Formation of Market Entry Strategy With an Interest in Decision-making: A Case Study in a B2b Context 2022
Added on 2022-10-19
72 Pages26663 Words19 Views
|
|
|
Bachelor thesis
Authors : Anna Nilsson 920815
Mélanie Sala 930828
Supervisor: Tomas Nilsson
Examiner: Dr. Pejvak Oghazi
Date: 29/05/2018
Subject: Degree project on the
International Sales and Marketing
Program.
Course code: 2FE22E
Formation of market entry strategy with
an interest in decision-making
A case study in a B2B context
Authors : Anna Nilsson 920815
Mélanie Sala 930828
Supervisor: Tomas Nilsson
Examiner: Dr. Pejvak Oghazi
Date: 29/05/2018
Subject: Degree project on the
International Sales and Marketing
Program.
Course code: 2FE22E
Formation of market entry strategy with
an interest in decision-making
A case study in a B2B context
i
Abstract
Today’s business environment is growing at an increasing pace, pushing firms to
internationalize. Foreign market entry has thereafter been a well-researched field by scholars.
International market selection and entry mode choice are key strategic decisions a company
must deal with when entering a foreign market and members of management team are
entrusted with the responsibility of these complex decisions that will set the direction for the
company.
There have been many studies showing that internationalization is a sequential and gradual
process leading companies to spread their activities to more markets that are geographically
and culturally distant. These processes are involving riskier and more committed modes of
entry. However, research concerning strategic decision making has shown that decisions
made by management were not always rational and are influenced by external and internal
factors which in turn influence the choices managers make. Market entry strategy fits into a
broader theoretical subject which is the one of “strategy” and decisions. Following the
principle that realized strategies are the result of planned and unplanned decisions, this
research investigates how strategy related to foreign market entry emerge in a multinational
company, with a specific interest in the decision-making process.
A case study was conducted at a multinational company in a B2B context and the research is
based on a qualitative approach, with empirical data collected from 10 in-depth interviews.
After the empirical data was analysed it was concluded that strategy is not to be seen as a
linear and sequential process nor as a set of objectives set in time. Foreign market entry
strategy is the result of decisions involving market selection, entry mode choice, and product
portfolio, and is subject to adjustments since it is affected by its internal and external
environments.
Keywords
Strategy, Decision-making process, Foreign Market Entry, Multinational Company,
Expansion, Market Development
Abstract
Today’s business environment is growing at an increasing pace, pushing firms to
internationalize. Foreign market entry has thereafter been a well-researched field by scholars.
International market selection and entry mode choice are key strategic decisions a company
must deal with when entering a foreign market and members of management team are
entrusted with the responsibility of these complex decisions that will set the direction for the
company.
There have been many studies showing that internationalization is a sequential and gradual
process leading companies to spread their activities to more markets that are geographically
and culturally distant. These processes are involving riskier and more committed modes of
entry. However, research concerning strategic decision making has shown that decisions
made by management were not always rational and are influenced by external and internal
factors which in turn influence the choices managers make. Market entry strategy fits into a
broader theoretical subject which is the one of “strategy” and decisions. Following the
principle that realized strategies are the result of planned and unplanned decisions, this
research investigates how strategy related to foreign market entry emerge in a multinational
company, with a specific interest in the decision-making process.
A case study was conducted at a multinational company in a B2B context and the research is
based on a qualitative approach, with empirical data collected from 10 in-depth interviews.
After the empirical data was analysed it was concluded that strategy is not to be seen as a
linear and sequential process nor as a set of objectives set in time. Foreign market entry
strategy is the result of decisions involving market selection, entry mode choice, and product
portfolio, and is subject to adjustments since it is affected by its internal and external
environments.
Keywords
Strategy, Decision-making process, Foreign Market Entry, Multinational Company,
Expansion, Market Development
ii
Acknowledgements
During the process of conducting this thesis, we were privileged with all the support and
assistance needed in order to reach a satisfying result. We would like to take this opportunity
to thank and show our gratitude to everyone involved in this process. A special thank you to
Electrolux Professional Products, especially Alberto Zanata, Head of Electrolux Professional
Products and Gerd Almlöf, Sales Administration Manager who always had time to help us
with valuable information and contacts throughout the thesis. We are grateful that you shared
your experience and your deep knowledge with us!
