Factors Influencing Market and Entry Mode Selection

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Factors influencing market and entry mode selection: Developing the MEMS modelAdam J KochMarketing Intelligence & Planning; 2001; 19, 5; ABI/INFORM Globalpg. 351


Adam J. KochFactors influencing marketand entry mode selection:developing the MEMS model

Marketing Intelligence &Planning19/5[2001] 351-361

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Figure 1Factors influencing market selection

OVERSEAS MARKETSELECTION

EXPERIENCE

Key: C=:J external category

mixed category

_ internal category

Stage of internationalisationClassifications of internationalisation stagesrefer either to international business ingeneral, or to company export involvementin particular (Cavusgil, 1980; Johanson,1997)[5].

The nexus between these classificationsand the ethnocentric, regiocentric,

COMPANY STRATEGICORIENTATION

COMPANY STRATEGICOBJECTIVES

COMPANYINTERNATIONAL

COMPETITIVENESS

COUNTRYMARKET POTENTiAL

CALCULATIONMETHODAPPLIED

policentric and geocentric types of strategiespursued in international marketing is wellworth examining, for both theory buildingand practical purposes. Stages of companyinternationalisation are strongly influencedby two factors: company strategic orientationand company international competitiveness.The first one increases, reduces, or

COUNTRYMARKET POTENTlAL

COMPANYINTERNATIONAL

COMPETITIVENESS

COMPANY STRATEGICORIENTATION

COMPANY STRATEGICOBJECTIVES

CALCULATIONMETHODAPPLIED

OWN/ACCESSIBLERESOURCES

OVERSEAS MARKETSELECTION

EXPERIENCE

Figure 1.Factors influencing market selection

Adam J. KochFactors influenci,ng marketand entry mode 5election:developing the I\IJEMS model

Marketing Intelligence &Planning19/5 [2001J 351-361

Key: c=:J external category

mixed category

_ internal category

Stage of internationalisationClassifications of internationalisation stagesrefer either to international business ingeneral, or to company export involvementin particular (Cavusgil, 1980; Johanson,1997)[5].

The nexus between these classificationsand the ethnocentric, regiocentric,

policentric and geocentric types of strategiespursued in international marketing is wellworth examining, for both theory buildingand practical purposes. Stages of companyinternationalisation are strongly influencedby two factors: company strategic orientationand company international competitiveness.The first one increases, reduces, or

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Figure 2Factors influencing market entry mode selection

EXPERIENCE INUSING INDIVIDUAL

MEMs

Key: c=:::J external category

mixed category

_ internal category

eliminates company interest in the progressof internationalisation. The latter would,depending on its level, expedite or delay theadvancement of company internationalinvolvement. The increasing availability of

international market information on theInternet would call for a revision of thetraditional view of the stages and dynamicsof the internationalisation and exportdevelopment processes (Hamill et al., 1997).

[ 353)



Figure 2Factors influencing market entry mode selection

EXPERJENCE INUSING INDIViDUAL

MEMs

Key: c:=J external category

mixed category

_ internal category

eliminates company interest in the progressof internationalisation. The latter would,depending on its level, expedite or delay theadvancement of company internationalinvolvement. The increasing availability of

international market information on theInternet would call for a revision of thetraditional view of the stages and dynamicsof the internationalisation and exportdevelopment processes (Hamill et ai., 1997).

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Company strategic objectivesStrategic objectives may take many forms,their choice being dependent on companytradition, industry specificity, or personalpreferences/interests of those in charge offormulating these objectives. They may referto, for example, global/local market shares,growth of global/local market sales revenue,export/total sales revenue ratio or profitoriented objectives. Some of these may aim toestablish/reinforce perception of thecompany as a market leader, or reducestrategic risks associated with companysurvival or growth, etc.

The strategic planning horizon is animportant factor in this respect. Johansson(1997) proposes that the longer the timehorizon in company strategic planning, themore likely it is for the company to prefercountries that show greater long-termprospects over those where only theimmediate market prospects appearcomparatively favorable. This would implythat companies with a relatively shortplanning horizon would in most instancesdeny themselves most chances to enhancethe firm's competencies, capabilities andskills through global market participation.

He also suggests that, when highest salesand market share prospects are sought by thecompany, markets believed to be most likelyto quickly accept the product are preferred.

Overseas market selection experienceEvaluation of company internationalbusiness experience involves examining itsintensity, recency, relevance, character(positive vs negative) etc. Experience is amajor factor shaping strategic directions,company corporate culture and collectiveknowledge, or common wisdom. Withoutsufficient, relevant experience andknowledge, there tends to be a stronger senseof risk and uncertainty involved in the globalmarketing decisions, which in turnconstrains at least the subjective, if not theobjective, freedom of choice of marketservicing modes.

Interesting associated aspects includelearning processes within the company andindustry, their efficiency and effectiveness.The influence ofthe increasing availability ofinternational market information on theInternet on the dynamics of experiencegaining should not be overlooked.

Company international competitivenessSuccess under the contemporary globalbusiness environment conditions iscontingent on companies possessing, orbeing able to access, certain capabilities andskills considered to be of critical importancefor a wide array of industries and business

situations. Apart from these, other industry-,company- and strategy-specific capabilitiesand skills may be required from a successfulinternational marketer.

Whilst company competitive performancetends to be ultimately assessed againstspecific criteria, or targets, benchmarkingand benchtrending refer to both categories ofkey success factors (general and specific).The specific depend more on deductiveprocesses for definition, the general - oninductive.

International competitiveness is oftenexamined in an opportunistic manner, forexample, by utilizing easily accessibleinformation on global market shares held byindividual companies. A legitimate methodas it may prove for some purposes, globalmarket share analysis, however, does notanswer one of the fundamentally importantquestions: which competencies, capabilitiesand skills explain the company performancein the international marketplace over thepast period? Also, analysis based on anexamination of global market shares may nothelp answer another crucial strategicmanagement question: how has it beenpossible for the company to develop, orobtain access to, its current set of criticallyimportant competencies, capabilities andskills?

Calculation methods appliedAmongst major relevant distinctions beingmade are those that refer to two alternatives:methods based on risk assessment versusmethods based on benefit evaluation, andsecond, methods based on the cost logicversus methods based on degree of marketingcontrol (Porter, 1980; Root, 1994). The relativepopularity of these alternatives in therelevant business practice depends on theindustry, and company, tradition, which inturn is correlated with availability ofinformation, legislation and the generalcharacteristics of the country's businessinfrastructure. Individual preferences ofthose in a position to determine the choice ofcalculation methods should not beunderestimated.

External/internal categoryOwn/accessible resourcesCompanies that have more of their ownresources, and/or have secured better accessto resources of other companies throughvarious forms of alliances, are less restricted,other things being equal, in theirinternational market selection. In larger,multidivisional companies with manyproduct categories, multiple perspectivesmay need to be adopted to cater to thedifferent strategy requirements of each



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Company strategic objectivesStrategic objectives may take many forms,their choice being dependent on companytradition, industry specificity, or personalpreferences/interests of those in charge offormulating these objectives. They may referto, for example, global/local market shares,growth of global/local market sales revenue,export/total sales revenue ratio or profitoriented objectives. Some of these may aim toestablish/reinforce perception of thecompany as a market leader, or reducestrategic risks associated with companysurvival or growth, etc.

The strategic planning horizon is animportant factor in this respect. Johansson(1997) proposes that the longer the timehorizon in company strategic planning, themore likely it is for the company to prefercountries that show greater long-termprospects over those where only theimmediate market prospects appearcomparatively favorable. This would implythat companies with a relatively shortplanning horizon would in most instancesdeny themselves most chances to enhancethe firm's competencies, capabilities andskills through global market participation.

