Ségdáe Campbell MNE & FDI Project

Analysis of a Recent Case of FDI:

Anomali in Belfast

Seminar Tutor: Mr Dan Prokop

Word count:2062

Case details:
Name of investor: Anomali
Location of investment: Northern Ireland

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Contents
1. Introduction........................................... 4
2. The motives behind FDI ....................... 4
2.1 Market seeking .................................. 4
2.2 Resource seeking .............................. 6
2.3 OLI framework ................................. 6
3. Subsidiary roles .................................... 7
3.1 Product Specialist ............................. 7
3.2 Strategic leader ................................. 8
4. Entry mode strategies ........................... 9
4.1 Greenfield FDI in comparison with
other entry modes.................................... 9
5. Place marketing .................................. 11
Why Northern Ireland? ......................... 11
Bibliography ........................................... 13

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1. Introduction
Over the past decade Belfast has become renowned as a hub for Cyber Technology.

California based cyber security firm Anomali is the latest in a string of companies to invest in

Northern Irelands' capital. Following in the footsteps of other American tech companies

such as Proofpoint and aPriori Technologies, Anomali reveal plans to open a European

research and development centre in the heart of Belfast ("BBC", 2017). Anomalies

investment has already provided 20 new jobs in the city with plans to create another 100 jobs

by the end of 2019 (Mulgrew, 2017). Over the course of this report I will

analyse and discuss the motives behind this case of foreign direct investment (FDI) while

taking into account the relevant frameworks and the place marketing that is making Belfast so

attractive for this type of investment. Furthermore, I will go onto examine what type of entry

mode strategy this firm is likely to use and what type of subsidiary role this new firm is likely

to adopt.

2. The motives behind FDI

Renowned British economist John H. Dunning has spent years researching and developing a

number of useful and logical frameworks for the analysis of firms’ international decision

making (McCann, 2013). From Dunning's four motives for FDI I have identified two

which directly relate to Anomalies decision to move to Belfast, they are market seeking and

resource seeking.

2.1 Market seeking

The market seeking motive is defined as an MNE investing in a foreign country to take

advantage of opportunities granted by markets of greater dimensions. Commonly, MNE's

invest in foreign countries to better serve their existing customers who have built foreign

subsidiaries of their own (Franco, 2008). It is evident to me that this is a key motive for
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Anomali. Anomalies CEO, Hugh Njemanze has publically stated that as a result of their

recent growth they were searching for ways to better serve their ever expanding market

(Invest NI, 2017). Anomali aren't strictly looking to better serve customers in Northern

Ireland, but they are now more able to serve adjacent countries and ones further afield in

Europe (Franco, 2008). Cyber security is becoming more and relevant in today's society;

threats to cyber security have been heavily publicized in world news in 2017. It is costing

nations and businesses hundreds of thousands of dollars. Three of the seven countries below

are major player in the European market this shows us that there is a huge market for

Anomali to grow into in Europe.

A European hub is much better suited to deal with customers this side of the Atlantic

because of things such as different time zones and subtle nuisances in terms of customer

service. The last aspect of market seeking motive I have chosen to focus on is that of

"competition". Nowadays I believe it is significant for MNE's to have a physical presence in

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or close to popular foreign markets to deter competitors from poaching existing or potential

customers.

2.2 Resource seeking

As the name would suggest, the resource seeking motive is simply an MNE investing in a

foreign market in an attempt to exploit resources not available or available at lower cost than

in the home nation. In Anomalies case their desired resource is highly skilled, highly

qualified workers, which falls under the specific-assets seeking category (Iammarino, 2013).

Anomali plan to create more than 120 new jobs with this new subsidiary over the next three

years. Over the past few decades Northern Ireland, has gained a reputation for having a high

calibre, cost-competitive workforce. Statistics show that wages in Belfast are as much as 30%

lower than there biggest competing cities such as Paris, Dublin and London, this is largely

due to property prices and the cost of living being substantially lower (Invest NI, 2017).

Investing in Belfast, Anomali are aiming to acquire particular technological capabilities and

resources (a qualified workforce) that is not available at such a competitive rate in the US or

further afield in Europe.

2.3 OLI framework

Anomalies subsidiary in Belfast can be related directly to the OLI framework, specifically the

locational and ownership advantages.

