An Analysis For Failure of Firms During Internationalisation: A Case Study About The Indian Firm Larsen and Toubro

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An analysis for failure of firms during internationalisation: A case study about

the Indian firm Larsen and Toubro
Thesis · August 2017

DOI: 10.13140/RG.2.2.23639.47525
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Leeds University
Business School
An analysis for failure of firms during internationalisation:

A case study about the Indian firm Larsen and Toubro
By
Rahul Sinha
Dissertation supervisor: Dr. Surender Munjal
Month and year of submission: August, 2015
Word count: 12211
This dissertation is submitted in part fulfilment of the requirements for the degree of
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MODULE TITLE: International Business Dissertation

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SIGNED: RAHUL SINHA
DATE: 29/8/2015
NAME : RAHUL SINHA
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Acknowledgements:
I would like to thank many people for supporting me and contributing for the
project and without whose help I could not have finished my project.
I would like to mention the senior management of L&T (Larsen and Toubro)
MMH IC (Metallurgical and Material Handling Independent Company) who
helped me in making my purpose of structured interview successful. The
discussions proved fruitful and helped me gather useful and necessary insights
for my recommendations.
I would also like to especially express my sincere gratitude and a big thanks to
my supervisor, Dr. Surender Munjal for his relentless support and endeavor and
excellent guidance and advice throughout the whole research process. Many
thanks for your continuous encouragement which helped me to complete my
project, without you it would have been very difficult.
Finally, many thanks to my family and friends who helped me with their sincere
encouragement and support throughout my project.
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Abstract:
Theory of Internationalisation started from around 1960 and is still very much
evident in the modern era firms (Hymer, 1960 (1976), Bjorkman & Forsgren
1997, Buckley and Ghauri 1999). Globalisation or internationalization of firms
pressed significantly over the last decade facilitated by the help of modern
communication, transportation and improved legal infrastructure along with the
political choice to consciously open markets to international trade and finance.
With success comes failure as well and it hold true for internationalisation as
well, many firms retracted from expansion and many abolished.
A qualitative research approach has been used to this case study of a single
organization. The data collection was involved with four in-depth structured
interviews with the business development heads of the firm, who were
responsible for the firm in venturing into Middle East and Africa. The overall
data analysis was conducted by a systematic content analysis approach.
The essay will discuss the reason for failure of firms while internationalization
and for that we will study with an Indian firm Larsen and Toubro, how they
failed in various bids while internationalising.
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Table of Contents
Declaration…………………………………………………………………. 2
Acknowledgements………………………………………………………… 3
Abstract……………………………………………………………………....4
Table of Contents…………………………………………………………….5
List of Tables and Figures…………………………………………………...8
List of Abbreviations…………………………………………………………9
1 Introduction………………………………………………………………...10
1.1 Background……………………………………………....................10
1.2 Research Objective…………………………………………………12
1.3 Research Questions…………………………………………………13
2. Literature Review………………………………………………….............15
2.1 Reason # 1…………………………………………………………..15
2.2 Reason # 2…………………………………………………………..16
2.3 Reason # 3…………………………………………………………..17
2.4 Reason # 4…………………………………………………………..18
2.5 Reason # 5…………………………………………………………..20
2.6 Reason # 6…………………………………………………………..22
2.7 Reason # 7…………………………………………………………..24
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2.8 Reason # 8………………………………………………………….25
2.9 Reason # 9………………………………………………………….26
2.10 Reason # 10……………………………………………………….26
2.11 Reason # 11……………………………………………………….28
2.12 Reason # 12……………………………………………………….30
3. Research Design…………………………………………………………...32
3.1 Secondary Research Design………………………………………..32
3.2 Methodology of Primary Research………………………………....33
3.3 Research Methods…………………………………………………..34
3.4 Case Study Strategy.………………………………………………..35
3.5 Ethical Consideration…………………………………………….....36
3.6 Data Collection……………………………………………………...36
3.7 Data Analysis……………………………………………………......37
3.8 Limitations……………………………………………………..........38
3.9 Conclusions………………………………………………………....39
4. Research Analysis and Discussion………………………………………...40
4.1 Sample Profile of In-depth Structured Interviews…………………..40
4.2 Codes and themes of In-depth Structured Interviews…………….....41
4.3 Types of Projects……………………………………………………42
4.4 Approach for acquiring projects during Internationalisation……….44
4.5 Juxtaposition of Indian and International Business for L&T……….45

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4.6 De-Internationalisation of the firm…………………………………46
4.6.1 Management Issues and their level of engagement………..48
4.7 Analysis of International motives…………………………………..50
4.8 Summary of Findings……………………………………………….51
5. Conclusions and Recommendations………………………………………54
5.1 Research Objectives: Summary of findings and conclusions……….55
5.2 Internationalisation process improvements…………………………56
5.3 Final Conclusion and future recommendations……………………..57
Reference List…………………………………………………………………58
Appendix A……………………………………………………………………69
Appendix B……………………………………………………………………70
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List of Tables and Figures
Tables
Table 4.1.1 Interview Sample Size and Interview

Length…………...41
Table 4.2.1 Codes and Sub Codes for

Analysis……………………...42
Figures
Figure 2.4 Dunning’s Eclectic

Paradigm…………………………….20
Figure 2.5 Factor for

Internationalisation……………………………22
Figure 2.6 National Industrial Factor Endowments…………………23
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List of Abbreviations
ABS – Association of Business School
L&T – Larsen and Toubro
ECC – Engineering and Construction Division
MMH IC –Metallurgical and Material Handling Independent

Company
MNE – Multinational Enterprise
R&D – Research and Development
FSA – Firm Specific Advantage
CSA – Country Specific Advantage
OLI – Ownership Locational Internationalisation Advantage
L1 – Lowest one in Bidding
L2 – Second lowest one in Bidding
EE – Emerging Economies
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INTRODUCTION
1. Introduction:
1.1 Background:
Any firm looking to expand its R&D, production, selling and other business
activities opts for internationalisation. In many large firms internationalisation is
a relatively continuous process with firms undertaking various
internationalisation stages on various foreign expansion projects simultaneously
in incremental steps over a period of time (Hollensen, 2011). Most of the early
literature on internationalisation is based was inspired by general marketing
theories. During the last 20 years the interest for internationalisation in networks
has been in focus, by this process the firms has different relationships not only
with customers but also with other actors in the environment.
Many models and theories are being delivered to make the process of
internationalisation a smooth and easy one. The Scandinavian “stages” model of
entry suggests that any firm entering foreign market has to be coupled with
progressive deepening of commitment to each and individual market. Increasing
commitment is particularly important in the thinking of Uppsala school
(Johanson and Weidersheim-Paul, 1975; Johanson and Valhne, 1977). The
ultimate consequence of the Uppsala internationalisation model is the firms’
tendency to intensify their commitment towards foreign market with growth in
experience (Hollensen, 2011).
Similarly John Dunning’s Eclectic approach (1988) is based on ownership-

location-internalization (OLI) framework. As per dunning the propensity of a
firm to engage itself in internationalisation production increases when certain
conditions are satisfied. According to him if a firm owns foreign production
facilities then they are always in an ownership advantages than the firms who
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are trying to internationalise either by export or any other method. Also a firm
with
doing business with advantages as such labour, cost, utility, transport and
communication are considered to be having the privilege of location based
advantage than any other firm. Finally it is more profitable for a firm to utilise
its advantages rather than selling them or the right to use them to a foreign firm.
It is also accepted that, precisely because of its general theoretical approach the
eclectic paradigm has limitations in predicting particular kinds of international
production and also fails to determine the behavioural aspects of individual
enterprises. The asset advantages of particular firms vary according to the factor
endowments and their origin and operating country as well. From the eclectic
paradigm it seems to be very obvious reason that due to lack of OLI advantage
any firm might face debacle but the question remains unanswered that if there is
a written rule then why still firms fail and why there are so many examples of
failure all around in the global market.
We will analyse the Dunning’s eclectic paradigm in a more detailed way in the
literature review and also would analyse why ownership advantage is not the
only reason for firms to fail while internationalisation.
As is rightly said by Joseph Monti Grant Thorton “International market is

strewn by the carcass of global adventurers” there are many firms who has
faced failures while internationalisation and retracted back to their home market.
M&S entered India and China and they failed as the perception of business in
retail industry is different from European market similarly Walmart failed in
Germany in 2006 and suffered a loss of approximately 1.1 billion USD as
Germans have totally different mentality while doing business compared to the
North Americans whose success was mostly built on streamlined distribution
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channels, high volume sales and low price (Globalconnections.hsbc.com, 2015).

