Strategy antecedents of modes of entry into foreign markets

Although a firm's choice of mode of entry to a foreign market is central to the implementation of international strategy, we have only limited understanding of the effects of international strategy on the choice. This study explores the effects of business relatedness and corporate international experience. Data were collected on 173 ventures of Swedish manufacturing firms that were present on the German market, and multivariate techniques were applied to test hypotheses. It was found that product/market relatedness and intangible resource relatedness between the foreign business unit and the industrial firm's core business unit favored a full control entry mode based on sole ownership. This finding was also valid for importance of foreign markets. Further, market importance moderated the two relationships regarding business relatedness. Contributions to the literature are discussed.     

Evans,W. A. Advertising Today and Tomorrow. Great Britain: George Allen and Unwin, 1974

Abstract

This study reports on developments in the international advertising agency business during the 1970s. Findings suggest that U.S. agencies remain the dominant force in international advertising in contrast to the declining performance of U.S. industry in other sectors. Specifically, American agencies have found faster growth in their overseas markets leading to continually larger shares of their total billings; there has been a growing concentration in the international business of U.S. agencies and in the industry internationally; and, the international experience of U.S. agencies has led to a growing penetration of foreign markets, to growth in productivity, and to increasing domestic market power. Results of the study indicate however, that U.S. agencies may be facing increasing challenges from non-U.S. agencies in the future; notably from the West European, Japanese, and some developing countries.     

Retailers׳ expansion mode choice in foreign markets: Antecedents for expansion mode choice in the light of internationalization theories

Whenever a retail company expands its store network in a foreign market, decisions have to be made about how this can be achieved. Existing studies of retail internationalization have usually analyzed the “entry mode” choice as an end in itself, and not as the start of a firm׳s international development. In addition, there is much debate in the academic literature about the antecedents for retail foreign operation mode choice and the relevance of generic internationalization theories to international retailing. Therefore, the objectives of this research are (1) to investigate the paths of entry and subsequent expansion modes pursued by retailers in international markets and (2) to develop and test a model of expansion mode antecedents in the light of generic business internationalization theories. This is achieved on the basis of data collected from 43 French fashion retailers and a PLS-SEM approach. Results show that (1) retailers clearly differentiate between entry and expansion modes; (2) the international marketing plan, the perceived attractiveness of the foreign market, and strategic and ownership conditions are the key antecedents for the choice of an expansion mode. After comparing the results with the explanations proposed by the generic internationalization theories, a multi-theoretical framework is proposed which draws from the Uppsala internationalization process model, network theory and the born-global theory. The findings provide a wealth of information for retailers׳ use in choosing appropriate foreign operation modes.     

Why franchise companies expand overseas

Business format franchising is becoming an increasingly international activity. From 1971 to 1985, U.S. franchisors added foreign outlets at a rate of 17% per year, almost twice as fast as they added domestic outlets (Aydin and Kacker 1990). As a result, by 1990 more than 350 U.S. companies had more than 32,000 franchised outlets overseas. By 2000, 60% of all franchisors in the United States are expected to have outlets overseas (Hoffman and Preble 1993).This study examines the 815 largest U.S. franchisors to understand what capabilities encourage them to expand overseas. It finds that the key capability that predicts the intent to expand overseas is superior capability to reduce franchisee opportunism. Franchisors who seek foreign franchisees have developed a greater capability to bond against and monitor potential franchisee opportunism. The data show that these differences are consistent across all industries in which franchising takes place.The results of this study indicate that foreign entrepreneurs can identify the American franchisors most likely to expand overseas by looking at their pricing structure and their monitoring capabilities. The easy identification of characteristics from which to find American franchisors will help to reduce the search costs of potential foreign franchisees. This reduction in search costs will make the establishment of international franchise relationships less expensive.This study also provides guidance to franchisors interested in expanding overseas. The results show how franchisors can structure their franchise relationships to reduce potential franchisee opportunism. This ability to reduce franchisee opportunism will make it easier for franchisors to enter high-growth foreign markets using the franchising business mode.This study also has implications for researchers. It suggests that international business research examine further the mechanisms by which firms make contractual modes of international business work. Whereas many firms may internalize international market transactions under conditions likely to lead to market failure, the large number of franchisors who use franchising as an international expansion mode despite conditions of market failure suggests that more attention be paid to mechanisms that companies can use to reduce the probability of failure of international contractual transactions. By helping to explain how franchisors monitor foreign franchisees or bond them against opportunistic behavior, this study suggests that the international business literature develop a more complex understanding of the workings of international business transactions than the simple choice of internalization or contractual entry modes.     

