AAA Triangle Case Study

4b. Local managerial must adjust their strategy when entering a foreign market by reviewing the AAA triangle framework. Although globalization and international has reduced the distance with the rest of the world to a new level, distance still matters. Local managerial should follow the AAA triangle by focusing on one or two As, which means adaption, aggregation, and arbitration. There are constraints pursuing all three As at the same time; companies can have limited managerial bandwidth, one culture, and small focusing effects tensions to overcome all three As. For example, when McDonald’s entering each countries’ market, they would adapt to the culture by creating a special product dish and even seasonal specialties that serves only to that

The reasons that many MNCs chose to enter the market using joint venture are multiple, as mentioned above. A successful joint venture in 2007 between Bank of America and China Construction Bank (CCB) illustrates the example of a MNC entering a foreign market by joint venture. Because China is a developing country and it is only timing issue in 2007 that China will eventually have access to credit card, Chinese market is very important for Bank of America. During 2000s, Chinese market is not efficient and has been hit by corruption scandals, while having the ability to influence the system without any significant equity control. 60% of the banks are state-owned. Bank of America faces significant risk entering the market, therefore, joint venture would be their first choice to hedge the risks, while capturing the potentials in the Chinese market. Fully owned subsidiary could be a better choice if the MNCs have enough network, resources, expertise and understanding of the local culture and market. For example, US MNCs entering Canada should considered fully owned subsidiary in the first place because of similar culture and lack of language barrier. Just few years ago, Target chose to enter Canada without being fully purposed, and assuming the same local culture and market with the US. Similar culture does not mean that there is no culture differences. Without a full preparation regarding its logistic supply chain and human resources, Target soon exit the Canadian market by

Political risks when entering Russia are its centralized and archaic political and civil institutions, corruption, and high terrorism threat. In Russia, political system is not evolving because of the single party state. There is also little reform and incentive from the government, which discourages foreign direct investment. In 2008, responding to the world’s financial crisis, Russia adopted a policy restricting foreign direct investment in 42 different important sectors. Russian state would like the businesses to be fully controlled, and leading sectors, including energy, oil, and banking are been restricted as a result. Another issue regarding the political background of Russia is that its inefficient government structure. High level of corruption poses challenges to the business’s ethics, especially to those who came from a country that do not allow any bribing activities. Although Russia has been making progress toward anti-corruption and attracting foreign direct investment, Russia is still to be seen as with full corrupted state officials, unfavorable political environment. Political risks in France are high terrorism threat and regularly exercised workers’ strike, for companies wishing to do business in France. Different with Russia, France does not have significant problem with government and corruption, and they choose to perform reforms regularly. French government emphasizes hugely on worker’s pay by launching a New Responsibility Pact in 2004, and working