Factors affecting the entry mode decision of service-dominant companies

Services are increasingly important in the foreign trade. Entering to new markets offer both manufacturing companies and service companies a chance to spread their competitive advantages without sometimes risky diversification. While both services and international market entry are widely studied topics, there is little understanding about the interaction of the two. More specifically, there is little understanding why service-dominant companies tend to choose more integrative entry modes than companies in manufacturing sector. This thesis tries to discover, firstly, how the level of company's service-dominance affects the entry mode decision-making factors. Secondly, this thesis examines how service-dominant companies consider the relative role of three factors often associated with foreign market entry: Strategic Variables, Transaction Variables and Environmental Variables. The research method is a holistic, qualitative single case study consisted of evidence from three executives of a Finnish service-dominant IT company operating in a global scale. The data collection was conducted through focused interviews with semi-structured, open-ended questions. The results indicate that service-dominant companies consider the factors affecting their choice of entry mode differently from manufacturing companies. Service-dominant companies first determine the required level of control, which affects the Strategic Variables and Transaction Variables. By analyzing these factors, service-dominant companies create an Entry Mode Strategy that determines their preferred mode of entry to all individual markets, instead of choosing an appropriate entry mode for a single market. Hence, service-dominant companies only consider Environmental Variables when deciding whether or not to enter an individual country with the predetermined entry mode. Based on the empirical findings, I develop a framework that describes the factors affecting a service-dominant company's entry mode decision-making. The framework and the empirical findings give valuable insights to both academics as well as managers and allow for a better understanding how the peculiar characteristics of service-dominant companies affect their choice of an entry mode