The Importance of Performance Assessment Tools in Measuring the Effectiveness of Modes of Market Entry

At what rate is performance assessment tools effective for Measuring the Efficiency of Various Modes of Market Entry of MNEs In Different International Markets?

Overview

Firms which have an interest in entering the foreign markets are faced with a difficult choice regarding the mode of market entry. The strategy of entering the international market should be made by the manager who seeks to establish the most desirable strategy. The presented aspect can be established through the use of assessment tools. For instance, the past experience of managers who have managed to enter the international market can come in handy in establishing the most effective strategy of entering the international market. Performance assessment tools come in handy gauging the effectiveness of different modes of market entry.

The importance of the topic

            Gathering data on the effectiveness of the performance assessment tools in measuring the modes of market entry is an important consideration in the presented field. The presented aspect is important since it would eliminate the uncertainty existing gap regarding the best mode of market entry for consideration for firms which seeks to expand into a new international market. According to Buckley and Casson (2010), an organisation which seeks to enter the foreign market should make a vital strategic decision on the mode of market entry for consideration. Considering the fundamental modes of entry such as joint ventures, exporting, licencing and sole venture, resource commitment is necessary despite the level. The initial choices that an organisation makes regarding the mode of entry is vital since it prevents an MNE from incurring losses of finances and time in case a change has to be made at a later point in time (Preece et al., 2016). The presented factor provides an indication that having an appropriate tool in place focused on measuring the effectiveness of the mode of entry limits the chances of resources wastage and potential failure in the new market.  

            Demirbag, McGuinness and Altay (2010) reveals that the best strategy of foreign market entry minimizes the costs of production and transactions carried out by the organisation in the new international market. Additionally, the perfect strategy also guides firm in overcoming market imperfections (Hennart, 2009). The higher the market imperfection, the greater the likelihood that the MNE will internalize the market and adopt a strategy likely to boost the operations of the firm in the international market. To ensure this, the managers must have the right guidance on the most effective mode of international market entry which is achieved through the use if appropriate assessment tools and strategies.

An overview of extant literature

            Past studies in the field of industrial organisation, international trade, and market imperfections have outlined several factors which influence the choice of international market entry. Integrating perspectives from various studies reveals that choice of market entry is influenced by three major types of dominant factors such as the location benefits of a firm, ownership advantages, and internalization benefits of integrating transactions within the business (Xie, 2012).

            The use of various strategies of assessment is important in establishing the effectiveness of various mode of international market entry. Managerial perceptions come in handy in accessing the location advantages before an MNE can settle for a specific geographic destination as a potential market. Additionally, the managerial assessment can also come in handy in assessing the most favourable mode of international market entry, having in mind that location benefits are exogenous (Lorenzo, 2015). The presented perceptions may vary from one manager to the other based on the fact that different individuals have different experiences on the identified mode of international market entry. Additionally, the level of experience and knowledge of the manager about the mode of entry and individual biases are an important factor of consideration in that they come in handy in determining the mode of international market entry preferred based on the past experiences of the persons in question (Johanson & Vahlne, 1977). Normative decision theory provides an indication that the decision to utilise a specific foreign market entry mode should rely on the trade-off between risks and returns (Beugelsdijk, 2014). An organisation is expected to settle for the mode of entry which offers the maximum risk-adjusted on the amount invested.

Identification of a possible research gap

            Despite the fact that various studies have made a substantial contribution to promote an understanding of the entry mode behavior of organisations, a fundamental gap in empirical literature still exists. Evidently, a fundamental gap still exists on the matter of how the inter-relationships among the determinant factors influence the choices that firms make on the mode of entry (Parboteeah & Cullen, 2017). The benefit of examining the effects of the inter-relationship stems from the fact that they may explain the behavior of the firm which cannot be captured by monitoring the independent effects of the factors.

