. The economic distance was not taken into vizor because of the fact, that it is not relevant for this type of industry. To calculate the psychic distance the above mentioned factors have been standardized to numbers between 0 and 1, time 0 stands for Montenegro respectively a country with the same figures than Montenegro and 1 for the country with the highest distance t o the reference country.The factors have been weighted according to their importance. In the exporting internationalization process the geographical distance has been weighted with 60%, the cultural and the wine distance were weighted with 20% each. In the subsidiary and joint venture internationalization process the geographical distance has also been weighted with 60%, the cultural distance with 40% and the wine distance was not taken into consideration. 5 3 3. 1 Case Study Company Description (www. plantaze. com) 13jul-Plantaze is a wine-producing company from Montenegro.Its history takes us back more than 100 years, more specifically to 1907 when the Montenegrin wine Vranac won its first prize in London. It was but more than 50 years later, when the government of Montenegro decided to invest in the development of agriculture, that the led to the creation of the company Plantaze as we know it today. Between 1964 and 1974, Plantaze spread out the vineyard to 377 ha and the wine c ellar capacity to 26. 000 hl. In the 1977-1982 period, the company realized one of its close important projects.Transforming the arid and rocky soil of the Cemovsko field into one of the largest green oasis of the Balkan area is not something to be overlooked. 62 million U. S. dollars cost the creation of the largest vineyard in Europe at that time, masking piece 2000 ha of orchards and vineyards. The geographical position makes this place so unique. Located at about 30 km from the Adriatic See, on the river Bojana, the Cemovsko field has a microclimate of its own, suitable for quality grape production.In 1979 the main processing plant was perform near the vineyard. Agrougostitelj, Agrokom, Agroekonomski institut, Uvoz-izvoz and Ribnjaci merged with Plantaze in 1998. 2005 was the year in which the company established a joint venture with their Italian partners and added the first sparkling wine Val to the product range. During the years, they successfully obtained international certificates of quality such as the ISO 90012000 HACCAP or the ISO 14000. In 2007, Plantaze invested 2 million euros in the remarkable wine cellar Sipcanik.Located at 30 meters below the soil, covering about 7000 m2, this completely natural area has the sinless climatic and technological conditions to age over 2 million liters of wine in wooden barrels, oak barriques and bottles. In the last 10 years exports have risen by 530% to 4 million bottles in 2008. The company exports to over 30 countries situated all over the world, from the U. S. A to Canada, to the E. U. countries, Russia, China and Australia. Today, Plantaze still owns and manages Europes biggest vineyard at Cemovsko field, which stands on 2310 ha and contains three wine cellars with a capacity of 310. 00 hl. They recently announced that the investments made in the period 2003-2009 were over 40 million euros. With an annual production of 22 6 million kilos per year, Plantaze is the biggest manufacturer of wine and tabl e grapes in Montenegro. A quick look at their companys official website will be enough to understand that this company has something special about it. Their mission statement is to clear worldclass quality products with which they can satisfy their loyal customers and gain new ones.It must be added that the company is not middling producing and selling wine and grapes. An 85ha peach plantation that averages an annual production of 1. 200 tons is one of their most prized possessions. As of 1957, Plantaze captures and sells about 100 tons of Californian trout. The Mareza fish pond covers 6. 000 m2 and is exclusively ply by fresh spring water. The grapevines used are not being bought they are being heavy(p) on a nursery of rootstocks that spreads over 40 ha. Two restaurants complete their portfolio. Mareza, a restaurant with a capacity of over 400 seats, located 5 km outside of Podgorica and Jezero, with a capacity of over 300 guests, located along the main road between Podgorica and Petrovac, on the shore of the beautiful and restful Skadar Lake appear in either touristic guide of Montenegro. Coming back to the wine business, we can see that Plantaze offers a great variety of wines. 11 types of red wine and 6 types of white wine are shortly in their catalogue. Furthermore, we can find a special rose wine made from red grapes applied in the white wines production. Three types of brandy complete the offer.The Plantaze company is probably one of the most successful brands and businesses in Montenegro. Their incredible attitude towards the environment and their fine attention to detail stands before every product they make. The Plantaze company must be a proud flag-bearer and ambassador of Montenegro because they managed to achieve something that many firms only dream of, and that is to produce conventional goods from your local country and culture at the highest quality possible. For this reason and others, the company Plantaze has been chosen to be analyze d and presented. 3. 2 Internationalization ProcessBecause the company has a history of over 40 years, in which it change goods on an international level, the need for splitting up the process into more than one period was created. Therefore, the internationalization process was divided into four different phases. 