Foreign market entry mode of service firms: The case of U.S. MBA programs

While international expansion has become an important strategic imperative on the part of knowledge intensive service firms such as U.S. business schools, little empirical support is available on how these business schools enter foreign markets. If U.S. based business education programs are expected to prosper in light of the potential onslaught of international competition, expansion to overseas markets will be one of the most sought after options available. A poor choice in market entry strategy, or the lack of international market entry, can result in a negative impact on the educational institution. This research focuses on developing, measuring, and empirically testing a framework of key factors influencing international market entry mode choice of U.S. business schools by using primary data from faculty and administrators of U.S. Master of Business Administration (MBA) schools.     

Mexico

Not understanding the cultural aspects of doing business overseas can jeopardize the success of international negotiations, entry strategies, joint ventures, technology transfer, marketing, and human resources. This article reports a study of the perceptions of U.S. and Mexican executives concerning the importance of 15 cultural dimensions of doing business in Mexico (our second largest trading partner). It found that, whereas Mexican executives believed more strongly than U.S. executives that the cultural dimensions of doing business in Mexico were more important than the product or service offered and the accompanying terms of sale, the U.S. executives, surprisingly, assigned higher levels of importance to the 15 cultural variables. Both Mexican and U.S. executives strongly agreed on which of the 15 variables were most important. All eight subgroups of U.S. executives assigned higher levels of importance to the 15 cultural aspects of doing business in Mexico than did their Mexican counterparts. When four comparisons of the executives of the eight subsets of U.S. companies‐large vs. small, border location vs. nonborder location, doing business in Mexico vs. not doing business there, and doing business there more than 5 years (pre‐NAFTA) vs. doing business there 5 years or less (post‐NAFTA)—were made of the level of importance they attached to the cultural variables, no significant differences were found. Based on the study's findings, implications for doing business in Mexico are indicated. © 2003 Wiley Periodicals, Inc.     

The Structure of Trust in China and the U.S.

This article investigates the structure of trust in China and compares it with the U.S., using the 2000 and 2005 waves of the World Value Survey (WVS). We analyze two dimensions of trust – trust in people and trust in major companies. It is found that the level of trust has remained stable in China within the 5-year period. On the other hand, trust in major companies has declined dramatically in U.S. while trust in people has increased slightly. The structure of trust in companies is different from trust in people. For both countries, individuals with higher education tend to have a higher level of trust. Individuals who are divorced tend to have lower trust in people. Individuals who think that other people are fair are more likely to trust in people. Preference for competition has a positive effect on trust in major companies. On the other hand, some differences between the two countries are observed. Perception of fairness does not affect trust in major companies in China, while it has a positive effect in U.S. in year 2006. Preference for equality has a negative effect on trust in major companies in U.S. but no significant effect in China. The pattern of trust and its changes over time may reflect differences in market conditions in the two economies.     

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.     

Potential Market Opportunities in Hungary,Poland and Bulgaria

Central European economies are undergoing radical reforms changing from central planning to free market economies. If these changes are to be successful, there is a need for their govemments to liberalise legislation to allow privatisation to take place and to allow and encourage foreign investment in the countries. Potentially the most effective form of foreign investment is the participation of Western companies in the business of the country enabling development of the market and the local understanding of the methods of business in free market economies. Whether and to what extent this participation takes place depends on the macro-environmental climate and the specific market environments in the countries. This paper addresses both of these issues and is based on a twelve month study of marketing conditions in Hungary, Poland and Bulgaria. In the first part the macro changes taking place are explored and the overall attractiveness assessed by comparison with the published literature on the market entry strategies. The conclusion is that Hungary is the most attractive of the three countries concerned for Western company investment in terms of political stability, economic development and performance, cultural unity, and lower legal and geo-cultural similarity.     

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.     

Turkey

The Turkish Republic was founded in 1923, following the fall of the Ottoman Empire. Turkey is strategically positioned at the crossroads of Europe, the Black Sea region, and the Turkic‐speaking republics of Central Asia. It is also situated on the Mediterranean coast at close proximity to the Middle East, the Gulf States, and North Africa. It thus offers an excellent base for economic activities throughout the region. The country was a gateway from the ancient Silk Road to new markets and today is becoming a powerful focal point as a cultural and political intermediary as well as a regional trade center of growing importance. Turkey is the 17th largest economy in the world (Economist, 2003; World Bank, 2001). Turkish culture, history, and people have always fascinated scholars. In recent years, the country also has captured the attention of Western companies and investors. Once highly insular, the Turkish economy has been transformed over the past two decades into a vibrant liberal market within a rapidly modernizing society. It is regarded by the U.S. Department of Commerce as one of the top emerging markets. This article will explore the foundations of the Turkish economy, business system, and business culture from the perspective of foreign companies. Following a brief overview of the economy, the country's market potential is discussed. Next, entry strategies—including potential partnerships with indigenous firms—are recommended. Finally, we offer insights into the business culture, and provide tips for working effectively with Turkish business people. © 2003 Wiley Periodicals, Inc.     

