A Comparative Analysis On The Market Entry Modes Of Sinopec And Shell In Gabon's Oil Sector

To survive the tough competition and increasing oil demand in high economic growth countries,it has been more and more important for oil producing companies to internationalize.Since oil market is already saturated and oil reserves in developed countries are decreasing or not existing,multinational companies are compelled to seek and exploit new opportunities.And these opportunities are often found in OPEC countries or transition economy country.However,these companies can be confronted by external forces like the level of economy,openness to investment in the foreign countries and the competitive structure in the host country oil industry.Therefore,the mode of entry strategy has to be very carefully evaluated and chosen in order to attain economy of scale and make the best use of their resources.This thesis covers the interesting area of market entry modes used when SHELL and SINOPEC entered Gabon oil industry in 1960 and 2004 respectively.This thesis,mainly based on comparison of market entry modes of SHELL and SINOPEC,is not only going to show how external and internal factors influenced SHELL and SINOPEC market entry modes choices but also analyze,compare their performances in Gabon's oil sector.Through a qualitative method,we have been able to go deeper into each company's entry strategy by collecting secondary data on SHELL and SINOPEC.As a result of the study we discovered that both companies used Foreign Direct Investment strategies as an entry mode in Gabon.SINOPEC originally used a licensing mode of entry in 2004 when the former Chinese president visited Gabon.Later on the company merged and acquired ADDAX,one of Gabon based well reputed former Oil Company.On the other hand SHELL successfully established itself as a green field venture in 1966,few years after Gabon's independence from French.While the Merger and acquisition of ADDAX by SINOPEC caused conflict with the Government,and SHELL had financial difficulties as a green field company,later on SHELL and SINOPEC were finally able to run freely their businesses in Gabon.To understand the companies market entry decision the Dunning paradigm(OLI-Model)was used to determine Ownership advantages of SHELL and SINOPEC,Location advantages of Gabon oil market and Internalization advantages of integrating transactions within the firm.Then the performance analysis on SHELL and SINOPEC was based on both company market and financial performances in Gabon.This thesis shows that most significant factors affecting entry mode decision of a company are the level of Ownership,Internalization advantages of companies and the location advantage of the target market.In the end,this research comes to the conclusion that by using Green field as a market entry mode SHELL'S Market growth rate is lower than SINOPEC'S market growth rate for the years studied.Financial indicators for both SHELL and SINOPEC were mixed as Price Earning ratio for SHELL and SINOPEC largely showed unfavorable trend for the years studied.While revenue also decreased for both companies during the period studied.