Thus the failure is different
in each and individual scenario and hence to make our research more fruitful
and concentrated we will look into an Indian Construction firm named Larsen
and Toubro (L&T).
L&T is a construction giant of India with a market capital of USD 15 billion

and employee strength of 50,000. They are known to undertake turnkey projects
in mineral and metal plants. They have successfully completed many projects in
India including those of TATA Steel, Jindal Steel and SAIL (Steel Authority of
India Ltd), also worked in non-metallurgical projects like Aluminum plants of
Vedanta Resources and National Aluminum Company (NALCO). L&T is a
very big company with lots of independent companies being segmented for ease
of business and better productivity. In order to make my research more fruitful I
have concentrated on MMH IC (Metallurgical and Material Handling
Independent Company) a particular section of L&T who faced the highest
debacle during internationalisation.
1.2 Research Objective:

L&T is considered as the “bellwether” of India’s engineering and construction
sector (Larsentoubro.com, 2015) but despite its success in Indian construction
sector the firm failed in acquiring projects overseas. Any internationalisation
process requires proper evaluation with steady calculation as well. The research
will try to analyse the reason behind the debacle of the firm during its
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INTRODUCTION
internationalisation whether it was improper alliances or wrong estimation of

resource allocation.
The construction industry has unique characteristics which distinguish itself

from other economic sectors. It is fragmented with high sensitiveness to the
economic cycle and political environment and has significantly high rate of
business failure (Enshassi et al., 2015). Throughout the world the ease of entry
and rise of infrastructure all around leads the construction firms to compete
fiercely in the market while exposing many of them to failure (Enshassi et al.,
2015). The industry in the developed country is supported by social and
political infrastructure and formal accreditation of professional competence
which is lacked in developing countries’ firms which mostly relies on
infrastructure and procedures borrowed, imposed or followed by developed
firms (Drewer, 2001).
A number of scholars have addressed the problems of the industry in developing

countries and also tried alleviate such problems (Hillebrandt, 1997; Ofori, 1993,
1994; Wells, 1986; Turin, 1973). However lack of progress was noted in
alluring such problems and they include the inappropriateness like shortages or
inadequacies in industry infrastructure, problems caused by clients and
consultants and also problem caused by contractor’s incompetence /
inadequacies (Ogunlana et al. (1996)).
Hence the objective of the research is to find out whether the firm L&T faced
this problem of retraction due to wrong internationalisation process as
ownership disadvantage or because of the lack of growth and competence in
developing countries compare to the developed ones.
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1.3 Research Questions:

In our case we are going to analyse the topic of failure of firms during
internationalisation taking the company Larsen and Toubro as our case
company and interviewing the top managements especially the international
business development team who were responsible for the global expansion of
the firm. The answer to the following questions will be our target to analyse in
our research.
Did Larsen and Toubro expanded with proper evaluation? Did they properly
assess the risk before Internationalisation?
Did they internationalise with proper assumption about the international market?
Did the firm failed to utilise location based advantages?
Did the company lacked ownership advantage for their failure in the foreign
grounds despite being a giant in the home market?
The answers to the following questions might help us get some clue about the
futile results which the firm faced since last five years during its expansion in
foreign lands.
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2 Literature Review:
2.1 Reason # 1:
Expansion without proper evaluation or in other words expansion for the wrong
purpose (Vessel, 2015):
In today’s world the phenomenon of entrepreneurship commands growing

interest amongst business leaders and policy makers (Gabrielsson & Manek
Kirpalani, 2004). Any business mistake heavily damages the firm’s asset base,
therefore firms trying to internationalise rapidly use the channels outlined
earlier as system integrator, distributor or networking, either separately or
together (Gabrielsson & Manek Kirpalani, 2004).During this rush up the main
motto or purpose for internationalisation gets dissipated and hence firms might
suffer debacle in foreign land resulting retraction from international business.
The common reason for expansion by most firms is going abroad only because
they lack proper customer base at the home ground or has a very little or no
growth in the domestic market (Vessel, 2015). The firms lack the initiative to
research whether the productivity is ahead of the market trend. Furthermore the
routine analyse of the readily available data diverts attention from where insight
creating advantage lies: in the weak signals buried in the noise (Bradley et al.,
2015).
As per Snyder the best way of approach is adopting a slow build approach and
gradually eroding rivals market share before taking over the competition. This
could take years - even decades. From the past evidence, it is clear that going
global is a time taking job and hence it is always better to understand things
slowly and eventually allocate the level of investment, strategy, adaptation and
time needed to be successful. The urgency of expansion is driven by the
perennial
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driver of moving into the market first and set up their foothold but it is always
better to enter market through learning and experience developed over period of
time and also from other negotiations.
2.2 Reason # 2:
Wrong Assumption about the nature of the international market (Vessel, 2015):
Firms having a great market in their home ground might assume that it is easy
to enter any international market and the “under-served” market might be a
bonanza as it might require small investment and marketing (Vessel, 2015). The
lesson that most company learns is that their product model does not fit the
market or even the pricing is very different from the customer pay ability and
willingness. Adequate and objective based market research may help to avoid
such pitfall (Vessel, 2015).
This happened with Alibaba the e-retail giant of China when they decide to
move into USA. Already in USA, giants like E-Bay and Amazon dominated the
e-commerce market. Alibaba failed initially as they tried to rush in without
studying the market properly and the customer requirement (LUBS, 2015).
The best way to avoid such incident is to consider strategic internationalisation,

which is safer in the sense as it already owns a firm, which has a customer base
of its own and thus gives ownership advantage. This approach is advantageous
as the company is easily accessed to the existing local contacts, existing
business relationship and overcome a certain amount of legal hassles.
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Though these considerations alone are not enough as there are also existing
models such as Uppsala in which a company decides its entry mode starting
from
the very scratch of exporting which the most hassle free method is existing in
the present market scenario.
2.3 Reason # 3:
Underestimating the operating costs in International Market (Vessel, 2015):
A central challenge or strategy embarks a firm to globalize but the payoffs

occur in future environment which are beyond the control of firms. A critical
step in embracing uncertainty is trying to characterize exactly what variety of
problems a firms face, a surprising rare activities at many firms (Bradley et al.,
2015). In many cases, firms underestimate the expenses that it undertakes while
moving abroad. Going abroad involves a whole lot of affair like management
set up, new office and new human resource allocation, extra staff expenditures
etc. Local expenditures also might include higher taxes such as value added tax
(VAT), additional fees and assessments that are business overhead (Vessel,
2015). These unaccounted expenses deplete the profit margin and start eating up
the fair share of profit depleting the anticipated profit margins based on
domestic sales and marketing models.
It is thus important to create and plan to engage the services of knowledgeable

and experienced people in the local market who can help understand the real
cost of doing business locally and steer your past dangerous miscalculations
about the actual financial opportunity available. The best way is to hire a local
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employee who might have the knowledge of the existing market condition and
help work out accordingly.
Here we again refer to the terms “Glocal”. This explains that any firm devoid of
being global must work towards “localization” efforts. Marketing is most
advantageous when it happens to originate in the local market and reflect local
values, culture, language and marketing tactics that may challenge the domestic
market resources.
McDonalds is a big example for this situation. They improvised their food
according to the location. For example, McDonalds sell cheeseburger in EU and
US as beef burger while in India it is Vegetarian burger as beef is against the
religious sentiments of Hinduism. Similarly, they went up for halal chicken in
Indonesia and changed the work time in Saudi Arabia during the holy month of
Ramadan. Therefore, a company starting from USA spread its wings to all parts
of the world and improvised their food, standard, staff requirements as per
location. This is known as Glocal, which is always a big step forward for firms
achieving success in cross border.
2.4 Reason # 4:
Deciding to become a global company lately (Vessel, 2015):
Well this may seems to be a bit confusing but still any company rushing faces
failure along with a late entrant (Vessel, 2015). The foundation or vision for the
company is laid when it starts. Any company who wish to be a global player
sets the management expectations and cascades through the organisation from
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the start. This is better in the sense that retooling any organisation lately is more
expensive and problematic (Vessel, 2015).
A central challenge or strategy is always the one firm undertakes before making
any choices but during this process the basic principles behind strategy for
expansion often gets obscured (Bradley et al., 2015). Sometimes the explanation
is a strategy for next big thing – natural in a field that emerged through steady
accumulation of frameworks with a promise to unlock the secrets of competitive
advantage (Bradley et al., 2015). The basic question that delays the business to
internationalise is “which market” to enter, modes and also the suitability of
business in that market. SWOT analysis can be an answer to the problem but
that seems to be not enough for internationalisation. SWOT can analyse the
market but cannot truly predict human requirements and ideology which is
uncertain along with the market.
The best way to avoid the situation is to start planning early about its
commitment to grow internationally from the beginning. This involves future
vision and understanding the implication beforehand and undertake them
eventually before time. Having the though process in the planning growth early
is a vital part of building platform for international success in the future, even
though it might not be start right away.
Dunning’s Eclectic paradigm:
In its original form dunning’s eclectic paradigm stated the extent, form and
pattern of international production are determined by three sets of advantages as
perceived by enterprises (Dunning, 1985). In order for firms to compete with
another firm and set up their international production firms must possess some
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set of advantages. These are sometimes known as competitive or monopolistic

