What is multinational enterprise?

According to Franklin Root (1994), an MNC is a parent company that:  Engages in foreign production through its affiliates located in several countries,  Exercises direct control over the policies of its affiliates,  Implements business strategies in production, marketing, finance and staffing that transcend national boundaries.

Introduction A Multinational Corporation is an enterprise that delivers services or production in more than one country. There are two models of Multinational Corporation. The first model of a multinational corporation is the one with an established headquarter that is based in one nation while some other facilities are based in locations in other countries. This type of a model allows the company to take advantage of benefits of incorporating in a given locality while at the same time they are able to produce goods and services in areas where the cost of production is lower. Multinational Corporations have risen as one source of foreign direct Investment in the major industrialized nations (Spero & Hart, 1997). The second model of a multinational corporation is a case whereby there is a parent company in one nation and subsidiaries in other countries around the world. With this model all the functions of the parent are based in the country of origin the subsidiaries more or less function independently. Multinational corporations have a powerful influence in international relations and local economies they play an important role in globalization. Multinational Corporations have grown in power a visibility but they have also been viewed more differently with both governments and consumers worldwide (Alan & Alain, 2008). In addition, multinational corporations often access new markets by creating joint ventures with existing firms operating in the markets. In joint ventures, the venture partner in the market to be entered remains with a considerable share or even complete autonomy. The establishment of joint ventures has most of the time proved unsuccessful in the long run for multinational corporations, which are likely to find their venture partners have tough competitors when a more direct entrant of the new market is attempted. Multinational corporations are thus able to succeed

on new markets in a number of ways which allows existing concerns in the market to be accessed with a varying degree of autonomy and control over operations. Because of the enormous size of MNC’s they enjoy massive economic, legal and political power which enables them to dictate the markets (Stopford, 1998). This research paper digs deep into identifying the political and legal challenges that have hit the Multinational Corporation. It also discusses various theories of MNC’s and how they have impacted in existing corporations. Politics and power within MNC While there are no doubts about the economic success and pervasiveness of multinational corporations, their motives and actions have been called into question by social welfare, environmental protection, labor organizations and government agencies worldwide. Due to these conflicts, there has arose numerous concerns about the influence of politics and legal constrains that should be met. Multinational companies are faced with various challenges most of them surrounding politics and power. In his book, The Economist, Bill Emmott argues that the power of multinationals as well as their predominance cannot be undermined. He further evidenced the extent to which they have powers. Due to interests from developing countries on MNC’s, the latter have gained indirect power influence, upon policies that a state may adopt, they have both economic powers and political influence (Emmot, 1993). Multinational Corporations operations are likely to affect political, social environmental and economic factors that diminish the risk of an outbreak of armed conflicts. Although MNC’s involved in large scale extractive operations have developed extremely comprehensive methodologies for undertaking stakeholder analysis and impact assessments. Multinational corporations have a number of means in which they can influence corporate decisions. Governments can restrict access to grants, subsidies, tax credits, loans, and investments insurance. Multinational Corporation has effect on employees and labor unions in influencing firm practice and the expected standards of operation. Interference and regulations by governments have played a role in multinational corporations. There have been political interferences with the affairs of multinational corporations especially host governments which demand certain conditions that should be met with the Multinational Corporations. In developed countries, these limitations tend to cluster mostly on industries that

In addition a lack of political will to make the process work for example failure to consult and lack of follow-up on agreed matters is a catalyst of political conflicts. 2003). According to Macdonald. There are significant problems of compensation programs for expatriates. The complexity of developing a systematic compensation programs requires corporate wide solutions. one must examine the types of interventions from governments (Geppert. use of technology and national trade balance (Phil and Anthony . International compensation systems have become more challenging. There are other legal challenges of compensation plans as drawn by different countries. politics within an organization that involves workers and their managers affects their technical and organizational capacity. A successful strategy of compensation involves keeping expatriates motivated at the same time meeting the objectives of the MNC. The expatriates pay systems are often different from those used for host country. level of employment. host countries and the third country nationals. 1983). Over time there has been an increase on legal challenges whereby a Multinational Corporation requires legal advice with respect to various facets of their operations and organizations (Imber. Lack of . In analyzing the legal and political influence. Most modern governments have given priority to the goals of public policy of economic efficiency. Host governments have in many instances restricted the freedom of a multinational corporation in deploying resources and limitations to strategic freedom. Political conflicts in headquarters are subject number of important factors still limiting the effectiveness of MNC in the region. 1998). When the government is unable to integrate consultation across all issues related to national planning and development conflicts in the organization are evidenced.are of impact to the economy such as telecommunication equipments industry. improvement and growth and betterment of living standards. The regulations have primarily affected multinationals in the form of sensitive issues as product choice. the international compensation policies can produce intense internal conflicts within an MNC any stage of globalization. There have been conflicts of expatriate employees paid more than the local employees who have jobs equal or greater importance and complexity. identity disclosure and cultural distinction drawing in MNC’s political conflicts are norms. In an organization where there are un-equal power relations. Governments have moved towards regulating the entire industrial sectors.

In most cases the state has every right to retain the control that sometimes . Environmental protection agencies are equally concerned about the activities of multinationals. Many of these institutions have not worked satisfactorily. Burton. In most countries. According to Burton. 2003). Attempts have been made to institutionalize workerinvolvement in decision-making in several countries a workers for example should be allowed to attend management committees. not substance. but many forces should also be at work to keep multinational corporations away from power wielding over their operations. all these concerns are valid and have undoubtedly occurred. There has been too much emphasis on form. little emphasis has traditionally been given to building strong bilateral relations between managers and workers. A critical issue will be the extent to which trade unions can increase their profile and influence through these pressures (Macdonald. Daniel F. 1997) Nonetheless. He further recommended that government run industries be privatized and then develop partnerships with the Corporations in order to improve the efficiency of multinational corporations. which often maintain environmental hazardous operations in countries with minimal environmental protection statutes. Burton came up with various recommendations he suggested that consumer awareness be increased through sensitizing them on the standards of goods from Multinational Corporations. On the other hand also. International labor unions have expressed concern that multinational corporations in developed countries can avoid negotiations for labor by moving their jobs to developing countries where the costs for are less. There is therefore room for greater optimism about progress being made in this area. Globalization has exerted competitive pressure and they are resulting in greater emphasis being given to improved workplace relations and higher level contributions to enterprise performance from workers. the power of a Multinational Corporation is judged mainly in terms of economic capabilities. multinational corporations have also suffered a blow on legal challenges.representatives and coordination of views with federations or employers also contributes to increased conflicts within an organization. Lastly he recommended that Multinational Corporations should operate on the regulations of a country and their activities should be legal and accepted by the state (Thornton Bradshaw. These are legal issues that must be met with a Multinational Corporation. The social organizations concerned about the actions of multinationals have set strict measures that should be met with the corporations.

