COURSEWORK

Module Code: MGT4100

Module Name: International Business Strategy

Module Coordinator: Rory McConnon

Essay Topic: Critically Evaluating ESET’s Source
Of Competitive Advantage From a
Resource-Based Perspective And
Based On The Case, Advise Companies
On How To Address Negative Country
Of Origin Perceptions.

Student Name: Arjun Muraleedharan Pillai

MISIS number: M00768958
Email id: am3435@live.mdx.ac.uk
Course: MA International Busines
Management
TABLE OF CONTENTS

1) INTRODUCTION
2) SUMMARY
3) EVALUATION
4) CONCLUSION
5) REFERENCES
INTRODUCTION

A virus problem was detected in one of the Slovak nuclear power plants and two
programming enthusiasts, Peter Pasko and Miroslav Trnka, were asked to sort the
issue. They were able to find the virus and named it ‘Vienna’ and created a
programme for detection and elimination of the same. They named that programme
NOD, which stood for, ‘Nemocnica no Okraji Disku’ which means ‘Hospital on the
edge of the disk’. NOD was the first anti-virus product which offered a Graphical
User Interface (GUI) with detection, fixing and prevention mechanism integrated with
it. NOD was produced (recorded, labelled and packed) in a living room and was
distributed mostly for free in a small network of friends and IT enthusiasts. The
ESET, spol. s r.o. was founded in 1992 by Rudolf Hruby, Peter Pasko and Miroslav
Trnka as a privately owned limited liability company (LLC). (About ESET, 2021) ,
(2015 ESET Asia Cyber Savviness Report, 2021).

This coursework aims to critically evaluate ESET’s sources of competitive advantage

from a resource-based perspective and based on the case, advice companies on
how to address perceptions on negative country of origin.

SUMMARY

Though NOD was released, the selling to the state owned companies was a complex
and difficult process due to bureaucratic procedures. Exporting was impossible at
that time. Under the given political conditions, the brilliant product developed by the
two enthusiasts had limited opportunities for commercialization. The Velvet
revolution in 1989 brought an end to the Communist Regime in Czechoslovakia, the
country become a democracy and opened up to the western world. (About ESET,
2021) . The economy moved from a state-owned centrally controlled one to a
market-based economy with private entrepreneurship as a key element. Until 1990,
NOD was sold only in domestic market but later thjat year, they started selling in
Austria via local distributer under the brand name ‘ Stopvir’. The major event that
happened after the establishment of ESET was the breaking up of Czechoslovakia
into Czech Republic and Slovak Republic. (About ESET, 2021) . The company lost a
large part of the former home market and was forced to look for new export markets.
However, the Slovak origin of company had an adverse effect on international sales
as software originating from a relatively unknown country was not considered as a
reliable, safe and high-performing product. To overcome this obstacle, ESET LLC
was established in San Diego, California in The United States of America in the Year
1999. This approach helped ESET to tackle the negative country-of –origin
associations. (About ESET, 2021) (Krastev, leadership, "I have nothing
against foreigners and teams, 2021)

EVALUATION

Resource based view relies on resources and these can be broadly classified into
tangible and intangible. Tangible assets are resources that can be physically
measured like the land, infrastructure, machinery, equipments and capital. Physical
assets can easily be brought in the market so they confer little advantage to the
companies in the long run because the rivals can soon acquire the identical assets.
Intangible assets are everything else that has no physical presence but can still be
owned by the company like brand reputation, trademarks, intellectual property rights.
(Maritan and Lee, 2017)

Tangible assets of ESET are ESET, spol. s r.o. founded in 1992 located at
Bratislava. The ESET LLC established in 1999 in The United States of America, new
research and development facility in Poland in the year 2008, Czech security
company ‘Setrnet’ which was acquired by ESET in the year 2008 and Slovak
Software company ‘Comdom Software’ which was acquired in 2010. Distribution
network in more than 180 countries and 100 million customer base can also be
added to tangible assets. The company’s turnover in 2014 was 320 million pounds.
(Krastev, leadership, "I have nothing against foreigners and teams, 2021)

Intangible assets of ESET starts from their brand recognition which started in 1993
when Trnka started contributing to the column ‘Virus Radar’ in a leading periodical in
the Slovak province. ESEtT won the first Virus Bulletin award in the year 1998. In
2002, Deloitte added ESET to its ranking of fastest growing companies in Europe
and ‘Fast 500 in EMEA. NOD32 antivirus programme holds the world record for the
largest consecutive number of the virus bulletin ‘VB100%’ award since 1998. ESET’
research and development team of skilled programmers and researchers is the most
valued intangible asset of the company. (Krastev, leadership, "I have nothing
against foreigners and teams, 2021)