7 These phases are not equal. For example, the first period is xx years long, whereas the second one is fifteen years long. The reason for this is that the first two periods were slower from the internationalization point of view than the last two. So, in the first period that is between 1964 and 1984, they started selling their products on the Yugoslav market and in Albania.The argumentation for the fact that Yugoslavia has been added to the internationalization process is actually very easy to follow. Because for the company at stake the cultural distance is of great importance, it was clear that Yugoslavia had to appear on the graph. Although from a political and tech nical point of view, there was only one single country and one single market, taking the cultural differences into consideration, the situation changes dramatically. The seven entities that are now seven different countries have their own traditions, habits and culture.Therefore, selling products all over the ex-Yugoslavian territory makes the process an international one. Furthermore, if the Uppsala Model is the center point of this presentation, gaining knowledge about different cultures and using it into new markets, like Plantaze did, just proves out argumentation. In the second phase, from 1985 and 2000, numerous other markets were penetrated. Of course, after(prenominal) 1991 and the fall of ex-Yugoslavia, the products sold into these new established countries could officially be called exports. The company entered some profound European countries like the Czech Republic, Slovakia, Poland and Hungary.In the east, Bulgaria was chosen to start exporting to. The first countries from the European Union in 8 which the firm started internationalizing were Italy, France and the U. K. , in which they established a wholly-owned sales subsidiary in London. Russia was the first contrasted market they choose. In the third period, or between 2001 and 2004, the focus remained on Central and Western Europe. Germany, Austria, the Netherlands, Belgium and Sweden were the next markets they entered. The third period also meant a development of the internationalization process.Some very upstage markets such as China and the United States were submitted to the process. The fourth and final phase takes place from 2005 until the present day, in 2012. Norway and Switzerland are the newest increment from the European continent, while Canada and Australia are another two outback(a) markets to which the company started exporting. 3. 3 Internationalization Motives To figure out the motives for the internationalization of Plantaze a quick look at Dunnings different categories o f motives is necessary. Strategic summation Seeking Resource Seeking Efficiency Seeking Motives for Internationalization Network SeekingMarket Seeking 9 Dunning (2000) explains how market and resource seeking motives have been the two most recognized categories of motives before. These two categories still correspond to most first time internationalization by firms. Overall, efficiency seeking and strategic asset seeking motives affix in significance and are more common as motives for companies already engaged in multinational activity. He also shows that closer relations with customers and durable relations with suppliers were important motives. Furthermore, he suggests that internationalization was more driven by opportunities rather than threats. Hansson/Hedin 2007, 5) Market Seekers Companies that invest in a particular country or region with the intention to supply goods and services are called market seekers. This category of motives focuses on demand aspects. (Hansson/Hedi n 2007, 6) Plantazes inhabitation market is limited as Montenegro is a small country and so it brings the firm not enough revenues. This fact and also to diversify the customer base of Plantaze to reduce the dependence on the home market are reasons why they decided to go abroad. Resource Seekers According to Dunning (1993) resource seeking means to invest abroad in order to obtain resources.This could be resources that can be acquired at a lower comparative cost, or simply does not exist at all in the home country. (Hansson/Hedin 2007, 7) Plantaze is not seen as a resource seeking company, as the conditions for producing in Montenegro are unique. Sometimes skills and capabilities are resources that can be used through collaboration with a business partner. Efficiency Seekers The purpose is to thin out structures of established investments in order to gain from common governance. Often those benefits come from economies of scale, but also jeopardy diversification.Therefore, effic iency seeking is seen as gaining from the differences of factor 10 endowments, cultures, institutional arrangements, and economic systems etc. (Hansson/Hedin 2007, 7) Economies of scale and orbital cavity as well as the increase of sales and profits are issues that an efficiency seeker much focuses on, and so does Plantaze. Another motive for the company to internationalize is that Plantaze might be able to lower the appraise burden. Strategic Resource Seekers Strategic resources are for example patents, knowledge, the skills of employees, and strategic supplies necessary for developing comparative advantages.By counsel on developing strategic resources the company supports its long term strategic objectives. (Hansson/Hedin 2007, 8) Plantazes aim is it to create brand awareness in foreign countries and to transmit the positive image of Montenegro by producing a traditional product from the home country and selling it to other countries. Network Seekers The network orientation re flects to what extent companies enrol in alliances, cooperative ventures and other forms of similar social connections. Networks outside the organization can be very important for the companies.Companies intend to nurse, develop and expand their existing networks. (Hansson/Hedin 2007, 9) Developing useful foreign relationships is an important factor for Plantaze. Their partner have knowledge of the local markets and the necessary skills. 