 Operations in a number of countries  High proportion of assets in or/ and revenues from global operations  Stakeholders are from different countries History and evolution of MNEs  These corporations originated early in the 20th century and expanded after World War II. Japanese.  Such enterprises maintain that they create employment. Theories of MNC and their effects on real life Multinational Corporations allocate many different theories to achieve the status of a multinational entity. These research paper compares who benefits the most Four theories and one hypothesis have been put forward to explain how structural goals are achieved by Multinational Corporations. Internalization theory. and improve technology in countries. it does not impair its ability to control a Multinational Corporation and lay down the conditions under which multinational corporations may establish subsidiaries within its borders to restrict and regulate their operations when they are established or to nationalize them. or West European.the Multinationals do not have. and oligopoly theory along with the tariff-jumping hypothesis. No matter how small a state is. even with these lucrative investment strategies it is not easy to distinguish benefits or hurt to the host country. However. 2011).  During the last three decades. bring light on how the foreign corporations continue their path of vertical integration. obsolescing bargain theory.  A multinational corporation developed new products in its native country and manufactured them abroad. product cycle theory. create wealth. Reasons for the Establishment of MNCs . many smaller corporations have also become multinational. How is a company classified as MNE?  Subsidiaries in foreign countries. The states still maintain their ability to have direct control and influence over their internal and political affairs (Grigsby.  Almost all the earliest and largest multinational firms were either American.

. Disadvantages of MNCs:  Trade restrictions imposed at the government-level  Limited quantities (quotas) of imports. capital and entrepreneurship.  To develop an international brand.  Slow down in the growth of employment in home countries.  Increase in exports and decrease in imports.  To avoid or minimise the amount of tax to be paid. Advantages of MNCs to the Host Country:  Transfer of technology.  Technology and management expertise acquired from competing in global markets.  To take advantage of government grants available.  Inflow of income from overseas profits.  Increase in the investment level and thus. the income and employment in the host country.  Export of components and finished goods for assembly or distribution in foreign markets.  Acquisition of raw materials from abroad.  To secure cheaper premises and labour. royalties and management contracts.  To save on costs of transporting goods to the market place. To increase market share.  Greater availability of products for local consumers.  Effective management of a globally dispersed organization.  Employment and Health & Safety Legislations in other countries may be more relaxed.

.  Low consideration for human rights and welfare.  Depletion of resources due to their continuous use by these corporations. Key challenges that Pakistan MNCs Face:  Domestic market like India vis .vis International expansion.  Handling of potential liabilities related to Labor.  Interference and dominance in the internal affairs of sovereign nations. Criticism of MNCs:  Creation of false needs in consumers.  Styles of doing business.  Autonomy to “local” managers.  The problem of Dumping.  Culture.  Language. IPR etc.  Centralization of R&D operations in their home country. Destroy competition and acquire monopoly.  Invasive advertising and corporate lobbying.a .  Creation of monopolies in the market and elimination of local competitors.

Case study .

they should be encountered by Telenor. if there are challenges in emerging markets due to being a typical MNE from the developed world. Telenor is an especially good case to investigate the implications that can arise when a multinational company from a developed market is operating in emerging markets. A company who enters emerging markets that is already inhabited by other developed market MNE’s will enjoy the benefits of efforts made by early entrants to adapt to the operational environment (Khanna and Palepu 2010). Firstly Telenor fit my first criteria. The reason why a company from the telecom sector is especially interesting when investigating business . Early I narrowed my search for case companies down to companies that fit the criteria above.Telenor The Norwegian Telecom company Telenor’s operations in Eastern Europe and Asia have made them a major player in emerging markets. This means that they had to deal with all the implications that are related to being a developed market MNE in that market. In this investigation Telenor is used as a critical case. When searching for a case that could be used for this purpose I used an information-based strategy for selection of samples and cases. or a case that is used as a representative of other cases. compared to many of their peers. lies in that Telenor was a first-mover in several emerging markets. Being a company that has existed for more than 100 years they carry the typical characteristics of a developed market-based firm with their typical values and longstanding traditions. they are a multinational company from a developed market who is operating both in developed and emerging markets. then it applies to all (no) cases” (Flybjerg 2004). for several reasons. but also individually from each other. The value of investigating Telenor’s operations in emerging markets specifically. My goal was to find a critical case that allows me to achieve information that permits logical deductions of the type “is this (not) valid for this case. By investigating a company that is present in emerging markets both in Asia and Europe I get the opportunity to investigate if emerging markets differ from each other. Therefore they may not have to deal with the same degree of challenges in emerging markets as first movers. It is exactly this heritage that can create implications when adjusting to operating environments in emerging markets. and hence their experiences in those markets will reflect the broadest range possible of the actual challenges and implications to business in that market. There is a wide range of companies to choose from that fit these criteria. As stated by Khanna and Palepu (2010) emerging markets should be distinguished collectively from developed markets. Hence. Secondly Telenor is a good case for investigation because they are present in emerging markets in different regions. that is also in the telecom sector. and the implications to strategy related to this.

