1. Entry Mode Choice

2. Location-specific advantages
Where to Enter?
Matching strategic goals with locations
Strategic goals
Location-specific advantages
Examples
Market-seeking
Strong market demand and customers willing to pay
Marketing and sales of consumer goods anywhere in the world
Natural resource-seeking
Quality and costs of natural resources
Oil exploration in the Middle East
Efficiency-enhancing
Economies of scale, abundance of low-cost labour force and suppliers, transport and communication infrastructure
Manufacturing in China; logistics in Rotterdam, Vienna and Miami
Capability-enhancing
Innovative individuals, firms and universities, industry agglomeration
Chinese acquisitions of technologies and brands in Germany; wind energy in Jutland; IT in Silicon Valley

3. Screening process for potential markets and sites
Step 1: Identify strategic goals
•Access to materials, labour, financing, etc.
Step 2: Assess opportunities and challenges in
the national business environment (PESTEL)
and market (competitor analysis)
Step 3: Select the market or site
•Firm resources (strength/weakness) analyses
• Match strategic goals with locations and firm resources
• Field trips

4. When to Enter? First-mover advantages Late-mover advantages
(or first-mover disadvantages)
• Proprietary, technological leadership
• Pre-emption of scarce resources
• Establishment of entry barriers for late entrants
• Relationships and connections with key stakeholders such as customers and governments
• Opportunity to free-ride on first-mover investments
• Resolution of technological and market uncertainty
• First mover’s difficulty to adapt to market changes

5. How to Enter?

6. Non-equity internationalisation strategies
Seller (Exporting)
Buyer (Importing)
Good
• direct exports
• Indirect exports via domestic intermediary
• Indirect export with foreign distributor or agent
• Direct import
• Indirect import
• Subcontracting of manufacturing
Service
• Delivering services to customers abroad
• Attracting foreign customers to your location.
• Hiring consultants based abroad
• Subcontracting of services
Combination of goods, services and rights
• Licensor
• Franchisor
• Build turn-key projects
• Build-operate-transfer contracts
• Management contract
• Licensee
• Franchisee
• Subcontracting
• R&D contracts

7. Control Level Comparison
Low Control
High Control
Indirect Export through Agents
Direct Export
Non-equity strategic alliance:
- Licencing
- Franchising
(1) Equity strategic alliance
(2) <100% acquisition
- International Joint Venture
(1) Greenfield investment
(2) 100% acquisition
(3)Merger
- Wholly Owned Subsidiary

8. Impact on entry mode (examples) Impact on location (examples)
Institutional Constraints on Foreign Entry
Types of constraints
Impact on entry mode (examples)
Impact on location (examples)
Certain operations or transactions are not permitted
Establish JVs where WOSs are not permitted.
Locate where planning permissions are easier to obtain.
Need for local knowledge
Establish JVs to access local knowledge
Locate in agglomerations of foreign investors that help attaining local knowledge.
Higher transaction costs due to costly contract enforcement
Avoid complex arm’s-length contracts with unfamiliar partners
Locate in areas where local uncertainty is lower
Higher transaction costs due to financial intermediaries
Avoid full or partial acquisitions of local firms -
Higher tariffs or other trade barriers
Locate production in the target market

9. Implications for action
Design operations to link your capabilities with the local contexts you are targeting.
Design operations to facilitate learning about IB in general, and the host country in particular.
Design operations for flexibility to enable later adjustment to changes in both your own capabilities and in the external environment.
If your medium-term target markets are international, design your business models accordingly from the outset.

10. Implications for Practice
Understand the rules of game in the host country – both formal and informal – and fit your strategies to the constraints and opportunities of these institutions.
Bring together the MNEs’ global capabilities and complementary local resources
Match the different elements of an entry strategy with the firm’s strategic goals.

11. Summary Basic entry decisions Where to enter When to enter
How to enter
The influence of institutional constraints on entry mode choice
Implications for action