He also suggests that, when highest salesand market share prospects are sought by thecompany, markets believed to be most likelyto quickly accept the product are preferred.

Overseas market selection experienceEvaluation of company internationalbusiness experience involves examining itsintensity, recency, relevance, character(positive vs negative) etc. Experience is amajor factor shaping strategic directions,company corporate culture and collectiveknowledge, or common wisdom. Withoutsufficient, relevant experience andknowledge, there tends to be a stronger senseof risk and uncertainty involved in the globalmarketing decisions, which in turnconstrains at least the subjective, if not theobjective, freedom of choice of marketservicing modes.

Interesting associated aspects includelearning processes within the company andindustry, their efficiency and effectiveness.The influence ofthe increasing availability ofinternational market information on theInternet on the dynamics of experiencegaining should not be overlooked.

Company international competitivenessSuccess under the contemporary globalbusiness environment conditions iscontingent on companies possessing, orbeing able to access, certain capabilities andskills considered to be of critical importancefor a wide array of industries and business

situations. Apart from these, other industry-,company- and strategy-specific capabilitiesand skills may be required from a successfulinternational marketer.

Whilst company competitive performancetends to be ultimately assessed againstspecific criteria, or targets, benchmarkingand benchtrending refer to both categories ofkey success factors (general and specific).The specific depend more on deductiveprocesses for definition, the general - oninductive.

International competitiveness is oftenexamined in an opportunistic manner, forexample, by utilizing easily accessibleinformation on global market shares held byindividual companies. A legitimate methodas it may prove for some purposes, globalmarket share analysis, however, does notanswer one of the fundamentally importantquestions: which competencies, capabilitiesand skills explain the company performancein the international marketplace over thepast period? Also, analysis based on anexamination of global market shares may nothelp answer another crucial strategicmanagement question: how has it beenpossible for the company to develop, orobtain access to, its current set of criticallyimportant competencies, capabilities andskills?

Calculation methods appliedAmongst major relevant distinctions beingmade are those that refer to two alternatives:methods based on risk assessment versusmethods based on benefit evaluation, andsecond, methods based on the cost logicversus methods based on degree of marketingcontrol (Porter, 1980; Root, 1994). The relativepopularity of these alternatives in therelevant business practice depends on theindustry, and company, tradition, which inturn is correlated with availability ofinformation, legislation and the generalcharacteristics of the country's businessinfrastructure. Individual preferences ofthose in a position to determine the choice ofcalculation methods should not beunderestimated.

External/internal categoryOwn/accessible resourcesCompanies that have more of their ownresources, and/or have secured better accessto resources of other companies throughvarious forms of alliances, are less restricted,other things being equal, in theirinternational market selection. In larger,multidivisional companies with manyproduct categories, multiple perspectivesmay need to be adopted to cater to thedifferent strategy requirements of each




individual product/product line. Theunderlying analysis may be conducted on alargely static or, alternatively, a dynamicplatform.

The strategic options of various forms ofstrategic alliances or the more temporarymeasure of piggybacking are of increasingpopularity as markets become more global,competitiveness becomes more intense andthe response time to market must continue todecrease.

NetworkingThrough measures such as participation ininternational trade fairs, exhibitions,sharing the same suppliers, buyers, throughstrategic alliances, joint ventures and ad hocconsortia (tendering process), companiesdevelop their networks and increase theirinternationalisation (Johanson and Mattson,1988). Certain ethnic groups (e.g. Chinese)have been found more likely to develop theirbusiness networks on the basis of sharedethnicity (Ch'ng, 1993). Contemporaryrequirements of globalisation, in particularimplications of the rapid growth ofelectroniccommerce (Nouwens and Bouwman, 1996),may affect these tendencies and forms theytake.

Similarity/proximity of overseas marketPsychic distance (Vahlne and WiedersheimPaul, 1977) has been found to often influenceoverseas market selection. Length andstrength of cultural and business linksbetween one's own and some foreigncountries, stereotypes or dominantperceptions of these countries, companyemployees' familiarity with these countriesand individual perceptions of decisionmakers or influencers exercise aconsiderable influence on the choice ofmarkets and on the order in which they getselected. The role of relevant experience andthat of expatriates in forming perceptions offoreign markets are difficult tounderestimate in this respect.

Market portfolio congruityA company's current market portfolio is aresult of incremental changes brought aboutby decisions taken in pursuing various pastglobal expansion objectives. Over a longperiod of time, not only the marketenvironment, but also the company logic ofmarket selection (Root, 1994) may change.Thus, the structure of a company's marketportfolio may often appear incompatible withcompany current environment and strategy,if current, rather than past, external andinternal environment conditions,competitive position of the company andobjectives form the backdrop of analysis.

The company may need to modify itscurrent market portfolio, to ensure itscongruity and a better match with thecurrent company objectives and its externalenvironment. Synergies able to produce, forexample, risk or cost reduction may besought on such occasions.

More specifically, such an analysis wouldtake into consideration:

similarity of customer requirements orcustomer expectations between countries;similarity of product uses andcircumstances; andsimilarity of standards.

It would also help to estimate costs ofsupplying different product/services todifferent countries and their impact oncustomer demand volume and on brandloyalty.

Expansion sequence optimizationIf future global expansion objectives becomeour frame of reference, another marketselection problem emerges: what would be themost suitable new foreign markets, and thesequence of entering them, given ouranticipation of the global market environmentand company's future resources,competencies and capabilities. Initial stages ofthis analysis may draw on availableclusterings of countries[6] based on theirgeneral socioeconomic characteristics?Proper contextualisation of such clusteringsthrough reference to the appropriate industrycontext, and prediction of its changes, needsto be undertaken on most occasions.

Many companies expand globally in acascade manner, starting from either:

markets considered least demanding andthen entering more, and more challengingforeign markets, as their experience,competencies, capabilities and skillsgrow; ormarkets where demand for some newproducts has already reached the levelwhich makes an entry a commerciallyviable proposition for them, and thenmoving to markets that follow the pioneers.

The best sequence of market expansion shouldbe sought for the company to use its resourcesefficiently and sustain its global growth.

External factorsCountry market potentialCountry market potential is a commoncriterion used in market selection (Hodgsonand Uyterhoeven, 1962; Johansson, 1997;Moyer, 1968; Root, 1994). Yet, the role ofjudgment, and the potential for politicalcontamination of the relevant productstatistics or country rankings, are often

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individual product/product line. Theunderlying analysis may be conducted on alargely static or, alternatively, a dynamicplatform.

The strategic options of various forms ofstrategic alliances or the more temporarymeasure of piggybacking are of increasingpopularity as markets become more global,competitiveness becomes more intense andthe response time to market must continue todecrease.

NetworkingThrough measures such as participation ininternational trade fairs, exhibitions,sharing the same suppliers, buyers, throughstrategic alliances, joint ventures and ad hocconsortia (tendering process), companiesdevelop their networks and increase theirinternationalisation (Johanson and Mattson,1988). Certain ethnic groups (e.g. Chinese)have been found more likely to develop theirbusiness networks on the basis of sharedethnicity (Ch'ng, 1993). Contemporaryrequirements of globalisation, in particularimplications of the rapid growth ofelectroniccommerce (Nouwens and Bouwman, 1996),may affect these tendencies and forms theytake.