When the monopoly over the sale of telephone sets in Norway ended. which assures me that I will be able to identify distinct strategies to base my investigation on if I choose a telecom company as a case company. while the growth potential is enormous. the initial investments for telecom operators entering emerging markets can be high. In 1995 Televerket changed its name to Telenor. both from other multinationals.1. Telenor’s main operations are concentrated in three geographic regions that include developed. Today Telenor is one of the leading mobile operators in the world. Telenor was one of the top 500 global companies by market value in 2010 according to the Financial Times Global 500. a growth from 15 million subscriptions in 10 years. they were operating under the name Norwegian Telecom (Televerket). and not so much strategies of developed market MNE’s in emerging markets.no July 14th 2010). but those who are unable to gain critical mass struggle (www.strategies in emerging markets is the rapid growth in this sector. where more than 50% of these revenues come from markets that are not developed. and even banking. 1. The use of mobile phone has improved living standards of millions of people by providing easier communication.200 employees worldwide and revenues of NOK 95 billion in 2010. but was not partly privatized and listed on the stock exchange before year 2000. Between 2000 and 2005 the number of mobile subscribers in developing and emerging economies grew more than a fivefold (Allen et al 2007). and the Norwegian market for telecommunications terminals opened up to competition in 1988. which means that profit margins can be great for those who succeed. but also local. access to quick medical help. Last.dn.1 Company information Telenor started out as a government agency in 1855 and has been known under various names. with 203 million mobile subscriptions. and emerging markets: The Nordics Telenor is a leading provider of mobile and fixed services in Norway. By choosing a case company that operates in a sector that has international competition. They have 33. and are among the top performers on Dow Jones Sustainability Indexes. . but also from local companies. newly industrialized. If I instead selected a case company from a sector that is dominated by multinational players. the analysis would be of competition between MNE’s from developed markets to capture emerging markets. as the international airline industry. I’m able to also analyze the broadest possible set of implications of operating in emerging markets. The benefits of the mobile phone has transformed into success for mobile companies in emerging markets and competition can be fierce. job opportunities. Sweden and Denmark. The operations in Scandinavia represent Telenor’s operations in developed markets. Therefore telecom operators must carefully plan and execute their strategies when entering emerging markets.

Uzbekistan.. The selected theories are context-independent and can be applied to “all” situations. Malaysia is considered a newly industrialized economy. Malaysia. It contributes to understanding the boundaries of the MNC’s.Central and Eastern Europe Telenor Group has a strong position as provider of mobile services in Hungary. By applying these theories the investigation of one specific case I will put myself into the context being studied. The first are theory about international production. Kyrgyzstan.6 per cent in VimpelCom Ltd. and the relevance of selected theories for this investigation. Each section starts with an overview of relevant theories within the area. My goal is to reach an understanding of Telenor in several different specific contexts. The contextindependent theories can help me reach that goal because they will help me develop an understanding.telenor. Internationalization theory Internalization theory explains the existence and functioning of the multinational enterprises. and hence theory will be used as a reference point. All markets in this group are defined as emerging markets according to the worlds Emerging Markets Monitor. Bangladesh. Following this I introduce theory about corporate branding and the theoretical view of strategy. and the second are theory about emerging markets. Asia The Telenor Group is one of the largest mobile operators in Asia through their operations in Thailand. Theory The selected theories cover two main areas. Kazakhstan. Pakistan. Georgia. and a guide to maneuver. This theory is based on activities in the presence of market imperfections just as they domestically expand. while the remaining countries are defined as emerging markets according to the worlds Emerging Market Monitor (www. and India. its interface with the external environment and its internal organizational design. who offers mobile services in Russia. They also have an economic share of 39. Tajikistan. Armenia. I also discuss possible limitations of the selected theories and the consequence the theory selection may have on the investigation. Cambodia. there are three prerequisites to be met by a Multinational Corporation to compete with local firms firstly it must have market . Laos and Vietnam.com). Ukraine. Serbia and Montenegro.

The theory suggests that a product’s life-cycle in all the parts in the world markets’ production gradually move away from the point of origin. This ranges from higher taxes to complete expropriation of MNC’s assets. Secondly it has to consider the particular foreign location that is hungry for new investments relative to the alternative locations including the home market (Rugman. the initial bargain favors the Multinational Corporation but the relative bargaining power is shifted to the host country from the MNC’s. Normally a product is produced elsewhere and introduced in the country of origin and this moves production to other countries. In most instances. An example is the IBM personal computers that were produced in the US and they later on spread to other industrialized countries (Dennis. The product cycle theory This is an economic theory that was developed to explain the observed pattern of international trade. the product is imported by its original country of invention. sales remain stable which then starts falling and the process continues until the substitutes enter the market. The last stage of a product cycle is the decline stage which is mostly evidenced in poor countries which remain the only market for the productions. the industry concentrates on the lowest cost of production. Personal computers in the United States mark a perfect example of this theory. 2007). The . At the early part of this stage. 2009). In this model. An example of this stage is the textile industry where goods are exported to developing countries due to lack of market (Hill. Growth is the second stage of a product after production. Upon maturity of a product.power that is derived from specialized knowledge. The fourth stage according to this theory is the saturation stage which is at the time when the sales of a product reach the peak and there is little possibility to increase. This theory is best explained by the five stages of production which firstly include the introduction stage where a new product is introduced to meet local needs and it is then exported to other countries which have similar needs and incomes. resources and constrains on both parties. The obsolescing model This theory was first developed by Raymond Vernon and it explains the changing nature of the bargaining relations between a Multinational Corporation and a host country as a function of goals. 1981). et al.