We would also like to express our gratitude and appreciation to our tutor, Dr. Tomas Nilsson
for your feedback and support during the process, and your valuable advice. For your words
of encouragement, guidance and advice, we would like to thank our examiner Dr. Pejvak
Oghazi. Furthermore, we would also like to thank our classmates for your valuable
oppositions and feedback with relevant adjustments and improvements during this process,
and also thank you for interesting conversations and discussions.
Anna Nilsson & Mélanie Sala
Acknowledgements
During the process of conducting this thesis, we were privileged with all the support and
assistance needed in order to reach a satisfying result. We would like to take this opportunity
to thank and show our gratitude to everyone involved in this process. A special thank you to
Electrolux Professional Products, especially Alberto Zanata, Head of Electrolux Professional
Products and Gerd Almlöf, Sales Administration Manager who always had time to help us
with valuable information and contacts throughout the thesis. We are grateful that you shared
your experience and your deep knowledge with us!
We would also like to express our gratitude and appreciation to our tutor, Dr. Tomas Nilsson
for your feedback and support during the process, and your valuable advice. For your words
of encouragement, guidance and advice, we would like to thank our examiner Dr. Pejvak
Oghazi. Furthermore, we would also like to thank our classmates for your valuable
oppositions and feedback with relevant adjustments and improvements during this process,
and also thank you for interesting conversations and discussions.
Anna Nilsson & Mélanie Sala
Table of Contents
INTRODUCTION ............................................................................................................ 1
1.1 BACKGROUND ........................................................................................................................... 1
1.2 PROBLEM DISCUSSION.............................................................................................................. 3
1.3 PURPOSE .................................................................................................................................... 5
1.4 RESEARCH QUESTIONS ............................................................................................................. 5
THEORETICAL FRAMEWORK ................................................................................. 6
2.1 STRATEGIC DECISION-MAKING ................................................................................................ 6
2.1.1 Formation of strategy ............................................................................................................ 7
2.1.2 Role of power ....................................................................................................................... 10
2.1.3 Organizational culture ......................................................................................................... 10
2.1.4 Internal communication ....................................................................................................... 10
2.2 MARKET ANALYSIS MODELS .................................................................................................. 10
2.2.1 Ansoff matrix ........................................................................................................................ 11
2.2.2 PESTLE analysis .................................................................................................................. 12
2.3 FACTORS AFFECTING ENTRY MODE....................................................................................... 13
2.3.1 Internal factors affecting market entry ................................................................................ 13
2.3.2 External factors affecting market entry ............................................................................... 14
2.4 MARKET ENTRY STRATEGIES................................................................................................. 16
2.4.1 Transaction-cost approach .................................................................................................. 16
2.4.2 The eclectic framework ........................................................................................................ 17
2.4.3 Resource-based view ............................................................................................................ 17
2.4.4 Institutional theory ............................................................................................................... 17
2.4.5 Entry mode decision ............................................................................................................. 18
2.4.6 Diversification mode choice................................................................................................. 18
2.5 RESEARCH MODEL .................................................................................................................. 19
METHODOLOGY ......................................................................................................... 20
3.1 RESEARCH APPROACH ............................................................................................................ 20
3.1.1 Inductive, Deductive Research and Abductive Research ..................................................... 20
3.1.2 Qualitative and Quantitative research ................................................................................. 21
3.2 RESEARCH DESIGN ................................................................................................................. 22
3.2.1 Case Study............................................................................................................................ 23
3.3 DATA SOURCES ....................................................................................................................... 23
3.4 DATA COLLECTION METHOD ................................................................................................ 24
3.4.1 In-depth interviews............................................................................................................... 25
3.5 SAMPLING ................................................................................................................................ 26
3.5.1 Sample Selection .................................................................................................................. 26
3.5.2 Respondent Validation ......................................................................................................... 26
3.6 ETHICAL PRINCIPLES ............................................................................................................. 27
3.6.1 Informed consent .................................................................................................................. 28
3.6.2 Invasion of privacy ............................................................................................................... 28
3.6.3 Harm to participants ............................................................................................................ 28
3.6.4 Deception ............................................................................................................................. 28
3.7 DATA ANALYSIS ...................................................................................................................... 29
3.7.1 Data Reduction .................................................................................................................... 29
3.7.2 Data Display ........................................................................................................................ 29
