Factors Influencing Market Entry Strategy for MNEs

Running head: MANAGING IN GLOBAL CONTEXT
Managing in Global Context
[What are the critical factors in choosing the ideal market entry strategy for the MNEs?]
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1MANAGING IN GLOBAL CONTEXT
The multinational enterprises (MNEs) are faced with multiple questions to answer while
they make plans for entering a foreign marketplace. One of the most challenging and common
questions that they are needed to answer is deciding the best mode of entry. There are various
modes through which MNEs can enter the target foreign market; however, apart from
understanding these entry modes they have another important task to consider. This is to research
and understand the potential impact of the country’s external environment on the chosen entry
mode. For example, exporting could be the best mode of entry for certain countries. It may be
due to numerous factors like a less favourable political state of the country or else. An
unsupportive political state might prevent foreign companies from setting up manufacturing and
other various facilities (Han et al., 2018). For example, Walmart still does not have any physical
existence in India despite so much of speculation on their entrance to India (Harris, 2013). This
essay is also in the line of the discussion in the above paragraph. The essay identifies factors,
which have impact on the selection procedure for the best market entry mode. The selection of
an appropriate entry mode can have the effects of political, economic and other important
external factors of the target country. This research essay tries to establish a discussion to
identify what all factors affect the market entry for MNEs. This discussion will be conducted in
reference to a few scholarly articles.
International market entry mode has been an extensive research area for global
researchers. The selection of integrated and non-integrated entry modes depend on various
factors. As observed by Pinto et al., (2017), the firm adopts the integrated modes to enter the
marketplace in situation when they have limited suitable partners in the host country. In other
situation like when the host government is not so favourable for foreign ownership when there is
high uncertainty in the country and when the firm is short of resources, non-integrated entry

2MANAGING IN GLOBAL CONTEXT
modes are the most preferred market entry strategy. However, the article does not identify any
such influence of market size and firms’ desire to become an established market player on its
foreign operations. Firms that had enhanced control on product customisation and also had closer
interaction with their customers preferred the integrated entry modes. Firms carrying an intention
to attain a rapid growth in a foreign marketplace preferred going for non-integrated modes. As
per the article, the discussed factors may be impactful under diverse entry situation.
Bruneel & De Cock (2016) identify locational advantages and ownership as impactful on
the market entry choice by SMEs. This is in particular to the computer software industry. The
article examined the behaviour of selecting marketing mode between cooperative, independent
and integrated modes of entry. Larger firms those which have higher resource capabilities and
have more locational advantages as compared to SMEs they will most certainly prefer integrated
entry modes. Additionally, firms those who follow product differentiation strategy they also
prefer going for integrated entry modes. By doing this they avoid losing their competitiveness to
the local partners. A foreign market that provides long-term investment potential to the firms is
mainly approached with integrated entry modes.
Hitt, Li & Xu (2016) in order to identify the impact of market risks on selecting the most
suitable market entry mode considered an integrated international risk framework. The influence
was compared between the diverse selection modes such as non-equity mode, wholly owned
subsidiary and a joint venture in the context of an emerging market like Malaysia. It was being
found in this article that all type of market risks affect the firm's entry mode. The article also
finds a negative relationship between market risks and the choice of market entry. In a situation
when there are high market risks the firms decided sticking to reduced control and lower

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resource commitment. Some of the factors as found in this article that greatly impacts the entry
mode choice are customer taste, industry structure and marketing infrastructure.
In the opinion of Anderson & Sutherland (2015), the choice between acquisitions,
Greenfield investments and joint ventures by MNEs can have the influence of the industry
structure in the manufacturing industry. The article finds that MNEs firms prefer Greenfield
operations over acquisitions and joint ventures mostly in industries that are highly concentrated.
On the other hand, MNEs will prefer acquisitions and joint ventures over Greenfield operations
in industries that are characterised by plant scale economies. It is because any new creation of
facility in such industries will disrupt the business of all firms including the new entrant.
However, firms tend to have their inclination towards Greenfield operations over joint ventures
and acquisitions in industries that have high growth rates. It is due to a fact that a growing
industry has the capacity to absorb a new facility created through Greenfield investment.
Wooster, Blanco & Sawyer (2016) helped to identify the impact of uncertainty on making
selection between low control resource commitment modes, and high control resource
commitment modes by MNEs in the context of the service industry. The article uses ordinal
logistic regression to examine the impact. The article finds that capital intensive firms prefer to
share control and investment in a case of a huge cultural difference between the home country
and host country, and there is a high risk in the host country. However, a higher control and the
resource commitment modes is most suitable to firms having lower exit costs and categorised
under knowledge-intensive firms. They do it to gain competitive advantage in a market, which is
still very much unexplored. With respect to demand-based uncertainty, any changes in the client
requirement have little or no influence on the capital intensive firm. However, knowledge-
intensive firms are highly vulnerable to any such scenario. In such a situation, the knowledge-