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.     

The role of networking and commitment in foreign market entry process: Multinational corporations in the Chinese automobile industry

This study addresses the role of business networking and commitment to local market when MNCs enter an emerging market. We investigate the reasons for variations in the speed of MNCs’ foreign market entry. Particularly, we examine whether MNCs’ networking with the key local actors facilitates MNCs’ entry and whether learning and commitment in the context of networking affects the speed of MNCs’ entry process in the Chinese automobile market. The study is based on the experiences of three MNCs, a U.S.-based firm, a European firm, and a Korean firm. Data is collected through in-depth interviews and through secondary sources related to the entry process of these cases. The cases illustrate that speed of foreign market entry is significantly influenced by business networking between MNCs and the key business and socio-political actors, since different types of business networking determine the level of learning and commitment. Our cases also show that the effects of business networking generated during the initial foreign market entry by the MNC may be different than those during sequential entries.     

The free trade agreement between Mexico and the United States: Financing and investing considerations

Enactment of a free trade agreement between Mexico and the United States will probably increase trade between the two countries. Direct foreign investment and capital market transactions will play a critical role in financing the ever-growing mutual economic interdependence of the two countries. The sustained growth of the Mexican economy is a critical factor in a successful long-term trading relationship. To a certain extent, Mexico's economic health is dependent on U.S. investment in Mexico and in Mexican companies. This article examines certain investing and financing considerations regarding U.S. investment in Mexico. The intent of this study is to make individuals, on both sides of the border, aware of the financial environment in which they are operating. This, in turn, should enhance the opportunities for successful cross-border business activities. © 1993 John Wiley & Sons, Inc.     

The Corporate Social Responsibility of Pharmaceutical Product Recalls: An Empirical Examination of U.S. and U.K. Markets

The pressure on companies to practice corporate social responsibility (CSR) has gained momentum in recent times as a means of sustaining competitive advantage in business. The pharmaceutical industry has been acutely affected by this trend. While pharmaceutical product recalls have become rampant and increased dramatically in recent years, no comprehensive study has been conducted to study the effects of announcements of recalls on the shareholder returns of pharmaceutical companies. As product recalls could significantly damage a company’s reputation, profitability and brand integrity, this paper investigates the effect on shareholder wealth and the extent to which the adoption of CSR practices by pharmaceutical companies in the United Kingdom (U.K.) and the United States (U.S.), the two largest markets for pharmaceutical products in the world, affected market reactions surrounding product recall announcements. The analysis of product recall announcements from 1998 to 2004 compiled from The Pharmaceutical Journal and U.S. Food and Drug Administration enforcement reports revealed marked differences in the way market participants in the two countries responded to news of product recalls. U.S. investors penalised firms according to the severity of product defects while U.K. investors were indifferent. While U.K. investors rewarded product recalls by firms which were not usually CSR-active, U.S. investors punished non-CSR active firms that performed recalls. These observations could pose strategic challenges to pharmaceutical firms operating in both countries. Jeremy Cheah is an Assistant Professor of Finance at Nottingham University Business School, Malaysia Campus. His research interests lie in the area of applied corporate finance and investment management. Wen Li Chan was an Advocate and Solicitor in Kuala Lumpur, Malaysia before assuming the post of University Teacher in Information Systems and Strategy at Nottingham University Business School, Malaysia Campus. She is currently investigating the roles and implications of information on firm valuation, particularly in the area of corporate cyber-litigation and corporate social responsibility. Corinne Chieng is a Corporate Executive at Star Publications (M) Berhad, Malaysia. She has previously worked as a tax consultant at Arthur Andersen Malaysia. Her research interests include the financial implications of corporate social responsibility on the valuation of firms.     

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.     

International Production Sharing Opportunities in Mexico and the Caribbean

Abstract

In an effort to take advantage of access to valuable resources and increased market presence, many U.S. manufacturers have pursued production sharing relationships in a variety of overseas locations. These efforts are seen as methods of combating several threats to firm performance: increased domestic production costs, escalating international manufacturing competition, and ever changing barriers to entry regulations. From the perspective of an integrated North American competitive strategy, two geographic areas-Mexico and the Caribbean Basin-have received much attention as potential operating locations. Using a survey of corporate managers responsible for strategic business unit operations, this study investigates and compares the manufacturing and logistics performance of U.S. manufacturers operating in Mexico and the Caribbean. Relationships between logistics performance, manufacturing performance, and firm performance are examined and managerial implications are discussed.     

