The influence of internal and external factors on entry modes

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.Validerat; 20101217 (root