Similarity/proximity of overseas marketPsychic distance (Vahlne and WiedersheimPaul, 1977) has been found to often influenceoverseas market selection. Length andstrength of cultural and business linksbetween one's own and some foreigncountries, stereotypes or dominantperceptions of these countries, companyemployees' familiarity with these countriesand individual perceptions of decisionmakers or influencers exercise aconsiderable influence on the choice ofmarkets and on the order in which they getselected. The role of relevant experience andthat of expatriates in forming perceptions offoreign markets are difficult tounderestimate in this respect.

Market portfolio congruityA company's current market portfolio is aresult of incremental changes brought aboutby decisions taken in pursuing various pastglobal expansion objectives. Over a longperiod of time, not only the marketenvironment, but also the company logic ofmarket selection (Root, 1994) may change.Thus, the structure of a company's marketportfolio may often appear incompatible withcompany current environment and strategy,if current, rather than past, external andinternal environment conditions,competitive position of the company andobjectives form the backdrop of analysis.

The company may need to modify itscurrent market portfolio, to ensure itscongruity and a better match with thecurrent company objectives and its externalenvironment. Synergies able to produce, forexample, risk or cost reduction may besought on such occasions.

More specifically, such an analysis wouldtake into consideration:

similarity of customer requirements orcustomer expectations between countries;similarity of product uses andcircumstances; andsimilarity of standards.

It would also help to estimate costs ofsupplying different product/services todifferent countries and their impact oncustomer demand volume and on brandloyalty.

Expansion sequence optimizationIf future global expansion objectives becomeour frame of reference, another marketselection problem emerges: what would be themost suitable new foreign markets, and thesequence of entering them, given ouranticipation of the global market environmentand company's future resources,competencies and capabilities. Initial stages ofthis analysis may draw on availableclusterings of countries[6] based on theirgeneral socioeconomic characteristics?Proper contextualisation of such clusteringsthrough reference to the appropriate industrycontext, and prediction of its changes, needsto be undertaken on most occasions.

Many companies expand globally in acascade manner, starting from either:

markets considered least demanding andthen entering more, and more challengingforeign markets, as their experience,competencies, capabilities and skillsgrow; ormarkets where demand for some newproducts has already reached the levelwhich makes an entry a commerciallyviable proposition for them, and thenmoving to markets that follow the pioneers.

The best sequence of market expansion shouldbe sought for the company to use its resourcesefficiently and sustain its global growth.

External factorsCountry market potentialCountry market potential is a commoncriterion used in market selection (Hodgsonand Uyterhoeven, 1962; Johansson, 1997;Moyer, 1968; Root, 1994). Yet, the role ofjudgment, and the potential for politicalcontamination of the relevant productstatistics or country rankings, are often

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underestimated (Samli, 1977). Reliability ofthe relevant information, and of the methodsused in obtaining it, has attractedconsiderable attention (Cavusgil, 1985;Van Wood and Goolsby, 1987).

Discussion of product market specificvariables to be used in market potentialestimation would appear to be in need offurther intensification with many moreindustries to be examined. This proposeddirection would assist educators as well asenhance communication of theory withconcrete business contexts.

Competitive significance of the marketAnother traditional point of interestconcerns importance of lead markets as cuesused in assessing company currentperformance and predicting its changes(Elliott and Cameron, 1994). Leading (or lead)markets (usually large, strong at the high-endof the product line, free from governmentregulation and protective measures, withstrong competitors and demandingcustomers) are of considerable strategicsignificance in global marketing (Elliott andCameron, 1994). Managing to get into thesemarkets and staying there provide thecompany with an excellent opportunity tobring up its capabilities and skills to thehighest levels required globally. On the otherhand, this presence can be used in thecompany's introductory promotion in thirdmarkets to bolster up their competitivecredentials.

Product performance and customerexpectations gaps between lead markets andother countries may at times be verysubstantial. These gaps may be used as a basison which to compare the competencies,capabilities and skills of competing companies.Ongoing study of the relevant trends helpsreduce the danger of developing rankingsbased on some outdated market information.

Attacking the competitors' profit base(usually their domestic market) is anincreasingly popular strategy amongst thosefollowing a global strategy. Preempting acompetitor's move into a new, importantmarket is another one.

Anticipated overseas market risksAnother market selection aspect which hasreceived more attention than most others wasforeign market risks assessment (Backhausand Meyer, 1986; De la Torre and Neckar, 1990;Kobrin, 1979). This has been driven by theinterest in it of export credit guaranteeorganizations, banks and companies involvedin international business.

There are three major categories ofinternational business risks (e.g. Czinkotaand Ronkainen, 1996):

ownership risks (expropriation,confiscation and domestication);operating risks (exchange risks, overinvestment and price controls relatedrisks); andtransfer risks.

An equally important area is one ofmanagerial perception of risks, reliability/absence of biasl"up-to-datedness" of inputs/risk estimates. Whenever no prescribedmethod in calculating some risks is available,the role of perception grows considerably.

IMarket entry mode selection

The list of basic factor categories for marketentry mode selection (Figure 2) under theMEMS model is the same as for marketselection: internal, external and mixed.

Internal factorsCompany size/resourcesSmaller companies usually have fewermarket servicing options (Benito and Welch,1994), as their very limited own resourcesmay simply not allow, or discourage from,some market entry modes. For example,establishing a fully owned subsidiary ofteninvolves very substantial investment andcorrespondingly high risk levels. Similarly,small companies may not have sufficientmanagement potential and special skills toenter foreign markets through establishingfully owned foreign based subsidiaries orinternational joint ventures.

The influence of company size on itsfreedom of choice in selecting market entrymode and their relevant preferences dependson industry-specific resource demands forindividual market entry modes. In thechemical industry, for instance, thisrelationship will be much stronger than inthe computer software industry.

Management locus of controlThe significance of management locus ofcontrol for the degree of company internationalbusiness involvement and the market entrymode preference is often underestimated, if notoverlooked altogether. Yet strong internal, orexternal, loci of control are likely toconsiderably affect manager perceptions; theway their intuition works and their marketentry mode decisions may thus, particularly inless experienced companies, determine theoutcome of this decision process.

If the decision is significantly influenced bya number of managers, we have a potentialityof locus of control discord; depending on itsmanagement style, the company will eitherdisregard loci of control which do not agree



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underestimated (Samli, 1977). Reliability ofthe relevant information, and of the methodsused in obtaining it, has attractedconsiderable attention (Cavusgil, 1985;Van Wood and Goolsby, 1987).

Discussion of product market specificvariables to be used in market potentialestimation would appear to be in need offurther intensification with many moreindustries to be examined. This proposeddirection would assist educators as well asenhance communication of theory withconcrete business contexts.

Competitive significance of the marketAnother traditional point of interestconcerns importance of lead markets as cuesused in assessing company currentperformance and predicting its changes(Elliott and Cameron, 1994). Leading (or lead)markets (usually large, strong at the high-endof the product line, free from governmentregulation and protective measures, withstrong competitors and demandingcustomers) are of considerable strategicsignificance in global marketing (Elliott andCameron, 1994). Managing to get into thesemarkets and staying there provide thecompany with an excellent opportunity tobring up its capabilities and skills to thehighest levels required globally. On the otherhand, this presence can be used in thecompany's introductory promotion in thirdmarkets to bolster up their competitivecredentials.

Product performance and customerexpectations gaps between lead markets andother countries may at times be verysubstantial. These gaps may be used as a basison which to compare the competencies,capabilities and skills of competing companies.Ongoing study of the relevant trends helpsreduce the danger of developing rankingsbased on some outdated market information.

Attacking the competitors' profit base(usually their domestic market) is anincreasingly popular strategy amongst thosefollowing a global strategy. Preempting acompetitor's move into a new, importantmarket is another one.

