Sme selection of international markets and choice of foreign entry

2005:119 SHU BACHELOR'S THESIS SME Selection of International Markets and Choice of Foreign Entry Modes A Case Study of AB Älvsbyhus Gunnar Backlund Sabrina Suikki Luleå University of Technology BSc and MSc Programmes in International Business Administration and Economics BSc Department of Business Administration and Social Sciences Division of Industrial marketing and e-commerce 2005:119 SHU - ISSN: 1404-5508 - ISRN: LTU-SHU-EX 05/119 SE Acknowledgements This bachelor’s thesis is the result of ten weeks hard and interesting research It could not have been done without help First, we would like to thank Associate Professor Manucher Farhang for his guidance, assistance and above all for his great patience Secondly, we would like thank AB Älvsbyhus and their marketing manager Roland Kjellgren for his time and effort to make this thesis possible We are also grateful to our fellow students who have been helpful in providing feedback and useful comments on our work in process We would also like to thank Ph.D Candidate Tim Foster for his inspiring lectures in International Marketing Last but not least, we would like to thank our families and friends for their support and understanding during this time and a special thanks to Assarina from Gunnar who has been reminding him of that life has its wonderful moments even when the studies are intense Luleå Technological University, Sweden May, 2005 Gunnar Backlund Sabrina Suikki Abstract The purpose with this thesis has been to study SMEs’ internationalization The process, which SMEs go through when selecting international markets, and what external and internal factors influence this selection have been studied Furthermore, SMEs’ choice of foreign entry mode has been studied and what external and internal factors influence this choice A case study has been conducted on AB Älvsbyhus that is the market leader in the Swedish woodhouse industry The case study is based on the theory discussed in the thesis which then is compared with AB Älvsbyhus actions Our findings show that AB Älvsbyhus internationalization behavior does not exactly match that in theory During our research study we also found that there has not been laid sufficiently attention on companies which proactively initiate their international activities Our conclusion is that each and every company must be analyzed individually on the basis of their specific prerequisites and abilities, in order to gain a better understanding of the company’s internationalization Sammanfattning Syftet med denna uppsats har varit att undersöka hur små och medelstora företag agerar när de börjar involvera sig på den internationella marknaden Uppsatsen undersöker den process som företagen genomgår när de väljer sina exportmarknader samt vilka externa och interna faktorer som påverkar detta val Vidare undersöks på vilket sätt företagen väljer att gå in på de valda exportmarknaderna, samt vilka externa och interna faktorer som påverkar detta val En fallstudie har genomförts på AB Älvsbyhus som är marknadsledare i Sverige inom trähusindustrin Fallstudien baseras på den teori som undersökts i uppsatsen, vilket sedan har jämförts med AB Älvsbyhus agerande Resultatet visar att AB Älvsbyhus internationella aktiviteter inte följer de mönster som teorierna visar Under våran undersökning märkte vi också att det inte har lagts tillräkligt med vikt på företag som på egen hand initierar sina internationella aktivititeter Varje företag måste analyseras individuellt utifrån dess specifika förutsättningar och förmåga Table of Contents Introduction .1 1.1 1.2 1.3 1.4 1.5 Background Problem Discussion Research Purpose Research Questions Demarcations Literature Review 2.1 2.2 Internationalization of SMEs International Market Selection of SMEs 2.2.1 2.2.2 2.3 SMEs’ Choice of Foreign Entry Modes 2.3.1 2.3.2 2.3.3 2.4 External factors influencing international market selection .6 Internal factors influencing international market selection Types of foreign entry modes 10 External factors influencing choice of foreign entry modes 12 Internal factors influencing choice of foreign entry modes 14 Conceptual Framework 16 2.4.1 2.4.2 2.4.3 Internationalization of SMEs 16 International market selection of SMEs 16 SMEs’ choice of foreign entry modes 18 Methodology 21 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Purpose of the Research 21 Research Approach 21 Research Strategy 22 Data Collection Method 23 Sample Selection 24 Analysis of Data 25 Quality Standards 26 Case Study: AB Älvsbyhus 27 4.1 4.2 4.3 Company Background 27 Internationalization of Älvsbyhus 28 International Market Selection by Älvsbyhus 29 4.3.1 4.3.2 4.4 External factors influencing international market selection .29 Internal factors influencing international market selection 31 Älvsbyhus’ Choice of Foreign Entry Modes 32 4.4.1 4.4.2 External factors influencing choice of foreign entry modes 32 Internal factors influencing choice of foreign entry modes 33 Data Analysis 35 5.1 5.2 Internationalization 35 International Market Selection 36 5.2.1 5.2.2 5.3 External factors influencing international market selection .37 Internal factors influencing international market selection 38 Choice of Foreign Entry Modes 39 5.3.1 5.3.2 External factors influencing choice of foreign entry modes 40 Internal factors influencing choice of foreign entry modes 41 Findings and Conclusions .44 6.1 Conclusions 44 6.1.1 6.1.2 6.1.3 6.2 How can SMEs’ internationalization process be described? 