Foreign Market Entry Essay Research Paper 10

Foreign Market Entry Essay, Research Paper

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; Anderson and Gatignon 1986; Douglas and Craig 1989; and etc.

4.0 Methods and evidence supporting the author’s viewpoints

Driscoll.s methods and evidence is based on the centralized theory of the framework of entry modes choices. The following are the various methods used and supporting evidence in the framework model.

4.1 Modes of entry to international markets

According to Driscoll, there are 3 main foreign market entry methods; namely

export, contractual and investment modes, which is supported also by other authors like Anderson and Gatignon’s (1986), Root’s (1987) and Young’s (1989).

These three methods encompass a broad area for a firm that is planning to enter into foreign market. As Driscoll explains, export modes can include either a direct export from its local market to the foreign market or an indirect involvement through an appointed trading house.

Then, in a contractual entry mode, a firm can arrange various methods such as licensing, franchising, turnkey projects, non-equity joint ventures and etc. to tap into its international market. In general, this method reduces the level of equity investment and direct participation by the firm. However, some evidence that Driscoll related, such that for franchising, where Burton and Cross (1995) argued that there are possibilities of higher level international involvement and equity investment by the firm.

Then, investment modes are methods used for some form of ownership by the firm in the foreign market. For instance, the investments may involve acquisition, merger or greenfield strategy and joint ventures basis, where Driscoll quoted some reference from Kogut and Singh (1988).

4.2 Characteristics of different entry modes

Driscoll proposed that the key characteristics of the entry modes methods are level of control, dissemination risk, resource commitment, flexibility and ownership. These characteristics are also supported by many authors such as Agarwal and Ramaswami 1992; Anderson and Gatignon 1986; Douglas and Craig 1989; and etc.

As Driscoll argues that control is the key functionality for a firm to maximize its economic efficiency and return of investment in international markets. This was also supported by Hill et al. (1990) where control allows firm to directly manage its operation and decision making which would ensures desired level of achievement in its whole operation and target market.

The next method relates to the risk of disseminating the firm.s knowledge asset to its contractual partner. Driscoll explains that protecting the firm.s know-how asset is critical to avoid unnecessary threats of survival for the firm. She quoted Williamson (1985) where risk can be minimized through comprehensive contingent contracts and continuous improvement of technology in products or services would gain a long term competitive advantage.

The following entry mode method is resource commi

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