Foreign Market Entry
1.0 Objectives
The author’s objective in this article is to discuss on the effective modes of entry for businesses that is planning to venture into international market. The entry modes methods discussed are aimed to help businesses to formulate an effective international business strategy and to position themselves to be successfully established in the global market.
2.0 Central Theory
The central theory introduced in this article is developed based on a comprehensive framework of the entry modes choices. These modes of choices would determine the success factor of the international business strategy, and to choose these choices there are several important factors to be considered. These factors include situational firm factors, foreign environment review, and moderating factors that would directly influence the firm’s desired mode of choice.
Referring to Appendix A is the mode choice of framework by Driscoll that depicts the whole concept discussed. To briefly illustrate, the firm would need to evaluate the two situational factors that would directly affect its desired level of different modes of characteristics. Subsequent from the selected desired modes, the firm would also need to determine the potential moderating influences, which would affect the desired mode. Thus, reassessment based on the moderators would take place to determine the most effective modes of entry. By selecting the right mode of entry, the firm would incorporate an effective business strategy for its international business plans.
3.0 Arguments
The article written by Driscoll is set to present an argument for the development of a comprehensive framework for understanding the mode of entry choices. In the article, she illustrated about the different modes of entry to international markets, analyzed on the different characteristics of the entry modes, discussed on the number of situational influences and moderating factors, and presented a comprehensive model of understanding with remarks on managerial implications.
Some of her arguments include the three broad grouping of the foreign entry modes that should not have any other classification, unless it has similar meanings such that quoted by some reference; and the five key characteristics of the entry modes that is similarly supported by other authors such as Agarwal and Ramaswami 1992;...
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...ended on the accuracy of handling these factors. Her categorization and literature evidence on these factors are also precise and comprehensive which covers many aspects of the dynamic foreign situational analysis.
As compare to one of the research source by a Taiwanese author Aihwa Chang (1998) in Appendix C [Please check the date and put the article in attachment Appendix C], the author related 5 different modes of entry; namely choice according to industry traditions, random choice, pre-determined choice and contingent choice [you may or may not need to add more write-up] which does not covers a board aspect of the whole actual environment. Then, as the author associated several factors such as economic efficiency, financial commitment, control, flexibility and experience, which has some similarity with Driscoll, however the substance discussed does not fully review the success factor of the entry selection.
Finally, Driscoll’s concluding remark recommended that firms should be flexible and adaptable to the situational changes of its entry mode choices from time to time as this would bear a high chances of success and sustainability in the international global business.
...choices for executives, and gaining rapport with local suppliers, the corporation stands a good chance of achieving success in their foreign expansion.
Saturation of domestic markets and the need by firms to diversify their markets have provided firms with the need to go international (MA sum, & Fernandez, 2008). Internationalization can be defined as the act by companies to explore international markets, although there has not been a clear definition of internationalization (Andersen 1997, p.28). Internationalization is a huge decision by firms and the wrong strategy can lead to ultimate fall of the organization. Internationalization allows firms and companies to own or control businesses and activities in several countries; a process that affects the whole organization making it more international (Dunning, 1993) and by going international, companies can gain competitive
al, 1990). Significantly, the initial selection of entry mode can have a huge impact on the survival and success of firm international operations (Hollensen, 2011; Root, 1994). The international operations in the target market basically depend on the firm’s choice of foreign entry modes (Hollensen et al., 2014). Many scholars on international market entry strategies examined that whilst making the decision regarding foreign market entry mode, there was a wide range of factors that influenced a firm’s entry mode decision. The entry mode decision can be influenced by different set of factors as the entry modes involve with different levels of control, ownership and resource commitment (Hollensen et al., 2014). The choice of entry modes between exporting, contractual agreement (licensing and franchising), joint venture and wholly owned enterprise are all strategic alternative (Lin, 2000). Therefore, managers need to analyze and determine the most suitable international strategy to enter a foreign country. After reviewing previous entry mode research, most of the research primarily focused on the experience of large multinational enterprises rather than SMEs that discussed about their entry mode strategy in foreign markets (Luo, 2001). Moreover, extant literatures on the entry modes have been
This model constitutes of “Risk of Entry”, “Bargaining Power of Buyers”, “Bargaining Power of Suppliers”, “Threat of Substitutes” and "Rivalry among established firms in the Industry". In the strategic decision making, to meet our goals we will try to globalize our company, work on external analysis, internal analysis and the threats.
Nowadays with the development of technology especially after the appearance of internet, communications between people become more convenient and frequent. When their relationships become increasingly close, globalization has turned into the trend of the age. Facing such a good opportunity of expanding market, acquiring more profit and resources, various international firms started to spring out. ‘International firms usually mean companies who do business between two or more countries’ (John D. Daniels, 2013). At present, they have comprised a large and growing portion of the world business. To be successful in fierce global competition, international firms have to make many changes actively to deal with different conditions. Changes on corporate governance, internal organization and foreign entry strategy are three major parts of them. However, no matter how many changes have been made, the implication of culture and institution from home country where they started from still exist. And host country culture and institutions also have implications to the choice of foreign entry strategy. To prove this, the paper use famous international company Haier as an example to analyze implications of culture and institutions from home country China and host country America.
The concepts of adaptation, aggregation and arbitrage are part of the AAA triangle model Ghemawat proposed as the way multinationals could build their competitive advantages looking to internationalise their businesses. The three mentioned concepts may play a key role in the success of the multinational global strategy, identifying what could be the best strategy to differentiate, what should be the structure and how to address the issues that may appear in each strategy.
Madhok, A. (1997), “Cost, Value and Foreign Market Entry Mode: The Transaction and the Firm,” Strategic Management Journal, 18(1), 39-62.
All research fully carried out on Entry nodes on the long run remain limited to large manufacturing firms. The foreign market selection and the choice of its entry modes drastically ascertain the performance of a specific firm. Entry mode can be defined as an arrangement for an organization that is organizing and conducting business in foreign countries like contractual transfers, joint ventures, and wholly owned operations (Anderson, 1997). Internationalization is part of a strategy which is going on for businesses and organizations transfers their operations across the national borders (Melin, 1992). The firm that is planning to have the operations across the border will have to choose the country that they are planning to visit. Anderson (1997) argues that the strategic market entry decisions forms a very important part of an organizational strategy. The decision to go international is part of the internationalization strategy of the firm. Multinational Corporations that desire to have international operations will find the strategy to go international, the mode of entry is very important. Even though there are studies which have shown that the main effect of being pioneers in a market promises superior performance in terms of market share and profitability than the late movers, Luo (1997) and other researchers have found out that the effect of the first mover may be conditional and will depend on the mode of strategy that is used (Isobe, & Montgomery, 2000). There are different strategies that MNCs can use to enter new foreign markets; they include exporting, licensing/franchising, full ownership and joint ventures. The mode of exporting entails a company selling its physical products which are usually manufactured outside the...
Rahman, S. H. (2006). International Market Selection Process: An Investigation of the Relevance of Business Operating Environment. Journal of International Business Research, 5(1), 73-86.
The position of the firm in the network is the most important driver for internationalisation and is based on two elements: degree of internationalisation of the firm and degree of internationalisation of the market. Based on this, a typology of 4 market positions are
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