advantage, sufficient to compensate the costs of setting up and operating in a
foreign land (Dunning, 1985).
Figure 2.4 Dunning’s Eclectic Paradigm
While dunning clearly outlined for any FIRMSs to follow the methods while
going to internationalise still firms do face problem. This means even a bit of
miscalculation can result in the crash of the whole system from its foreign
investment.
2.5 Reason # 5: Lack of Ownership Advantage:
Mostly one of the common phenomena that is observed in firms from emerging
economies is that they try to move into developed economies despite the fact
that the technological or managerial compatibility is much lower than the
developed ones. For doing this it is found that firms go out and spend a lot more
i.e. 16% higher than they do usually while they lack the ownership advantages
to some extent.
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The theory of comparative advantage is inspired by Ricardo’s (1817) theory of

comparative advantage as emerging economies company lack absolute
advantage over developed economic counterparts. These ownership advantage
can be designed into two different factors either i) country specific advantage
(CSA) ii) firm specific advantage (FSA) based on structure of capability.
(Rungman and
Li, 2007). These following theory can be explained as the combination of

country level endowments in industry and the firm-level comparative capability
advantage. Example: BYD of China entered into the battery industry 12 years
ago, it utilised China’s low labor cost and huge market potential. So the final
product was low cost and high quality batteries to compete with the Japanese
Rivals. Thus the FSA along with CSA is mostly used by firms to grab hold of
the foreign market or to make a strong hold of the business even in their home
ground.
The distinction between structural and transactional market imperfections is an

important one (Dunning and Rungman 1985). The relevance of each in
determining the ownership advantages of firms will vary according to the firm’s
product specification or the markets they operate and also the view point of the
competitive process whether it is static or dynamic (Dunning, 1985).
India lacks Internationalisation openness because of comparatively backward

economic infrastructure. While the steel industry and the software industry are
quite ahead of all the neighboring countries in terms of product design,
internationalisation, market research, branding and R&D. As there is a low
labour cost in India industries like mining of raw materials also has competitive
advantage over others.
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INTRODUCTION
Thus ownership advantage is not a definitive term, rather it’s more comparative
depending on the place and the situation in which it is undertaken. There are
five
actors that plays a major role in cross border

internationalisation:
Figure 2.5 Factor for Internationalisation
2.6 Reason #6: National Industrial Factor Endowments:
This is one of the factors that encourages emerging economy firms to go for
internationalisation. Firms tend to acquire FSA into the firms CSA while
trading cross border. As per Feliciano and Lipsey (2002) it is preferable for
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firms to go for internationalisation in countries where there is comparative

advantage in exporting. Classical theories of International trade suggests that
comparative advantage resides in the factor endowments, these might include
land, labour, resource and the size of the local population (Porter, 2015).
Michael E. Porter argued on this topic and gave a diamond theory of his own
which is famously known as Porter’s diamond theory. It represents the national
playing fields that countries establish for their firms (Porter, 2015).
Firm Strategy,
Structure &
Rivalry
Factor Demand
Conditions Conditions
Related and
Supporting
Industries
Figure 2.6: Porter’s Diamond of National advantage (Porter, 2015).
The factor conditions can be explained as a country’s creation of its own

important factors such as skilled resources and technological base (Porter,
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2015). The stock factor at a given time is less important because they can be
upgraded and deployed. Local disadvantages in factors of production force
innovation and upgradation while labor or resource problem is also met by
firm’s improvisation of situation which inversely leads to comparative
advantage.
The demand conditions arises when a particular product is heavily on demand

in local market rather than foreign markets then the firm naturally provides
more attention to the local firm rather than the foreign market (Porter, 2015). A
more demanding market leads to national advantage (Porter, 2015).
Related and supporting industries are competitive and they enjoy more effective
and cost effective inputs (Porter, 2015). This effect is strengthened when the
firms are strong global competitors (Porter, 2015).
Finally the firm strategy, structure and rivalry are effected by local conditions,
as per porter’s theory a firm with less rivalry is beneficial while over long run
more local rivalry is better since it puts pressure on firms to innovate and
improve. It also forces firms to go beyond local advantages for
internationalisation (Porter, 2015).
Thus from the diamond theory it is evident that factor disadvantages will not let
firms to internationalise or innovate unless and until there is enough rivalry
(Porter, 2015). Countries that succeed at national industrial strategy have
proactively created internationally competitive industries.
2.7 Reason # 7: Dynamic Learning:
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Currently the theory of ownership advantage is challenged by critics (Mathews,

2006; Luo and Tung, 2007) who have pointed out that this may not be
sufficient to prove as internationalisation is not just about learning but more
about overcoming the challenges faced by the emerging economies. CSA and
FSA might be primary driver since it integrates technical, organisational and
managerial resources across country and firm levels. An internationalisation or
cross border trade starts becoming successful only when the firms tend to learn
from the successful internationalisations from a foreign country.
Following the logic of comparative ownership advantage, emerging economy

firms tend to acquire target firms CSAs based on location and factor
endowments and strategically use them for their FSAs via learning (Shimuzu,et
al., 2004) . Example: TATA Steel internationalisation of Corus changed the
ideology of TATA Steel in becoming a global key player in steel business and
enhance their comparative ownership advantage. (Deng, 2009; Niosi &
Tschang, 2009).
Chinese firms do have comparative advantage in globally oriented

manufacturing industry with their links of suppliers and customers in Hong
Kong, Singapore, South Korea and Taiwan as well as Japan. In India firms are
very competitive in software outsourcing, Pharmaceutical and other industries,
for the betterment of this industries firms have integrated with many Western
Developed countries who give a better learning opportunity.
2.8 Reason # 8: Value Creation:
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EE firms must acquire successful cross border trades by integrating

heterogeneous resources and carefully start the process of creative destruction
(Schumpter, 1934).
It is all about learning when it comes to successful cross border trade (Shimizu
et al., 2004), particularly in the phase of post internationalisation integration.
Internationalisation usually involve a careful and strategic makeover of the
whole management system, hence a smooth post-internationalisation transition
is important in avoiding the aggressive overturning of the structure and ensure a
smooth integration of the resources (Kumar, 2009; Zollo & Meier, 2008). In
order to achieve this he firms need to go for friendly internationalisation or a
more systematic one rather than a hostile situation in which there is a high
chance
of facing problem with the existing management system. In this case India
prefers friendly agreement wile going for any internationalisation (Rao, 2008).
2.9 Reason # 9: Reconfiguration of Value Chain:
When firms tend to go up the value curve by optimizing their value chain and
internalising the resources from different countries they may enter the more
lucrative “blue ocean” markets faster than domestic players even without
internalization (Kim & Mauborgne, 1997). Thus the comparative ownership
advantage framework can therefore also enhance the international competitive
advantage through internationalisation to reconfigure the global value chain
(Keng, 2009).
As of Kogut, 1985 the national competitive advantage depends on the resource

endowments. Resource endowments is the one of the prime factors in
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determining the country’s location advantage in the entire global value chain
and also determine their firms specific advantage against the key global players.
Thus emerging economies firms can set their position through strategic asset
seeking internationalisation (Sun, Chen & Pleggenkuhle-Miles, in press).
Indian firms prefer to acquire technologies intensive firm because India has
more advanced-technology and service industries, but due to comparative
backward infrastructure firms tend to integrate forward via overseas
internationalisation.
2.10 Reason # 10: Institutional Facilitation and Constraints:
The institution based view of strategic asset points out that most of the EE firms
undergoes a dual function of both facilitating and constraining the comparative
ownership advantage (Luo et al., 2010; Peng et al., 2008, 2009 and
2010). This can be explained by an example where we can find that Indian firms
has more open market mechanism where private enterprises have more ease of
access to the stock market to finance the cross border internationalisation
(Gupta, 2005). On the other hand if we look into the Chinese market it is
evident that Chinese government still controls many critical industrial and
financial resources also along with monopolising the financial market by state
owned firms. This increased power helps the Chinese government to finance
OFDI, particularly in case of large scale internationalisation. (Bremmer, 2009;
Huang, 2008).
If we compare the Indian market with the Chinese one we can mostly private
firms tend to go abroad rather than the public ones. TATA steel or TATA group
is an example of the following scenario. The internationalisation of Corus steel
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or JLR is a very strong example of internationalisation, similarly we can see