44 How can the influence of external and internal factors on SMEs’ international market selection be described? 45 How can the influence of external and internal factors on SMEs’ choice of foreign entry mode be described? 47 Implications and Recommendations 48 6.2.1 6.2.2 6.2.3 Implications for theory 48 Implications for practitioners .49 Implications for future research 49 References 51 Appendix I Interview Guide in English Appendix II Interview Guide in Swedish List of Figures Figure 2.1: Elements of the Entry Strategy……………………………………………… 10 Figure 2.2: Market Entry Methods……………………………………………………………10 Figure 2.3: Conceptual Framework………………………………………………………….20 List of Tables Table 3.1: Relevant Situations for Different Research Strategies…………………… 23 Table 4.1: Facts about AB Älvsbyhus……………………………………………………….28 CHAPTER INTRODUCTION Introduction In this chapter background, problem discussion and purpose will be presented Furthermore, the research purpose and research questions will be discussed Finally the demarcations of the research area will be presented 1.1 Background Czinkota & Ronkainen (2004) state, that participation in the international marketplace has become a reality for large, small and medium sized companies This participation can be very rewarding for both the companies and the employees According to Lewis III & Richardson (2001), companies that export grow faster, are more productive, and have employees that earn more However, it has to be kept in mind that most companies not become international overnight New activities in a new foreign environment moreover increase the company’s risk This leads to that companies must plan and organize their activities, as well as adjust these to the needs and opportunities of international markets, if they aim to become internationally competitive with a long-term perspective According to Farhang (2001) the way in which some companies turn from being purely domestic companies, in terms of marketing goods and services, into international companies, has been the subject of research during the last three decades Researchers have been trying to come up with conceptual models that would explain why companies go international, how they it and what kind of organizational forms they adapt to be able to manage the internationalization In other ways, researchers have searched for the motives and the determinants, as well as looked into the strategies and the methods in which companies manage and conduct operations abroad Until recently most of the major actors on the global market have been the large 50 to 100 years old companies Going international has been enormously expensive not only in financial terms but also in terms of top management’s time and commitment Due to the high costs, going international must generate added value for the company beyond extra sales In other words, the company needs to gain a competitive advantage by going international Therefore, unless the company gains by going international, it should probably stay at home The task of managing international marketing is also complex, especially when it has to operate in several markets The company has to adapt its marketing programs to the needs and preferences of customers that differ in forms of culture, purchasing power and tradition (Ibid) According to De Búrca, Fletcher & Brown (2004), the changes in the international business environment has complicated the foreign market selection These changes, involving the formation of regional trade groupings, the creation of strategic alliances between companies, and the exponential spread of information technology, are resulting in a breakdown of barriers between countries A marketer needs to see the world as an entity rather than as a series of national markets As a consequence of this, it has been more difficult to choose the most appropriate international market As markets now can stretch across national boundaries, geographic segmentation may no longer be an appropriate basis for market selection This might still be the fact for large transnational companies who have the financial means to enter several markets at the same time However, for small and medium sized enterprises (further referred as SMEs, which are companies with 50 to 250 employees) with generally smaller means a venture into the international market is still unlikely CHAPTER INTRODUCTION Decisions as to the form of market entry, for example exporting, joint ventures or franchising, logically follow the decision as to the most appropriate market to enter However, market selection and entry mode are closely linked due to the attractiveness of markets is influenced by the strategic thrust of the corporation, competitive action in those markets and government regulation relating to the possible forms of