3.7.3 Drawing Conclusion and Verification ................................................................................. 29
3.8 QUALITY CRITERIA ................................................................................................................ 30
3.8.1 Credibility ............................................................................................................................ 30
3.8.2 Transferability...................................................................................................................... 30
3.8.3 Confirmability ...................................................................................................................... 31
3.8.4 Dependability ....................................................................................................................... 31
3.9 RELIABILITY............................................................................................................................ 31
INTRODUCTION ............................................................................................................ 1
1.1 BACKGROUND ........................................................................................................................... 1
1.2 PROBLEM DISCUSSION.............................................................................................................. 3
1.3 PURPOSE .................................................................................................................................... 5
1.4 RESEARCH QUESTIONS ............................................................................................................. 5
THEORETICAL FRAMEWORK ................................................................................. 6
2.1 STRATEGIC DECISION-MAKING ................................................................................................ 6
2.1.1 Formation of strategy ............................................................................................................ 7
2.1.2 Role of power ....................................................................................................................... 10
2.1.3 Organizational culture ......................................................................................................... 10
2.1.4 Internal communication ....................................................................................................... 10
2.2 MARKET ANALYSIS MODELS .................................................................................................. 10
2.2.1 Ansoff matrix ........................................................................................................................ 11
2.2.2 PESTLE analysis .................................................................................................................. 12
2.3 FACTORS AFFECTING ENTRY MODE....................................................................................... 13
2.3.1 Internal factors affecting market entry ................................................................................ 13
2.3.2 External factors affecting market entry ............................................................................... 14
2.4 MARKET ENTRY STRATEGIES................................................................................................. 16
2.4.1 Transaction-cost approach .................................................................................................. 16
2.4.2 The eclectic framework ........................................................................................................ 17
2.4.3 Resource-based view ............................................................................................................ 17
2.4.4 Institutional theory ............................................................................................................... 17
2.4.5 Entry mode decision ............................................................................................................. 18
2.4.6 Diversification mode choice................................................................................................. 18
2.5 RESEARCH MODEL .................................................................................................................. 19
METHODOLOGY ......................................................................................................... 20
3.1 RESEARCH APPROACH ............................................................................................................ 20
3.1.1 Inductive, Deductive Research and Abductive Research ..................................................... 20
3.1.2 Qualitative and Quantitative research ................................................................................. 21
3.2 RESEARCH DESIGN ................................................................................................................. 22
3.2.1 Case Study............................................................................................................................ 23
3.3 DATA SOURCES ....................................................................................................................... 23
3.4 DATA COLLECTION METHOD ................................................................................................ 24
3.4.1 In-depth interviews............................................................................................................... 25
3.5 SAMPLING ................................................................................................................................ 26
3.5.1 Sample Selection .................................................................................................................. 26
3.5.2 Respondent Validation ......................................................................................................... 26
3.6 ETHICAL PRINCIPLES ............................................................................................................. 27
3.6.1 Informed consent .................................................................................................................. 28
3.6.2 Invasion of privacy ............................................................................................................... 28
3.6.3 Harm to participants ............................................................................................................ 28
3.6.4 Deception ............................................................................................................................. 28
3.7 DATA ANALYSIS ...................................................................................................................... 29
3.7.1 Data Reduction .................................................................................................................... 29
3.7.2 Data Display ........................................................................................................................ 29
3.7.3 Drawing Conclusion and Verification ................................................................................. 29
3.8 QUALITY CRITERIA ................................................................................................................ 30
3.8.1 Credibility ............................................................................................................................ 30
3.8.2 Transferability...................................................................................................................... 30