Anticipated overseas market risksAnother market selection aspect which hasreceived more attention than most others wasforeign market risks assessment (Backhausand Meyer, 1986; De la Torre and Neckar, 1990;Kobrin, 1979). This has been driven by theinterest in it of export credit guaranteeorganizations, banks and companies involvedin international business.

There are three major categories ofinternational business risks (e.g. Czinkotaand Ronkainen, 1996):

ownership risks (expropriation,confiscation and domestication);operating risks (exchange risks, overinvestment and price controls relatedrisks); andtransfer risks.

An equally important area is one ofmanagerial perception of risks, reliability/absence of biasl"up-to-datedness" of inputs/risk estimates. Whenever no prescribedmethod in calculating some risks is available,the role of perception grows considerably.

IMarket entry mode selection

The list of basic factor categories for marketentry mode selection (Figure 2) under theMEMS model is the same as for marketselection: internal, external and mixed.

Internal factorsCompany size/resourcesSmaller companies usually have fewermarket servicing options (Benito and Welch,1994), as their very limited own resourcesmay simply not allow, or discourage from,some market entry modes. For example,establishing a fully owned subsidiary ofteninvolves very substantial investment andcorrespondingly high risk levels. Similarly,small companies may not have sufficientmanagement potential and special skills toenter foreign markets through establishingfully owned foreign based subsidiaries orinternational joint ventures.

The influence of company size on itsfreedom of choice in selecting market entrymode and their relevant preferences dependson industry-specific resource demands forindividual market entry modes. In thechemical industry, for instance, thisrelationship will be much stronger than inthe computer software industry.

Management locus of controlThe significance of management locus ofcontrol for the degree of company internationalbusiness involvement and the market entrymode preference is often underestimated, if notoverlooked altogether. Yet strong internal, orexternal, loci of control are likely toconsiderably affect manager perceptions; theway their intuition works and their marketentry mode decisions may thus, particularly inless experienced companies, determine theoutcome of this decision process.

If the decision is significantly influenced bya number of managers, we have a potentialityof locus of control discord; depending on itsmanagement style, the company will eitherdisregard loci of control which do not agree




with that of the decision maker (authoritarianend of the spectrum) or undertake actionsaimed at achieving perceptual consensus withregard to the situation on hand (participativeend of the spectrum).

Finally, one has to acknowledge thatindividual loci of control may change, as aresult of some critical events or, moregradually, as the relevant experience grows.Many, perhaps most, managers will neverchange their locus of control. So the question:"is locus of control a matter of nature ornurture?" must remain unanswered here.

Experience in using MEMsHow many times, how recently, in whatcircumstances (similar enough, dissimilar)the company (or its competitors) have usedany particular market entry mode, theirrelevant success rates and degrees - all thesefactors obviously influence both marketentry selection process and the choicesthemselves (Paliwoda and Thomas, 1998;Root, 1994; Van Fleet, 1991).

Companies that have gathered aconsiderable knowledge of a region prefer toinvest resources into business ventures inthat region rather than seek contractualmodes there.

Companies' management cultures willinfluence decision influencers', and decisiontakers', behaviour. If, for instance, negativepersonal consequences are certain forproponents of an unsuccessful untried entrymode, untried modes will then be shunned bythe company decision makers.

Effectiveness, and efficiency, of theorganisational learning depend on the amountof experience gathered by individuals, and onthe prevalence of reflection sharing in thecompany.

It would appear that there may well be acertain optimal duration of the abovementioned responsibility in any given context;going beyond it may increase the chances forexperience, both group and individual, tocontinue to affect the decision processoutcomes as strongly as before. It has beensuggested that managerial succession oftenexplains the changes in the preferred marketservicing modes. The market entry selectionprocess is more likely to be subject to scrutinyand ongoing improvement, if the sharedreflection-in-action becomes commonplace.Increased accessibility of information on theInternet can be anticipated to speed upexperience acquisition (Hamill et al., 1997).

Management risk attitudesThe level to which the company will acceptvarious international business risks dependson the context: the company's financialsituation, its strategic options, the

competitiveness of its competitiveenvironment, its relevant experience etc.Risks may be estimated by using appropriateformulae. One should, however, bear in mindthat the perception of risks associated withindividual market entry modes or countriesmay influence companies' decisionsconsiderably, as well.

The less risk-averse the management, themore likely it is for the company to selectcountries that show greater long-termprospects and promise to enhance the firm'scapabilities (Johansson, 1997, p. 124).

Market share targetsWhen the criterion used in market entrymode selection is sales or market sharemaximization, market entry modes whichare believed to be most likely to deliver thedesirable results within established planningperiods will be preferred.

For instance, if maximization of marketshare appears to be contingent on thedevelopment of own distribution and aftersales network, the company may decide toprefer a fully owned/majority marketingsubsidiary to be the entry mode into a certainforeign country. If it seeks to maximizeexport sales revenue growth over the nexttwo or three years, it may be prone to useindirect exporting over other entry modesinto new markets.

Calculation methods appliedThe broad alternatives of risk or benefitbased calculation method and cost or controlbased calculation method are available alsowith regard to the market entry selection.Some concrete methods may not, however, beapplicable to each of the contemplated entrymodes, either because of the unavailability ofthe required data, or because of the differentlogic, and dynamics of these entry modes(Erramilli and Rao, 1993; Goodnow, 1985;Klein, 1989; Root, 1994). If the market entryselection is to be based on direct comparisonsof the anticipated outcomes of competingmodes of market entry, the choice of methodshould make it possible.

Profit targetsVarious market entry modes are likely toproduce different levels of profit; equallyimportantly, the dynamics of profitgeneration of various modes (take, forexample, indirect export and investment in anew manufacturing and marketing overseasoperation) will be very dissimilar. Theformer will show some profits almostimmediately and then may soon level off, thelatter may mean no profits for three or fouryears (construction cycle, time needed toestablish all necessary market contacts,acquire/build all necessary assets, train the

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with that of the decision maker (authoritarianend of the spectrum) or undertake actionsaimed at achieving perceptual consensus withregard to the situation on hand (participativeend of the spectrum).

Finally, one has to acknowledge thatindividual loci of control may change, as aresult of some critical events or, moregradually, as the relevant experience grows.Many, perhaps most, managers will neverchange their locus of control. So the question:"is locus of control a matter of nature ornurture?" must remain unanswered here.

Experience in using MEMsHow many times, how recently, in whatcircumstances (similar enough, dissimilar)the company (or its competitors) have usedany particular market entry mode, theirrelevant success rates and degrees - all thesefactors obviously influence both marketentry selection process and the choicesthemselves (Paliwoda and Thomas, 1998;Root, 1994; Van Fleet, 1991).

Companies that have gathered aconsiderable knowledge of a region prefer toinvest resources into business ventures inthat region rather than seek contractualmodes there.

Companies' management cultures willinfluence decision influencers', and decisiontakers', behaviour. If, for instance, negativepersonal consequences are certain forproponents of an unsuccessful untried entrymode, untried modes will then be shunned bythe company decision makers.

Effectiveness, and efficiency, of theorganisational learning depend on the amountof experience gathered by individuals, and onthe prevalence of reflection sharing in thecompany.

It would appear that there may well be acertain optimal duration of the abovementioned responsibility in any given context;going beyond it may increase the chances forexperience, both group and individual, tocontinue to affect the decision processoutcomes as strongly as before. It has beensuggested that managerial succession oftenexplains the changes in the preferred marketservicing modes. The market entry selectionprocess is more likely to be subject to scrutinyand ongoing improvement, if the sharedreflection-in-action becomes commonplace.Increased accessibility of information on theInternet can be anticipated to speed upexperience acquisition (Hamill et al., 1997).