obsolescing model theory gives an explanation of a firm that has invested in a host country whereby it starts with a good bargaining position with the host country's government because of the specific firm advantages such as superior technology. Telenor – From National Monopoly to Multinational Enterprise . The oligopoly theory Oligopoly theory contends that firms move abroad to exploit the monopoly power they enjoy through the best market expertise. The tariff jumping-off hypothesis This theory dwells mainly on foreign direct investments maintaining that firms normally use foreign direct investments in order to jump over the existing tariff barriers of host countries. The move was more attractive to foreign and domestic firms because it achieved similar outcomes (Blonigen. 2000). access to capital markets. Under this scenario. After the firm has made an investment. The theory is characterized by a few suppliers producing a heavily differentiated good through massive advertising and marketing. For example. the decision on how much to invest on projects for research can be contentious because it might pose a risk to any business. another competitor might decide not to follow and this leads to loss of competitive edge in the market which may lead to long term decline on market share and profitability (Kreps. This theory has a direct relevance to studying the behavior of businesses in oligopolistic markets. the bargaining advantage may slowly shift to the host country (Vernon. each firm decreases its price and increases the output in order to control a larger share in the market. The Japanese electronics products and the response of the United States played to let firms receive lower duties is an example of tariff. If one firm invests on Research and design spending. managerial skills and control of technology. unique products.jumping off. There are other influences like the legal structures that must be adhered strictly. firms set their prices and outputs on the assumption that their rivals would not react at all. and access to final product markets. 1977). 1990). In this theory.

telenor. officially opens in St.telenor.Telenor’s history dates back to 1881 when The Norwegian government passed the Monopolies Act.913 million) and provides a network with a capacity for more than 400 000 users. Austria.com). Montenegro.telenor. Today they have also started commercial business in Thailand.com). Ireland. in which Telenor has a 13 per cent ownership share. The investment amounts to more than NOK 100 million (USD 1. under the name The Norwegian Telegraph Administration.la9dl. Lithuania. Source http://www. and also in Austria. Russia and Telenor invests in a joint venture in Bangladesh. Early Expansion In 1969 The Norwegian Telegraph Administration changed name to Norwegian Telecommunications (Televerket). which gave the state.com). with partners). Malaysia. Check Republic.com) * Televerket logo 1969.html The First Moves Abroad If we put the international contracts to develop satellite and GSM networks aside. giving the state exclusive rights to run telephone services. Greece.telenor. This monopoly was extended in 1899 with The Telegraph Act. high capacity infrastructure for the Internet in Norway. .telenor. (www. While Telenor is beginning to expand their business abroad internet has its real breakthrough in Norway and Telenor builds a new. when the Norwegian market for telecommunications terminals opened up to competition (www. Around the same time Telenor invests in several international telecom companies (www.com). Telenor also consolidates its position in TV distribution and becomes the market leader in satellite-based broadcasting in the Nordic region (www.no/lx-telegram. Germany (1997. At the same time Telenor is responding to technical development and cooperates with Canal Plus (Europe’s largest broadcasting company) in developing a digital standard for satellite broadcasting. The Norwegian telecommunications network became fully digitalized by 1997 (www. Hungary. Petersburg. exclusive rights to convey messages by means of telegraph lines and similar installations. By the millennium The Norwegian Telegraph Administration had changed from being a state monopoly in the market for telecommunications terminals. into a public company named Telenor. Ukraine. and the year 1988 marked the end to the end of Norwegian Telecom’s government granted monopoly over the sale of telephone sets. Further they were licensed to Develop GSM networks in Bangladesh and Montenegro (1995). Right before the millennium they also expanded their operations to Southeast Asia by acquiring at 33% holding in Malaysian company DiGi. Montenegro. and Bangladesh (1995) through joint ventures. Serbia and India. Telenor’s international expansion starts in 1995 when Northwest GSM. Hungary. By the year 2000 Telenor was present in Russia.

The attempt to gain market control in Sweden and Norway can be interpreted as an attempt by Telenor to gain back their monopoly position. In 1999.com). 1998 is the year when the last part of the monopoly on telecommunications ends: the Norwegian telecommunications market is opened up to full competition after the first deregulation of the market 10 years earlier. and operating as a market leader was probably well incorporated in Telenor’s corporate culture at this time so it is understandable why they were taking measures to ensure continuation of this position. Companies have strong incentives to avoid or suppress competition and to gain monopoly power.The investments in Norway while expanding abroad indicates a horizontal expansion strategy where Telenor wants to expand their business abroad.7 billion (www. and hence get directly involved in commercial operations in Russia (www. and being one of Europe's largest telecom operators they would also have gained significant power in the other markets they were about to enter at that time. valued as high as $82. The proposed merger with Telia also shows that Telenor has a strong wish to become a market leader in their home market. After all.com). the merger with Telia was a perfect tool to secure Telenor’s strong market position in Norway. without abandoning their operation in the home market. Telenor acquire a 33% holding in DiGi in Malaysia and thus they expand their operations to Southeast Asia. but this is stopped by Norwegian and Swedish authorities. but perhaps the failed merger was an additional push on Telenor to continue to pursue their international expansion strategy. According to Eekhoff and Moch (2004) mergers is a common instrument for companies seeking control of a market. the same year as the Telia merger falls through. The negotiations broke down largely due to the underestimation from both sides of the cultural differences between the negotiating parties and has been referred to as one of the largest unsuccessful projects in modern Nordic history (Fang et al 2004). and also in the rest of Scandinavia. In 1999 Telenor is set for a merger with their counterpart in Sweden. Norway (Guilén and Garcia-Canal 2010).telenor. and the temptation to gain monopoly power will not disappear as long as there are rivals competing in a market (Eekhoff and Moch 2004). They also acquire part of VimpelCom in Moscow when they enter a joint venture agreement with Russian business group Alfa. When this is no longer an option Telenor is forced to think outside its home market to ensure future growth. If the merger of Telia and Telenor had gone through they would have formed one of Europe's largest Telco’s. With expectations of continually increasing competition in their home market. Telenor has a long history as market monopolist. Telia. .bnet. We do not know what Telenor would have looked like today if the merger had been successful.