3.8.3 Confirmability ...................................................................................................................... 31
3.8.4 Dependability ....................................................................................................................... 31
3.9 RELIABILITY............................................................................................................................ 31
EMPIRICAL DATA ...................................................................................................... 32
4.1 INTRODUCTION TO ELECTROLUX PROFESSIONAL PRODUCTS ............................................ 32
4.2 FACTORS AFFECTING MARKET ENTRY .................................................................................. 32
4.2.1 Internal factors..................................................................................................................... 32
4.2.2 External factors .................................................................................................................... 34
4.3 MARKET ENTRY ...................................................................................................................... 35
4.3.1 Teamwork............................................................................................................................. 37
4.3.2 Disagreements & the role of the manager ........................................................................... 38
4.3.3 Cultural differences ............................................................................................................. 40
4.4 EVALUATION OF THE EXPANSION AND THE CURRENT BUSINESS ......................................... 42
ANALYSIS ...................................................................................................................... 44
5.1 STRATEGY FORMATION .......................................................................................................... 44
5.2 FACTORS AFFECTING MARKET ENTRY STRATEGY ............................................................... 46
5.2.1 Internal factors..................................................................................................................... 46
5.2.2 External factors .................................................................................................................... 47
5.3 MARKET ANALYSIS MODELS .................................................................................................. 48
5.4 ENTRY MODE CHOICE ............................................................................................................. 49
5.5 TEAMWORK ............................................................................................................................. 51
CONCLUSIONS AND IMPLICATIONS .................................................................... 52
6.1 ANSWER TO RESEARCH QUESTIONS ....................................................................................... 52
6.2 THEORETICAL IMPLICATIONS................................................................................................ 54
6.3 MANAGERIAL IMPLICATIONS ................................................................................................. 54
6.4 SUGGESTIONS FOR FUTURE RESEARCH ................................................................................. 55
6.5 CRITICAL REVIEW ................................................................................................................... 55
REFERENCES ......................................................................................................................... I
APPENDIX - INTERVIEW GUIDE ..................................................................................... X
4.1 INTRODUCTION TO ELECTROLUX PROFESSIONAL PRODUCTS ............................................ 32
4.2 FACTORS AFFECTING MARKET ENTRY .................................................................................. 32
4.2.1 Internal factors..................................................................................................................... 32
4.2.2 External factors .................................................................................................................... 34
4.3 MARKET ENTRY ...................................................................................................................... 35
4.3.1 Teamwork............................................................................................................................. 37
4.3.2 Disagreements & the role of the manager ........................................................................... 38
4.3.3 Cultural differences ............................................................................................................. 40
4.4 EVALUATION OF THE EXPANSION AND THE CURRENT BUSINESS ......................................... 42
ANALYSIS ...................................................................................................................... 44
5.1 STRATEGY FORMATION .......................................................................................................... 44
5.2 FACTORS AFFECTING MARKET ENTRY STRATEGY ............................................................... 46
5.2.1 Internal factors..................................................................................................................... 46
5.2.2 External factors .................................................................................................................... 47
5.3 MARKET ANALYSIS MODELS .................................................................................................. 48
5.4 ENTRY MODE CHOICE ............................................................................................................. 49
5.5 TEAMWORK ............................................................................................................................. 51
CONCLUSIONS AND IMPLICATIONS .................................................................... 52
6.1 ANSWER TO RESEARCH QUESTIONS ....................................................................................... 52
6.2 THEORETICAL IMPLICATIONS................................................................................................ 54
6.3 MANAGERIAL IMPLICATIONS ................................................................................................. 54
6.4 SUGGESTIONS FOR FUTURE RESEARCH ................................................................................. 55
6.5 CRITICAL REVIEW ................................................................................................................... 55
REFERENCES ......................................................................................................................... I
APPENDIX - INTERVIEW GUIDE ..................................................................................... X
List of Tables
Table 1. Common contrasts between Quantitative vs Qualitative Research 22
Table 2. Six Sources of Evidence: Strengths & Weaknesses 24
Table 3. Overview of the interviewees 27
List of Figures
Figure 1. Types of strategies 9
Figure 2. Ansoff Matrix 11
Figure 3. Research model 19
Table 1. Common contrasts between Quantitative vs Qualitative Research 22
Table 2. Six Sources of Evidence: Strengths & Weaknesses 24
Table 3. Overview of the interviewees 27
List of Figures
Figure 1. Types of strategies 9
Figure 2. Ansoff Matrix 11
Figure 3. Research model 19
1
Introduction
This chapter introduces the research area and the topic of the thesis. The problem discussion
reveals research gaps which have led to the purpose, research question and delimitation of
this thesis.
