INTRODUCTION

In some instances, a company can create a disadvantage from the resources it transfers abroad. This can happen if the resources are not appropriate for operating in the host country or because the host country's government or consumers dislike them. This problem is particularly challenging for EMNCs, as individuals not only in advanced economies but also in other emerging countries can have a negative attitude toward emerging country firms and tend to associate them with less sophisticated products.

OPENING CASE: CHINA NATIONAL OFFSHORE OIL CORPORATION'S FAILED BID FOR UNOCAL

The Chinese oil firm China National Offshore Oil Corporation (CNOOC) found out the hard way that its state ownership and Chinese origin were a competitive disadvantage in the eyes of the US Congress when it tried to acquire the US oil firm Unocal in 2005. CNOOC was a Chinese state-owned firm in charge of managing offshore oil and gas projects. It created CNOOC Ltd. as a Hong Kong–quoted subsidiary to undertake exploration and production (E&P) operations in collaboration with foreign firms. CNOOC controlled 70 percent of CNOOC Ltd., with the remaining shares were traded in New York and Hong Kong.

In December 2004, CNOOC Ltd.'s CEO considered acquiring the US independent petroleum firm Unocal Corporation. Unocal had been created in 1890 and over the decades had gained expertise in offshore E&P operations and a good success record in finding hydrocarbons. Unocal expertise and its large operations in Indonesia, Thailand, Bangladesh, and Myanmar seemed a good complement for CNOCC expansion plans.

CNOOC Ltd.'s CEO discussed the possibility of acquiring Unocal with its CEO, but by the time he discussed this action with the CNOCC Ltd.'s board and made a formal offer, the operation turned into a competitive takeover. On April 4, 2005, the US petroleum giant Chevron made a bid for the purchase of Unocal, offering US$62 per share in 25 percent cash and 75 percent stock. On June 22, 2005, CNOOC Ltd. countered this with its offer of US$67 per share in cash. On June 22, 2005, Chevron increased its offer to US$63.01 in 40 percent cash and 60 percent stock.