July 12, 2008

Research Proposal on What issues influence a company's choice of entry mode when seeking an overseas market?

1.0  Title

The working title of the research is initially drafted as – What issues influence a company's choice of entry mode when seeking an overseas market?

2.0  Background of the Study

When companies expand outside the domestic marketplace and start their competition on a global basis, there are specific considerations that would likely to determine the success or failure of the endeavor. Primarily, the organisation shall face two competitive pressures such as pressure for cost reduction and pressures to be responsive to local conditions. Nonetheless, the degree of the pressure varies depending on which strategy to pursue. There are four strategies that the organisation could from: international, multidomestic, global and transnational. There are pros and cons associated with each of these strategies. Therefore, there must be the linkage on the appropriateness of the chosen strategy and the pressures for cost reductions and local responsiveness as it could generally affect the mode of entry of the organisation.

In penetrating foreign markets, three basic decisions are contemplated upon: which markets to enter, when to enter those markets, and on what scale. Notable is that choosing an entry mode involves trade-offs. The choice of foreign markets must be made on the basis of evaluating the long-run profit potential; hence, balancing the benefits, costs, and risks associated with doing business in that country. Timing of entry advents most companies when done appropriately. A common notion is that "entry is early when an international business enters a foreign market before other foreign firms, and late when it enters after other international businesses have already established themselves."  The scale of entry and its strategic commitments should be evaluated as well so as to sustain the long-term impact of the action.

            Further, there are choices of entry modes and these have inherent advantages and disadvantages. These are exporting, licensing, cross-licensing agreement, franchising and joint ventures. The rationale of this study is to analyse and evaluate the influences that shape the decisions of different organisations when planning to globalise. Based on the framework developed by Johnson and Scholes, there are specific elements that contribute to the major decisions of the organisations. This study will seek to determine those elements so as to acquire deeper knowledge on the matter.  

3.0  Preliminary Literature Review

A literature review will be provided in the actual study which will be put in second chapter. Literatures will be about the contributing factors on the entry decisions of the organisations prior to implementing global strategies. Examples of the books that will be reviewed are the book written by Gerry Johnson and Kevan Scholes entitled Exploring Corporate Strategy. The book contains the fundamental of corporate strategies and understanding the strategy development. Figure 1 is the framework used by the authors.

The second edition of the book entitled Exploring Strategic Change will be also reviewed. This time the two authors along with Julia Balogun and Veronica Hope Hailey focus on the implementation of organisational change and the management of organisational transitions representing a departure from the notion that change management can be a formulaic and linear process.

The Handbook of Strategy and Management by Howard Thomas, Andrew Pettigrew and Richard Whittington examine the domain of strategic management. The authors also address how various organisations could act and thinks strategically especially in light of the changing contexts.

In addition to the three identified sources, literatures will be also acquired from online journal databases such as Blackwell Synergy, Emerald and Questia. Literatures will be reviewed to increase the knowledge about the topic and to help in the analysis of data.

4.0  Theoretical Framework

According to Johnson and Scholes (2002), strategic management has three main components within such as strategic position, strategic choices and strategies into action. The first component concerns identifying the impact on strategy of the external environment, the organisation's strategic capability (resources and competences) and the expectations and influence of stakeholders. The second component centers on understanding the bases for future strategies at business and corporate levels and development of directions and methods. The final component is concerned with ensuring that strategies are working in practice by means of structuring, enabling and managing change.

Figure 1. Strategic Management (Johnson and Scholes, 2002)

5.0  Research Aim and Questions

The main purpose of this research is to distinguish the internal and external factors that influence their choice of mode of entry when seeking markets offshore. In lieu with this, the research will attempt to answer the following questions:

1)     During strategy development, what are the factors to be considered?

2)     During transaction cost analysis, what are the factors to be considered?

3)     During deliberation of ownership, localization and internationalization process, what are the factors to be considered?

4)     In assessing the organisational capacity, what are the factors to be considered?  

6.0  Research Plan

The study will incorporate an exploratory approach in the phenomenon because it aims to determine the present facts as well as facts that are not yet explored about the phenomenon. This approach is a preferred mean of finding out "what is happening to seek new insights" or "to ask questions or to assess phenomena in a new light" (Saunders et al, 2003; Robson, 2002). This study will use the principal ways of conducting exploratory research, which include: literature search; talking to experts about the subject; and conducting interview. 

The survey method will be used for data collection. Surveys are conducted to gather data from the field in order to generalize results from a sample to a larger population. The primary purpose and advantage of surveys is to generalize the results. A semi-structured questionnaire will be used in the interview and survey. The questionnaire will contain two types of questions: ranking and open-ended. The ranking questions should be rated by the respondents using a 5 point Likert Scale.

 


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