Strategic options of home country firms faced with MNC entry

This article analyses the strategic options facing a domestic firm threatened by the entry of MNCs - whether to attack the incoming MNC, to cooperate with it, to defend their home position or to exit the market. The authors suggest a framework for determining an optimum strategy based on the firm's market (global or local) and the strength of its strategic and marketing assets. They test the framework by studying the response strategies to MNC entry of 78 Israeli firms, tracking their reactions from 1993 to 1999, as significantly more MNCs entered the market. Was the model able to predict which strategies were selected by the firms? For firms competing in global markets, barely half of those with strong assets chose to 'contend' with MNCs as predicted. The rest chose a 'cooperator' strategy, as did all firms with weak assets (in line with model predictions). For firms competing locally, the majority with strong assets followed the predicted 'contester' strategy, and the majority with weak assets chose a 'defender' strategy, again in accordance with the model. Statistical tests of the model resulted in acceptance of all hypotheses in the holdout sample and 3 out of 4 in the main sample. Two case studies are presented, showing the results of 'wrong' and 'correct' decisions.