Reliance and Mahindra also follow TATAs footsteps but while as the national
producer of steel SAIL (Steel authority of India Ltd) has not yet set its foot
outside India until recently when they announced in spending USD 12 billion in
order to build plants in Mongolia, Oman, Indonesia and South Africa after 8
years of TATAs internationalisation.
The following table explains Dunning’s OLI paradigm and comparative

ownership framework.
Over all EE firms can build up their comparative ownership advantage with the
following five points and also ease their decision for entering the foreign market,
decide which entry mode to follow, evaluate their level against the global value
chain, choice of locations and along with impact of other areas of global
strategy, such as JV partner, technological innovation, international financial
institutions and team building.
Conclusion from Dunning’s Eclectic Paradigm ownership advantage:
Finally we can conclude that ownership advantage is one of the prime factor
observed by firms while going abroad but along with comparative ownership
advantage the theory seems to be clearer and also clearly specifies the
guidelines to follow for any company relating to cross border trade, mergers and
internationalisations. Hence any company having an ownership advantage is
more susceptible to go for cross border trade than any other firms who lacks the
same.
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INTRODUCTION
2.11 Reason # 11: Conditions when Eclectic Paradigm does not

suffice
2.11.1 Models of Incremental Internationalisation:
Uppsala Model is one of the theory which suggests firms to go for

internationalisation in a systematic manner or in an incremental stepwise
manner. This is also documented with Johanson and Vahlne (1977) providing
the most cited conceptual and empirical base. As suggested by Johansson and
Valhne from their research on Swedish firms concluded that initial
internationalisation activities are usually targeted towards “physically close”
markets or markets with similar culture, language, political system, trade
practices etc. After initial expansion with low risk, indirect exporting to similar
markets, firms improve their foreign market knowledge. After certain time with
developed experience firms tend to go into further “physically distant” markets.
This in turn improves the knowledge of the market, leading to further
commitment including equity investment in offshore manufacturing and sales
operation. Thus the model shows off how managerial learning drives for
successful internationalisation. At the
same time the model also depicts the process in terms of market selection and
also the mechanism used to enter foreign market. Networking is also another
important mode through which internationalisation or cross border trade is
successfully done.
2.11.2 Networks and the Internationalisation process:
A network is an involvement of “sets of two or more connected exchange

relationships” (Axelsson and Easton, 1992). Relating to this market is depicted
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INTRODUCTION
as systems of social and industrial relationships among customers, suppliers,

competitors, family and friends. Accordingly because of networking there is an
influence on strategic decision of the company and also there will be resource
exchange involved in the whole process.
According to Johanson and Valhne's 1992 study entry to any foreign market is a
gradual process and it happens over interaction between parties and
developing/maintaining relationships over time. Following this method it is
found that technical consultancy firms operates in networks of connected
relationships which later become "bridges to foreign market" providing firms
with opportunity and motivation to interantionalise (Sharma and Johanson,
1987).While entrepreneur seek to enter foreign market , network theory leads to
examine a variety of internationalisation issues. These include the impact of
network relationships on the foreign market and the relative influence of the
foreign firms on new market entry strategy.
Recently a survey had been carried out among 25 firms to understand their
taking on networking while they are going for cross border trade. From the
sample it is found that 64% (16) of the firms indicated that their foreign market
entry was
triggered by formal or informal network rather than their own proactive

identification process. 36% (9) of the firms noted that there was at least one
relationship crucial to the future growth of the company. Even though 44% (11)
firms denied the fact that networking is essential in development of the
company. As per their data if the networking is done with wrong entity it can
later prove to be a disaster for the company. So with profitability’s there is
always a risk clause with third party relationships in international markets.
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INTRODUCTION
2.12 Reason # 12:
Wrong learning and advice from experts (Vessel, 2015):
Most firms are filled with people who are experts in their position and they do
have a clear vision how to take the company forward (Vessel, 2015). These
expert advices do not come handy and neither they are cheap but it is less costly
than any missed opportunity and damage to the corporate psyche and reputation
caused by any failure. Commitment and flexibility is inversely proportional to
each other and hence for making the correct strategic choice firms have to
undergo the perfect trade-off which can only be judged by an individual with
experience (Vessel, 2015).
The best way is to commit “Internal Resources” required. The staffs can be
selected internally for which international expansion is not simply and
expansion of their responsibility. Then relating them with external experts and
finally after brain drain ensure a proper knowledge transfer developing the
internal expertise while growing the business. Mostly the company must have a
clear idea and expertise how to go for an international expansion before doing
so and understanding that international expansion is not only offshoring or
doing
business in foreign land but also developing a different business with additional
requirement, considerations and cautions they have known before. Ownership
advantage along with proper networking and learning before internationalisation
can only satisfy the conditions for doing cross border trade for any enterprise
across the globe.
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INTRODUCTION
Networking is perhaps the most important ground rule for internationalisation.

Any company trying to go for cross border trade with a bit of networking might
have stronger ground than the company without proper contacts or links but it is
not all. We cannot set this as the final rule for declaring successful
internationalisation. It might happen that the relationship might be wrong,
unstable, or reluctant to work for spontaneous improvement and the company
might face debacle. So obviously, with networking, there is greater chance of
success but there is risk factor also that lies along with.
Apart from the ownership advantage or the network advantage there are also
certain conditions which firms need to follow while pursuing or doing cross
border trade. Success depends on variety of "localization" efforts. Any company
trying to achieve overseas success should start working from home country
whether it is marketing materials or building up a strong commercial base.
There are certain reasons being assumed from the present failures and they are
enlisted below.
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INTRODUCTION
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RESEARCH DESIGN AND METHODOLOGY
3. Research Design:
With an exploration of recent internationalization literature and the frameworks

throughout the literature, this part ascertains and explains the specific research
design being invoked in this dissertation. A brief outline for approaching the
research is adopted for the secondary research which is followed by a
description of the primary research methodology. In the first few sections the
selected research approach will be justified; the sample interviews will be
discussed. The research will also highlight internationalisation failures, ethics of
business as well as consideration with cross -culture, piloting validity and
generalizability. An overview of data analysis approach is also given, which
onto leads to discussion of research limitations in the following chapter.
3.1 Secondary Research Strategy:
Within this framework of research comes the studies of 50 journal articles in

addition to the relevant textbook in the field. The majority of the articles were
from full text database source online. 50% of the referred papers were sourced
from journals which were rated as world elite or top of their field by
Association of Business Schools (ABS) on the basis of originality, significance
and riguor (2010). Rest of the articles were from sources of acceptable standard
such as Science Direct or Research Gate. An elaborate details of the academic
journals being consulted is enlisted in Appendix A.
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3.2 Methodology of primary Research:
The primary research methodology adopted for this dissertation follows an

interpretivist epistemological approach. There is an argument regarding the
interpretivist perspective in which Saunders et al. (2009) claimed that in this
following perspective a researcher has to understand the differences between
human beings and observe their role as social actors. Pursuing an interpretivist
research strategy, gives the researcher a scope to gain access to people’s
‘common sense thinking’ through data collection in order to interpret their
course of action in their viewpoint (Bryman and Bell, 2011). From an
ontological perspective, a subjectivist research approach fits with the
interpretivist epistemological approach, as the penultimate goal of this method
is to see the firms / organisations as socially constructed products, with their
own viewpoint of the world that might influence the perception and
understanding (Saunders et al., 2009). Key reason for failure of firms while
internationalisation can be understood from the individual’s point of view. The
subjectivist approach derives theories from the collected data of the firms
during internationalisation and aids in finding the key recommendations.
The study follows a deductive approach to research while supporting the

interpretivist stance. The science of deductive reasoning occurs when the
conclusion is derived logically from a set of premise, the conclusion being true
when all the set of premises are true (Ketokivi & Mantere, 2010). The data
collection is an important approach of this research as we can only as the
eventual focus of the study will be guided by the themes that emerge from the
data gathered and also might relate to an existing theory (Bryman & Bell, 2011).
The basic problem of using an inductive approach is the gap in the logical
arguments between the conclusion and the premises observed, the conclusion
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being ‘judged’ to be supported by the observation being done (Ketokivi &

Mantere, 2010). There is also another observation method which we will be
overlooking in our case and that is abduction research method. The final
character of deduction process is generalization. In order to generalize properly
the sample should be properly evaluated and also its size should be taken into
consideration (Saunders et al., 2012).
3.3 Research Methods:
The research method utilised for this project are predominantly of qualitative
nature and the deductive approach of linking data and theory is extensively
associated with qualitative research (Ketokivi & Mantere, 2010). Through this
research method a thematic analysis approach is followed (Miles and Huberman,
1991), enabling a deep exploration of themes from textual data (Guest et al,
2012). The research method involves development of theory followed by a set
of rigorous test through a series of propositions (Ketokivi & Mantere, 2010). A
combined research method was also put into consideration before finalizing the
approach i.e. a combination of qualitative and quantitative research methods –
which is mostly used in case study research settings ( Adam, 2007). However
with limitations of time and resources a predominantly qualitative research
strategy was pursued as suggested by Creswell (2013) and Wolcott (1994),
question one thing in particular – evaluating engagement levels. Focussing on
qualitative research methods allows the researcher to fully dedicate time to the
development of a systematic understanding of motivations for de-
internationalisation of business and also the ideology attached with the factor of
internationlisation. Qualitative tool are chosen in-depth structured interviews
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which incorporated an exercise of asking the participants to draw their basis of

internationalisation and also the market entry strategy being adopted by the firm.
The application of this research is believed to facilitate the evaluation of

internationalisation theories and specifically design the framework and evaluate
the reason for retraction of firms from International Business.
3.4 Case Study Strategy:
The research project is involved about an instrumental case study of an Indian

