International Strategy as Key Determinants

Running Head: MULTINATIONAL ENTERPRISE
1
Management

Running Head: MULTINATIONAL ENTERPRISE
2
Question: Critically discuss the impact of external
factors (i.e. country’s characteristics) on Multinational
Enterprises entry mode choices.
Introduction
It is true that whenever any multinational enterprise decided to enter into the foreign market,
the most significant decision is the entry mode choice. The choice of entry mode puts the
major impact on the performance of firm as well as on its survival. Firm can choose the
several entry modes but it is essential to identify the several external factors that can affect its
growth in particular country (Castaño, Méndez and Galindo, 2015). Market size is the most
essential factor that is required to be considered before making any entry choice. If the
market of any country is small, it is not appropriate for firm to enter into that market. In
addition to this, several other factors are also responsible that are required to be considered
for making entry. In the recent time, government stability or laws made by the government
also affect the firms. The discussion of PESTLE analysis has also been done that will help in
knowing the entire external factors that can affect the multinational enterprise to make entry.
For the entry mode choice, Tesco Company has been chosen. By taking into account the
Tesco entry mode, China country has been chosen.
Impact of external factors on the Multinational
Enterprises entry mode choices
It is true that when any multinational enterprise make a decision for taking entry into any
country, it has to come across various external factors that can affect its entry mode` choice.
External factors related to entry mode choice can be seen with the PESTLE factors:
 Political and legal factors: the first factor that is included in the political and legal
factor is the laws. Every country has different laws that can affect the ability of business to
start its operation. For example- Thailand have the law that no company or foreign entity can
own more than 49 per cent stake in the Thailand. License is also one such factor that is
required by the enterprise to put into mind before moving to any particular country.
Government possess license so that the =huge percentage of the income status in their own

Running Head: MULTINATIONAL ENTERPRISE
3
country only. Taxes are also one such way that every government charges on foreign
businesses for selling or operating products in their home country (Tulung, 2017). Taxes are
therefore one such significant factors can impact the capability of a firm to do business.
The countries government also uses tariffs in order to ensure the balance trade between
countries. It becomes a significant factor when it comes to the international marketing or
trade of the product or service. Several risks are also associated with the currency at the time
of running a business in the currency of foreign country. Several countries also put
restrictions of several types. For example- many countries have the strict requirement to do
other business related investment in their own country (Davies, 2016). Several countries also
have political instability that tends to affect the ability to do business (De Villa, Rajwani and
Lawton, 2015).
It is found that Tesco was failed in China. However, it can choose the joint venture as an
entry mode. Due to high competition between the already stable companies, it is not easy to
sustain in the market. However, China is also proved the best destination for doing direct
investment. For example: According to Chang and Kao (2009) when the quality of
governance is high, it helps the political environment to be stable. However, it will face some
of the legal issues due to less regulation for privacy, consumer rights, as well as recognition
of digital signature.
(Trading Economics, 2019)
 Economic factors: economic condition of the country is also one such element that
affects the entry mode choice of multinational enterprise. The per capital income is one such