Management risk attitudesThe level to which the company will acceptvarious international business risks dependson the context: the company's financialsituation, its strategic options, the

competitiveness of its competitiveenvironment, its relevant experience etc.Risks may be estimated by using appropriateformulae. One should, however, bear in mindthat the perception of risks associated withindividual market entry modes or countriesmay influence companies' decisionsconsiderably, as well.

The less risk-averse the management, themore likely it is for the company to selectcountries that show greater long-termprospects and promise to enhance the firm'scapabilities (Johansson, 1997, p. 124).

Market share targetsWhen the criterion used in market entrymode selection is sales or market sharemaximization, market entry modes whichare believed to be most likely to deliver thedesirable results within established planningperiods will be preferred.

For instance, if maximization of marketshare appears to be contingent on thedevelopment of own distribution and aftersales network, the company may decide toprefer a fully owned/majority marketingsubsidiary to be the entry mode into a certainforeign country. If it seeks to maximizeexport sales revenue growth over the nexttwo or three years, it may be prone to useindirect exporting over other entry modesinto new markets.

Calculation methods appliedThe broad alternatives of risk or benefitbased calculation method and cost or controlbased calculation method are available alsowith regard to the market entry selection.Some concrete methods may not, however, beapplicable to each of the contemplated entrymodes, either because of the unavailability ofthe required data, or because of the differentlogic, and dynamics of these entry modes(Erramilli and Rao, 1993; Goodnow, 1985;Klein, 1989; Root, 1994). If the market entryselection is to be based on direct comparisonsof the anticipated outcomes of competingmodes of market entry, the choice of methodshould make it possible.

Profit targetsVarious market entry modes are likely toproduce different levels of profit; equallyimportantly, the dynamics of profitgeneration of various modes (take, forexample, indirect export and investment in anew manufacturing and marketing overseasoperation) will be very dissimilar. Theformer will show some profits almostimmediately and then may soon level off, thelatter may mean no profits for three or fouryears (construction cycle, time needed toestablish all necessary market contacts,acquire/build all necessary assets, train the

[357)




[358]

salesforce as required, develop customerbase, etc.). A long decision horizon mayprefer the latter, a short one will prefer theformer. The suitability of the method used inestimating and comparing anticipated profitsbetween various entry modes and reliabilityof inputs are two other important concerns.

Johansson (1997) suggests that the lowerthe target rates of return, the more likely it isfor the company to select countries that showgreater long-term prospects and promise toenhance the firm's capabilities.

External/internal categoryCompetencies, capabilities and skillsrequired/available for each MEMRecently, the competence-based perspectivehas been adopted by several authors topropose and examine capabilities and skillsconsidered critical in the contemporaryinternational business (Jagodka, 1997; Koch,1997). Owing to the transformation of theglobal business environment, re-appraisal ofthe mechanisms through which internationalcompetitiveness may be established andfurthered is a necessity for internationalmarket participants. Importance of individualcompetencies, capabilities and skills dependson the context components: product category,area of (contemplated) presence, form ofbusiness and company strategic objectives(Koch, 1997).

The complementary suggestion byLuostarinen and Sviird (1982) that humanresource policy should lead, rather thanfollow, company overall internationalstrategy bears some important implicationsfor the international market participants.

Sufficiency and reliability of informationinputsUnavailibility of some information needed tomake comparisons between various entrymodes, different defmitions and methods usedin gathering data in different foreign countries,fmally inaccuracies in, and obsolescence of,data as well as various forms of bias may makeit difficult, or impossible, to comparecompeting market entry modes properly.

External factsCharacteristics of the overseas countrybusiness environmentWhile the general characteristics of overseascountry business environments are usuallyvery easy to obtain these days, industry andcompany-specific information is usuallymore difficult to acquire. Whilst the formercategory of information is not always freefrom bias, complete and up-to-date, the latteris considered quite sensitive and usually notprovided free of charge; indeed, it may be

quite costly to obtain, a concern for smallbeginners, in particular.

Similarity and volatility of generalbusiness regulation/practices, businessinfrastructure and supporting industrieslevels of development, forms, scope andintensity of competition, customersophistication and customer protectionlegislation are amongst those characteristicswhich would normally attract the attentionof potential entrants into a foreign market.

Market barriersAmongst barriers that can make access toforeign markets more difficult, the followingcategories are considered of major importance(e.g. Cavusgil, 1985; Johansson, 1997;Van Wood and Goolsby, 1987):

tariff barriers;governmental regulations;distribution access;natural barriers (market success andcustomer allegiances);advanced versus developing countries;exit barriers.

Major underlying dimensions and impact oftrade barriers have been examined in theliterature (e.g. Karakaya and Stahl, 1992;Paliwoda and Thomas, 1998).

Industry feasibility/viability of MEMSome entry modes (fully owned foreignsubsidiary, international joint ventures) maybe excluded by law in some countries; someof these exclusions may relate to selectedindustries considered to be of strategicsignificance for the state. Some entry modes(licensing) may involve excessive know-howdissemination risk, particularly ifthe foreigncountry is not a signatory to the appropriateinternational conventions. Other hindrances(e.g. restrictive labor regulation andpractices, cost of labor, insufficient level ofskill) may discourage from establishing asubsidiary, or a joint venture operation in aforeign market. Investing in a foreignsubsidiary may secure a favorable taxationtreatment (for instance, tax holidays) andsave the company a lot of money on avoidingpaying custom duties.

Owing to specific risks and costs involvedin individual MEMs, and varying associatedsales potentials over a period of time, someMEMs may turn out less viable than othersin a given situation context.

Popularity of individual MEMs in theoverseas marketSome country markets may show a highpopularity level for some modes of marketentry with the industry in question(Seabright, 1996). Selection of entry mode bynew potential entrants will be influenced by



[358]

salesforce as required, develop customerbase, etc.). A long decision horizon mayprefer the latter, a short one will prefer theformer. The suitability of the method used inestimating and comparing anticipated profitsbetween various entry modes and reliabilityof inputs are two other important concerns.

Johansson (1997) suggests that the lowerthe target rates of return, the more likely it isfor the company to select countries that showgreater long-term prospects and promise toenhance the firm's capabilities.

External/internal categoryCompetencies, capabilities and skillsrequired/available for each MEMRecently, the competence-based perspectivehas been adopted by several authors topropose and examine capabilities and skillsconsidered critical in the contemporaryinternational business (Jagodka, 1997; Koch,1997). Owing to the transformation of theglobal business environment, re-appraisal ofthe mechanisms through which internationalcompetitiveness may be established andfurthered is a necessity for internationalmarket participants. Importance of individualcompetencies, capabilities and skills dependson the context components: product category,area of (contemplated) presence, form ofbusiness and company strategic objectives(Koch, 1997).

The complementary suggestion byLuostarinen and Sviird (1982) that humanresource policy should lead, rather thanfollow, company overall internationalstrategy bears some important implicationsfor the international market participants.

Sufficiency and reliability of informationinputsUnavailibility of some information needed tomake comparisons between various entrymodes, different defmitions and methods usedin gathering data in different foreign countries,fmally inaccuracies in, and obsolescence of,data as well as various forms of bias may makeit difficult, or impossible, to comparecompeting market entry modes properly.

External factsCharacteristics of the overseas countrybusiness environmentWhile the general characteristics of overseascountry business environments are usuallyvery easy to obtain these days, industry andcompany-specific information is usuallymore difficult to acquire. Whilst the formercategory of information is not always freefrom bias, complete and up-to-date, the latteris considered quite sensitive and usually notprovided free of charge; indeed, it may be

quite costly to obtain, a concern for smallbeginners, in particular.