There is also an early movement into a joint venture in Bangladesh in 1995. Grameen Telecom Corporation is a non-profit sister department of the internationally acclaimed micro-credit pioneer Grameen Bank. A common trait is that they expand into European markets. Hungary. but that this may not have been a defined strategy at the beginning of their international expansion. and then commits resources to foreign markets as they accumulates knowledge and experience to manage the risks of expansion and coping with the liability of foreignness. Ahlstrand. source http://www. and ultimately. In the positioning school strategy is deliberate. Lithuania. source http://www. whereas in the learning school strategy is seen as emergent. as Russia. In their description of the premises of the learning school Mintzberg.grameenphone. a pioneering initiative to empower rural women of Bangladesh. This pattern is not completely clear in Telenor’s early expansion. The Pattern of Strategy in Telenor’s Early Expansion Based on the writings on horizontal expansion into foreign markets by Guilén and Garcia-Canal (2009) there should be a pattern in Telenor’s foreign expansion where they start with countries that are closer in socio-cultural distance. and Montenegro.0 **Picture. as plans for the future. only later. *GrameenPhone logo 1997. Emergent strategies are strategies that are created by understanding through actions what their intentions should have been in the first place.grameenphone. and Lampel (2009) concludes that strategies appear first as patterns out of the past. started by Telenor’s joint venture partner in Bangladesh. The overall plan is not yet completely clear based on the different markets they are making investments.com). Malaviya (2004) claim that the Village Phone Project added a dimension to . They also make reference to the work of McGill University's faculty of Management that defines strategy as pattern or consistency in action. the emphasis seem to be on markets that are more emerging than their home market Norway.php?topic=63. He considers the most important reason to be the Village Phone Project. a market that you would expect is very different in terms of sociocultural distance from Norway. While they make an attempt to enter Sweden by merging with Telia. The name GrameenPhone translates to “Rural phone” (www.fhiredekha. GrameenPhone. perhaps. however it seems like a pattern is taking place where Telenor invests more and more in emerging markets. In other words it is the consequences of actions or planned strategies that lead to a pattern.With the new investments we can see the strategy of Telenor emerging as a pattern. as perspectives to guide overall behavior. Check Republic.com/forum/index.com/ According to Malaviya (2004) there are several reasons for why Telenor decided to enter Bangladesh in 1995. Following I present evidence that Telenor’s international expansion strategy after the failed merger with Telia takes on a pattern as international expansion into emerging markets. However they also make investments in telecom companies in developed markets.

Today the CEO is Jon Eddy Abdullah who took over for Johnsen in 2008 when Johnsen became the CEO of DTAC.cellular-news. while at the same time including managers from Norway to maintain their corporate culture and values. Telenor’s move to Bangladesh helped them accumulate knowledge and experience in emerging markets in Asia with relatively low financial risk. To some degree this explains why Telenor at an early stage of their international expansion entered a socioculturally distant country as Bangladesh. The first CEO of Telenor Pakistan was the Norwegian Tore Johnsen. This shows that Telenor is extracting knowledge gained in other developing countries by employing managers mainly with experience from these countries. and a potentially large market with relatively no competition.the venture. Initially after the launch Telenor targeted small towns and rural areas of Pakistan to gain support of the people living there in sight to become the 1st Mobile Operator to cover such areas. When Telenor later started to expand their business to other Asian countries it may have been an emergent strategy.pk). Similarly to Bangladesh Telenor could expect challenges in the labor market in Pakistan when searching for talent and there were not any native Pakistanis in the first management team in Pakistan. At the time of entry Telenor installed a top management team in Telenor Pakistan that consisted of managers from Telenor's operations in Norway. and Bangladesh (Malaviya 2004). They started their operations in 2005.telenor. To pursue a win-win socially responsible bottom line became a personal crusade for Telenor’s CEO Tormod Hermansen. Identification of New Opportunities in Emerging Markets – Telenor in Pakistan Telenor Pakistan is a wholly owned subsidiary of Telenor. Telenor’s entry into Pakistan was to a large degree based on their positive experience in Bangladesh.com. while the operations in Eastern-Europe usually had one or two representatives from the local labor market. Telenor is the single largest European investor in Pakistan and Telenor Pakistan is the second largest network in Pakistan with a market share of 24% (www. He identifies the two other main influences on Telenor’s decision t o enter Bangladesh as the low financial risk with an initial investment of US$40 million. which enabled them to learn about Asian emerging markets which in hindsight open for a strategy to pursue international expansion in emerging markets in Asia.com July 2008). Hungary. Abdullah was previously the Chief Technology Officer at DiGi in Malaysia so also he has experience from within Telenor from before (www. a result of the action that was the decision to enter Bangladesh. In addition to the opportunity to enhance an image as a socially responsible corporation. Telenor was the only company who made a bid on the US$291 million mobile telephone license in Pakistan. Russia. This 60 . no one else dared to enter the unstable country.

In emerging markets a large proportion of the population is often not connected to a bank.000 EasyPasia shops all over Pakistan serving all customers with Financial Services. and in some emerging markets consumers are now going directly from operating with cash. because they do not have a banking license like Telenor they are not allowed to open bank accounts. and Airtime Top up.7 billion (edition. For Telenor in the near future a largely untapped market waits. Introducing Mobile Banking Telenor made one of their greatest technological breakthroughs for succeeding in emerging markets in Pakistan when they launched EasyPasia in 2009. who has a full banking license. This is part of the reason why CNN in an article in 2010 predicted that Telenor's mobile banking is probably the model for the future. while 62% used a mobile phone. Because Telenor Pakistan used their normal retailer shops as merchants it became easier for people in Pakistan to make money transactions through the EasyPasia’s branches than by going to a bank. Africa and Latin America who do not have a bank account but do have a cell phone. Mobile Wallet. Money Transfer (Domestic & International money transactions). to mobile banking. all through the customers’ mobile phone.strategy has contributed to quickly gaining customer support over the country and is a clear parallel to the strategy of GrameenPhone in Bangladesh. In a few years that number that should reach 1. The services offered by EasyPasia are Utility Bill Payment (UBP).cnn. The merchant branches also offer cash in and out services. In comparison the entire banking network in Pakistan has 8.500 branches. In preparation Telenor purchased Tameer Microfinance Bank in 2008. However. Growth and Market Share . most notably Safaricom in Kenya with its profitable M-Pesa that have made the life of millions of people better with a service that allows customers to send remittances and pay bills via SMS. thought there is similar models provided by other companies. There are about 1 billion people across Asia.com January 2010). EasyPasia is a service for mobile banking that allows customers to make payments. There are more than 20. Telenor has more than 22 million subscribers in Pakistan and they are now able to open a bank account at an EasyPasia merchant. In 2010 approximately 89% of the adult population in Pakistan was not connected to a bank. according to CGAP and the GSMA. they are also able to offer saving accounts. Over PKR 11 billion (USD 120 million) has been moved through 6 million transactions from Telenor Pakistan’s merchant shops. Because Telenor purchased Tameer Microfinance Bank. withdraw cash and create saving accounts using their mobile phone subscription.

