The influence of internal and external factors on entry modes

Abstract: As internationalization and globalization increases in today’s business
society, it becomes ever more important for individual business to keep up
with the development. The way a company ventures from their domestic market
to new geographical markets is of great importance for how well the company
succeeds with their overall business mission. Selecting the right entry mode
is an important decision that demands a lot of resources and thorough
planning. When selecting entry mode a wide range of internal and external
factors must be taken into consideration before making the final decision.
This thesis purpose is to provide a better understanding of the impact of
internal and external factors on Swedish SMEs’ choice of international
market entry strategies. In order to reach the purpose we constructed two
research questions regarding how the internal and external factors
influence firm’s choice of international market entry mode. Based on the
research questions, a literature review was conducted, which resulted in a
conceptual framework that presented what would guide the data collection.
In order to collect data, a qualitative, case study methodology was used,
using a multiple case study through interviews as our main data collection
tool. The main conclusions regarding the internal factors revealed in this
thesis are that company size/resources limit the companies’ possibilities
to choose market entry modes which demands great financial resources, it
also affects the management risk attitude toward being more risk averse.
Further the findings suggest that even though the companies in the study do
not exclude any single market entry mode, they prefer the use of entry
modes from which they have previous experience. The findings also suggest
that the motive for engaging in internationalization is that the domestic
market is insufficient due to the size and maturity. The main conclusions
regarding the external factors revealed in this thesis are that industry
feasibility/viability of MEM influences the choice of market entry mode
when there is an interest of a market as the company will alter their
market entry mode in order to avoid legal difficulties when trying to reach
the market. This is further enhanced by the factor of market barriers as
they might force the company to choose a specific market entry mode in
order to avoid legal difficulties when entering a new international market.
Target country production factors can be overcome through effective
implementation of well thought strategic plans, without affecting the
companies’ choice of market entry mode. Finally our findings suggest that
the geographical distance influence on the choice of market entry mode
decreases when the company’s resources and knowledge increase.