1.1 Background
In today’s dynamic business environment, a key challenge for multinational companies is to
make adaptive adjustments and take critical decisions regarding their internationalization
strategy (Douglas et al., 2004; Luoma et al., 2018). Internationalization and international
strategy were considered as static concepts until the dynamism concept was added, treating
internationalization as a process that unfolds over time (Andersen, 1997).
While internationalization has been described as an orderly and sequential process of
increasing the international operations of the firm, only a few researches have given attention
to the content of internationalization strategy (Andersen, 1997; Solberg & Durrieu, 2006).
However, viewing internationalization as strategy is paramount because managers who are
planning have to make key strategic decisions that Tuppura et al. (2008, p.474) divided in
three: “(1) the internationalization path, (2) the choice of entry/operation modes, and (3) the
number of countries, i.e. the choice between geographical concentration and diversification”.
The internationalization path is related to the speed that firms adopt when internationalizing.
The choice of entry deals with “how” to enter these markets. Finally, firms have to choose
where to enter and if they will serve multiple markets (geographical diversification) or focus
on a limited number of markets (geographical concentration) (Tuppura et al., 2008).
International market selection and entry mode choice are therefore key strategic decisions an
organization has to make regarding its internationalization and members of management team
are entrusted with the responsibility (Andersen, 1997; Douglas et al., 2004). These strategic
decisions are complex and will set the direction for the firm (Parayitam, S. & Papenhausen,
C., 2018).
Introduction
This chapter introduces the research area and the topic of the thesis. The problem discussion
reveals research gaps which have led to the purpose, research question and delimitation of
this thesis.
1.1 Background
In today’s dynamic business environment, a key challenge for multinational companies is to
make adaptive adjustments and take critical decisions regarding their internationalization
strategy (Douglas et al., 2004; Luoma et al., 2018). Internationalization and international
strategy were considered as static concepts until the dynamism concept was added, treating
internationalization as a process that unfolds over time (Andersen, 1997).
While internationalization has been described as an orderly and sequential process of
increasing the international operations of the firm, only a few researches have given attention
to the content of internationalization strategy (Andersen, 1997; Solberg & Durrieu, 2006).
However, viewing internationalization as strategy is paramount because managers who are
planning have to make key strategic decisions that Tuppura et al. (2008, p.474) divided in
three: “(1) the internationalization path, (2) the choice of entry/operation modes, and (3) the
number of countries, i.e. the choice between geographical concentration and diversification”.
The internationalization path is related to the speed that firms adopt when internationalizing.
The choice of entry deals with “how” to enter these markets. Finally, firms have to choose
where to enter and if they will serve multiple markets (geographical diversification) or focus
on a limited number of markets (geographical concentration) (Tuppura et al., 2008).
International market selection and entry mode choice are therefore key strategic decisions an
organization has to make regarding its internationalization and members of management team
are entrusted with the responsibility (Andersen, 1997; Douglas et al., 2004). These strategic
decisions are complex and will set the direction for the firm (Parayitam, S. & Papenhausen,
C., 2018).
2
According to Yip et al. (2000) internationalization can be approached systematically or not
systematically. Systematic approach means using formal strategic planning with market
research, considering country alternatives and entry modes, and having long-term objectives,
while unsystematic approach – or ad hoc – means being more opportunistic in decisions and
using a rule of thumbs (Yip, et al., 2000; Andersen & Buvik, 2002). The issue of systematic
and ad hoc internationalization fits into a broader theoretical debate than internationalization:
deliberate versus emergent strategies. Influencing scholars as Kotler (1984, cited in Yip, et
al., 2000) or Porter (1996) have studied deliberate approaches of strategy, while Mintzberg
(1978) focused on emergent approaches.