to Bangladesh and Pakistan at the time of Tel enor’s entry to these markets. In Pakistan and India one of the main challenges is reaching the BOP. Mobtel of Serbia and Promonte of Montenegro is that they were the second largest. When Telenor started their operations in Pakistan they established more than 20 000 local branches around the country. but most importantly regarding consumers and their needs. at the same time as they concentrated on growth in urban areas. When Telenor enters markets with high growth potential. but also with an established telecom sector they choose to gain market share through acquisition. This is described by Dunning (2001) as internationalization advantages – the advantages by producing through a partnership agreement. that was very little developed. or the largest telecom operator in their country. While this has proved to be a successful strategy in Bangladesh and Pakistan Telenor has gained critique for implementing the same growth strategy in India where Union or introduced more than 210 000 local branches at the time of its launch. Through The Village Phone Project in Bangladesh GrameenPhone created a large rural network by placing almost 70 000 mobile phones in 40 000 villages. When it comes to technological development and customer needs Hungary. Common for Pannon of Hungary. The major difference between India and the two previous countries is that India has an established telecom sector with fierce competition. they differ strongly from each other. In Pakistan Telenor targeted small towns and rural areas of Pakistan to gain support of the people living there in sight to become the 1st Mobile Operator to cover such areas. Montenegro and Bangladesh. but also individually from each other (Khanna and Palepu 2010). Telenor choose an organic growth strategy. emerging markets should be distinguished collectively from developed markets. together with Malaysia and Thailand can be distinguished from Pakistan and India. Differences can be found in almost every aspect of the market. Target Consumers and Technological Development While all countries discussed in this investigation unless specified otherwise can be characterized as emerging markets. Serbia. While both Pakistan and Hungary are considered as emerging markets due to voids in the institutional environment. despite a similar low degree of mobile penetration in the Indian market. while in the writings about Telenor’s . also before they were acquired by Telenor.To understand why they succeed in emerging markets specifically we must understand the way Telenor generate their resources and capabilities in different locations where they are available. and Pakistan where the telecom sector was basically absent. 65 In countries with less developed telecom sector as Bangladesh.

to simpler adaptations as the $1 prepaid scratch card in Bangladesh right after the millennium. but the mobile market has advanced the 16 years since the opening of their mobile network. the focus in Hungary.telenor. and they also offer internet for computers through a USB device (www. In addition to promoting postpaid and prepaid deals. Serbia. so in short the focus is on calling. They also promote packages where you get a discount in calling price to family and friends. and Malaysia is on keeping current customers and winning new ones by offering modern technology. International Roaming that allows users to browse the internet on their phone while travelling in foreign countries. and increasingly their first encounter with banking in Pakistan.telenor. and Bangladesh today are products similar to what they offer in the developed markets in Scandinavia. the mobile users in Pakistan prefer to buy their phone credit in advance. because the mobile phone is to a large degree still used mainly to stay in touch with friends and relatives.grameenphone. as searching for songs or finding food recipes. Thailand. While Telenor are making innovations from mobile banking in Pakistan. GrameenPhone’s promoted services are slightly more advanced. their main product offerings in EasternEurope. The promotion for accessing internet with the phone focuses on entertainment value.me/eng). and access to internet. They are also promoting a new auto-charge service so that customers’ calls will not disconnect – again – due to running out of prepaid calling balance. because as consumers in India and the BOP segment in Bangladesh.operations in emerging markets in Eastern-Europe I have found no mention of such challenge. the ability to connect to the internet for entertainment use. and mobile banking (www. These offers are identical to the services provided by Telenor Montenegro (www.in). text messaging. Hence Telenor are also serving a more technically demanding consumer group in Bangladesh. the ability to send text messages.com). which is also equal to the time Telenor has been present there. Thailand. their prepaid services. they promote modern handsets as the Blackberry. send text messages and also access the internet. Similarly Uninor’s websites focus on promoting low calling rates.pk).com. In comparison there has only been a mobile phone sector in Pakistan for six years. The third main promotion on Telenor Pakistan’s website is mobile banking. but the main emphasis in this promotion is to convince consumers of why this is a good option. On the official websites of Telenor Pakistan the promoted products offerings are Talk Shawk that is a service that provides the ability to call. Malaysia. Mobile banking is not introduced in India (www. In Eastern Europe Telenor is more or less . Montenegro. While Telenor will introduce many of their customers in India and Pakistan for their first mobile phone. In Bangladesh there is an aim to reach the BOP. There is also mention of their postpaid service where you receive bills according to your usage that is the standard solution amongst developed market consumers.uninor. Bangladesh.

