The impact of firm resources and host country specific factors on international entry mode strategy - Dissertation Example

Data Gathering Instrument 62 List of Tables List of Figures Chapter 1: Introduction This study aims to determine the factors that influence the choice of entry modes that U.K firms may explore in their effort to establish a presence in a foreign market. Such factors shall pertain to either firm specific or country specific resources and attributes which exert an influence over the eventual choice of a mode of entry of a multinational firm into the host country. During the third quarter of the twentieth century, globalisation was considered a largely political issue, with implications concerning foreign dominance and power wielded by rich, developed nations over the developing and underdeveloped Third World countries.

As a consequence, the globalisation commitment entered into by countries in multilateral agreements was met with slow progress and considerable suspicion by political and civic groups. Businessmen were quick to see the advantages, however, of gaining access to new markets opening up across borders. In deciding upon entering a foreign market, a firm takes on considerable risks, but foresees that there is an opportunity to earn considerable returns as well. It will therefore base its decision on whether or not there is a favourable trade-off between risks and returns – that is, whether the chances of earning returns significantly higher than it would in the local market would exceed the risks that it may be facing.

This is the crux of the normative decision theory. On the other hand, behavioural theory suggests that a firm may also consider entry into foreign markets depending on the trade-off between the relative availability of resources in the targeted site compared with the home site, as against the degree of control that may be exercised, which is. The paper tells that in an era of expanding globalization, tastes and preferences of people in different countries and cultures have converged, due to many factors most prominent of which is the increased flow of electronic communications by which people across borders are able to exchange information and socially interact with one another.

As a result, the fashion clothing industry has been rapidly expanding across the globe, with the development of brand loyalty and affinity playing a large part in the economic success of certain brands. Fashion clothing companies, in an effort to penetrate new markets and, in some cases, explore new, less costly sources of factors of production, contemplate cross-border expansion. The problem with such a strategy is that there is no one fixed approach to entering another market. Each situation is approached in its own context, because of the unique set of issues relating to each location’s political, economic, social, technical, legal, and environmental circumstances.

The particular competencies and resources of the business also work to influence the feasibility of the company’s entry into a foreign market. It is thus possible for a company to select and control the conditions of its entry into other countries, such that it may develop channels of distribution with varying degrees of commitment and exposure. Three companies in particular – Marks & Spencer, Burberry, and Next – have pursued aggressive expansion strategies in foreign markets.