While rational decision-making scholars such as Ansoff (1957), Chandler (1962, cited in
Noda & Bower, 1996) and Porter (1996) studied the content of decisions by using rational
tools such as SWOT analysis and other quantitative models, the approach chosen during this
thesis will be the one of Mintzberg, et al. (1976, p. 246) who view decision-making as
important issues “in terms of the actions taken, the resources committed, or the precedents
set”. This means that strategic decision-making is not a linear sequence of steps, and although
it is rational to some extent, it is influenced by political, social and cultural processes that are
not linear (Rajagopalan et al., 1993)
Chandler (1962, cited in Noda & Bower, 1996) considered strategy as a course of action
consciously made by top management, or that it was a deliberate choice made between “a
different set of activities to deliver a unique mix of value” (Porter, 1996, p.64). Porter (1996),
who was focused on internal core competencies and competing abilities, argued that choosing
the right industry and positioning were the most important (Noda & Bower, 1996). Strategy
management has often considered strategy as an explicit, made on purpose and in advance set
of actions (Teece et al., 1997). Strategy formulation (goals and objectives setting) has
therefore often been distinguished from strategy implementation, and strategy process from
strategy content (Teece, et al., 1997; Kopmann et al., 2017).
Mintzberg (1978, p. 964) however had a different view and did not agree with the dichotomy
between formulation and implementation because it assumed that the “formulator [was] fully
informed” and the “environment [was] sufficiently stable” to make a choice. Instead of
considering the strategic process as planning, Mintzberg (1978) posited the eventuality that
strategies were not always made consciously or explicitly and considered it like a learning
According to Yip et al. (2000) internationalization can be approached systematically or not
systematically. Systematic approach means using formal strategic planning with market
research, considering country alternatives and entry modes, and having long-term objectives,
while unsystematic approach – or ad hoc – means being more opportunistic in decisions and
using a rule of thumbs (Yip, et al., 2000; Andersen & Buvik, 2002). The issue of systematic
and ad hoc internationalization fits into a broader theoretical debate than internationalization:
deliberate versus emergent strategies. Influencing scholars as Kotler (1984, cited in Yip, et
al., 2000) or Porter (1996) have studied deliberate approaches of strategy, while Mintzberg
(1978) focused on emergent approaches.
While rational decision-making scholars such as Ansoff (1957), Chandler (1962, cited in
Noda & Bower, 1996) and Porter (1996) studied the content of decisions by using rational
tools such as SWOT analysis and other quantitative models, the approach chosen during this
thesis will be the one of Mintzberg, et al. (1976, p. 246) who view decision-making as
important issues “in terms of the actions taken, the resources committed, or the precedents
set”. This means that strategic decision-making is not a linear sequence of steps, and although
it is rational to some extent, it is influenced by political, social and cultural processes that are
not linear (Rajagopalan et al., 1993)
Chandler (1962, cited in Noda & Bower, 1996) considered strategy as a course of action
consciously made by top management, or that it was a deliberate choice made between “a
different set of activities to deliver a unique mix of value” (Porter, 1996, p.64). Porter (1996),
who was focused on internal core competencies and competing abilities, argued that choosing
the right industry and positioning were the most important (Noda & Bower, 1996). Strategy
management has often considered strategy as an explicit, made on purpose and in advance set
of actions (Teece et al., 1997). Strategy formulation (goals and objectives setting) has
therefore often been distinguished from strategy implementation, and strategy process from
strategy content (Teece, et al., 1997; Kopmann et al., 2017).
Mintzberg (1978, p. 964) however had a different view and did not agree with the dichotomy
between formulation and implementation because it assumed that the “formulator [was] fully
informed” and the “environment [was] sufficiently stable” to make a choice. Instead of
considering the strategic process as planning, Mintzberg (1978) posited the eventuality that
strategies were not always made consciously or explicitly and considered it like a learning
End of preview
Want to access all the pages? Upload your documents or become a member.