Factors Influence Entry Mode Choice

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2.5 Factors that influence the entry mode decision After understanding the most common entry modes, it is necessary to explain the different factors that influence the entry mode decision. There are a lot of different studies available that try to gather all the variables that can influence the entry mode decision. (Sarkar, M., & Cavusgil, S. T., 1996). However, more and more researchers are focused on the influence of one particular variable, like corruption (Rodriguez, P et al., 2005) or national culture (Kogut, B., & Singh, H. (1988). This research will focus on the most important variables which can be divided into internal factors and external factors. 2.5.1 Internal factors Company size and resources Koch (2001) declares that…show more content…
(2004), previous international experiences of the enterprise’ managers can influence the entry mode choice. There is a positive significance between the country of birth, years spent aboard and frequency of international business trips on the management commitment abroad and willingness to explore foreign markets. Additionally, knowledge of international markets, transactions, culture and business practices influence the management objectives, choices and desired level of international commitment and control, which in their turn affects the choice of foreign entry mode. Objective of the company Levi & Jeyaseeli (2006) declare that If an enterprise has limited objectives for entering a new market, it will prefer exporting or licensing as entry mode. Meanwhile, aggressive and proactive enterprises will tend to use strategic alliances, joint ventures or wholly owned subsidiaries when increasing market share fast. Relationships Fredrik & Webster (1992) state that the relationships companies have with suppliers, customers and other participants are connected with the foreign market selection. Normally, a more complex entry mode will require a closer relationship and more commitment, adaptation and trust. Nowadays enterprises trend to develop closer relationships with their customers and suppliers to improve their…show more content…
(2004), market laws and regulations can prevent import to the foreign target market. This could permit enterprises to only establish in less attractive geographical locations. Cultural distance Cultural distance can be seen as an important external factor that influences the entry mode decision. Enterprises prefer to enter countries that have a cultural similarity with the country of origin (Root, 1994). Studies showed that when the cultural distance is large, enterprises tend to set up a joint venture, rather than a wholly owned subsidiary (Agarwal, 1994). According to Peinado et al. (2007), cultural distance can be considered as one major source of uncertainty. Geographical distance A larger geographical distance can make transportation of some exported goods very expensive and make it impossible to compete against local goods in the target market (Root, 1994). Thus high transportation costs discourage export as entry

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