FREE ESSAY ON FOREIGN MARKET ENTRY

FOREIGN MARKET ENTRY

1.0 Objectives
The author's objective in this article is to discuss on the effective modes of entry for
businesses that is planning to venture into international market. The entry modes methods
discussed are aimed to help businesses to formulate an effective international business
strategy and to position themselves to be successfully established in the global market.
2.0 Central Theory
The central theory introduced in this article is developed based on a comprehensive
framework of the entry modes choices. These modes of choices would determine the success
factor of the international business strategy, and to choose these choices there are
several important factors to be considered. These factors include situational firm
factors, foreign environment review, and moderating factors that would directly influence
the firm's desired mode of choice.
Referring to Appendix A is the mode choice of framework by Driscoll that depicts the
whole concept discussed. To briefly illustrate, the firm would need to evaluate the two
situational factors that would directly affect its desired level of different modes of
characteristics. Subsequent from the selected desired modes, the firm would also need to
determine the potential moderating influences, which would affect the desired mode. Thus,
reassessment based on the moderators would take place to determine the most effective
modes of entry. By selecting the right mode of entry, the firm would incorporate an
effective business strategy for its international business plans.
3.0 Arguments
The article written by Driscoll is set to present an argument for the development of a
comprehensive framework for understanding the mode of entry choices. In the article, she
illustrated about the different modes of entry to international markets, analyzed on the
different characteristics of the entry modes, discussed on the number of situational
influences and moderating factors, and presented a comprehensive model of understanding
with remarks on managerial implications.
Some of her arguments include the three broad grouping of the foreign entry modes that
should not have any other classification, unless it has similar meanings such that quoted
by some reference; and the five key characteristics of the entry modes that is similarly
supported by other authors such as Agarwal and Ramaswami 1992; Anderson and Gatignon
1986; Douglas and Craig 1989; and etc.
4.0 Methods and evidence supporting the author's viewpoints
Driscoll's methods and evidence is based on the centralized theory of the framework of
entry modes choices. The following are the various methods used and supporting evidence
in the framework model.
4.1 Modes of entry to international markets
According to Driscoll, there are 3 main foreign market entry methods; namely 
export, contractual and investment modes, which is supported also by other authors like
Anderson and Gatignon's (1986), Root's (1987) and Young's (1989).
These three methods encompass a broad area for a firm that is planning to enter into
foreign market. As Driscoll explains, export modes can include either a direct export
from its local market to the foreign market or an indirect involvement through an
appointed trading house. 
Then, in a contractual entry mode, a firm can arrange various methods such as licensing,
franchising, turnkey projects, non-equity joint ventures and etc. to tap into its
international market. In general, this method reduces the level of equity investment and
direct participation by the firm. However, some evidence that Driscoll related, such that
for franchising, where Burton and Cross (1995) argued that there are possibilities of
higher level international involvement and equity investment by the firm.
Then, investment modes are methods used for some form of ownership by the firm in the
foreign market. For instance, the investments may involve acquisition, merger or
greenfield strategy and joint ventures basis, where Driscoll quoted some reference from
Kogut and Singh (1988).
4.2 Characteristics of different entry modes
Driscoll proposed that the key characteristics of the entry modes methods are level of
control, dissemination risk, resource commitment, flexibility and ownership. These
characteristics are also supported by many authors such as Agarwal and Ramaswami 1992;
Anderson and Gatignon 1986; Douglas and Craig 1989; and etc.
As Driscoll argues that control is the key functionality for a firm to maximize its
economic efficiency and return of investment in international markets. This was also
supported by Hill et al. (1990) where control allows firm to directly manage its
operation and decision making which would ensures desired level of achievement in its
whole operation and target market. 
The next method relates to the risk of disseminating the firm's knowledge asset to its
contractual partner. Driscoll explains that protecting the firm's know-how asset is
critical to avoid unnecessary threats of survival for the firm. She quoted Williamson
(1985) where risk can be minimized through comprehensive contingent contracts and
continuous improvement of technology in products or services would gain a long term
competitive advantage.
The following entry mode method is resource commitment. Driscoll pointed out that there
is a high tendency for firms to commit more business resources as the international
business progress. This was supported by Johanson and Vahne (1977) in the Uppsala
Internationalization Model as a firm needs to increase its resources commitment when it
becomes more experienced and knowledgeable about the foreign markets. The commitment
involves financial and physical cost, opportunity cost, and unforeseen risks and threats;
for instance, threat of employee abduction and hostile occurrence.
Flexibility is another substantial method that has inverse relation to the former method.
According to Driscoll, a firm needs to be flexible in changing its entry modes quickly
and efficiently, and thus gaining better competitive edge in the market. Her statements
was also supported by Porter (1976) on the concept of flexible exits barriers strategy,
while Klein (1989) added that firms should have less formalized and centralized
organization structures to adapt to its dynamic environment.
The final entry mode is ownership where Driscoll argues that by having full equity
ownership, a firm should have greater control as compare to sharing that causes risk
dissemination. Gatignon and Anderson (1988) asserted that ownership should have a direct
relation to the amount of control, however there are cases where control can be achieved
despite the above argument. For example, McDonald's standardized franchise business.
In relation to the above entry modes, Driscoll summarized a comparison of the entry modes
characteristics across the generic foreign entry modes (refer to Appendix B). Some of the
significant analysis includes the ideal level of entry modes characteristics through
investment modes but has low level of flexibility, then exporting method that gives
higher degree of flexibility despite the drawbacks of other modes, and contractual modes
that facilitates as intermediate level for all the modes of entry as compare to the
former methods. 