Image: Market share held by the leading Windows anti-malware application vendors
worldwide, as of April 2020

Image Source: (Anti-malware vendors: global market share 2020 | Statista, 2021)
The two critical assumptions of Resource based allocation are that resources must
be heterogeneous and immobile.
The skills and capabilities of ESET can be considered heterogeneous as it is
different from other companies. The organizational structure of ESET was dual until
in 2008 the US subsidiary and the parent company merged. The Research and
Development centre in Poland is now serving as major education centre in central
Europe.

With team building events, skill training, language courses, pension schemes and
health insurance packages, the company has a high level of employee satisfaction
and low employee turnover which can be classified as immobile resources.

Image: VRIO Framework

Image source: (Jurevicius, 2021)
According to VRIO Framework, in order to have a sustainable competitive
advantage, one of the resources must be valuable, rare, inimitable and organized.
The Research and Development centre of ESET in Karkow, Poland was opened in
the year 2008 to find excellent software programmers in Slovakia alone. Slovakia at
that time had five million inhabitants. The purpose was to strengthen the research
base and to accelerate innovation in countering the growing volumes and
sophistication of cyber attacks.

While analysing the Research facility in Poland with the VRIO Framework, it can be
concluded that the facility is valuable, rare, as other competing companies do not
offer any facility as big as the facility of ESET in Poland. The cost to imitate such a
facility is high and the facility is located in Silicon Valley of Europe which means that
it is organized to capture value. So it can be concluded that ESET has a competitive
advantage according to VRIO Framework.

CONCLUSION

The Slovak origin of the ESET was a barrier for their international business as the
brand image of a company producing software from a relatively unknown country
was very poor and there were doubts about the quality, reliability and performance of
the product. The negative country-of-origin was addressed by the company by
establishing ESET LLC in San Diego, California, USA in the year 1999. (About
ESET, 2021) .This subsidiary was upgraded as the international business centre for
ESET and was responsible for all foreign markets. The US subsidiary brought in
more international revenue and got rid of the negative country-of-origin. By the end
of 2008, the company’s brand name was established world-wide, the dual structure
got terminated and the US subsidiary merged to its parent company. (About ESET,
2021). So for a company facing negative country-of –origin, the strategy adopted by
ESET can be used successfully.

Based on the resource based allocation and the VRIO Framework, it can be
concluded that ESET hold a competitive advantage over other companies in the
Anti-Virus business despite coming from a lesser known country. Other than the
Research facility considered for the VRIO Framework, other resources such as the
brand image of the company with NOD32 being the consecutive winner of several
awards can also be considered for VRIO framework analysis. Other resources such
as the employee benefit schemas, infrastructure, and distribution networks provide
can only provide temporary competitive advantage. But other companies might find it
very difficult to achieve the status of Research and development facility and success
of NOD32 in near distant future.
REFERENCE

Eset.com. 2021. About ESET. [online] Available at: <https://www.eset.com/in/about/>

[Accessed 20 February 2021].

Eset.com. 2021. 2015 ESET Asia Cyber Savviness Report. [online] Available at:
<https://www.eset.com/sg/about/newsroom/press-releases1/whitepapers/2015-eset-
asia-cyber-savviness-report/> [Accessed 20 February 2021].

Wu.ac.at. 2021. [online] Available at:

<https://www.wu.ac.at/fileadmin/wu/d/cc/cee/3__Lehre/CaseStudies/ESET_Arnold_S
chuh_2017.pdf> [Accessed 20 February 2021].

Statista. 2021. Anti-malware vendors: global market share 2020 | Statista. [online]

Available at: <https://www.statista.com/statistics/271048/market-share-held-by-
antivirus-vendors-for-windows-systems/> [Accessed 20 February 2021].

Maritan, C. and Lee, G., 2017. Bringing a Resource and Capability Lens to Resource
Allocation. Journal of Management, 43(8), pp.2609-2619.

Jurevicius, O., 2021. Is the VRIO Framework a Key to Competitive Advantage?.

[online] Strategic Management Insight. Available at:
<https://strategicmanagementinsight.com/tools/vrio.html> [Accessed 20 February
2021].