foreign entry Deciding on the most appropriate form of market entry involves understanding each of the various modes available and the conditions under which one mode might be more suitable than others (Ibid) Root (1994) states that to managers in SMEs, planning entry strategies may appear to be something only large companies can afford to do; these managers identify such planning with elaborate research techniques that are applied by specialists to a massive body of quantitative data However, this is a misconception of the entry plan process The truly important is the idea of planning entry strategies Once management accepts this idea, it will find ways to plan international market entry; how limited the company resources ever may be Without an entry strategy for a product or target market, a company has only a simple “sales” approach to foreign markets A large number of problems may face SMEs when turning international What are the major obstacles for internationalization experienced by SMEs and this influence their choice of international target markets and foreign entry modes, has not been sufficiently studied in the past 1.2 Problem Discussion We believe that the internationalization of SMEs is open for research on many levels First of all, why a company should export at all and what criteria should be fulfilled before a company enters a foreign market We also think that research could be conducted on what markets SMEs should enter depending on several different factors, such as cultural differences, company tradition, product and competitors In addition, research could be conducted on how Internet can be used for a company’s internationalization and how an effective use of this media can help the internationalization of the company While the literature often separates the process of internationalization from the factors that determine international market selection and choice of foreign entry mode, we consider that the factors in play for many SMEs are of a nature that creates conditions, where the process of going international and the decisions on international market selection and choice of foreign market entry mode become inseparable In short, we believe that SMEs’ decision for going international as well as their internationalization process and the moves made by many of them, are less formal and deterministic and more natural in the context of the company’s generic growth than is often anticipated by researchers Having said this, a combination of external and internal factors may directly or indirectly influence SMEs internationalization activities It is in view of the above discussion and research referred earlier, the purpose of our study can be identified as that stated below CHAPTER INTRODUCTION 1.3 Research Purpose The purpose of this research is to examine how the process of SMEs’ internationalization is intertwined with the set of external and internal factors that determine international market selection and choice of foreign entry mode To satisfy the above purpose of our study the following research questions shall be addressed 1.4 Research Questions RQ1: How can SMEs’ internationalization process be described? RQ2: How can the influence of external and internal factors on SMEs’ international market selection be described? RQ3: How can the influence of external and internal factors on SMEs’ choice of foreign entry modes be described? 1.5 Demarcations Since the existing theories discuss external and internal factors influence on companies’ international market selection and choice of foreign entry modes in general for both small and medium sized companies, our literature review will also address to both small and medium sized companies However, in our case study the external and internal factors influence on a medium sized company’s international market selection and choice of foreign entry modes will only be studied The company selected for our case study is a Swedish medium sized company operating in the woodhouse industry, which is in a transition stage of becoming a large international enterprise, when looking at the company’s turnover and their increasing number of employees The reader should keep in mind that the selection international markets and the choice of foreign entry modes are influenced by several factors in the company’s environment However, in this thesis the other aspects of the internationalization process, such as setting export goals and objectives, designing the marketing plan or control system for monitoring the export activities, will not be presented in detail CHAPTER FINDINGS AND CONCLUSIONS The company of our case study, Älvsbyhus, follows most uncommon and according to existing theories rather unusual pattern: they initiated their very first export activities on their own There were no unsolicited orders from abroad involved in the beginning and Älvsbyhus has not been following the gradual stage process in their internationalization It can be stated that the decision to go international for Älvsbyhus was natural due to the economic recession in the Swedish market at the time and there were positive prospects for a future demand in the Finnish