Factors enhancing the choice of higher resource commitment entry modes in international new ventures

The choice of entry mode in foreign markets is an important strategic decision with major consequences for the success of international new ventures (INVs). It is generally accepted that these firms choose relatively low-resource commitment entry modes to operate in foreign markets. Nevertheless, some researchers have suggested that higher resource commitment entry modes in foreign markets also seem to be competitive strategies for INVs. In this study, from a marketing/international entrepreneurship interface perspective and focusing on organizational issues, we center our attention on international market orientation as a neglected yet important factor in INVs’ choice of higher resource commitment entry modes in foreign markets. We suggest that an entrepreneurial orientation and the timing of international entry are important correlates to an international market orientation. We also suggest that the international learning effort of INVs through their international market orientation has a direct, positive impact on the resources these companies commit to their foreign markets through the use of higher resource commitment entry modes. Accordingly, the model proposes a positive effect of entrepreneurial orientation and early international entry on international market orientation which, in turn, is positively related to higher resource commitment entry modes. The hypotheses were tested on country-level data from Spain, using a structural equation model to analyze relationships between the latent variables.This study extends previous international entrepreneurship research, including insights on antecedents of international new ventures’ choice of resource commitment entry modes in foreign markets. The paper also goes further than previous international entrepreneurship research, by addressing the strategic consequences of rapid entry into foreign markets. Additionally, the results of this work encourage international entrepreneurs to look beyond the explicit value of experiential market knowledge to realize the potential value of international market orientation as an antecedent to higher resource commitment entry modes.     

Integrating Foreign Languages and Cultures into U.S. International Business Programs: Best Practices and Future Considerations

This paper describes the importance of foreign languages and cultures and their integration into U.S. international business programs. The author juxtaposes globalization strategies of European and American business schools and highlights pre-university foreign language study in Europe and the U.S. The paper goes on to describe model U.S. undergraduate and graduate international business programs and their use of strategies that lead to professional proficiency. The author concludes with a discussion of strategies to be considered by U.S. business schools.     

A Cross Cultural Analysis of the Geographical Knowledge of U.S., Irish,Israeli, Mexican,and South Korean Business School Students

ABSTRACT

Geographical knowledge about foreign countries is considered to be a significant factor related to the successful marketing of goods and services in international markets-a not insignificant conclusion by experts given the sizable trade deficits run up by the United States in 2000 ($365 billion), 2001 ($346 billion), and 2002 ($435 billion).

Unfortunately, previous research has concluded that U.S. business school students-tomorrow's executives who will make decisions that will impact their firms' international operations-have inadequate levels of international geographical knowledge.

This article compares the geographical knowledge of U.S. business school students to that of business school students in four countries: Ireland, Israel, Mexico, and South Korea. The sub-par performance exhibited by the U.S. students and the impact of six independent variables on global geographical knowledge are used to develop a number of pedagogical conclusions designed to enhance the international geographical knowledge of U.S. business school students and students in foreign business schools and overcome the antipathy toward this subject matter that apparently exists within business schools and their various external constituencies.     

Paths to foreign markets: Does distance to market affect firm internationalisation?

An idea widely shared among international business scholars, economists and geographers is that geographic, cultural and psychic distance to market affects firm internationalisation in a number of ways. However, evidence for this broad proposition remains inconclusive. This study provides a comprehensive assessment of four separate hypotheses pertaining to the location of markets, the sequence of market entry, the rate of international expansion, and the relationship between sequentially-linked markets. In contrast with previous studies, the analysis is based on a large sample of non-repetitive foreign market entries (n=1132) made by diverse exporters in dissimilar locations within a single country (China). Market entry data thus exhibit substantial variation on the constructs of interest. The results reveal virtually no support for three traditional hypotheses linking distance to market with the sequence of markets entered and the rate of foreign expansion. This study challenges the long-held notion that there is a simple link between distance and market entry sequence. However, this study provides arguably the first demonstration of the “near-market effect” in the context of low-risk entry modes such as exporting. Specifically, the results show that consecutive export locations tend to be culturally related suggesting that exporters are able to transfer learning between similar markets.     