Similarity and volatility of generalbusiness regulation/practices, businessinfrastructure and supporting industrieslevels of development, forms, scope andintensity of competition, customersophistication and customer protectionlegislation are amongst those characteristicswhich would normally attract the attentionof potential entrants into a foreign market.

Market barriersAmongst barriers that can make access toforeign markets more difficult, the followingcategories are considered of major importance(e.g. Cavusgil, 1985; Johansson, 1997;Van Wood and Goolsby, 1987):

tariff barriers;governmental regulations;distribution access;natural barriers (market success andcustomer allegiances);advanced versus developing countries;exit barriers.

Major underlying dimensions and impact oftrade barriers have been examined in theliterature (e.g. Karakaya and Stahl, 1992;Paliwoda and Thomas, 1998).

Industry feasibility/viability of MEMSome entry modes (fully owned foreignsubsidiary, international joint ventures) maybe excluded by law in some countries; someof these exclusions may relate to selectedindustries considered to be of strategicsignificance for the state. Some entry modes(licensing) may involve excessive know-howdissemination risk, particularly ifthe foreigncountry is not a signatory to the appropriateinternational conventions. Other hindrances(e.g. restrictive labor regulation andpractices, cost of labor, insufficient level ofskill) may discourage from establishing asubsidiary, or a joint venture operation in aforeign market. Investing in a foreignsubsidiary may secure a favorable taxationtreatment (for instance, tax holidays) andsave the company a lot of money on avoidingpaying custom duties.

Owing to specific risks and costs involvedin individual MEMs, and varying associatedsales potentials over a period of time, someMEMs may turn out less viable than othersin a given situation context.

Popularity of individual MEMs in theoverseas marketSome country markets may show a highpopularity level for some modes of marketentry with the industry in question(Seabright, 1996). Selection of entry mode bynew potential entrants will be influenced by




the experience, degree of success of the formerentrants and the anticipated product marketsituation. In most instances, a very positiveexperience in a particular entry mode and theexpectations of growing demand and stablebusiness environment will encourageemulation of the mode of entry most popularthere. On the other hand, companies that hadpositive experiences in different entry modesin other markets before may sometimes betempted to try an alternative to the mode ofentry prevalent in the new market, if thatcould improve strategy match.

Market growth rateAs a market entry selection criterion, marketgrowth rate can be expected to be ofconsiderable significance. If a market isgrowing at a fast rate, and this rate of growthdoes not seem sustainable over several years,the company will be well advised to tap intothis opportunity without any delay and useindirect or direct exporting. If demand in aforeign market is anticipated to be verylarge, but only in several years, establishingown manufacturing/marketing subsidiariesmay be the best answer.

Image support requirementsIn some industries, companies that want tobuild and sustain the image of a leading globalsupplier have got to be present in leadingmarkets. Whoever produces industrial robotswould like to have customers in Japan,leading printing machinery manufacturerswant to have German or US customers intheir reference lists; global suppliers of winewould want to have a firm foothold in Franceand, perhaps, Italy and Germany. Somecompanies may license their inventions toincrease their role as global providers ofnewest technology, and influence the relevantindustry standards. Maintaining the samehigh standard of the after-sales service maylead to the preference of modes that helpachieve this objective through establishinghigh control over the distribution and servicenetwork. Image support requirements may bemanifold, to correspond with variouscompany strategies and their aspects.

Global management efficiency requirementsIncreasing involvement in internationalbusiness raises the awareness of thelimitations of the company's resources and,sooner or later, results in are-definition of thecompany's global strategy. For somecompanies choosing a diversified,multinational mode of operation is theanswer, for others - the standardised, globalapproach may turn out to be more appropriatefrom the strategic efficiency point of view.

Critical success factors and companies' corecapabilities must be examined to find the

optimal organisational structure and strategyto follow. Avoiding excessive diversity of theglobal market entry portfolio may be strongadvice for most global companies. All possibleeconomies of scale (and scope) that may flowfrom such a portfolio must be investigated andorganisation structures and strategies of allcompetitors considered. Lesser involvementrequired from the company headquarters insome entry modes may be another decisionfactor.

IConclusion

This paper's comprehensive discussion offactors influencing the MEMS process hasrevealed that this process is influenced by alarger number of the external and internalenvironment factors than most previousmodels have assumed. Influence of somefactor categories proposed in this paper is illrecognised by the predominantly prescriptiveliterature[7]. To increase the content validityof its models, theory needs to integratefindings of various narrow studies andexplore a wider spectrum of the relevantMEMS practice.

The relative importance of individual factorcategories in the MEMS process has beenfound here to depend on the external andinternal environment of the company. Further,accessibility of various external and internalenvironment information has been found toinfluence the pace of the internationalisationprocess, the quality of market/market entrymode decisions, and the ultimate market/market entry choices made by the company.

The increasing role of the Internet and theWWW in transforming the internationalbusiness environment (Nouwens andBouwman, 1996; Quelch and Klein, 1996)necessitates a corresponding shift in thediscussion of the MEMS process. In particular,the role of the Internet and the WWW in:• facilitating international business

information acquisition;reducing the perceived and real risks; andexpediting the internationalisation processof small and medium-sized enterprises

can be properly investigated andacknowledged. Some associated radicalchanges to international business theory,including conventional views on theinternationalisation and export developmentprocesses are anticipated by, for example,Hamill et al. (1997).

The fully contextualised in-depthexamination of market/market entry modeselection practice should be carried out moresystematically and longitudinally, to developa sufficient knowledge basis on which to

[359]



the experience, degree of success of the formerentrants and the anticipated product marketsituation. In most instances, a very positiveexperience in a particular entry mode and theexpectations of growing demand and stablebusiness environment will encourageemulation of the mode of entry most popularthere. On the other hand, companies that hadpositive experiences in different entry modesin other markets before may sometimes betempted to try an alternative to the mode ofentry prevalent in the new market, if thatcould improve strategy match.

Market growth rateAs a market entry selection criterion, marketgrowth rate can be expected to be ofconsiderable significance. If a market isgrowing at a fast rate, and this rate of growthdoes not seem sustainable over several years,the company will be well advised to tap intothis opportunity without any delay and useindirect or direct exporting. If demand in aforeign market is anticipated to be verylarge, but only in several years, establishingown manufacturing/marketing subsidiariesmay be the best answer.

Image support requirementsIn some industries, companies that want tobuild and sustain the image of a leading globalsupplier have got to be present in leadingmarkets. Whoever produces industrial robotswould like to have customers in Japan,leading printing machinery manufacturerswant to have German or US customers intheir reference lists; global suppliers of winewould want to have a firm foothold in Franceand, perhaps, Italy and Germany. Somecompanies may license their inventions toincrease their role as global providers ofnewest technology, and influence the relevantindustry standards. Maintaining the samehigh standard of the after-sales service maylead to the preference of modes that helpachieve this objective through establishinghigh control over the distribution and servicenetwork. Image support requirements may bemanifold, to correspond with variouscompany strategies and their aspects.

Global management efficiency requirementsIncreasing involvement in internationalbusiness raises the awareness of thelimitations of the company's resources and,sooner or later, results in are-definition of thecompany's global strategy. For somecompanies choosing a diversified,multinational mode of operation is theanswer, for others - the standardised, globalapproach may turn out to be more appropriatefrom the strategic efficiency point of view.