market that was similar to the Swedish one The more experienced Älvsbyhus has become internationally, the less risky their business abroad has turned out to be It has been natural for Älvsbyhus to go international and export within the Nordic countries due to the geographical proximity of the markets and the similarities in traditions of house constructing, culture and language The company has had a growing and excellent economic situation for several years now and not see foreign direct investments abroad as too risky Ü Hence, our case study shows that the reality does not always follow the existing theories This can be both for better and worse We have found that a company can become successful by using somewhat unconventional methods in their internationalization Yet, it should be noticed that there is not just one way of becoming internationally successful A company’s export success or failure does not necessarily always correlate with theoretical patterns However, by following the guidelines of existing theories the companies might achieve even better results Our conclusion would be that each company’s specific prerequisites must be examined separately in order to gain understanding why the company does or does not follow the most common theoretical patterns Ü During our research study we also found that there has not been laid sufficiently attention on companies which proactively initiate their international activities 6.1.2 How can the influence of external and internal factors on SMEs’ international market selection be described? According to theories a company’s decision to select international markets is based on an external factor’s influence and the exporter simply responds to an opportunity to a given market However, in most cases the selection of a particular foreign market is based on the following criteria: low psychic, cultural and geographic distance Often any of these criteria results in the selection of the same market and companies’ foremost foreign target markets are habitually the neighboring countries There exist two main determinants that influence the companies’ international market selection: External and Internal factors The external factors influencing the international market selection can be divided in four main sections: • • • • Economic influences: Per capita income, Infrastructure, Stage of economic development and exchange rate stability Socio-cultural influences: Social and cultural differences, Psychic distance, Communication, Social perspectives, Attitudes and Language Political and legal influences: Political stability, Trade barriers, General attitudes towards imports and direct foreign investment Market attractiveness: Market size and growth rate, Competition, Cost of serving the market, Profit and market potential and Market access 45 CHAPTER FINDINGS AND CONCLUSIONS The internal factors in their turn can be divided in two main sections: • • Company capability profile: Skills, Resources, Product adaptation and Competitive advantage Company’s potential: Company’s management ability, flexibility and commitment, Planning and control, Capacity, cost structure and productivity, as well Personnel’s motivations and qualifications The company of our case study, Älvsbyhus, does not quite follow these theoretical patterns for international market selection, since the company does not admit the imperative influence of all of these external and internal factors for their selection of international markets However, on closer look a great influence of some of these factors can easily be identified The company’s international market selection in our case study has been primarily influenced by following external factors: • • • • Economic influences: Profitable stage of economic development, Low geographical distance and Good infrastructure Socio-cultural influences: Low psychic distance and Similarities in culture, language, attitudes and traditions in house constructing Political and legal influences: Laws and regulations on house constructing Market attractiveness: Market size and growth rate, as well Profit and market potential Concerning the influence of internal factors, the company’s international market selection in our case study has been primarily influenced by following factors: • • Company capability profile: Skills, Resources, Product adaptation and Competitive advantage Company’s potential: Management ability, flexibility and commitment, Planning and control and Excess capacity Since some differences between the theoretical patterns and our case study can be identified, the following can be stated: Ü Our case study shows that each and every company and their situation should be studied individually in order to identify the main external and internal factors that influence the company’s international market selection In fact, this has been a point in support of conducting an in-depth case study Ü A greater influence of some particular factors may vary depending on the situation of the company studied For example a good financial situation of a company may leave out the influence of some factors, since the company can take greater financial risks when