International new ventures as “small multinationals”: The importance of marketing capabilities

This paper explores how marketing capabilities contribute to the international expansion of international new ventures, and influence their choice of entry mode. The study examines how marketing capabilities help international new ventures to use entry modes involving higher resource commitment in international markets. The proposed model was tested on country-level data from Spain. The results show that marketing capabilities contribute to a firm's decision to choose entry modes involving higher resource commitment in foreign markets. The paper also includes insights on antecedents of international new ventures’ choice of entry modes in foreign markets.     

A Korean,a Chinese,and an Indian walk into an American bar: Tapping the Asian-American goldmine

Historically, globalization has been synonymous with mega brands’ expansion into international markets. However, changes in the marketing landscape—namely, growth of immigrant consumers, new and emerging branding strategies, and advancements in technology—have created a shift in the globalization paradigm, opening opportunities for small brands. Focusing on the growing number of Asian-American consumers, the authors develop a two-stage global market entry strategy for small brands entering the U.S. market. Specifically, the authors show how Asian brands can penetrate the U.S. market by serving Asian-American consumers or using them as a launchpad to reach mainstream American consumers. The growth of small global brands signifies an important and exciting change in the branded marketplace currently dominated by Western brands.     

Determinants of entry strategies of U.S. companies into Russia,the Czech Republic,Hungary, Poland,and Romania

Executive Summary This study advances and tests determinants of entry strategies of U.S. companies to Eastern Europe, as well as factors that determine the satisfaction of these companies with their economic performance in this area. Using survey data and a multivariable research design, the study adds new knowledge and supports previous findings. It reports that the entry mode of U.S. companies into these countries is determined by the following variables, ranked from most to least important: market potential, company activity, level of competition, and year of market entry. It also reports that the satis‐faction of U.S. companies doing business in these countries is decided by the following variables, ranked from most to least important: economic‐performance outlook, level of competition, number of competitors, market potential, year of entry, and business activity. © 2000 John Wiley & Sons, Inc.     

Determinants of Sales Destinations of U.S. Multinational Firms' Affiliates in Developing Countries

This study examines the determinants of the sales of .U.S. multinational firms' affiliates to alternative destinations, including sales to other affiliate firms in a host country and a source country markets as well as sales to other non-affiliate persons in each market. Sample host countries are drawn from developing economies where U.S. multinational firms had affiliate firms during the period 1983–1998. The results of the study reveal that affiliates of multinational firms manipulate sales to minimize international taxation. This is supported by the finding that foreign corporate income taxes: affect sales between affiliate firms favorably, unlike its impacts on sales of affiliates to non-affiliate persons in both a host country and source country markets. Considering all markets together, economic volatility and political instability have minimal impacts on sales of affiliates to other affiliate firms compared to their impacts on sales to non-affiliate persons. The results also confirm that host countries' economic policy reforms and membership in multinational investment guarantee agencies facilitate sales of affiliates to other affiliate firms.     

The Impact of Changes in the Political and Economic Environment on Foreign Direct Investment Opportunities in Romania

Abstract

This study reports findings of a survey including 139 Finnish and 97 Austrian companies active in Eastern Europe. The study focuses on two major areas in the firm's business activities in Eastern Europe, namely on market strategies-the timing of market entry, market selection, entry modes and motives-and company performance. The number of market entries has increased after the transition, but the majority of business activities still take place in geographically-close countries. Companies have gradually started to use more high-commitment modes of operation, but contrary to our expectations, high commitment modes were also frequently used in more unstable markets. Company performance in Russia and especially in other countries of Eastern Europe was in general clearly lower than in domestic markets and foreign markets in general. Against expectations, firm size, dependence on international markets, length of operation, and mode of operation in Eastern Europe did not significantly influence the performance. However, firms which concentrated on Russian markets on a continuous basis performed much better than other firms.     

Dangers in the reduction in U.S. international net worth

The great concern exercised over the accuracy of estimates of the net direct investment position as a part of the U.S. international net worth is largely misplaced. By focusing on additions to the U.S. international net worth embodied in real assets owned in foreign countries, analysts divert attention from the large and growing volume of foreign-owned claims in private U.S. financial markets and the implications of those claims for instability in the foreign exchange market and for financial crisis.     

