Three Mechanisms to Enter Under-Developed Markets: the Case of Investment in Mongolian Market by Korean Firms

Abstract

This paper analyzes processes of market entry and business development of an under-developed market from the perspective of three mechanisms. When entering an under-developed market, a different set of strategies is required, compared to when entering a developed or developing markets. In this study, we suggest three mechanisms that are needed to enter an under-developed market for FDI while seeking competitive advantages: selecting, learning, and coordinating. We have explored a dynamic market exploiting process through Sky Group, a joint venture (JV) between Tai-Han Electronic Wire and SK Telecom in Mongolia. The selecting mechanism helps firms identify local market chance and proper mode of entry. The Skytel, a Korean telecommunication service provider in Mongolia shows the selecting mechanism by establishing a JV with Tai-Han in order to reenter the Mongolian market. After selecting an entry mode, according to a business opportunity, the learning mechanism is needed for efficient market exploitation. The learning mechanism closely related to Multinational enterprise (MNE)s absorptive capacity in a market. The Sky Group case shows the learning mechanism through its international operations to absorb the local market knowledge. In case of under-developed country, they have various constraint factors that shrink business activities. To overcome this efficiently, the coordinating mechanism is needed. The coordinating mechanism is essential for networking and integrates each firms absorptive capacity. The Sky Group case is a good example that shows synergy effects through the coordinating mechanism.