enjoying good economic situation When concentrating on and selecting for instance only Nordic countries as international target markets the political factors have minor influence since the political stability is high on these markets The situation would be different in a country where the political stability is low due to a civil war for example Furthermore, the type of products and industry the company is acting on affect the extent of different factors influencing the international market selection 46 CHAPTER FINDINGS AND CONCLUSIONS 6.1.3 How can the influence of external and internal factors on SMEs’ choice of foreign entry mode be described? According to existing theories the international entry strategy is a comprehensive plan and it sets forth objectives, goals, resources and policies that will guide a company’s international activities A company’s entry strategy is not a single plan; it is actually a composite of several individual product/market plans The selection of a foreign entry mode is affected by other decisions that may include the following: Choice of a target/product market Objectives and goals in the target market Choice of an entry mode to penetrate the target market country Marketing plan to penetrate the target market Control system to monitor performance in the target market The classification of different foreign entry modes is complicated and there are many relevant criteria to take into consideration Companies often choose to make their first exports to neighboring countries due to the similarities in the markets, this reduces risks and cultural patterns are often similar Trade barriers influence the type of entry mode when a company is initiating export When product regulations and standards necessitate significant product adaptation and modification, companies often establish local production, assembly or finishing facilities Foreign governments can also favor products that are produces in the country and can therefore give advantages to companies who choose to make direct investments in the country The distance to the chosen target market is also a factor to take into consideration High transport costs can influence a company to conduct a foreign investment Some market entry modes might take months to implement, while others can be put into action in less time Some times it might be justified to use a an entry mode that costs more than another due to higher benefits in the long run, since the choice of entry mode is just the first stage in a strategic plan for the international markets Different types of entry modes provide different types of risks, control and flexibility Entry modes with a high involvement on the foreign market like direct investment provides a high control, but also high costs and risks Depending on product and market the flexibility is also a factor to take into account Entry modes with low resource commitment like direct exporting provides low costs but also low control The company in our case study, Älvsbyhus, has utilized both direct export and direct investments During the first years of its internationalization the company used only direct export Due to low geographical distance, low or non existing trade barriers and low cultural distance this type of entry mode suited Älvsbyhus The company took the initiative to start exporting in 1980 when the Swedish market became saturated Älvsbyhus saw a growing demand for its products in Finland and an opportunity the spread the risk for the company in case of a recession in the business cycle In 1996 the company expanded its exports to Norway and two years later an expansion to Denmark took place A new factory was built in southern Sweden 1998 to serve the markets in Norway, Denmark and southern Sweden In 2005 Älvsbyhus made its first direct investment when a factory was established in Southern Finland The growing demand on the Finnish market and high transportation costs made this step natural in order to satisfy the customers The company’s investment in Finland did not affect the company’s finances to a large extent After two months profits the investment was paid back 47 CHAPTER FINDINGS AND CONCLUSIONS Älvsbyhus has primarily been influenced by the following external factors in its decision on foreign entry mode • Socio-cultural distance, Country risk and demand uncertainty, Market size and growth, Legal restrictions and Geographical distance Älvsbyhus has primarily been influenced by the following internal factors in its decision on foreign entry mode • Speed, Costs, Flexibility, Risks, Long-term objectives, Company size, International experience, Type of product, Planning and control and Managerial reasons Since some differences between the theoretical patterns and our case study can be identified, the following can be stated: Ü Concerning the external factors the following have to be taken into consideration, when selecting an appropriate foreign entry mode Depending on the company’s profile, economic situation and the export target market situation some factors are not evident for consideration For example, in markets served by Älvsbyhus, trade barriers not exist and can therefore not