628 The Marketing Book
Three basic choices
The issue of mode of market entry choice ties in
with the degree of commitment which the
company has to export business generally, as
well as to corporate policy which may rule out
certain types of overseas association, e.g. joint
equity venture or trading with a certain country
or political or economic bloc on the basis of
human rights record or political repression.
There is no single ‘best’ strategy which may be
adopted for market entry. There is no correct
answer, only to say that this must be examined
within an exclusive situational context. For
each market, this may throw up new and
exciting but untried alternatives, leading an
experienced international marketing firm to be
able then to boast of a portfolio of different
market entry modes currently in operation
internationally. Situational ‘fit’ is the answer.
While the choice of entry mode is wide, the
costs of making a mistake are heavy. Selection
is best made against a number of criteria, such
as the company’s estimation of the perceived
value of this particular market and their total
commitment to it, whether short or long term.
Export.
Taking it further:
- Contractual modes.
- Investment modes.
Four underlying dimensions
Choice of mode of market entry may be
dependent upon the firm’s needs with regard
to the following (Driscoll and Paliwoda,
1997):
Control dissemination risk, i.e. authority over
operational and strategic decision making.
Dissemination risk or the extent to which a
firm perceives that its firm specific advantages
will be expropriated by a contractual partner.
Resource commitment, namely the financial,
physical and human resources that firms
commit to enter foreign markets.
Flexibility or the ability of a firm to change
entry modes quickly and with minimal costs in
the face of evolving circumstances. This is
inversely related to resource commitment.Seven situational influences
From in-depth interviews conducted by
Driscoll and Paliwoda (1997), a number of
situational variables emerge which have been
classified into two broad groupings of firm-
specific (or ownership) advantages and loca-
tional advantages: Product differentiation.
Tacit know-how.
International experience.
Governmental intervention.
Market attractiveness.
Socio-cultural distance.
Country risk.However, only one variable – socio-cultural
distance – was found to have a statistically
significant influence on mode choice. Increas-
ing socio-cultural distance between a firm’s
home country and its host country makes it
more likely that the firm will choose con-
tractual modes of entry over investment modes.
One other variable, tacit know-how, approa-
ches significance, suggesting that as know-how
becomes more tacit in nature, firms prefer the
use of investment entry modes to contractual
modes. These findings confirm mode choice as
comprising a number of decision dimensions,
each of which is influenced by different situa-
tional factors. Examining the ability of various
mode choice dimensions to differentiate among
distinct mode options, it has been shown that
resource commitment, control and dissemina-
tion risk are the most important aspects of
mode choice. Of the three, resource commit-
ment appears to be the most prominent con-
sideration. The results confirm that socio-cul-
tural distance and tacit know-how play an
important role in mode choice. This research
had indicated that, in making mode choices,