replicating their business model from developed markets in Scandinavia with regard to product offerings and consumer targeting. Naushad was working with Telenor Pakistan since 2006 and was considered to be one of most valuable assets to the company especially for shaping up the HR system. than in the wholly owned subsidiaries in Eastern Europe. During past few months. though the product offerings are different. which are custom designed to reach specific customers. has witnessed most of its seasoned employees leaving the company over clashes with senior management. Telenor Pakistan faces challenges in retaining its employees Telenor Pakistan – the number 2 cellular operator in Pakistan has started to lose control over its human resource (HR) as the year 2012. Few of these personnel were the integral part of teams that were taking care of Telenor’s famous brands such as Easy Paisa. "Make it easy. Be inspiring and Be respectful". the employee evaluation process has become biased which has almost frozen the promotional process at Telenor Pakistan. Unlike past. and individually from each other. . Keep promises. We have analyzed the difference in product offerings above. so far. they are designed to meet the basic needs of consumers. Bangladesh. while in Bangladesh product offerings are tailored to also meet a more technologically demanding segment of customers. In Pakistan and India. 6 of its employees from the marketing and commercial division including Ahmed Bilal. Sources at Telenor reveal that change in policies by senior management has caused the differences to surface between senior and middle management. Naushad Javaid. this system has not been introduced to India and Bangladesh and I have not found any evidence of the initiative with $1 scratch cards from Bangladesh being implemented in Pakistan and India. In the start of August. There is no single strategy to reach the BOP in any one of the three last countries that are applied to all three markets. While Telenor makes a major effort to reach the BOP in Pakistan with the mobile banking system EasyPasia. Similar for the three last markets is a larger degree of adaptation of homegrown business model to reach the BOP. Telenor's values. however the degree and form of adaptation is different in every market. Shariq Mustafa. Director HR had also resigned from the company along with his other team members. Khamoshi Ka Boycott and djuice. Pakistan and India can be separated from the two previous groups. Ahmed Mustafa and Muhammad Usman have left the company and joined ZONG.

Fewer stakes are involved with one company. Heavy investment and good marketing strategy is required to break the other company’s monopoly in the telecom industry. Its main aim is to provide its customers with the best possible service. company culture. It can boast about its big investment and strong Biggest disadvantage for telenor is the relatively low market share. SWOT Analysis of MNEs: Strengths:  Weaknesses:  Telenor is a multinational company which is one of its biggest strengths. It is to be noted that Telenor is among the pioneers in Mobile Banking in Pakistan whereas Youth brand has been the backbone for its Khamoshi Ka Boycott and youth related campaigns.  Telenor covers a total of coverage area in more than 3000 cities. Telenor Pakistan hasn’t witnessed a smooth sail. Customer is getting less differentiation from all the service providers. business partners and vendors. if not perfect is a good substitute of the service of others. A service of one provider.  Switching cost of customer from one service provider to other is low. towns and highways throughout Pakistan. it is rather turning out to be just another company where employee retention is no more a concern. this inconsistent HR policy and lack of interest may not disturb higher management at Telenor Pakistan or Global but soon picture may change.Sources at Telenor confirmed that in the coming days many other employees are expected to leave the company just because certain VPs are watching their vested interests. Losing people from those important desks in a consistent way may turn out to be expensive for them in future. making it the 2nd  On the other hand differentiation between . Being at number 2 position in terms of subscriber base. Mobilink and Ufone have already settled down. The signal quality is good and its signals are available even in the most remote areas. 24 hr help line is available for the customers help if they need it. Since the departure of Tore Johnson.  Telenor Pakistan boasts customer care better than any telecom company in Pakistan. Once considered to be ve ry friendly and supportive for its employees. Pricing is going down quality is improving and customers enjoying more power  Telenor’s network service is remarkable throughout the country.

That means if government liberalized its regulation more there is potential in other new entrants from abroad to invest in telecom sector of Pakistan.  Telenor targets different types of customers at the same time. making it the 2nd largest network in Pakistan. 0345.largest GSM service provider in the services players already offering in Pakistan telecom industry are not much distinct from one other. A number of players have already begun to invest in the infrastructure . Therefore telecom industry of Pakistan has been experiencing growth since last one and half years. Telenor currently has these dialing codes.  Telenor has a strategic alliance with Nokia Siemens Pakistan. With its cash it is able to make outstanding marketing strategies.  Pakistan. 0347. 0343.000 cell masts throughout Pakistan. 0346. With Djuice its main aim is to get hold of the youngsters. Current government has liberalized the taxation and licensing licenses and investing in the appropriate infrastructure.  Being a multi-national company telenor has got good fund backing and is able to compete with the well established Initial years were not good as the entry into the telecom industry was not at all easy. They do this by providing cheap SMS rates. which are centered on obtaining the necessary Government is now stable from the day President General Musharaf has taken over. Telenor has a strategic alliance with Nokia Siemens Networks for expansion in Pakistan. Telenor Pakistan has more than 5. 0344. 0342. target more of the executive class. On the other hand it might be the demotivating factor because of less differentiation creative new entrant might not enter easily. It has GPRS service and EDGE service across its network in Pakistan. The company also had to bear losses after the propaganda was made against the Norwegian based telecommunication company after companies like Mobilink and Ufone. Networks for expansion in Opportunities  Threats  A number of opportunities exist in the voice telecommunication space. With their post-paid package³Persona´ they the publication of caricatures of the Profit. and 0350.

It is a big threat to the company as it cuts down companies profits. People called for the total opposition of the Norwegian based Obtain one of the existing cellular companies. So the company should take notice and try to provide service in every nook and corner of the country.  Inefficiency and poor network service of other networks:  Poor network service by the other networks is an opportunity for telenor to exploit.  company. Telenor had to face severe criticism from the religious forces in Pakistan after the publishing of caricatures on the Holy Prophet (P. Almost 80% of population is living in rural areas of Pakistan in which above 70% have no access to cellular connections.B. That is market opportunity which any operator can avail by applying expansion strategies. If they continue their good service to its customers.    polices in order to attract more and more foreign direct investment in the country. Telenor PEST analysis: Political Analysis .U. But this political instability can occur if the government changes and bring new policies which might not be in favor of telecom industry.H). Other companies’ loss is going to be telenor’s gain.  Market size is the biggest ever opportunity in Pakistani telecom sector. its customer base is only going to increase.by obtaining comparable data and video communication licenses and are now in a position to exploit the voice market. This in no way limits new entrants to enter the market but rather provides acquisition and consolidation opportunities. Moreover. Valuation could range between 8-12 times earnings. people can even shift to other network who have coverage in those areas.