Critical success factors and companies' corecapabilities must be examined to find the

optimal organisational structure and strategyto follow. Avoiding excessive diversity of theglobal market entry portfolio may be strongadvice for most global companies. All possibleeconomies of scale (and scope) that may flowfrom such a portfolio must be investigated andorganisation structures and strategies of allcompetitors considered. Lesser involvementrequired from the company headquarters insome entry modes may be another decisionfactor.

IConclusion

This paper's comprehensive discussion offactors influencing the MEMS process hasrevealed that this process is influenced by alarger number of the external and internalenvironment factors than most previousmodels have assumed. Influence of somefactor categories proposed in this paper is illrecognised by the predominantly prescriptiveliterature[7]. To increase the content validityof its models, theory needs to integratefindings of various narrow studies andexplore a wider spectrum of the relevantMEMS practice.

The relative importance of individual factorcategories in the MEMS process has beenfound here to depend on the external andinternal environment of the company. Further,accessibility of various external and internalenvironment information has been found toinfluence the pace of the internationalisationprocess, the quality of market/market entrymode decisions, and the ultimate market/market entry choices made by the company.

The increasing role of the Internet and theWWW in transforming the internationalbusiness environment (Nouwens andBouwman, 1996; Quelch and Klein, 1996)necessitates a corresponding shift in thediscussion of the MEMS process. In particular,the role of the Internet and the WWW in:• facilitating international business

information acquisition;reducing the perceived and real risks; andexpediting the internationalisation processof small and medium-sized enterprises

can be properly investigated andacknowledged. Some associated radicalchanges to international business theory,including conventional views on theinternationalisation and export developmentprocesses are anticipated by, for example,Hamill et al. (1997).

The fully contextualised in-depthexamination of market/market entry modeselection practice should be carried out moresystematically and longitudinally, to developa sufficient knowledge basis on which to

[359]




[360]

formulate enhanced models. Examination ofassociated information flows (Benito et ai.,1993) would be of particular significance. Aholistic perspective would help bridge thegap between the narrowness of most currentmodels and the immense complexity of globalbusiness decisions. It would also provide anefficient guidance in designing theseprocesses by individual companies, to suittheir particular contexts.

This paper aims to guide some relatedfurther investigation. Verification of some ofits current propositions through moreintensive, longitudinal study of the relevantpractice, including the associated informationflows (Benito et ai., 1993), is necessary. Acontinuing systematic examination of changesin global market expansion and marketservicing patterns by individual industriesand companies is likely to help develop theoryand foster beneficial reflection andimprovement of the relevant business practice.

Notes1 This separation in no way contradicts, or

weakens, the earlier argument that marketselection and market entry mode selection areparts of the same decision process; dividingthis paper's discussion into two parts serveshere to simply reduce the complexity of thenecessary graphic representation (see Figure1 and 2).

2 Some names of factor categories used in thispaper will not strictly correspond with thoseused in some pre-existing classifications;readers should not find it difficult, however, torelate the factor categories of this model intothe categories used elsewhere.

3 Introduction of the mixed category wasrequired due to the inherent characteristics ofsome of the factors proposed in this paper (suchas company international competitivenessinvolves comparing data which come fromboth inside and outside the company;similarity/proximity of the overseas marketinvolves both the "hard" external elements,such as geographic distance, those "soft"external, such as business culture andlanguage and those "soft" subjective, likemanagement perceptions) which would not fitthe alternative, dichotomic classfication.

4 At least two strategic orientation classificationsmay be applied here: proactive, reactive andplanned orientation (Glaister and Thwaites,1993), and companies as prospectors, analyzersand defenders (Miles and Snow, 1984).

5 Classification used by the Australiangovernment export agency Austradedistinguishes between five internationalizationstages: Export Awareness, MarketIdentification, Market Entry, MarketConsolidation, and Market Investment. Exportdevelopment process, according to Czinkota andRonkainen (1996), also has five stages, and these

are: Export Awareness, Export Interest, ExportTrial, Export Evaluation, and Export Adoption.

6 Cavusgil (1990) proposes five such clusters:dependent societies; seekers; climbers; luxuryand leisure societies; and the rocking chairs;these, or similar, references could obviouslybe applied to fragments of country markets aswell.

7 Examples of these would be company strategicorientation, company internationalcompetitiveness, market portfolio congruity;expansion sequence optimization, industryviability of MEM, calculation method applied,management locus of control, popularity ofMEMs ("risk reduction" effect) andprofitability targets.

References and further readingBackhaus, K. and Meyer, M. (1986), "Country risk

assessment in international industrialmarketing", in Moller, K. and Poltschik, M.(Eds), Contemporary Research in Marketing,Vol. 1. of the Proceedings of the 15th AnnualConference of the European MarketingAcademy, pp. 199-227.

Benito, G.R.G. and Welch, L.S. (1994), "Foreignmarket servicing: beyond choice of entrymode", Journal of International Marketing,Vol. 2 No.2, pp. 7-28.

Benito, G.R.G., Solberg, C.A. and Welch, L.S. (1993),"An exploration of the information behavior ofNorwegian exporters", Journal of InformationManagement, Vol. 13, August, pp. 274-86.

Bradley, M.F. (1984), "Effects of cognitive style,attitude toward growth and motivation on theinternationalisation of the firm", Research inMarketing, Vol. 7, pp. 237-60.

Cavusgil, S.T. (1980), "On the internationalizationprocess of the firms", European Research,Vol. 8, pp. 273-81.

Cavusgil, S.T. (1985), "Guidelines for exportmarket research", Business Horizons,November-December, pp. 27-33.

Cavusgil, S.T. (1990), "A market-orientedclustering of countries", in Thorelli, H.B. andCavusgil, T. (Eds), International MarketingStrategy, 3rd ed., Pergamon, New York, NY.

Cavusgil, S.T. and Nevin, J.N. (1981), "Internaldeterminants of export marketing behaviour:an empirical investigation." Journal ofMarketing Research, Vol. 18 No.1, pp. 114-19.

Ch'ng, D. (1993), The Overseas ChineseEntrepreneurs in East Asia: Background,Business Practices and InternationalNetworks, CEDA, Sydney.

Czinkota, M.R. and Ronkainen, LA. (1996), GlobalMarketing, The Dryden Press, Forth Worth,TX.

De la Torre, J. and Neckar, D.H. (1990),"Forecasting political risks for internationaloperations", in Vernon-Wortzel, H. andWortzel, L. (Eds), Global StrategicManagement, 2nd ed., Wiley, New York, NY.

Elliott, G.R. and Cameron, R.C. (1994), "Consumerperception of product quality and the country-



[360]

formulate enhanced models. Examination ofassociated information flows (Benito et ai.,1993) would be of particular significance. Aholistic perspective would help bridge thegap between the narrowness of most currentmodels and the immense complexity of globalbusiness decisions. It would also provide anefficient guidance in designing theseprocesses by individual companies, to suittheir particular contexts.

This paper aims to guide some relatedfurther investigation. Verification of some ofits current propositions through moreintensive, longitudinal study of the relevantpractice, including the associated informationflows (Benito et ai., 1993), is necessary. Acontinuing systematic examination of changesin global market expansion and marketservicing patterns by individual industriesand companies is likely to help develop theoryand foster beneficial reflection andimprovement of the relevant business practice.

Notes1 This separation in no way contradicts, or

weakens, the earlier argument that marketselection and market entry mode selection areparts of the same decision process; dividingthis paper's discussion into two parts serveshere to simply reduce the complexity of thenecessary graphic representation (see Figure1 and 2).

2 Some names of factor categories used in thispaper will not strictly correspond with thoseused in some pre-existing classifications;readers should not find it difficult, however, torelate the factor categories of this model intothe categories used elsewhere.

