One Exit Strategy, Research Paper Example

Firms who typically want to leave the country liquidate their assets (or stake) and close down operations in the country. Although this strategy is not used in every situation where a foreign firm leaves a country, it is probably most commonly employed strategy. There are a number of issues that might prompt an exist strategy.  For example, oil and natural resource firms need strategic options if their assets are nationalized: this has occurred in a number of countries recently (e.g. Venezuela). (VOA, May 9, 2009). BP also essentially decided to leave Russia after a joint venture with a local firm went sour.

A key factor in understanding what type of measures can be implemented depends on the foreign company’s corporate structure in the affected country.  A firm that has assets via a joint venture will most likely sell the stake back to the partner or to another firm. A firm that actually has built an independent firm with assets and employees may face a more difficult and prolonged exit from the country,

Overall, an exist strategy will have a different impact on strategic planning depending on the importance of the operation’s in that country and the country’s overall strategic vision. If an oil company is depending on operations in a country to provide 20% of total oil output, the firm will need to scramble and find other immediate strategic options to make up for the decline in output. If the affected operations only account for 2% of the firm’s total output, the strategic impact is minimal.

References

VOA. (May 9, 2009). Venezuela Seizes Assets of 60 Oil Companies. Available at: http://www.voanews.com/english/news/a-13-2009-05-09-voa16-68815877.html.