.Government of Pakistan had developed Pakistan telecommunication Authority (PTA) so that helps in the establishing Business in Pakistan in more efficient manner.Political factors are those which are directly controlled by the political parties and Government they could be able to influence directly in any situation or in any industry.. Risk rate of economy of Pakistan goes to 3 out of 5 that is the alarming situation for the Pakistan as well as all the industries of Pakistan. Rate of interest is increasing day by day it is approximately 14. In Pakistan government dictates the pricing regulations so that influence the smooth working of the telecommunication industry. In Pakistan all the financial institutions are controlled by government rather than the head of financial Institution State Bank of Pakistan (SBP). In Pakistan Although an proper Institution for telecommunication sector working (PTA) but Government is influencing the working of that department and imposing the policies made by politicians. So they create a major impact on any industry.00% which is higher than any country in the world so it makes impossible for the telecommunication industry to take loan facility. In Pakistan Risk of martial Law is always threat for all the industries and in the dictatorship they could not be able to explore themselves and do not grow as they could be.. So they help the industry in giving economic soundness and provide financial aids to survive in the time of crises. In Pakistan Government is changing the policies very rapidly so that creates instability. Economic Analysis Economic factors are directly controlled and influenced by the financial institutions like State Bank of Pakistan (SBP).  Pre-paid customers were charged 10 per cent withholding tax on every new load. Currently government has increased the taxes on the telecommunication sector so that reduces the income of the telecommunication sector some of the examples of that are given below etc. In Pakistan Political environment was not stable that is the major threat for telecommunication industry because no one knows at what time Government will change and with the change of government policies will also change. Terrorism is the Major problem that is facing Pakistan in now a day that is the most crucial factor that is hurdle in the growing in the telecommunication sector because no one knows about the terrorist activities. Now the government of Pakistan is trying to give the maximum Protection to this sector and passing number of Laws to make it more safe and stable. which was deducted in advance  With 15 per cent sales tax on every call increased the sales tax from 15 per cent to 21 percent for mobile users. Overall economic conditions are not very good for any industry because rate of inflation is increasing day by day and value of currency is going down which causing increase in the value of loan payable that is another major threat for telecommunication industry. Government is trying to provide investor friendly environment to give the more benefit to the investors and give them maximum safety.

Telecommunication industry is the fastest growing industry in the Pakistan that shows that investment is quite comfortable in telecommunication sector. Pakistani people celebrate a lot of festivals on that occasion they try to make contact to their all family members and other at any cost these occasions are Jashn-e-Baharan.That create misunderstanding and create threat about the particular package. The population is increasing rapidly which increase the number of cellular usage and help in projecting high profits.7 million FDI which was 26. The total population of Pakistan is approximately 169. Social Analysis Social analysis is directly attached with the people and with the culture in which they are working if they try to dictate the social factors that create the threats to that industry and if they work within the social norms then social factors become the key to success. The latest technology of 3G mobile communications has been earmarked and PTA will . This technology gives less radiation then GSM technology. They create the lot of opportunities for telecommunication industry so they make calls to their relatives particularly on that festivals. Pakistani people are more social so they have family system and they want to remain in contact with other through any means so that is the opportunity for telecommunication sector to capture the feelings of the people.).During 2010 telecommunication sector attracted US $ 142. Introduction of CDMA (Code Division Multiple Access) Technology in the mobile Sims is also creating the Opportunities for the telecommunication industry. Technological Analysis: Telecommunication technology is changing the behavior of the people and providing them opportunities to get the bright future. AJ NAE BOLO GY TO KAL BUGHTOO GY {KhamoshiKa Boycott} (Djuice) KRO MUMKIN (Telenor) Low Educated people could not be able to understand the language of telecommunication (Djuice etc. Although these companies are bringing positive change in the society but also destroying the social culture and providing the negative attitude to the young generation of the country by providing late night services that is affecting the education of the young generation. Some campaigns to educate people and develop the positive behavior in that social culture. Due to latest technology the cost of telecommunication industry is decreasing and they are giving lowest rates to the peoples to remain in contact with relatives and with their families. Corruption is the major threat for any industry in the Pakistan that is because people are unaware and uneducated but now these telecommunication companies are working on that like.500. Eid Celebrations and other cultural festivals. So government is trying to give maximum benefit to the telecommunication industry. During the quarter ending December 2009.248. Telenor is taking initiative in this regard. telecom sector Labor Cost of Pakistan is very Low as Compared to other Countries so that is also an opportunity for the Telecommunication sector.4% of the total FDI in the country during this period.

such as alleviating poverty. This technology will increase operating capacity. This could lead to the production of a worldwide excess supply of both goods and services. the greatest potential threat posed by multinational corporations would be their continued success in a still underdeveloped world market. rapid slow down in phases of economic life and contraction of corporate activities.  They should make it as investors expecting high standards of social and environmental commitment to prefer Telenor.  They should customers to be confident that the Telenor Pakistan runs its operations in a responsible manner.  They should have important contributions to make on key issues. Conclusion In conclusion. . Recommendations: Respond to challenges Telenor’s aim should be to understand and respond to the challenges that society is faced with.soon be inviting applications for 3G spectrum auction. The current focus of the telecommunication industry is on increasing the coverage rather then up gradation of the systems they should upgrade the systems to meet the requirement of the modern world. In turn it can lead to wage and deflation of prices. These possibilities are only hypothetical however the operations of multinational corporations will continue to expand.  Build trusting relationships They should provide readiness to help find solutions to the challenges they are facing. combating climate change and encouraging safe use of Information Communication Technology (ICT). While the productive capacity of multinationals increases. the buying power of people in much of the world remains relatively unchanged.  They should work towards making Telenor's employees proud of the way we do our business. using their technology and competence to find innovative solutions.

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