4 4. 1 Analysis and Interpretation Theoretical Background The Uppsala Internationalization Model The Uppsala Internationalization model is a model of a firms choice of market and form of entry when expiry abroad. It was developed by a number of Swedish researchers, Johanson, Wiedersheim-Paul and Vahlne (1975, 1977). The model was named after the business 11 chool of the Swedish city and based on the process of internationalization of four Swedish manufacturing companies with operations in more than 20 countries. The model assumes that internationa lization is a progressive process made of several successive stages. The main aspects of internationalization are market knowledge and level of perpetration in a particular host country. The major obstacle to international operations is the lack of knowledge about foreign markets and operations, which can be overtaken in stages by actively engaging in such foreign environments (Forsgren, Hogstrom, 2004 Lakomaa, 2009).The Swedish researchers noticed that observed companies had begun to operate abroad in nearby markets and then slowly penetrated markets farthest away. They entered new markets through export, and after several years of exports the company could establish wholly owned or majority-owned operations. Thus, the process of progressive internationalization is built on four stages that are sporadic export, export via nonparasitic representatives, foreign sales subsidiaries and production and manufacturing units in foreign markets. Source Forgren and Johanson 1975, 16 12The figure shows that additional market commitment will be made in small move, both in the market commitment and geographical dimension. The geographical dimension means that firms enter new markets with successively greater psychic distance, defined in terms of factors like language differences, culture and political system, etc. Therefore, companies internationalize by going to those markets they can most easily understand and where the perceived market uncertainty is low. Criticism of the Uppsala Model There were several critics referring to the Uppsala model.Some of them are that the model is too deterministic (Reid, 1983 Turnbull, 1987) or that the model doses not take into account interdependencies between different country markets (Johanson and Mattson, 1986). Studies have shown that the model is not valid for service industries, situations of highly internationalized companies and industries and that the livelong internationalization process has speeded up. Firms also tend to enter distant markets in terms of psychic distance at an early stage (leap-frogging tendency), because the world has become much more homogenous and that has lead to that psychic distance has decreased. . 2 Application of the Uppsala Model Only by simply looking at the internationalization process that the Plantaze company followed over the years, it is easy to leave off that the firm followed more or less the theory that the Uppsala Model describes. In the beginning, for example, when the firm started selling their products only on the ex-Yugoslavian territory and Albania without having the need of going to distant markets is understandably the kind of behavior that a newly founded enterprise would have in the Uppsala Model.After learning from this experience (because in from the companies point of view, since culture plays an important factor, it learned a great deal from selling on the whole territory of Yugoslavia, where seven different entities and cultures were mashed togeth er under one flag) they could start and wonder off to other countries and cultures. In the second phase of their internationalization process, countries from Eastern Europe were chosen and some small steps to the Western part of Europe were also made. The first important milestone in the companys history is the opening of their first sales-subsidiary in the United Kingdom.It is called Monteadria and it is located in 13 London. This particular step can be noted as the exception from the rule since the firm ventured off to a distant market directly by establishing a sales-subsidiary and not starting by exporting and then gradually develop. Nevertheless, it is quite difficult for a company that is active on the market to truly and without exceptions follow the Uppsala Model since it does not take into account other important factors such as market attractiveness, market size of it and others.The globalization and internationalization effect can be seen in every market and in every cou ntry. Because of that, because of the massive inflow of information and data available in a blink of an eye, companies show leapfrogging tendencies and go to more distant markets earlier. The overall psychic distance between countries has decreased. Plantaze took full advantage of the fast abject business world in which they operate. The company grew rapidly and intensified export activities worldwide. As a result, their export figure has increased by more than 550% since 2003. 