affect decision on foreign entry mode Ü Concerning the internal factors some factors are not always relevant to be taken into consideration while looking at different companies For example, when conducting foreign investments, payback time might not be relevant if the company’s economic situation is satisfying Theory does not discuss the relevance of a good economic situation to a large extent for companies and how this influence decisions on foreign entry modes Other factors like the ability to serve the customers in the best way might on the other hand be a motivation for direct investments 6.2 Implications and Recommendations The earlier part of this chapter presented the findings and the conclusions of this thesis In this section we shall discuss the implications for theory, based on our analysis and conclusions After that, implications for practitioners and for future research shall be presented 6.2.1 Implications for theory The aim of this thesis has been to explore and describe a phenomenon in a specific area of research Previous research has provided us with theory, from which we have formed our research problem and research questions The purpose of this research is to examine how the process of SMEs’ internationalization is intertwined with the set of external and internal factors that determine international market selection and choice of foreign entry mode Our case study shows that the reality does not always follow the existing theories Our conclusion would be that each company’s specific prerequisites must be examined separately in order to gain understanding why the company does or does not follow the most common theoretical patterns concerning a company’s internationalization, international market selection and choice of foreign 48 CHAPTER FINDINGS AND CONCLUSIONS entry mode A greater influence of some particular factors, both external and internal, may vary depending on the situation of the company studied Furthermore, the type of products and industry the company is acting on, affect the extent of different factors influencing the international market selection Depending on the company’s profile, economic situation and for most the export target market situation some factors are not evident for consideration However, theory does not discuss the relevance of a good economic situation to a large extent for companies and how this influence decisions on foreign entry modes During our research study we also found that there has not been laid sufficiently attention on companies, which proactively initiate their international activities Our contribution to theory is based on an empirical study, which comes from the research problem that we have formed in this field of study Our contribution can serve as a base for further research and be added to what have been examined and described in previous research 6.2.2 Implications for practitioners This study has investigated what external and internal factors influence the medium sized company Älvsbyhus in their selection of international markets and choice of foreign entry mode Our recommendation for companies like Älvsbyhus is to look beyond the traditional values and their traditional strategies Älvsbyhus has the resources and capacity to act on even several other international markets, but it seems like the lack of interest and old habits is the only thing that are restraining them An example of this is the test sales in Estonia, Lithuania and Poland where no product adaptation was made for these markets; even the price of the houses remained the same as on the Nordic markets After unsuccessfulness in these test markets, Älvsbyhus made the conclusion that the demand for their products was too low, even though no real market research was conducted Älvsbyhus’ economic situation makes it possible to make direct investments in these markets without any substantial risks For example, by establishing additional manufacturing subsidiaries in these markets and by using the local somewhat low-cost workforce, the company could probably cut prices, as well as augment the demand to be higher and ease the sales for their woodhouses on these markets However, the motivation for the company not to enter an additional international market like Germany was explained by the marketing manager at Älvsbyhus as “Other Swedish house producing companies have tried to enter the German market and they were not successful, so why should we expose ourselves for that kind of risks?” One can not but wonder if a more proactive and risk-taking approach would not have secured the company additional profitable opportunities and opened new windows to the new global market 6.2.3 Implications for future research This thesis has provided an insight to a field of study where it still remains a great deal of areas in which to conduct additional research The following areas could be of interest for further study: Ü To make the same study on a larger sample of companies Ü To investigate how different types of organizational structures affect the choices for internationalization for SMEs Ü To investigate how the motivational factors mentioned in this thesis affect both large and small companies in the internationalization process 49 CHAPTER FINDINGS AND CONCLUSIONS Ü To investigate why and how companies come up with unconventional methods of internationalization, which not follow the traditional sequential internationalization process Ü To 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Who established the company and when? How many employees the company have? The company’s total turnover? What products the company offer? What is the core business of the company? How much of the total sales the company export (in percentage)? What products are being exported? History of Internationalization During how many years has the company been exporting? 