Växjö University

Beyond the Choice of Entry Mode - A case study of Micropower

by

 Judith Biecheler

Inhalt

1 Introduction 5
1.1 Background and Problem discussion 5
1.2 Problem formulation 6
1.3 Purpose 6
1.4 Limitations 7

2 Theory framework 7
2.1 Introduction 7
2.2 Current Phase 8
2.2.1 Internationalization 8
2.2.2 Market Entry Strategy 8
2.2.3 Market Entry Modes 8
2.2.4 Porter´s Five Forces - Model 9
2.3 Next Phase 10
2.3.1 Change factors 10
2.3.2 Market entry strategy change 10
2.4 Adjustments 11

3 Methodology 11
3.1 Research Journey 12
3.2 Research Method 12
3.2.1 Qualitative versus Quantitative Methods 12
3.3 Access 13
3.4 Data Collection 13
3.5 Scientific Credibility 14
3.5.1 Validity 14
3.5.2 Reliability 14

4 Empirical Data 15
4.1 The Micropower case 15
4.2 Results from another study 18

5 Analysis 18
5.1 Introduction 19
5.2 Current Phase 19
5.2.1 Internationalization 19
5.2.2 Market Entry Strategy 20
5.2.3 Market Entry Mode - Exporting 21
5.2.4 Porter´s Five Forces - Model 22
5.3 Next Phase 23
5.3.1 Change factors 23
5.3.2 Market Entry Strategy Change 24
5.4 Adjustments 25

6 Conclusions 26

7 Recommendations 27

References 28

Appendix 31

1 Introduction

1.1 Background and Problem discussion

Any company that starts to do business in foreign markets goes through a process, which is triggered by proactive and/or reactive factors. This process starts generally by finding and selecting a target market, decisions which frequently are made on the basis of marketing research. An important part of the research is to locate the market entry barriers, when entering in the foreign market. With this information the company has to develop a strategy to enter the market. Within the strategy formulation the company also has to choose an appropriate mode of entry. There are several different market entry modes and no one is the correct one, since they all have advantages as well as disadvantages. They are, however, more or less suitable depending on the company, its resources, its products etc. (Czinkota, 1993, p. 329-331, Johansson, 1997, p. 208 ff, Taylor, C. 2000).

However, a company′s internationalization process does not stop here. As the company gains experience from its current activities, it may want to make additional investments in the market, due to factors that could be described as internal or external. These factors could also motivate a change of entry mode. Extreme views even say that once the internationalization process has started, it will tend to proceed regardless of whether strategic decisions are made in that direction or not (Randoy, T. 2002, Wheeler, 1996). Although a lot of theory has been written on internationalization and on the choice of entry mode, there is little to be found on the internationalization process and particularly on the changing of entry mode.

To realize that the company could find itself in such a situation, where they need to develop in the foreign market, can be difficult. The fact that the strategy and in that also the entry mode chosen needs to be changed can be hard for a company to grasp, because change is always connected with a high degree of uncertanity. Research has shown (Randoy, T. 2002, Wheeler, 1996) that companies have found themselves in situations where their strategies and entry modes needed to be changed and, more importantly, research (Randoy, T. 2002, Wheeler, 1996) has shown that companies has managed to change entry modes. However, what the research lack is more indepth analysis of the process of changing entry mode. For reasons indicated above, a company in the relevant situation may need some help, some recommendations, which could make the change process less uncertain. A company that may be in such a situation is Micropower, located in Växjö, Sweden. The sales staff is built up of three employees. Since the start about twenty years ago they have exported their battery chargers through agents and distributors. Today they export to 16 different countries all over the world. In general the system has worked well but the system of agents and distributors limits the company′s options of selling to the markets, hurting their competitiveness and thereby restricting their possibilities to grow internationally. One of Micropower´s export markets is Germany. The company has been contacted by customers wanting to do business directly with the company, unwillingly of going through the agent/distributor. This puts Micropower in a difficult dilemma: on one hand they cannot steal market from their agent/distributor but on the other hand they might loose important customers. Maybe it is time for Micropower to make additional investments in Germany to take the next step in the internationalization process.

1.2 Problem formulation

The discussion above leads into the following problem:

• What characterizes the process of changing an entry mode in a small technologybased company?

By characteristics we mean, for example internal and external factors that trigger the change process.

1.3 Purpose 

The purpose with this case study is to explore the characteristics of the process of changing an entry mode in a small technology-based company doing business internationally.

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