The Strategic Importance of Retail Investment in Asia and Its Implications for the Metro Group in Asia

Abstract

The speed, intensity and reach of retailers' foreign expansion are rising. As more distant markets have to be chosen to stay competitive, the pressure to expand abroad is increasing. Often, changing or stretching the initial business model in order to comply with local market demand maintains the performance of the firm. This phenomenon of strategy alteration after market entry is examined, using the Metro Cash and Carry expansion into Asia as an example. First, the investment attractiveness of Asia as a region is examined. Second, there is a review of countries in Asia that are especially considered for business expansion. Finally, the question of how an overall internationalisation strategy or business concept of a company changes after market entry into Asia is explored.     

International Catalog Mix Adaptation

Abstract

Striking the right balance of adaptation of the international catalog mix may be the key to profitability. U.S. catalog firms, new to international markets, have less experience in adapting than firms in more globalized industries. The literature on international marketing strategy adaptation reveals that this decision depends on the environment, industry, market, product, and characteristics of the firm. This paper examines the influence of market similarity, type of business and the firm's international experience on international catalog adaptation, and explores the effects of catalog adaptation on a firm's performance. We hypothesize that the greater the market similarity, the less likely it is that firms will adjust their catalog. We also argue than adaptation is greater for consumer catalogs than for business-to-business catalogs. A third hypothesis is that more internationally experienced firms will adapt more and a final hypothesis is that a greater degree of adaptation will increase the international catalog performance. The results did not support the association of international catalog adjustment and market similarity, experience, and type of catalog. Findings are mixed both on catalog adaptations and firm performance. We found that some but not all adaptations in the catalog lead to improved performance. We speculate that U.S. catalog firms are making adaptations to reduce the costs of international marketing operations. This cost reduction strategy may not necessarily lead to profitability, thereby discouraging other firms from entering international markets.     

Patterns and Effects of Entry in U.S. Airline Markets

We use T-100 traffic data and DB1B fare data from the U.S. Department of Transportation to identify patterns and effects of entry by network carriers and low-cost carriers in non-stop U.S. airline markets. For the sample period from 1996 to 2009, we find that entry activity of low-cost carriers did not only experience significant absolute increases but also led to substantial fare reductions. As route entries by network carriers do not have comparable effects, the existence and expansion of low-cost carriers must be considered as the main driver of competition in the domestic U.S. airline industry.     

Market entry and international propagation of business cycles

In this paper, pro-cyclical market entry acts as an international transmission mechanism for business cycle shocks. In an imperfectly competitive dynamic equilibrium model, an expansion in one open economy leads to additional business formation in a parallel large open economy through demand spillovers. Business formation causes a decline in markups leading to an expansion in employment, production, and investment in both economies. The modeling of the entry decision is critical. Only when the entry game is modelled as sequential (with incumbents enjoying a first mover advantage) are markups sufficiently elastic to cause international comovement.     

The demise of the American hegemony in international business research has been greatly exaggerated

The drivers for the internationalization of business teaching and research were multinational corporations, the Cold War, and the relative price advantage of non-America business schools. Yet, the internationalization largely failed to reflect local contexts. The consequent paucity of original local business thought, international or not, exposes non-American business schools to the raid of American-based massive open online courses which will prune off the mainstay courses at emerging market business schools. Deprived of a substantial share of their fee-paying students, the remaining docents at those schools will be less likely to publish altogether, including in fields that might sustain independent thought. Therefore, American-like international business research is likely to have a longer life, more narrowly focused on English-speaking countries and Europe, with even less of a contribution from emerging markets.     

An Investigation into the Overseas Expansion of Small Asian-Owned U.K. Firms

This paper contributes to the growing body of knowledge in international entrepreneurship by reporting on a qualitative empirical investigation into the overseas expansion processes of small Asian (originating from the Indian sub-continent)-owned firms operating in the U.K. clothing industry. The key decision makers within these firms frequently identified themselves as an active, and important, influence upon the actual activities of their firms as international operators. For some firms though, a more passive approach to internationalisation could be identified, whereby the receipt of unsolicited orders had an effect on some firms' timing of overseas market entry. The balance between the nature of opportunities, that frequently derived from cultural networks, and the constraints of a limited resource base with which to exploit those opportunities, also had a major impact on the direction and pace of certain firms' overseas expansion. The findings suggest a general tendency to adopt an incremental approach to internationalisation within this mature trade sector. The cultural and business experience of managers, however, was found to have an effect on the pace and direction of the overseas expansion. Recommendations on the likely efficacy and effectiveness of public/private sector interaction within the area of international entrepreneurship involving entrepreneurs from Asian backgrounds are offered.