10 Why did the company start up their export activities? 11 How did the company start up their export activities? 12 To which countries did the company begin to export? 13 To which countries does the company export nowadays? 14 Does the company aim to extend their export activities in the future? 15 How has the export motives changed, since the very beginning of the export activities? 16 If the export motives have changed, why have they changed? 17 Which motives are the most important ones today when selecting export markets and entry modes? Company’s Foreign Market Selection 18 How have the following external factors influenced the company’s target market selection? - Geographical distance? - Per capita income? - Infrastructure? - Exchange rate stability? - Psychic distance? - Political stability? - Trade barriers? - Tax benefit? - Market size and growth rate? - Competition? - Costs of serving the market? - Profit and market potential? - Market access? APPENDIX I 19 How have the following internal factors influenced the company’s target market selection? - Skills? - Resources? - Product adaptation? - Competitive advantage? - Unique products? - Management ability, flexibility and commitment? - Planning and control? - Excess capacity? - Overproduction? - Personnel’s motivations qualifications? Company’s Choice of Mode of Entry 20 What type of entry mode has the company utilized? - Direct export - Indirect export - Licensing - Franchising - Contracting - Sales subsidiaries - Manufacturing subsidiaries - Joint ventures - Strategic alliances _ _ _ _ _ _ _ _ _ 21 How have the following external factors influenced the company’s choice of entry modes? - Socio-cultural distance? - Country risk and demand uncertainty? - Market size and growth? - Direct and indirect trade barriers? - Competitive environment? - Small number of relevant export intermediaries available? - Laws and regulations? - Geographical distance? 22 How have the following internal factors influenced the company’s choice of entry modes? - Speed? - Costs? - Flexibility? - Risks? - Payback? - Long-term objectives? - Company size? - International experience? APPENDIX I - Type of product (complexity and differentiation)? - Planning and control? - Managerial reasons? - Relationships? 23 What type of risks did the company perceive as the largest in the initial phase of the export activity? 24 What meaning did these risks have for the company in the beginning of the engagement? 25 How have these risks been managed? Thank you for your time and cooperation! APPENDIX II Appendix II Interview Guide in Swedish Företagets bakgrund Namn och titel på respondenten? Vem grundade företaget och när? Hur många anställda har företaget? Företagets omsättning? Vad är företagets huvudsakliga verksamhet? Vilka produkter erbjuder företaget? Hur stor del av företagets försäljning är export? (i procent) Vilka produkter exporteras? Företagets export historia Under hur många år har företaget exporterat? 10 Varför började företaget exportera? 11 Hur började företaget exportera? 12 Till vilka länder började företaget exportera? 13 Till vilka länder exporterar företaget idag? 14 Är det företagets mål att utöka sin export i framtiden? 15 Har företagets motiv för att exportera förändrats sedan exporten inleddes? 16 Om motiven har ändrats, varför? 17 Vilka är de viktigaste motiven idag när företaget väljer exportmarknader och typ av inträde på marknaden? Företagets val av internationella marknader 18 Hur har följande externa faktorer påverkat företagets val av internationella marknader? - Geografisk avstånd? - BNP per capita? - Infrastruktur? - Stabilitet i växelkurs? - Kunskap och information om markanden? - Politisk stabilitet? - Handels hinder? - Skattefördelar? - Marknadens storlek och tillväxt? - Konkurrens? - Kostnader att verka på marknaden? - Avkastnings och marknads potential? - Tillgänglighet till marknad APPENDIX II 19 Hur har följande interna faktorer påverkat företagets val av internationella marknader? - Kunskaper? - Resurser? - Produkt anpassning? - Konkurrens fördelar? - Unika produkter? - Ledningens förmåga, flexibilitet och hängivenhet? - Planering och kontroll inom företaget? - Outnyttjad kapacitet? - Överproduktion? - Anställdas motivation och förmåga? Företagets val av typ av inträde på en internationell marknad 20 Vilken typ av inträde har företaget utnyttjat? - Direkt export - Indirekt export - Licensera - Franchising - Kontraktstillverkning - Dotterbolag som sköter