An outline of how the question might be researched

            The data for the presented study will be gathered from secondary sources. Various online sources will be consulted to gather data likely to generate findings on the presented study. Some on the online database to be considered in the presented case include Google Scholar, Emerald, and EBSCOhost. An inclusion and exclusion criteria will be implemented to gather only quality and reliable sources. To achieve this, the data sources will be filtered based on the year of publication. Only recent sources will be consulted to avoid the use of outdated data for the presented study. The data will be collected only from sources published within the last ten years. The presented factor provides an indication that the data required for the presented study is existing. The data from the study will be collected qualitatively. Mobile surveys, face to face interview, systemic observations and telephone interviews will be implemented in the presented case to gather the requisite data for the presented study.

            Other than collecting data from online sources, primary research will also be carried out to answer the presented research question. The primary research will involve interview process whereby various firm managers will be carried out to gather data about the modes they consider as appropriate in international market entry. Additionally, the gathered data through the interview process will also seek to reveal the importance of the use of the assessment tools from the managers’ perspective when it comes to analysing the mode of international market entry.  

Implications of findings

            The findings generated from the presented study would come in handy in filling the existing gap in research. The findings for the presented study could be recommended for MNE managers who seek to expand their operations into the international market. Evidently, the managers will be aware of the best mode of entry to consider based on their business and expectation in the international market. The managers will find it easier to gauge the most effective mode of international market entry before investing resources in one only to fail at a future date. The findings of the study can also aid in the process of policy making. Evidently, the generated findings can guide policy makers in making effective policies focused on guiding firm managers on the appropriate modes of international entry likely to promote the success of the firm in the international market. According to Jin et al. (2013), it is apparent that environments which are defined by a high investment risk are discouraging for firms which seek to advance in the industry. Therefore, it is recommended that firms should refrain from entering them especially through the use of risky modes of market entry. Drafting policies on the presented area would, therefore, require policy makers to establish the modes of entry which are considered as risky in order to come up with effective rules focused on guiding the management on the strategies to avoid.

References

Beugelsdijk, S. (2014). Firms in the International Economy: Firm Heterogeneity Meets International Business. Cambridge, Massachusetts: The MIT Press.

Buckley, P., & Casson, M. (2010). The Multinational Enterprise Revisited (1st ed.). London: Palgrave Macmillan.

Demirbag, M., McGuinness, M., & Altay, H. (2010). Perceptions of Institutional Environment and Entry Mode. Management International Review, 50(2), 207-240. doi:10.1007/s11575-010-0028-1

Hennart, J. (2009). Down with MNE-centric theories! Market entry and expansion as the bundling of MNE and local assets. Journal of International Business Studies, 40(9), 1432-1454. doi:10.1057/jibs.2009.42

Jin, Z., Deng, F., Li, H., & Skitmore, M. (2013). Practical Framework for Measuring Performance of International Construction Firms. Journal of Construction Engineering & Management, 139(9), 1154-1167. doi:10.1061/(ASCE)CO.1943-7862.0000718

Johanson, J., & Vahlne, J. (1977). The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments. Journal of International Business Studies, 8(1), 23-32. doi: 10.1057/palgrave.jibs.8490676

Lorenzo, J. P. (2015). Investment Promotion as Progressive Realization of Economic and Social Rights. Asia-Pacific Journal on Human Rights & The Law, 16(1/2), 55-103.

Parboteeah, P., & Cullen, J. (2017). International business: Perspectives from developed and emerging markets (2nd ed.). New York: Routledge.

Preece, C. N., Mat Isa, C. M., Saman, H. M., & Che Ibrahim, C. K. (2016). Development of entry location, entry timing and entry mode decision model for construction firms in international markets. Construction Management & Economics, 34(4/5), 236-257. doi:10.1080/01446193.2015.1084429

Xie, Y. H. (2012). Foreign Firms’ Brand Extensions in a Host Market: Strategic Factors in International Branding Strategy. Journal of Marketing Theory & Practice, 20(1), 105-118.