5. 1 Implications and Limitations Implications of the Study The main implication of the study would certainly represent if whether or not managers that handle the company use the Uppsala Model when entering the internationalization process. save by looking at the export path explained in the Excel sheet above, it is easy to conclude that the firm applied the model. Of course, the fact that the managers specifically used the Uppsala Model or that the pattern used just ergodicly fits, is something that needs to be analyzed more in detail.In contrast, when it comes to the path chosen by the company for entering new markets and countries via wholly-owned or partially-owned subsidiaries or joint-venture, the situation changes. The path chosen is not similar to the Uppsala Model. unity argument would be that they chose to enter the British market with a subsidiary in London before opening one in Belgrade or Sarajevo. The logical step, according to the Uppsala Model would be to start with establishment of subsidiaries in neighboring countries and afterwards spread out to other, more foreign countries. 14 5. 2 Limitations of the StudyThe main limitation of this study would be that it revolves around the Uppsala Model and thus making its criticism point, the major liability of the study. The model is old and was not updated to the current economic situation. For example, in todays business world, companies have the tendency to leapfrog some entry modes and to go directly to more physically d istant markets. The world today has become more homogenous because of the globalization process that has been going on in the last decades and the psychic distance has also decreased. The company described and used in the study, Plantaze, is not the perfect fit to the Uppsala Model.The point that the company posses enough financial resources leads to the fact that consequences of their commitments wont have a huge impact on their balance sheets. Moreover, the company is not obliged to go abroad to gain new market knowledge and gain experience because today they can call on other sources for additional information and know-how. Universities, government databases and institutions or other companies from the branch can provide this kind of data. Regarding the limitations of the research, the fact that the findings are closely linked to a specific context is underlying.This research has been confined to a few countries in the European Union. This may not be sufficient to generalize our findings in this paper. However, this paper points out the direction and may act as an indicator how our company internationalized. Thus, we believe that our findings are useful to better understand the driving forces of the internationalization of Plantaze. 6 Conclusion and Future Research The path chosen by the Plantaze company follows to a certain degree the theory of internationalization that the Uppsala Model presents.No one knows for sure if the high management of the company intentionally acted in this manner or if the match is just a random one. To better understand their internationalization process, in future studies, interviews with the persons responsible and who took the decisions must be conducted. Only then, only with that data, the study can truly show how the company reacted to the internationalization process and how they proceeded. Nevertheless, without having that data available to be 15 used, and only through analyzing ex-post the steps taken in the past, the U ppsala Model provides a possible framework for companies to follow.In addition to future research possibilities arising directly from the limitations, it should be recommended that future research may explore longitudinal research design for further contribution to international business in this context. 16 7 References Publications Birn, robin redbreast J. 2001. The Handbook of International Market Research Techniques, London 2001 Hansson, Anders and Hedin, Kim. 2007. Motives for internationalization. Small companies in Swedish incubators and science parks, Uppsala Hofstede, Geert. 2001. gardenings Consequences Comparing Values, Behaviors, Institutions, and Organizations Across Nations.Thousand Oaks, CA Sage. Johanson, Jan and Wiedersheim-Paul, Finn. 1975. The Internationalization of the Firm Four Swedish Cases, in The journal of Management Studies, 1975, 305-322 Kent, Raymond A. 1993. Marketing Research in Action, New York Kogut, B. and H. Singh. 1988. The Effect of National Cu lture on the excerption of Entry Mode, in Journal of International Business Studies, 19(3) 411432. Masum, Mohibul Islam and Fernandez Alejandra. 2008. Internationalization-Process of SMEs Strategies and Methods, Vasteras. Pett, Timothy L. 2008.Examining SME Internationalization Motives as an Extension of agonistic Strategy, in Journal of Business and Entrepreneurship, 2008, 1-13. Internet CIA Factbook n. a. Hofstedes Cultural Dimensions. Understanding Workplace Values near the World http//www. mindtools. com/pages/article/newLDR_66. htm, accessed October 15, 2012. 17 Plantaze www. plantaze. com , accessed October 15, 2012. WHO http//www. who. int/substance_abuse/publications/global_alcohol_report/msbgsruprofiles. pdf, accessed October 15, 2012. Worldbank http//data. worldbank. org/indicator/NY. GDP. PCAP. CD, accessed October 15, 2012. 18 8 Appendix 19