Investing in the centre of Belfast, Anomali are hoping to take advantage of certain

locational advantages that the city has to offer. Belfast has worked hard to put investment

incentives in place for foreign MNE's, Belfast has done this by enticing companies with a

myriad of tax incentives, 20% corporation tax is amongst the lowest in Europe, also for

businesses with fewer than 250 employees can claim a tax deduction of 150 per cent on R&D

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expenditure (Invest NI, 2017), meaning Anomali would actually be granted money by the

government for conducting their primary objective as a European research and development

centre.

Furthermore, Anomali will be able to apply their Asset-based ownership advantages

in Belfast. As a company Anomali have won a number of prestigious awards in the field of

cyber security, these include: winner of the Best Overall Security Company of the Year

category and best Cybersecurity Product; Threat Detection, Intelligence and Response

(Anomali.Ltd, 2017). This is evidence that supports the fact that they possess unique income-

generating intangible assets such as state of the art software (Eden, 2010) which can be

deployed in the market to make profit and differentiate themselves from competitors.

3. Subsidiary roles
Although the R&D centre in Belfast is a wholly owned subsidiary, as I will go onto to

mention, it is still its' own organisational entity with its own unique profile of capabilities.

These capabilities are known as subsidiary roles.

3.1 Product Specialist

(White & Poynter, 1984) developed a typology, which identified five main subsidiary roles.

These typologies have three inter-related scope dimensions which are product, market and

value-added. By using this typology, I have identified that the subsidiary falls under the

category of "Product specialist". A product specialist subsidiary is able to develop and

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produce products for a global market

(White & Poynter, 1984). Here's a quote

from a report that further backs up my

claim "We are pleased to make Belfast the

new base for developing new products and

scaling our business in Europe and beyond”

(Invest NI, 2017). Furthermore, this quote

allows me to infer that the Belfast firm will

have a Global market scope. In conjunction, I believe that a constrained product scope is

likely to be used as the parent company (Anomali) is likely to steer and direct the focus of the

research and development to help reach their business objectives as a whole. As the

image above displays the subsidiary will have a broad value added scope which means it will

be free to market and sell its own products independent from the parent company

3.2 Strategic leader

The following typology will be useful for determining a subsidiary's role (Bartlett & Ghoshal,

1996). The typology does this by evaluating the capabilities of the local subsidiary and the

importance of the market it serves. I believe the Belfast subsidiary fall under the category of

strategic leader with this framework (see figure below).

Strategic leader is defined as a fairly capable

and proficient subsidiary that acts almost as

partner to the HQ more than a subsidiary.

Strategic leader subsidiaries are also placed in

markets of high importance to the business

(Bartlett & Ghoshal, 1996). This is applicable

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to Anomali because as previously mentioned the CEO has publically supported the Belfast

subsidiaries autonomy and ability to design and develop products in the global market (Invest

NI, 2017).

4. Entry mode strategies

4.1 Greenfield FDI in comparison with other entry modes

By definition a Greenfield investment is a type of FDI were a parent company builds new

foreign subsidiary from the scratch (Investopedia, 2016). Specifically, this case of FDI is

known as a wholly owned subsidiary (WOS). The parent company (Anomali) will hold all of

the Belfast subsidiary's common stock, which means 100% of the profit is able to be filtered

back to the US (Brouthers & hennart, 2007).

Figure .2 – Modes of Entry (Brouthers & hennart, 2007).

By opting to go for a (WOS) Anomali are fully involved in the creation and construction of

the new research and development facility. While they will have complete control over the

build and are able to make decisions without compromise, it is also a lot more labour

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intensive for the parent company. In comparison, joint ventures (JV) and acquisitions are

deemed to be a lot more time efficient. That being said, (JV's) can be risky as

Anomali would risk losing their specific Asset based ownership advantages (e.g. the partner

can steal/ copy their software and technology); A (WOS) ensures that their property is

protected (Geringer, 1988). While Anomali are able to protect their ownership advantages

this way, they are risking the most from a capital standpoint in comparison with the other

entry mode strategies (Kumar & Subramaniam, 1997). Although Anomali received financial

aid from Invest NI ("BBC", 2017), they will still be solely liable for any financial losses

incurred. The majority of (WOS) will struggle to gain customers while they adapt to the new

marketplace, however, Anomali moved to Belfast specifically to better serve their existing

customer base (Invest NI, 2017), so it's doubtful they will struggle given this information and

their specific 'O' advantages within the market. It is a high risk high reward venture as shown

by the graph below.

Figure .3 - Contingency framework for Entry Mode Decision (Kumar & Subramaniam, 1997).