construction conglomerate named Larsen and Toubro’s approach for
internationalisation and their retraction and failure later in business; using the
four in-depth structured interviews to form a single case study (Yin, 2009). This
strategy explores international expansion ideologies and their dis-engagement in
firms thoroughly.
A case study approach is particularly useful when analyzing contemporary

events within its natural setting, as direct observations of these events can be
observed and the people involved in the process can be interviewed (Yin, 2009).
With a case study approach for the topic the findings intend to be generalized to
the theoretical themes and frameworks developed from the literature review
(Yin, 2009). The study involves multiple data collection methods, interviews
and case studies, aiding to triangulate the data as typical for study designs
(Brynab and Bell, 2011; Creswell, 2013).
The application of an ethnographic research approach, aids in describing and

interpreting similar and shared patterns of culture by the help of observations
and interviews (Tracy, 2013). The method would have been more perfect for
this study but the resource required in this process is intensive, as the data is
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normally gathered through an extended time period. The researcher’s time

restrictions and closeness to the previous firm justified the reason for interview
and case study approach.
3.5 Ethical Consideration:
As the research was undertaken in a non EU firm and as well as the top
managements are involved discussing their plans for future and the past
mistakes a number of ethical reasons were bound to rise. Any information
gathered solicited was obtained only by the prior information as well as the
organizational consent. As the research topic is based on data that might be
confidential in nature; all the position of the management being involved has
been kept anonymous.
Participation in the interview was voluntary and no form of incentives were

involved in the following process. When the colleagues were approached
everyone decided to participate voluntarily and under no circumstances were
they pressurized or coerced into way of participation. Also interview questions
were formed sensibly keeping in mind the comfort and stress level of the
interviewee.
3.6 Data Collection:
The interviews were opened with preset questions which were previously e-
mailed to the interviewee so that they can have a look and be ready when they
are being questioned. The draft of the business structure and the
internationalisation decisions were permitted by the four interviewee being
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involved. The interviews were recorded and each interview estimated to be

around 20 mins.
Notes were also taken during interviews to capture non-verbal cues and
observations but also part of a checking mechanism of taping problems (Robson,
2011). In order to reduce and control the biasedness of the research a full record
of the interview was shortly developed after the event in the form of transcripts,
undertaken by the researcher personally to develop familiarity with the raw data
(Saunders et al., 2009). The transcripts were later checked with the participants
for final checking and approval. Minimal alteration were being done where
some spelling mistakes and wrong texture of statements changed the overall
meaning being ascertained by the interviewee, successfully preventing
falsification of research outcomes.
3.7 Data Analysis:
For the purpose of maintaining tranquility of this research systematic approach

for qualitative data research was applied, as it provides a clear and structured
guidelines from the beginning of the data collection to the development of final
recommendations (Miles and Huberman’s, 1991).
First of all the researcher familiarized oneself with the interview transcripts
including the respondent’s presentation and then develop a descriptive thematic
framework through classification and arrangement of research outcomes into
broad categories (Ritchie and Lewis, 2003). As the next step the interviews are
assembled into thematic research material and transcript them for further review
and analysis.
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The interview was analysed in a comparative way with the case studies and
research works being done in the literature review. For example Dunning’s
eclectic paradigm states that a firm can internationalise successfully if they have
a strong ownership advantage, after interview the statements are being checked
with the eclectic theory and also concluded accordingly whether it was needed
or not. Following the concept outlined by Howard and Monk (1998) during the
analysis, a focus was put on structures, processes, concerns of the firm for
internationalisation and also determine the approach of the firm for
globalisation.
3.8 Limitations:
Qualitative research methods such as in-depth interviews and case studies do

not only bring advantages. They also lack certain points, along with limitations.
One aspect is while doing interview an individual can have high level of
influence towards the respondents (Saunders et al., 2009). Particularly the
previous working relationship between participants and researcher might pose a
potential risk of interviewees being reluctant in disclosing true feelings and
views. During the interview any question might seemed to be out of context and
might hamper the interviewee’s easiness and also could indicate the potential
risk as well.
Finally due to time and budget limitations, the sample recruited was small and
based on an interview and single case study while with higher time advantage
the involvement could have been more and might have resulted in better
outcome. Therefore the research findings cannot necessarily be generalized
without further research, though it is possible to draw a number of conclusions
from case study, building the basis for sector wide research on failure of firms
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while internationalisation. Multiple case studies with focus groups and

observations could have helped more in finding the reliability and validity of the
research (Tracy, 2013).
3.9 Conclusion:
This chapter justifies the interpretivist epistemological methodology for the

research study and highlights the benefits envisioned while applying a deductive
approach for research. The case study strategy along with structured interviews
were compared with other available methods. A purposive sampling design was
created along with identifying their restrictions and limitations. The chapter
concluded with an outline of the data collection undertaken and explored the
adoption of systematic data analysis approach. Research limitations were also
discussed in the final chapter such as close group working limitations or
participants and respective risks were considered and finally action for their
preventions concluded the chapter.
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RESEARCH ANALYSIS AND DISCUSSION
4 Research Analysis and Discussion:
This chapter is composed by the analysis and discussion of the results, which is
derived from the research conducted to achieve the goal of this study. The
primary data has been collected through four in-depth structured interviews
(Saunders et al., 2009) which were analysed with a systematic approach for
qualitative content analysis (Miles and Huberman, 1991; Ritchie and Lewis,
2003). The data is analysed and discussed in this section by interrelating the
outcomes with significant details being discussed in the literature review (See
Chapter 2) and reference along with the question guide (See Appendix).
Similarities and difference in opinions is particularly emphasized amongst all
interviewees. Furthermore the data is examined in the present market scenario
and emerging trends which are not thoroughly discussed in the literature review.
To simplify the representation of opinions and findings, the mangers are

abbreviated as (e.g. Vice President Business Development – BD1, Project
Manager Business Development– BD2, Joint General Manager Business
Development 1 – BD3, Joint General Business Development 2 – BD4) and
direct quotes are also utilised for this purpose. In order to reduce the complexity
and make the analysis more fruitful only the important part of the quote are
being used which are by no means an exhaustive enumeration. Detailed Input
can be viewed in Appendix 1.
4.1 Sample Profile of In-depth Structured Interviews:
Four in-depth structured interviews were conducted between 16th August 2014
to 24th August 2014 with employees of Larsen and Toubro representing
business development team, project management team and also the general
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management team as illustrated in Table 4.1.1. The average length of interviews

were 25-30 minutes. As further demographics are not further required and
relevant they are excluded by virtue of anonymity.
Management Team Sample Size Interview Length

Vice President Business 1 25 Min
Development (BD1)
Project Manager Business 1 35 Min
Development (BD2)
Joint General Manager Business 1 30 Min
Development (BD3)
Joint General Manager Business 1 35 Min
Development (BD4)
Total 4 Average: 35 Mins
(Approx.)
Table 4.1.1 Interview Sample Size and Interview Length
4.2 Codes and themes of In-depth Structured Interviews:
The question guides for in-depth structured interviews which is sought to aid in
answering the research questions (see chapter 1.3), data was collected on the
themes derived from the conceptual framework. This included OLI advantages
and disadvantages (Dunning’s Eclectic Paradigm), challenges and barriers,
networking approach and also other factors involving internationalisation. In
order to make the interview process simple as well as descriptive the following
table 4.2.1 is created.
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Codes Sub codes
Internationalisation, Planning and Type of Projects

Processing details Approach for acquisition of projects
during Internationalisation.
Juxtaposition of Indian and International
Business for L&T (basically it’s a
comparison of the way bidding is done
and also client response)
Failure of the firm De-internationalisation of the firm
(Challenges and barriers) (Reason for failure)(Management
support)
(Level of Engagement)
Analysis of internationalisation motives
compared to other Indian firms
(Late or Early movers)
Conclusion along evaluation of theories Summary of findings
Table 4.2.1 Codes and Sub Codes for Analysis
With the code system as the foundation of the analysis the most remarkable
aspects of the themes are being retrospect, which will be discussed in the
following sections aided by the quotes of the different interviewees.
4.3 Types of Projects:

Within this paragraph we will be looking into the projects the firm tended to
work while internationalisation. This area would look into the similarity and
dissimilarity of the projects and operations after internationalisation. In the
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beginning the group members were asked to draw an outline of the projects that
the firm acquired during internationalisation and display their thoughts and
presentation of the acquired projects and insight into their feelings and concerns.
The answer seemed to be same for every participant. L&T mostly focused on
EPC (Engineering, Procurement and Construction) projects during
internationalisation as it is used to do back in India. L&T in India is known to
undertake projects where all the EPC factors come to play and they act as a sole
body in carrying out the project from start to finish. Initially they lacked the
support from the clients as their brand name was not well known in foreign
lands hence they started only working the construction part as a petty contractor
and after four years now they have bagged new projects and slowly making
their foothold strong in Middle East. The feedback from BD1, BD2, BD3 and
BD4 seemed to be very positive in this aspect towards the growth of the projects
being undertaken. A brief overview of BD3’s statement is provided for
reference (See Appendix).
“Taking a cue from the projects in India L&T’s MMH IC started their
international expansion in UAE 4 yrs. back after doing their homework of
analysing the construction market in the Middle East. When we started we were
treated as mere contractors while now two months back we acquired a USD
100 million project on EPC basis which seems to be a descent amount globally”.
However despite the good feel about the new project being acquired and also
about getting stronger in UAE as an engineering firm somewhere the firm
seemed to be threatened by the big global construction firms already
functioning in that area for a long time.
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4.4 Approach for acquiring projects during Internationalisation:
Foreign market entry modes is the prime concern for firms while they
internationalise. The modus operandi is to find the best way to penetrate an
untapped market or sometimes a market in which already many firms are
existing along with a scope of expansion unlike Middle East. These modes vary
from Strategic Alliancing to JV to licensing depending on the way the firm
tends to shape its business overseas.
Other divisions of L&T internationalized almost 20 years back while MMH IC

was the late mover regarding internationalisation with only 4 years knowledge
of overseas operation. So basically when MMH IC entered Middle East and as
of now also they are not very recognizable since big firms as such Bechtel or
Balfour Beatty is operating there since last 30 years shaping up the Middle East.
So L&T instead of doing any merger or acquisition they decided to run the
operation with the help of their Indian counterpart in terms of Engineering and
Designing and also some ideas of Project Management. This step was decided
as MMH IC was unsure of the acquisition process and also they wanted to set
up as a sole functionality of its own despite of the time it takes. In reference to
this issue BD2 was noted saying:
“To be very honest L&T MMH IC division do not have any brand name outside
India and they are also considered as a contractor rather than an EPC firm, but
in parts of construction the firms has technology partners like Paul Wurth S.A.
or Siemens VAI whose sole job is to help the firm providing technological
interface for required parts while most of the management is carried out by out
Indian Counterpart including the mobilization and immobilization of labour
and staff”
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Thus from these area we can conclude the firm in order to control the project
management and operations they never cared for any kind of partnership.
Owing to their brand name and experience in India they tried operating
overseas which is quite a risky project in itself as the functionality of a foreign
client is totally different from an Indian one but for technology referencing
they went up to German and Italian firms which is a positive point and might
help the firm in better growth of construction technology.
4.5 Juxtaposition of Indian and International Business for L&T:
Every country has its own business culture in terms of working and processing.
This section we will be analysing whether culture was the reason behind L&T’s
debacle.
A strong consensus from all participants were observed pertaining to this topic
as they all agreed initially there was some indifference and difficulty in doing
and finding business because of cultural discordance. The incongruity can be
explained by the statement as:
“When we started business in Middle East everything was against us. In India
the relationship with client is more easy and flexible, for example if a supply
fails in India the client might give a new opportunity to finish up the job while in
UAE and Saudi Arabia once any mistake is done no second chance is provided.
Also man management is difficult as the deployment rule of labours and
equipment from site is very difficult. What we did in India was a past and we
were in deep trouble here because of lack of expertise. The bidding is also very
different, in India usually there is a contest between L1 and L2 candidates
(lowest bidder and second lowest bidder) after tender stage. L1 and L2 are
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renegotiated over and over again while starting a project takes almost one and
half year from contract agreement while in countries like Middle East L2 is not
given any importance and renegotiation is out of question. From tendering to
construction process starts in two months period. L&T with its Indian
management system is not that fast in assessing the requirements for project
and for that reason we were only allowed for construction neither for planning
nor for management, which is off route from the way L&T MMH IC works. ”
Failure of timely delivery of project is a regular problem because extension of

projects in India in not a big deal, neither for the client nor for the contracting
firm as the investment involved and the cost incurred from labour or machinery
is low while in a developed country the labours are costly, their daily wage is
high and as well the investment involved is also on the higher note, thus failure
to any timeline causes to be a total disruption for the project as whole. The
person talked about the bidding process which is also very different in
comparison to the bidding process followed in India. In India the after bidding a
firm gets abundant time to complete their project management and engineering
research for the project to begin while in countries like UAE or Saudi Arabia
the planning time is short. Also from the last line it can be understood that this
developing country firm lacked the expertise and finesse in comparison to its
developed country competitors. Thus the failure can be pertained to these
lackluster of work culture to some extent, which the firm conceived while
working in its home country.
4.6 De-Internationalization of the firm:
In this section we will be looking into the reason for the retraction of the firm
from its business in Africa three months back. For this particular topic BD3 was
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the most responsive of the lot as he was the team leader for the business
functionality in Africa and to analyse the reason let me quote the words which
he said:
“The movement to penetrate South African market came into mind after we
successfully started to crack our projects in Middle East, now after moving to
South Africa we made the primary mistake of improper evaluation i.e. the whole
internationalisation venture into Africa was not considered properly. When we
entered Africa the first shock that came to us was in the form of ignorance,
nobody knew L&T at all and we lacked the strength to execute a project without
proper technology and construction strength. Leaving apart our fault the
government regulation is South Africa is also very bad. We were not able to
mobilise labours for our jobs i.e. one of the prime strength of L&T which we
were able to do in India. Market forces were also not on our side, big European
and American firms were already there for last thirty years, we tried our best
for projects but we failed owing lack of recognition and proper technology.”
From this area we can realise the firm retracted from Africa referring to
multiple synopsis, initially the firm failed to analyse the market in which they
were roping to internationalise, improper evaluation, next the firm was a late
mover i.e. while the EU and the US firms moved thirty years back the company
delayed itself so much that they couldn’t even set up their foothold for a single
time during their short two year stint. Lack of technology is a common
phenomenon for any developing country firm and for that reason developing
country firms prefer to go for strategic alliancing with technological firms from
developed nations who can help the firm with their advanced expertise. In India
the firm operates in projects with reputed consortium partners like Paul Wurth
or Siemens VAI while in Africa they didn’t do the same and ended up failing to
tie the loose ends resulting in de-internationalisation.
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The problem is not only with the wrong computation of the firm’s
internationalisation principal while venturing into Africa but also with the
African government, who despite being a developing country do not promote
the entry of foreign firms for business in their soil. They have made the rules so
stringent that firms who are trying to enter the market assessing the locational
advantages of resource and labour is not getting any opportunity to set up their
business. These same thing happened for this section of L&T, who despite their
internal management problems also faced obligations from government criteria.
4.6.1 Management Issues and their level of engagement:
In order to fully analyse the reason for the debacle I segmented the working into
another micro section which is management decision and level of engagement
of the managers back from the home country to emphasise the business
expansion in Africa. In this section the answer was not same for all the
interviewees, they varied as BD1 said:
“We as senior managers tried our level best to engage ourselves in the market.
We regularly used to go to Africa and pitch our ideas as an engineering firm to
our client but Africa currently seem to be a very bad place to venture into, as
the market there is not that much booming as it was ten to twelve years back.
Somewhat the market there is getting stagnated and the policies of government
were meant for us to do business there.”
The statement regarding stagnation of market is not fully wrong though we all
know Africa is the Eden of development right now. They are one of the fastest
growing GDP but for last two years they suffered lot of disruption, constrained
by strikes in mining sector (Resource shortage), electricity shortage and low
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investor confidence pertaining to bad governance, terrorism and the Ebola

outbreak in parts of Africa like Sierra Leona, Liberia and Guinea (World Bank
Group, 2015). The management also failed in acquiring project as their thinking
was not up to the global standard, they never retrospected the global problems
which the firm might face when they internationalise to another developing
country like Africa. In order to give better meaning to my words let’s have a
look to what BD4 said about the failure of internationalisation factors in Africa.
“Our senior managers only perceived the situation half way, they didn’t really
realise what kind of disadvantages we were altogether in that alien land. We
didn’t have recognition no proper alliancing and neither any proper technology
to compete with the world out there. We were in the back foot from the very
beginning and ended up by losing all our grounds and existence there. For me
the management could have done better and made a better entry planning. Only
SWOT and other analysis don’t really show the real market. We entered Africa
at a wrong time and may be were late compared to our neighboring Chinese
country firms and the all-time best EU and US firms. We had our idea in
construction but for management we should have used some consultation firms
in Africa who could have guided us but our arrogance killed us.”
From this pretext it is clearly understandable that the wrong managerial decision
has killed the firm during internationalisation to Africa when L&T MMHIC
ventured to Middle East there were some other divisions of L&T already
working for last twenty years while in Africa MMH IC were the first to move
into the country among other divisions of the firm and hence they had lower
ownership advantage in this scenario. The firm tried to control the business by
themselves that is they wanted to keep all the control in their hands as they were
unsure of the assimilations they had to go through but this decision didn’t prove
to be right as they also lacked the advantage of networking in a foreign land.
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Hence the failure is somewhat pertaining to the wrong managerial decision as