Country-of-Destination and Export Marketing Strategy:

As changes in the economic and political environment in many developing countries bring opportunities for multinational corporations, many U.S. and other MNCs find that they have little experience with marketing and exporting to such countries, having focused mainly on developed-country markets. In addition, there has been little research which has investigated issues relating to marketing in LDCs. This study explored these issues and found that different marketing strategies are used by U.S. companies which export to developing countries as opposed to those which market to developed countries, thereby highlighting the importance of taking the country-of-destination into account when planning export marketing strategies. In addition, a separate analysis of firms which export mainly to developing-countries revealed that direct distribution, the number of countries exported to, product standardization, and a focus on price are negatively associated with market share. The implications of these findings are discussed.     

A comparative analysis of the role of national culture on foreign market acquisitions by U.S. firms and firms from emerging countries

Do firms from emerging economies differ from U.S. firms in their foreign market acquisition strategies? A comparison of cross-border acquisitions by firms from the United States and 18 emerging countries shows that (1) firms from both the United States and emerging countries target countries that are culturally closer to their home countries, (2) a strong interaction effect occurs between market potential and cultural distance for emerging country firms as the market potential increases (i.e., at high market potential, firms from emerging economies are willing to overlook cultural distance), (3) no interaction effect occurs between market potential and cultural distance for U.S. firms, and (4) different cultural dimensions affect the market entry strategies of U.S. firms and firms from emerging countries.     

U.S.-American and German Business Ethics:An Intercultural Comparison

The differences between the "habits of the heart" in German and U.S.-American corporations can be described by analyzing the way corporations deal with norms and values within their organizations. Whereas many U.S. corporations have introduced formal business ethics programs, German companies are very reluctant to address normative questions publicly. This can be explained by the different cultural backgrounds in both countries. By defining these different "habits of the heart" underlying German and American business ethics it is possible to show the problems and questions within the intercultural management of values, but also the possible solutions.     

Strategic alliances in emerging Latin America: a view from Brazilian,Chilean, and Mexican companies

Brazil, Chile, and Mexico constitute the leading newly industrialized countries (NICs) of Latin America. It is within these markets that the world expects significant economic gains over the next decade. Local companies in these countries are allying with foreign companies to enhance their competitive positions, yet little is understood about such interfirm collaboration with partners from these Latin American countries. Our study examines the strategic objectives of these Latin American companies, partnership structures, and their satisfaction in collaborating with companies from developed countries. Although existing studies have historically examined the dyad of strategic alliances from a perspective of developed countries (e.g., the U.S.), our study explores the issue from a perspective of companies in emerging Latin American economies.     

The share of small and medium-sized enterprise in Greek manufacturing

This paper examines the determinants of small establishment shares in Greek manufacturing and compares the results to previous findings for U.S. small firms. Two groups of explanatory variables are used: Industry variables and small-firm performance variables. Both types of variables are found to have an impact on the determination of small firms shares, with performance variables being at least as strong as industry variables. Measures of entry barriers give mixed results. Capital intensity exercizes an expected negative impact. Advertising intensity shows a trace of positive impact for medium-sized establishments in consumer goods sectors. Operating efficiency of small firms also appears as a strong influence on their shares whereas investment intensity does not appear significant. These results are in partial agreement to earlier findings for U.S. small firms. Their generality is tempered both by the fact that they come from a small country of middle level of development and by the recognition that the year of observation (1983) was at the start of Greece's industrial adjustment to entry in the EEC. Both these concerns constitute areas of future research.     

Business goals in market versus transition economies: An exploratory comparison of Hungarian and U.S. MBA students

Developed market economies and transition economies are characterized by radically different institutional, economic, and cultural environments, which we expected would produce differences in business goals among MBA students. We measured differences between 103 Hungarian and 454 U.S. part‐time MBAs and found that U.S. respondents placed more importance on growth of the business, short‐term profits, staying within the laws, and honor, face, and reputation. Hungarians placed more emphasis on game and gaming spirit, and family values. Although the results showed significant differences on some business goals, they were not as great as the literature would suggest, indicating that some convergence has occurred since transition began. © 2004 Wiley Periodicals, Inc.     

The impact of firm and environmental characteristics on international joint venture (IJV) marketing performance in Thailand

International joint ventures (IJVs) have become an important means of market entry for many firms, particularly those seeking entry into Asia (Lin & Germain, 1999). This study examines firm and environmental characteristics that impact the overall satisfaction with marketing performance and economic performance of IJVs in Thailand. The data for this study were collected via a mail survey of 1,047 Thai‐foreign IJVs in Thailand. The analysis indicated that IJV marketing performance was influenced by market characteristics, commitment, marketing orientation, and organizational control and that these variables differentially impact overall satisfaction with marketing performance and economic performance. © 2004 Wiley Periodicals, Inc.