Some of the evidences supported in the article are by Erramilli and Rao (1993) and Klein
(1989) that emphasizes on the needs of firm to weigh the factors (actual environment)
that could affect their desired level of characteristic when making entry mode choices. 
(Remember to attach the summarized table in appendix B .... ; )
4.3 Factors moderating mode choice
According to Driscoll, there are several factors that affect the firms ability to achieve
the desired level of different mode of characteristics. They are government policies and
regulations, firm size and corporate policies. 
For government policies, Driscoll discusses on the types of policies such as capital
controls, intellectual property laws, monetary and etc. that would restrict the firms
desired level of entry modes. Some evidence quoted includes the Poitiers Incident of 1983
by Hood and Truijens (1993) where French authorities boycotted Japanese VCRs market
penetration, Kenya's internal export compensation, and South African two tier currency
restriction to foreigners by Economic Intelligence Unit (1993b).
Another moderator factor is firm size restriction that limits the firm to commits on
higher resources and ownership, and forced to resort to less desired entry modes. Then,
corporate policy or the historical precedence does influence the undertaken mode of entry
compare to the desired level.
4.4 Situational influences on mode choices
The other method that Driscoll discussed in the article is on the situational influences
that affects the firms desire level of entry mode. The two main category include firm
factors that relates to the firms competitive advantage or skills, product or industrial
experience, and strategic approach developed; and another factor is environmental that
links with demand and competitive conditions, political and economic issues, and social
cultural characteristics in the foreign market.
Some of the evidence discussed under firm factors where a company that has firm-specific
advantage over others will choose a mode choice that gives more control. Hymer (1960);
Kindleberger (1969) quoted that when product differentiation through R&D exists, firms
will seek to establish control over these advantages and protect them from dissemination
through the use of investment mode of entry.
Then, experience and exposure of a firm in international marketing is another crucial
firm factor that influences mode choice. This is in agreement with Buckley and Casson
(1985) that states that experience reduces cost and risk in the serving market and
increases the resource commitment of the firm.
Driscoll also agrees with Kim and Hwang (1992) that a firm might want to leverage one
product against another and to be strategic in its strategies to achieve overall
corporate objectives. 
Meanwhile, in environment factors the demand of the foreign market plays an essential
part of the entry. Driscoll related that the demand and competitive condition influences
the cost of serving the market and its commitment. Then, the stability of the host
political and economic condition determines the entry modes of its resource commitments
and flexibility. The ideal choices for higher risk factors, as Driscoll stated is through
exporting options.
Differences and dissimilarities in social cultural issues as quoted by Johanson and
Vahlne (1977) would cause uncertainties of level of investments and foreign market
penetration, and thus affects the entry mode decision making.
5.0 Values/ Literature
This article provides a comprehensive and feasible framework to help businesses to
prepare for international business venture. The concepts of entry modes discussed by
Driscoll allows firms to determine their desired mode of entry characteristics, such as
more control and low dissemination risk and thus enable companies to consider various
choices that fits to their level. As compare to some other models, Driscoll has
incorporated more alternatives for companies to assess and analyze their strength. Firms
can also look into possibilities of combining various characteristics that best suit
their environment, hence, allowing business managers to have a multidimensional task and
priority in their mode choices. As a result, they would be more flexible and effective in
adapting to the dynamic environment.
The other contribution from the article is the introduction of situational influences,
for instance, political and economic factors or firm specific advantage, which allows
firms to measure an independent desired mode of characteristics against its independent
actual mode chosen. This would provide a more realistic and accurate scenario of the mode
chosen for the business. This has been proven by recognized authors, where in many cases
the implementation of desired modes are different from the actual modes, as this is due
to the influences of various situational factors. Thus, as an advantage the managers
would be able to evaluate more effective entry modes base on the various situational
factors.
Then, the following main contribution is the moderating factors, which allows firms to
better evaluate their entry mode strategy after reassessing the potential moderators
factors such as government and corporate policies, and firm size. The impact includes
helping managers to understand the influences of moderating factors, instead of relying
on the expected desired modes. As a result, this prevents any potential pitfalls of
overseeing the influencing moderating factors. The impact would ensure that there is a
long-term success factor in its decision made for international business commitments.
6.0 Conclusion
In summary, Driscoll's presentation on the entry mode framework for international
business ventures has provided a very extensive and comprehensive coverage in the
strategic business planning for a foreign market. Her three broad foreign market entry
methods with a combination of various entry modes characteristics inter-relation has
given a great insight and understanding of the practical business approach to an
international environment. For instance, Driscoll's statistic research on firms of
different entry modes in relation to different modes of entry characteristics proves an
important practical solution in her argument, i.e. more control and low risk
dissemination for investment, and etc. 
Then, Driscoll also related two very important factors that would affects the choice of
entry modes; namely situational and moderator influences. These factors are crucial
aspects to be evaluated and considered for every international business as the success
factor of the entry mode chosen are largely depended on the accuracy of handling these
factors. Her categorization and literature evidence on these factors are also precise and
comprehensive which covers many aspects of the dynamic foreign situational analysis. 
As compare to one of the research source by a Taiwanese author Aihwa Chang (1998) in
Appendix C [Please check the date and put the article in attachment Appendix C], the
author related 5 different modes of entry; namely choice according to industry
traditions, random choice, pre-determined choice and contingent choice [you may or may
not need to add more write-up] which does not covers a board aspect of the whole actual
environment. Then, as the author associated several factors such as economic efficiency,
financial commitment, control, flexibility and experience, which has some similarity with
Driscoll, however the substance discussed does not fully review the success factor of the
entry selection. 
Finally, Driscoll's concluding remark recommended that firms should be flexible and
adaptable to the situational changes of its entry mode choices from time to time as this
would bear a high chances of success and sustainability in the international global
business.