well.
4.7 Analysis of Internationalisation Motives:
In this part we will be looking into the motives for the firm to internationalise.
When asked about the reason why this part of firm internationalized in Middle
East almost twenty years later to its other divisions, the answer was:
“For last twenty years in India we were having a golden era, we never thought
of going global because as we were full with resources and projects what we
had in hand. Since last three to four years the steel business industry in India is
staggering a bit. Except TATA steel no other firms are interested in expansion
right now under the present economic condition in India and hence we decide to
move outside India to find business suitability. Our first target was Middle East
where other parts of L&T was working for last twenty years so creating a name
was not an issue but this division of L&T suffered a lot initially as we lacked
project management expertise in alien lands, after this the decision to go into
Africa was materialized but it didn’t prove fruitful either”
So L&T’s MMHIC division planned for internationlisation because of reactive

motives, they did not go to foreign countries for their business expansion in the
first place rather they moved out of India since their business in India
deteriorated and they were unable to incur profit from the Indian business. This
kind of decisions often seems to be more risky than a planned one as here
internationalisation is just a motive for the sake of business expansion not for
qualitative improvement of the firm. To make sure whether they were late
movers I asked similar kind of question where the reply was as:
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“Yes we were late movers and for that I regret to some extent while we were
also option less as our business in India was very strong then. You can’t have
more in hand without dropping off something, we never wanted to hamper our
position in Indian business and hence the decision, but yes we were late movers
and for that we suffered in creating a substantial market for ourselves as well as
the business seemed very difficult to us, we found competition in the form of
Indian, European and Chinese business who were way stronger than us.”
Late movement into any nation for the sake of growth is one of the preliminary
miscalculations a firm can usually do. This firm suffered the same problem,
when any firm is moving late they lose the advantages being enjoyed by the first
comers who creates their advantage from the land, resource and labour. In
Middle East though other divisions of the firm were working for last two
decades still this part of the firm decided to go late until they suffered from push
factor in present economic scenario in India. When entered they faced tough
competition from firms of China, EU and US who were first movers in this
markets. Along with this they were also driven by financial situation, where
high cost of market entry combined with falling prices led to declining profits
through out and also their lack of knowledge in international market made their
venture more difficult for them.
4.8 Summary of findings:

The majority of participants felt very comfortable to discuss the failure and
success of the firm during internationalisation and particularly value the
opportunity to have all the core employee views and concerns heard at early
stage of decision making (Zoeller, 1999). However; time difference, unclear
objectives and an increase of workloads were identified as factors with a
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decreasing impact on participant’s engagement levels (Zoeller, 1999). Access to

key information regarding market trends and market conditions was recognized
as the main catalyst for institutional change by the participants (Hayes, 2010).
Effective internationalisation and subsequent recommendations were developed
by the participants to initiate changes in process, leadership and decision
alignments (Hayes, 2010; Svendsen, 1998).
In the literature review we discussed about the eclectic paradigm being one of
the most influential factors for firms to internationalise as described by John
Dunning. Any firm with OLI advantage has upper hand in doing business
globally, my argument was all the factors does not collide to the fact of OLI
advantage or written theories and for that my research was based on a very
strong Indian firm who is considered as the bellwether of Indian Engineering
industry. After the interviews the minimum deduction that could be done for the
failure of the firm is lack of knowledge regarding internationalisation. The firm
was strong in India and hence their decision was to have a tight control over the
market they were moving into and in order to become a sole owner of their
international projects they did not opt for acquisition or technology transfer of
any sort despite being technologically naïve compared to the firms operating in
that market. They were evidently late movers, in the very first section it was
discussed that any firm who is an early mover enjoys more competitive
advantage over late mover as they have the advantage of land and resource
easily over the new comers. The firm also failed to analyse the market they
were trying to move into, Africa was not their business playground with lot of
economic disparities in their economy but still the firm moved in and failed
overall.
Though few points were clear but for overall discussion I needed a bit more
time and elaborate research. Due to shortage of time the project was carried out
57 | P a g e
in a small sample interview. Overall this chapter fulfilled research objectives of

finding out the reason for failure of internationalisation of the firm despite
having theories detailed for the firms to act. Most benefits identified are
predominantly in line with existing literature and complement some of the
themes. Recommendation for the coordination of future international business
will be discussed in Chapter 5 on the basis of data analysed in the section.
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CONCLUSION AND RECOMMENDATION
5. Conclusions and Recommendations:
Arguably, internationalisation is gaining importance in every sector, where a

push towards greater accessibility, feasibility and significant changes in the
environment are becoming apparent (Richards et al., 2004).The emergence of
new computing and communication technology and their potential to modify
business, demonstrate that change is unavoidable in this 21st century (Rahman
and Ramos, 2011).
The aim of the study was to explore the reason for failure of the Indian
conglomerate L&T more specifically the part of L&T named MMHIC, The
specific research objectives were to:
1. Analyse the literature surrounding internationalisation practices in firms.
2. Critically review whether OLI is the only defying factor for any firm
during industrialization.
3. Critically investigate the failure of the firm L&T taking their division
MMH IC into context and value created through case study analysis.
4. Provide recommendations for future working group for

internationalisation, to help support cross border trade engagement more
effectively.
The final chapter is divided into three sections. Section 5.1 reviews research
objective one, two and three in turn through correlate the research findings with
the themes being identified in the literature review section. Section 5.2 will
provide practical reference for internationalisation process improvements and
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finally in section 5.3 is followed by a final conclusion and few

recommendations for future research in this field.
5.1 Research Objectives: Summary of Findings and Conclusions:
Many authors have highlighted the importance for firms to internationalise their
business and its management in order to implement changes more effectively.
The range of international business management approaches in literature is vast,
covering ownership advantage for firms, decision making and strong
networking (Ayuso et al., 2006); techniques which are mostly process oriented
to generate valuable learning outcomes (Heugens et al., 2002); all engagement
approaches soughed for improving the firm’s competitive advantage (Svendson,
1998).
Internationalisation factors and market conditions was recognized by

participants as the main catalyst for institutional change as a key benefit from
effective internationalisation. The participants started with the business L&T
MMH IC ventured in foreign market till date and eventually how they survived
in one market while they failed in another. Dunning acknowledged that any firm
with OLI advantage is comfortable more than other firms to internationalise
while this firm had the ownership advantage in UAE for last ten decades as they
had their other sections working there still they face a lot of problem initially
and they failed business for the first three years and still they are not
comfortable in projects acquisition there.
In Africa the firm enjoyed locational advantage with cheap labour cost and
abundant natural resources, the firm who is known for building plants in India
61 | P a g e
for firms like TATA Steel and Vedanta did not enjoy a single moment of
business success there and finally they failed and retracted.
All the firms are not comfortable with the fact of licensing or technical
acquisition as they might feel insecure because they might end up giving their
technical knowhow to a potential foreign competitor (Hill & Jain, 2011). L&T
MMHIC was not comfortable either in partnering with foreign firm as they did
not wanted to risk what they had in hand, along with that they were late movers
in the already harvested market where big players were already present. Thus
networking also did not help the firm in acquiring projects as they really were
not known to the world to that level.
Hence it can be said a firm can fail even if it enjoys ownership advantages in its
home country, but the term “ownership advantage” is so big somewhere the
meaning is lost to some extent as we really can’t make everything out of
ownership advantages only. Locational advantage is also not an only criteria for
a firm to succeed. Thus we can conclude by saying if the internationalisation
reasons for the firm is retrospected then we will finish up by saying successful
internationalisation is all not only about theories. It’s the time and place and the
way business is done.
5.2 Internationalisation process improvements:
In this short time every method for improvement cannot be justified neither can
be researched for a bigger diaspora but as for the firm that was involved in the
research the improvements can be done by the following process:
i) During internationalisation the firm should evaluate carefully, that is

