Entry Mode Choice in Foreign Markets by MNEs : A Case Study of SKF’s HSB Project towards the Chinese Mining Industry

Abstract:

Market strategy is a broad phenomenon which covers many aspects; market entry, market segmentation, market research etc. To conduct a research about the whole concept of market strategy within a thesis would take years. This research solely focused on market entry strategy were the problem arise as many large multinational enterprises do not enter foreign markets in respect to the market conditions, but focuses on maintaining their own business culture wherever they enter.This research brought up a case study about the multinational enterprise SKF and how they could expand one of their projects (hydrostatic shoe bearing) with a market entry strategy. In relation to how SKF handle business in foreign markets and in respect to the Chinese market; a suitable entry mode was in focus for the HSB project. The implications were obtained by semi-structured interviews at SKF headquarter in Gothenburg in order to understand SKF’s way of handling foreign business. For the Chinese mining industry semi-structured interviews and secondary data were the source of the data gathered.The findings revealed that SKF’s way of handing foreign investment is dependent upon the resource commitment in the project. Exporting is common for minor projects and Wholly Owned Subsidiary for major projects. The main focus is to keep the technology and know-how within the company. Regarding the Chinese mining industry, the high intensity of rivalry would demand high resource commitment by foreign companies in order to stay competitive with the constant development. Currently, SKF consider HSB as a minor project which implies that resource commitment into the project would be of low prioritization. Therefore a suitable entry mode in the Chinese mining industry for the HSB project would be to enter the market with Exporting. Exporting would allow SKF to keep the technology and know-how within the company and Export after the demand in the market.