Regional multinationals and the Korean cosmetics industry

This paper analyzes the market penetration and expansion strategy of cosmetics and toiletries multinational enterprises (MNEs) in South Korea from the perspective of regional strategy as developed recently by Rugman. We find that MNEs have different market entry and expansion strategies in the home region and in the foreign region. Home region MNEs (Japanese MNEs in this case), in general, utilize their firm-specific advantages (FSAs) better than foreign region MNEs (European and MNEs from the Americas in this case). Due to differences in transaction costs, home region MNEs exploit downstream FSAs while foreign region MNEs develop upstream FSAs. Market similarity also leads to a greater incentive to operate in the home region rather than in foreign regions. The home region effect significantly increases the likelihood of entry into foreign markets as the host country's “diamond” significantly affects the market entry strategies of MNEs.

Alan M. RugmanEmail: URL: http://www.kelley.indiana.edu/rugman

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Chang Hoon Oh   is a PhD candidate at the Kelley School of Business, Indiana University. His research interests center on the market penetration strategies, learning and financial performance of multinationals. He will become an assistant professor of international business and strategy at Brock University, Canada, in summer 2007. Alan M. Rugman   is the L. Leslie Waters Chair of International Business at the Kelley School of Business, Indiana University, where he is professor of international business and professor of business economics and public policy and director of the IU CIBER. He is president of the Academy of International Business, 2004–2006. He has been Thames Water Fellow in strategic management at Templeton College, University of Oxford. ().