technological advantages and also the firms already existing in the
62 | P a g e
market they are trying to move into. For technological advantage they
can access consortium partners like they do for projects in India in
which the risk of technology spill over is reduced to some extent.
ii) Firms should reduce reactive reasons for internationalisation rather
they should be indulged in more proactive methods by which business
can be put into a suitable position during cross border trade.
iii) Locational advantages should be taken into context but along with that
governmental referendums should also be taken care of.
iv) Networking should also be considered along with OLI advantage as it
is one of the prime source of doing business.
v) Finally despite having ownership advantage any firms should
prioritise their reason for expansion as they might backfire in cases as
it happened for our case firm.
5.3 Final Conclusion and future recommendations:
I finish with what is started. No theories can really absolve the problem of de-
internationalisation, but certain measures can help firms from the debacle they
faced, there is enough scope for this point to research but keeping in mind our
limitation of time and resource it’s been done on a single Indian firm, in the
near future if this has to be done then at least more than four to five firms have
to be involved to absolutely sort out the reason for failure of firms after
internationalisation.
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APPENDIX
Appendix A
Questions Used for the Research
a) What are the projects L&T did in foreign lands till date?
b) How L&T planned to acquire projects in foreign economies like Middle East or Africa? Did they partner with big
existing brands, used foreign consultants or whether they tried to do things alone?
c) As per L&T’s point of view how did they fair in abroad projects? (do they think they were able to maintain their
name and standard which they used to do in India)
d) How is culture important for business of L&T in India and International? Do they matter a lot?
e) Why did L&T failed in acquiring projects abroad while they were successful in India?
f) Why did they retract from Africa just few months back after harvesting for projects so long?? What seemed to be
problem?
g) Were the management fully supportive of the situation and what were their level of engagement during this
process? Were the estimations wrong when they planned for business in foreign countries like HR estimate or
expense calculation?
h) Finally what are the future plans of L&T in internationalisation and how do they think they can rectify their mistake?
76 | P a g e
APPENDIX
Appendix B
Questions that helped me shape my research:
Question BD1 BD2 BD3 BD4
What are the kind of We bided for many We started in UAE 4 yrs. Taking a cue from the We followed our India’s
projects L&T were projects but we finished back and gained our little projects in India L&T’s footsteps and tried expanding
engaged in foreign acquiring projects only position riding on the MMH IC started their in the same pattern and failed
market related to construction name being garnered by international expansion in in UAE and Africa as well. We
basis. In India we were L&T’s other divisions. UAE 4 yrs. back after doing needed different pretext but we
recognized as engineering Initially we failed and now their homework of lacked that. Tried for EPC
firm while in UAE we we are going steady in analysing the construction projects and ended up getting
were mere contractors UAE but our business in market in the Middle East. only contractor based projects.
Africa has totally failed. When we started we were
treated as mere contractors
while now two months back
we acquired a USD 100
million project on EPC
basis which seems to be a
descent amount globally
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APPENDIX
Appendix B (Contd.)

How L&T planned to We never do acquisition To be very honest L&T No, we did not. We always We all believe in doing
acquire projects in foreign or tie ups. This is MMH IC division do not try to act alone and we did business individually. For this
economies like Middle something that L&T never have any brand name outside the same in UAE and purpose neither in India nor
East or Africa? Did they does and so we never India and they are also
Africa as well. outside India did we venture
partner with big existing planned to go that way, considered as a contractor
brands, used foreign hence with our expertise rather than an EPC firm, but out for any tie up. With our
consultants or whether in India we tried doing in parts of construction the engineering and design team
they tried to do things business in UAE and firms has technology partners in India and also planning we
alone? Africa like Paul Wurth S.A. or decided to acquire projects
Siemens VAI whose sole job abroad.
is to help the firm providing
technological interface for
required parts while most of
the management is carried
out by out Indian
Counterpart including the
mobilization and
immobilization of labour and
staff
78 | P a g e
APPENDIX
Appendix B (Contd.)
Why did L&T failed Africa was a wrong The government is not The movement to penetrate African market For African market I
in acquiring projects decision and we failed very co-operative with came into mind after we successfully started have the least
abroad while they pertaining to our lack of foreign entry firms. to crack our projects in Middle East, now knowledge for failure
were successful in
knowledge and the They have some after moving to South Africa we made the but what I know is we
India?
Why did they retract market scenario. The strange stringent rules primary mistake of improper evaluation i.e. failed pertaining to our
from Africa just few basic reason is wrong which were the whole internationalisation venture into lack of decision making
months back after evaluation of the market completely against our Africa was not considered properly. When we and wrong managerial
harvesting for and it is not worth a business policy and entered Africa the first shock that came to us issues. Also Africa is
projects so long?? place to venture anymore along with that the was in the form of ignorance, nobody knew not a very good market
What seemed to be now. market is already L&T at all and we lacked the strength to to invest now in terms
problem?
captured by other execute a project without proper technology of construction.
foreign firms from and construction strength. Leaving apart our
decades back so fault the government regulation is South
basically we never had Africa is also very bad. We were not able to
a chance there but mobilise labours for our jobs i.e. one of the
may be in future the prime strength of L&T which we were able to
market improvises and do in India. Market forces were also not on
we can do business. our side, big European and American firms
were already there for last thirty years, we
tried our best for projects but we failed owing
lack of recognition and proper technology.
79 | P a g e
APPENDIX

Were the management The movement to penetrate South The managers were Our senior managers only Like every firm we
fully supportive of the African market came into mind after supportive to some perceived the situation half way, also have managerial
situation and what we successfully started to crack our extent but somewhat they didn’t really realise what issues. Wrong
were their level of projects in Middle East, now after we failed to kind of disadvantages we were decision, late entry
engagement during moving to South Africa we made the managerial decisions altogether in that alien land. We rocked our firms
this process? Were the primary mistake of improper as well. The didn’t have recognition no proper badly in
estimations wrong evaluation i.e. the whole estimations were not alliancing and neither any proper international
when they planned for internationalisation venture into Africa wrong totally but yes technology to compete with the expansion. So
business in foreign was not considered properly. When we they were not very world out there. We were in the basically we as
countries like HR entered Africa the first shock that fruitful as well back foot from the very beginning MMH IC before
estimate or expense came to us was in the form of because our start in and ended up by losing all our expansion will have
calculation? ignorance, nobody knew L&T at all middle east faced grounds and existence there. For to really think about
and we lacked the strength to execute problems and we did me the management could have it. It’s really not
a project without proper technology not learn from that done better and made a better Indian standard of
and construction strength. Leaving and did the same entry planning. Only SWOT and business out there.
apart our fault the government mistakes in Middle other analysis don’t really show
regulation is South Africa is also very East as well. the real market. We entered
bad. We were not able to mobilise Africa at a wrong time and may
labours for our jobs i.e. one of the be were late compared to our
prime strength of L&T which we were neighboring Chinese country
able to do in India. Market forces were firms and the all-time best EU and
also not on our side, big European and US firms. We had our idea in
American firms were already there for construction but for management
last thirty years, we tried our best for we should have used some
projects but we failed owing lack of consultation firms in Africa who
recognition and proper technology could have guided us but our
arrogance killed us
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APPENDIX
81 | P a g e
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Thesis · August 2017

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An analysis for failure of firms during internationalisation:

Dissertation supervisor: Dr. Surender Munjal

Month and year of submission: August, 2015

Word count: 12211

MODULE TITLE: International Business Dissertation

SIGNED: RAHUL SINHA

NAME : RAHUL SINHA

List of Tables and Figures…………………………………………………...8

1.2 Research Objective…………………………………………………12

1.3 Research Questions…………………………………………………13

2.1 Reason # 1…………………………………………………………..15

2.2 Reason # 2…………………………………………………………..16

2.3 Reason # 3…………………………………………………………..17

2.4 Reason # 4…………………………………………………………..18

2.5 Reason # 5…………………………………………………………..20

2.6 Reason # 6…………………………………………………………..22

2.7 Reason # 7…………………………………………………………..24

2.9 Reason # 9………………………………………………………….26

2.10 Reason # 10……………………………………………………….26

2.11 Reason # 11……………………………………………………….28

2.12 Reason # 12……………………………………………………….30

3.1 Secondary Research Design………………………………………..32

3.2 Methodology of Primary Research………………………………....33

3.3 Research Methods…………………………………………………..34

3.4 Case Study Strategy.………………………………………………..35

3.5 Ethical Consideration…………………………………………….....36

3.6 Data Collection……………………………………………………...36

3.7 Data Analysis……………………………………………………......37

4. Research Analysis and Discussion………………………………………...40

4.1 Sample Profile of In-depth Structured Interviews…………………..40

4.2 Codes and themes of In-depth Structured Interviews…………….....41

4.3 Types of Projects……………………………………………………42

4.4 Approach for acquiring projects during Internationalisation……….44

4.5 Juxtaposition of Indian and International Business for L&T……….45

4.6.1 Management Issues and their level of engagement………..48

4.7 Analysis of International motives…………………………………..50

4.8 Summary of Findings……………………………………………….51

5. Conclusions and Recommendations………………………………………54

5.1 Research Objectives: Summary of findings and conclusions……….55

5.2 Internationalisation process improvements…………………………56

5.3 Final Conclusion and future recommendations……………………..57

Table 4.1.1 Interview Sample Size and Interview

Table 4.2.1 Codes and Sub Codes for

Figure 2.4 Dunning’s Eclectic

Figure 2.5 Factor for

Figure 2.6 National Industrial Factor Endowments…………………23

ABS – Association of Business School

L&T – Larsen and Toubro

ECC – Engineering and Construction Division

MMH IC –Metallurgical and Material Handling Independent

MNE – Multinational Enterprise

R&D – Research and Development

FSA – Firm Specific Advantage

CSA – Country Specific Advantage

OLI – Ownership Locational Internationalisation Advantage

L1 – Lowest one in Bidding

L2 – Second lowest one in Bidding

Similarly John Dunning’s Eclectic approach (1988) is based on ownership-

As is rightly said by Joseph Monti Grant Thorton “International market is