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5. Place marketing
Why Northern Ireland?

In this section I will analyse the place marketing that Northern Ireland has conducted in

recent years. This place marketing has enabled Belfast specifically to entice dozens of big

tech companies to invest over the course of the past decade. As globalisation

continues to take effect on the world, how countries brand themselves to external investment

is more important than ever before. Personally, Being Irish I've known for some

time how much of a hotbed Ireland has become for investment by multinational enterprises,

however upon further research I've realised just how deliberate the reimaging of Irelands

economic landscape has been. Over the past few decades the governing bodies of both

the south and the north have been successful in branding themselves as, "pro-business"

favouring "green lights in place of red tape" (IDA Ireland, 2017). I believe that the previous

quote is of upmost importance when attempting to understand the switch in the government's

attitude toward foreign direct investment. The Irish government is attempting to make it as

easy as possible for multinationals to succeed.

Anomali motives for investing in Northern Ireland are pretty clear cut. Anomali invested

because of the incentives Northern Ireland have put in place in conjunction with the quality

workforc. Some incentives include 20% corporation tax (which is amongst the lowest in

Europe), for businesses with fewer than 250 employees can claim a tax deduction of 150 per

cent on R&D expenditure (Invest NI, 2017), meaning Anomali would actually be granted

money by the government for conducting their primary objective as a European research and

development centre. Statistics show that wages in Belfast are as much as 30% lower

than there biggest competing cities such as Paris, Dublin and London, this is largely due to

property prices and the cost of living being substantially lower (Invest NI, 2017). Investing in

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Belfast, Anomali are aiming to acquire particular technological capabilities not available at a

competitive rate in the US. Over 4,000* people graduate each year with business

qualifications in Northern Ireland; they are all highly skilled and hungry to enter the

workplace at cost-competitive rate (Invest NI, 2017). It's clear that this is a major factor in

Anomalies decision to set up shop in the city.

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Bibliography
"BBC". (2017, may). http://www.bbc.co.uk/news/uk-northern-ireland-39959091.
Retrieved from http://www.bbc.co.uk/: http://www.bbc.co.uk/news/uk-northern-
ireland-39959091

Anomali.Ltd. (2017, May). https://www.anomali.com/company/awards. Retrieved

from https://www.anomali.com/company/awards:
https://www.anomali.com/company/awards

Bartlett, C. A., & Ghoshal, S. (1996). Tap youtr subsidiaries for goal reach.

Brouthers, & hennart. (2007). Boundaries of the Firm: Insights From.

Eden, L. &. (2010). Rethinking the 'O' in Dunning’s OLI/Eclectic Paradigm. In L. &.
Eden, Multinational Business Review (pp. 13-34).

Franco, R. M. (2008). Why do firms invest abroad? .

Geringer, J. (1988). Joint Venture Partner Selection: Strategies for Developed

Countries. Westport, CT: Quorum Books.

Iammarino, M. &. (2013). Multinationals and Economic Geography: Location,

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IDA Ireland. (2017, january). https://www.idaireland.com/Invest-in-Ireland. Retrieved

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Ietto-Gillies, G. (2005). ‘Dunning’s eclectic framework’, in Transnational Corporations

and International Production: Concepts, Theories and Effects. Cheltenham:
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Invest NI. (2017, March). Retrieved from https://www.investni.com/invest-in-northern-

ireland/competitive-operating-costs.html: https://www.investni.com/invest-in-
northern-ireland/competitive-operating-costs.html

Investopedia. (2016, January). https://www.investopedia.com/terms/. Retrieved from

https://www.investopedia.com:
https://www.investopedia.com/terms/g/greenfield.asp

Kumar , & Subramaniam. (1997). A Contingency Framework for the Mode of Entry
Decision. JWB.

McCann, I. &. (2013). In I. &. McCann, Multinationals and Economic Geography:

Location, Technology and Innovation. (p. 36). Edward Elgar.

Mulgrew, J. (2017, September). https://www.belfasttelegraph.co.uk. Retrieved from

https://www.belfasttelegraph.co.uk/business/jobs/us-cyber-firm-anomali-takes-
on-belfast-office-for-120-new-staff-36152897.html:

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https://www.belfasttelegraph.co.uk/business/jobs/us-cyber-firm-anomali-takes-
on-belfast-office-for-120-new-staff-36152897.html

White, & Poynter. (1984). Strategires for forign subsidiaries in Canada.

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