Entry to Foreign Market Cameron International Corp
Cameron International Corporation with revenues of $6,134.8 million (FY 2010), net profit of $562.9 million (FY 2010) and an operating profit of $858.5 (FY 2010), provides flow equipment and pressure control equipment for both land and sea oil rigs. It manufactured the blowout preventer on the Transocean BP rig that failed. It operates in more than 100 countries through various contractual arrangements. The company has just recently ventured into FDI relationships with a purchase of a Brazilian company that manufactures products for the Brazilian oil and gas industry to support its expansion into that market. One of the weaknesses of the company is the overreliance on the U.S. market, making possible future joint ventures and equity purchases in foreign markets a viable strategy for expansion. Although the company has sales offices in Thailand and Malaysia, this area is a small portion of the company’s activities.
Recently, Myanmar, formerly Burma, has reversed a decade’s long policy of isolation imposed by the ruling military regime. Noted more for human rights abuses than anything else, Myanmar has suffered under sanctions and lack of involvement in the international community. In 2011, the country reversed course with the election of Thein Sein, a former military leader, the release of Aung San Suu Kyi, free elections, and negotiations with rebel groups. The country is very rich in oil and gas resources with extraction as the most productive sector, but the “business climate is widely perceived as opaque, corrupt, and highly inefficient. Wealth from country’s ample natural resources is concentrated in the hands of an elite group of military leaders and business associates.” (CIA World Fact Book, 2012)
As a consultant you have been asked to prepare a report on the pros and cons of market entry into Myanmar, the best means to enter, and potential difficulties if the company enters. The CFO has prepared a report stating that the break-even analysis supports both FDI and subcontracting.
Write a six to eight (6-8) page paper in which you:
- Determine which institutional and risk factors must be considered and whether they support entry or not.
- Conduct a VRIO analysis to determine whether entry is supported.
- Assess existing cultural issues to determine how they should be addressed should the company enter the market.
- Determine if the company should pursue FDI with potentially more risk and higher returns, or subcontract to provide component parts.
- Recommend which joint venture partners the company should approach and for what percentage if the company decides to engage in FDI.
- Determine the three (3) greatest difficulties that may develop and the strategies the company should pursue to these difficulties, should they arise.