försäljning - Tillverkande dotterbolag - Samarbete med annat bolag - Strategiska allianser _ _ _ _ _ _ _ _ _ 21 Hur har följande interna faktorer påverkade företagets val av typ av inträde på den internationella marknaden? - Tid att ta sig in på marknaden - Kostnader - Flexibilitet - Risker - Återbetalningstid av investering - Långsiktiga mål - Ledningens påverkan - Typ av produkt - Företagets storlek - Internationell erfarenhet - Relationer 22 Hur har följande externa faktorer påverkade företagets val av typ av inträde på den internationella marknaden? APPENDIX II - Lagar och förordningar? - Geografiskt avstånd? - Konkurrenskraftig marknad? - Sociala och kulturella skillnader? - Osäkerhet att bedöma efterfrågan? - Marknaden storlek och tillväxt? - Direkta och indirekta handelshinder? - Få eller befintliga mellanhänder för export? 23 Vilka risker upplevde företaget som de största i början av sin export? 24 Hur påverkade dessa risker företaget i början av sin export? 25 Hur har dessa risker blivit behandlande? Tack för din tid och medverkan! [...]... interesting and selected for this reason In order to study the external and internal factors influencing SMEs’ selection of international markets and SMEs’ choice of foreign entry mode were found especially interesting, for the reason that these explain why companies enter certain markets and why they decide to use certain foreign entry modes 24 CHAPTER 3 METHODOLOGY Concerning the choice of country and industry,... hypothesis can be disapproved or not (Ibid) The purpose of this thesis is to gain an understanding of how SMEs select and enter foreign markets In this field of research there is a relatively lot of theory available In order to develop an understanding of how both the internal and external factors influence SMEs’ choice of international market and foreign entry modes this thesis will be descriptive 3.2 Research... Literature Review In this chapter a selection of the literature and existing research on SMEs’ internationalization is presented The reader should take into consideration the fact that SMEs’ international market selection and SMEs’ choice of foreign entry modes are highly connected and are often hard to separate in the literature At the end of this chapter, some of the theories reviewed will be used... this part will be finished by the theory and references referring to SMEs’ choice of foreign entry modes, especially looking at the different types of foreign entry modes and the factors influencing the choice of specific entry mode 2.4.1 Internationalization of SMEs According to Czinkota & Ronkainen (2004), internationalization process is a gradual process and there are very few companies that initiate... purpose of the research is present in the sample study In this thesis the research has been started by looking at SMEs’ internationalization and what external and internal factors influence SMEs’ international market selection Additionally, the SMEs’ choice of foreign entry modes has been studied and in particular what external and internal factors influence these choices This specific area of research... Personnel’s motivations and qualifications 17 CHAPTER 2 LITERATURE REVIEW 2.4.3 SMEs’ choice of foreign entry modes According to Root (1994), international entry strategy is a comprehensive plan and it sets forth objectives, goals, resources and policies that will guide the international business activities The selection of an entry mode involves following decisions: 1 2 3 4 5 Choice of a target/product... least flexible and the most costly of all entry modes are the entry modes with high resource commitments, like the wholly owned subsidiaries (Ibid) Managerial reasons: De Búrca, Brown & Fletcher (2004) state that the previous experiences of international markets of the company’s management influence highly the choice of foreign entry mode Country of birth, years spent abroad and frequency of international. .. size and growth rate, Competition, Cost of serving the market, Profit and market potential, as well as Market access Internal factors influencing international market selection of SMEs According to Jobber (2004), internal factors influencing the international market selection of SMEs are connected with company capability profile • Company capability profile: Skills, Resources, Product adaptation and. .. managements willingness to go international, as well as the level of commitment abroad In addition the choice of foreign entry mode is influenced by management’s planning orientation, knowledge of international markets, business practices, transactions and different cultures, as well as of their ability and willingness to adapt to international strategic approaches, marketing orientation and long-term objectives... risk and demand uncertainty • Market size and growth • Direct and indirect trade barriers • Competitive environment • Small number of relevant intermediaries available De Búrca, Brown & Fletcher (2004) point out the importance of the following additional factor for the choice of foreign entry mode: • Laws and regulations Root (1994) also takes up an additional factor that influences the choice of foreign