3 Introduction of the mixed category wasrequired due to the inherent characteristics ofsome of the factors proposed in this paper (suchas company international competitivenessinvolves comparing data which come fromboth inside and outside the company;similarity/proximity of the overseas marketinvolves both the "hard" external elements,such as geographic distance, those "soft"external, such as business culture andlanguage and those "soft" subjective, likemanagement perceptions) which would not fitthe alternative, dichotomic classfication.

4 At least two strategic orientation classificationsmay be applied here: proactive, reactive andplanned orientation (Glaister and Thwaites,1993), and companies as prospectors, analyzersand defenders (Miles and Snow, 1984).

5 Classification used by the Australiangovernment export agency Austradedistinguishes between five internationalizationstages: Export Awareness, MarketIdentification, Market Entry, MarketConsolidation, and Market Investment. Exportdevelopment process, according to Czinkota andRonkainen (1996), also has five stages, and these

are: Export Awareness, Export Interest, ExportTrial, Export Evaluation, and Export Adoption.

6 Cavusgil (1990) proposes five such clusters:dependent societies; seekers; climbers; luxuryand leisure societies; and the rocking chairs;these, or similar, references could obviouslybe applied to fragments of country markets aswell.

7 Examples of these would be company strategicorientation, company internationalcompetitiveness, market portfolio congruity;expansion sequence optimization, industryviability of MEM, calculation method applied,management locus of control, popularity ofMEMs ("risk reduction" effect) andprofitability targets.

References and further readingBackhaus, K. and Meyer, M. (1986), "Country risk

assessment in international industrialmarketing", in Moller, K. and Poltschik, M.(Eds), Contemporary Research in Marketing,Vol. 1. of the Proceedings of the 15th AnnualConference of the European MarketingAcademy, pp. 199-227.

Benito, G.R.G. and Welch, L.S. (1994), "Foreignmarket servicing: beyond choice of entrymode", Journal of International Marketing,Vol. 2 No.2, pp. 7-28.

Benito, G.R.G., Solberg, C.A. and Welch, L.S. (1993),"An exploration of the information behavior ofNorwegian exporters", Journal of InformationManagement, Vol. 13, August, pp. 274-86.

Bradley, M.F. (1984), "Effects of cognitive style,attitude toward growth and motivation on theinternationalisation of the firm", Research inMarketing, Vol. 7, pp. 237-60.

Cavusgil, S.T. (1980), "On the internationalizationprocess of the firms", European Research,Vol. 8, pp. 273-81.

Cavusgil, S.T. (1985), "Guidelines for exportmarket research", Business Horizons,November-December, pp. 27-33.

Cavusgil, S.T. (1990), "A market-orientedclustering of countries", in Thorelli, H.B. andCavusgil, T. (Eds), International MarketingStrategy, 3rd ed., Pergamon, New York, NY.

Cavusgil, S.T. and Nevin, J.N. (1981), "Internaldeterminants of export marketing behaviour:an empirical investigation." Journal ofMarketing Research, Vol. 18 No.1, pp. 114-19.

Ch'ng, D. (1993), The Overseas ChineseEntrepreneurs in East Asia: Background,Business Practices and InternationalNetworks, CEDA, Sydney.

Czinkota, M.R. and Ronkainen, LA. (1996), GlobalMarketing, The Dryden Press, Forth Worth,TX.

De la Torre, J. and Neckar, D.H. (1990),"Forecasting political risks for internationaloperations", in Vernon-Wortzel, H. andWortzel, L. (Eds), Global StrategicManagement, 2nd ed., Wiley, New York, NY.

Elliott, G.R. and Cameron, R.C. (1994), "Consumerperception of product quality and the country-




of-origin effect", Journal of InternationalMarketing, Vol. 2 No.2, pp. 49-62.

Erramilli, M. K. and Rao, C.P. (1993), "Servicefirms' international entry mode choice: amodified transaction-cost analysis approach",Journal ofMarketing, Vol. 57, July, pp. 19-38.

Glaister, K. and Thwaites, D. (1993), "Managerialperception and organizational strategy",Journal ofGeneral Management, Vol. 13 No.4,pp.15·33.

Goodnow, J.D. (1985), "Developments ininternational mode of entry analysis",International Marketing Review, Vol. 2 No.3,pp.17·30.

Hamel, G. and Prahalad, C.K. (1994), Competingfor the Future, Harvard Business SchoolPress, Boston, MA.

Hamill, J., Jevons, C. and Poon, S. (1997),"Implications of the Internet for internationalmarketing by small and medium enterprises",Proceedings of the VIth Annual BusinessCongress of the International ManagementDevelopment Association, Chonju City, SouthKorea, July.

Hodgson, RW. and Uyterhoeven, H.E.R (1962),"Analyzing foreign opportunities", HarvardBusiness Review, Vol. 40, March-April,pp.60-79.

Jagodka, R (1997), "Skills needed for effectiveinternational marketing", unpublisheddoctorial dissertation, University of LaVerne, CA.

Johanson, J. and Mattson, L.G. (1988),"International marketing andinternationalization process - a networkapproach", in Paliwoda, S. and Turnbull, P.(Eds), Research in International Marketing,Croom Helm, London.

Johanson, J.K. (1997), Global Marketing: ForeignEntry, Local Marketing and GlobalManagement, McGraw-Hill, Chicago, IL.

Karakaya, F. and Stahl, M.J. (1992), "Underlyingdimensions of barriers to market entry inconsumer goods markets" (research note),Journal of the Academy ofMarketing Science,Vol. 20 No.3, pp. 275-8.

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Nouwens, J. and Bouwman, H. (1996), "Livingapart together in electronic commerce: theuse of information and communicationtechnology to create network organizations",Project 2000, Journal of Computer-MediatedCommunication, Vol. 1 No.3. Available athttp://shum.huji.ac.il/jcmc/voll/issue3/hoffman.html

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Porter, M.E. (1980), Competitive Strategy:Techniques for Analyzing Industries andCompetitors, Free Press, New York, NY.

Quelch, J.A. and Klein, L.R (1996), "The Internetand international marketing", SloanManagement Review, Spring, pp. 60-75.

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Samli, A.C. (1977), "An approach for estimatingmarket potential in East Europe", Journal ofInternational Business Studies, Fall-Winter,pp.49-53.

Seabright, P. (1996), "The starfish effect: canmarket entry by one firm encourage furtherentry by others?", European Economic Review,Vol. 4 No. 3-5, pp. 541-50.

Vahlne, J.E. and Wiedersheim-Paul, F. (1977),"Psychic distance - an inhibiting factor ininternational trade", unpublished paper,Center for International Business Studies,Department of Business Administration,University of Uppsala, Uppsala.

Van Fleet, M. (1991). "Two sources of overseasinvestment and export expertise", Journal ofBusiness Strategy, Vol. 12 No.6, pp. 62-3.

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of-origin effect", Journal of InternationalMarketing, Vol. 2 No.2, pp. 49-62.

Erramilli, M. K. and Rao, C.P. (1993), "Servicefirms' international entry mode choice: amodified transaction-cost analysis approach",Journal of Marketing, Vol. 57, July, pp. 19-38.

Glaister, K. and Thwaites, D. (1993), "Managerialperception and organizational strategy",Journal ofGeneral Management, Vol. 13 No.4,pp.15·33.

Goodnow, J.D. (1985), "Developments ininternational mode of entry analysis",International Marketing Review, Vol. 2 No.3,pp.17-30.

Hamel, G. and Prahalad, C.K. (1994), Competingfor the Future, Harvard Business SchoolPress, Boston, MA.

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Factors Influencing Market and Entry Mode Selection

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