Factors influencing market and entry mode selection ...

1 Factors influencing market and entry mode selection : developing the MEMS model Adam J. Koch School of Business, Swinburne University of Technology, Melbourne, Victoria, Australia Keywords 17 years, complemented by his international market entry , Model Introduction business consulting. Increasing globalisation The holistic model of the market and market of strategic outlook with many companies Abstract In the associated paper ``Selecting entry mode selection process (MEMS), and the growing role of the Internet in overseas markets and entry introduced by Koch (2001), has been designed providing international market information modes: two decision processes or to accommodate all business contexts and in this process were given due consideration. one?'', it was proposed that most of the relevant business practice. This Lists of Factors proposed in this paper have market selection and market entry mode selection be looked upon as paper focuses on the evaluation stage of the been developed with a view to ensuring a two aspects of one decision model and briefly examines the great variety high level of their content validity in most process.

2 Examines a wide of influences on the MEMS process outcomes. conceivable international business spectrum of factor categories to contexts[2]. Care was taken to include in References made throughout this paper to the be included in the proposed MEMS. model and argues that an inclusive organisation's context will help better these lists all such factor categories, which spectrum of analysis would make explicate the character of influences by these can be assumed to exercise a strong influence it a universally applicable model, various factor categories. They will also on this process, if only in some contexts. All capable of accommodating all Factors proposed to influence the market /. make it possible for the reader to compare business contexts and most this author's suggestions with their own market entry mode selection process fall into relevant business practices. prior understanding of these influences and three broad categories: external, internal, facilitate further refinement of that and the mixed, internal/external category understanding.

3 (see Figures 1 and 2)[3]. Some of the proposed The scope of the model's (Koch, 2001) categories of Factors may influence some evaluation process is presented in this paper others, adding to the complexity of the from two angles: that of market selection , and discussed decision process. that of market entry mode selection . The role of each of these categories will be briefly characterized to help the reader examine the reasons behind each proposition. Internal environment Factors market selection will be looked at first. This paper aims to describe, rather than prescribe, or model, the market / market Internal Factors entry mode selection process. It proposes two Company strategic orientation comprehensive lists of factor categories, Companies develop strategic orientations[4], which may, and do, influence outcomes of the which reflect their individual and group selection process. One of these lists relates to experience, values and attitudes of their market selection , the other to market entry employees (those currently employed and mode selection [1].)

4 Their predecessors), changes in their The relative significance of the individual business environment and strategic categories, and the way in which the relevant objectives established for the company (some inputs are going to be used in this decision degree of stretch (Hamel and Prahalad, 1994). process, depends largely on the context required to achieve these). Strategic (Bradley, 1984; Cavusgil, 1980; Minor et al., orientation may predispose companies to 1991). The lists and associated discussion are more, or less, collaboration with their based on a comprehensive review of the competitors; it is also likely to strongly available literature and on this author's influence the process of business Marketing Intelligence & direct international business experience of internationalisation. Planning 19/5 [2001] 351 361. The research register for this journal is available at The current issue and full text archive of this journal is available at # MCB University Press [ISSN 0263-4503] [ 351 ].

5 Adam J. Koch Figure 1. Factors influencing market Factors influencing market selection and entry mode selection : developing the MEMS model Marketing Intelligence &. Planning 19/5 [2001] 351 361. Stage of internationalisation policentric and geocentric types of strategies Classifications of internationalisation stages pursued in international marketing is well refer either to international business in worth examining, for both theory building general, or to company export involvement and practical purposes. Stages of company in particular (Cavusgil, 1980; Johanson, internationalisation are strongly influenced 1997)[5]. by two Factors : company strategic orientation The nexus between these classifications and company international competitiveness. and the ethnocentric, regiocentric, The first one increases, reduces, or [ 352 ]. Adam J. Koch Figure 2. Factors influencing market Factors influencing market entry mode selection and entry mode selection : developing the MEMS model Marketing Intelligence &.

6 Planning 19/5 [2001] 351 361. eliminates company interest in the progress international market information on the of internationalisation. The latter would, Internet would call for a revision of the depending on its level, expedite or delay the traditional view of the stages and dynamics advancement of company international of the internationalisation and export involvement. The increasing availability of development processes (Hamill et al., 1997). [ 353 ]. Adam J. Koch Company strategic objectives situations. Apart from these, other industry-, Factors influencing market Strategic objectives may take many forms, company- and strategy-specific capabilities and entry mode selection : and skills may be required from a successful developing the MEMS model their choice being dependent on company tradition, industry specificity, or personal international marketer. Marketing Intelligence &. Planning preferences/interests of those in charge of Whilst company competitive performance 19/5 [2001] 351 361 formulating these objectives.

7 They may refer tends to be ultimately assessed against to, for example, global/local market shares, specific criteria, or targets, benchmarking growth of global/local market sales revenue, and benchtrending refer to both categories of export/total sales revenue ratio or profit key success Factors (general and specific). oriented objectives. Some of these may aim to The specific depend more on deductive establish/reinforce perception of the processes for definition, the general on company as a market leader, or reduce inductive. strategic risks associated with company International competitiveness is often survival or growth, etc. examined in an opportunistic manner, for The strategic planning horizon is an example, by utilizing easily accessible important factor in this respect. Johansson information on global market shares held by (1997) proposes that the longer the time individual companies. A legitimate method horizon in company strategic planning, the as it may prove for some purposes, global more likely it is for the company to prefer market share analysis, however, does not countries that show greater long-term answer one of the fundamentally important prospects over those where only the questions: which competencies, capabilities immediate market prospects appear and skills explain the company performance comparatively favorable.

8 This would imply in the international marketplace over the that companies with a relatively short past period? Also, analysis based on an planning horizon would in most instances examination of global market shares may not deny themselves most chances to enhance help answer another crucial strategic the firm's competencies, capabilities and management question: how has it been skills through global market participation. possible for the company to develop, or He also suggests that, when highest sales obtain access to, its current set of critically and market share prospects are sought by the important competencies, capabilities and company, markets believed to be most likely skills? to quickly accept the product are preferred. Calculation methods applied Overseas market selection experience Amongst major relevant distinctions being Evaluation of company international made are those that refer to two alternatives: business experience involves examining its methods based on risk assessment versus intensity, recency, relevance, character methods based on benefit evaluation, and (positive vs negative) etc.

9 Experience is a second, methods based on the cost logic major factor shaping strategic directions, versus methods based on degree of marketing company corporate culture and collective control (Porter, 1980; Root, 1994). The relative knowledge, or common wisdom. Without popularity of these alternatives in the sufficient, relevant experience and relevant business practice depends on the knowledge, there tends to be a stronger sense industry, and company, tradition, which in of risk and uncertainty involved in the global turn is correlated with availability of marketing decisions, which in turn information, legislation and the general constrains at least the subjective, if not the characteristics of the country's business infrastructure. Individual preferences of objective, freedom of choice of market those in a position to determine the choice of servicing modes. calculation methods should not be Interesting associated aspects include underestimated.

10 Learning processes within the company and industry, their efficiency and effectiveness. The influence of the increasing availability of External/internal category international market information on the Own/accessible resources Companies that have more of their own Internet on the dynamics of experience resources, and/or have secured better access gaining should not be overlooked. to resources of other companies through Company international competitiveness various forms of alliances, are less restricted, Success under the contemporary global other things being equal, in their business environment conditions is international market selection . In larger, contingent on companies possessing, or multidivisional companies with many being able to access, certain capabilities and product categories, multiple perspectives skills considered to be of critical importance may need to be adopted to cater to the for a wide array of industries and business different strategy requirements of each [ 354 ].