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School of Business

A330A9000 Master's Thesis, International Marketing Management

Sami Saarenketo, Sanna-Katriina Asikainen, Olli Kuivalainen

Research Plan

28 September 2011

Sirén Tomi e0369362



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TABLE OF CONTENTS

INTRODUCTION ...................................................................................................................... 4

Background of the study ............................................................................................................. 4

Research questions and objectives .............................................................................................. 4

Theoretical framework ................................................................................................................ 5

Definitions ................................................................................................................................... 5Delimitations ............................................................................................................................... 5

Structure of the study .................................................................................................................. 5

LITERATURE REVIEW ........................................................................................................... 6

Transaction cost analysis (TCA) ................................................................................................. 7

Resource-based view (RBV) ....................................................................................................... 8

Institutional theory ...................................................................................................................... 8

Eclectic framework ..................................................................................................................... 8

Uppsala model ............................................................................................................................ 8

Characteristics of South American business environment .......................................................... 8

South America as an opportunity and challenge ......................................................................... 8

The role of government ............................................................................................................... 8

Corruption ................................................................................................................................... 8

Overcoming the barriers and challenges ..................................................................................... 8

Market entry modes of SMEs in South America ........................................................................ 8

The choice of market entry strategy ............................................................................................ 8

Mode switching strategies ........................................................................................................... 8

Mode combination strategies ...................................................................................................... 8



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THE INTERNATIONALIZATION OF FINNISH COMPANIES TO SOUTH AMERICA .. .. 9

EMPERICAL ANALYSIS OF FINNISH SMES IN SOUTH AMERICA ................................ 9

Research method ......................................................................................................................... 9

Case selection process ................................................................................................................. 9

Case descriptions and within-case analysis ................................................................................ 9

Case A 9

Case B 9

Cross-case analysis .................................................................................................................... 9

6.4. Expert descriptions and analysis .......................................................................................... 9DISCUSSION AND CONCLUSIONS ...................................................................................... 9

Summary of major findings ........................................................................................................ 9

Managerial implications .............................................................................................................. 9

Limitations and suggestions for futher research ......................................................................... 9

REFERENCES .......................................................................................................................... 11



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INTRODUCTION

The working title of the study is “Market entry modes of Finnish SMEs entering South

America” or “Internationalization process of Finnish SMEs to South America”. Depending on

how the study will change during the process.

Background of the study

Research questions and objectives

The Aim of the study is to examine the different market entry modes Finnish SMEs have used

in entering South America. The objective is to compare different entry mode strategies the

companies have used in their internationalization process and find out if the company has

been forced to switch or combine its strategy. By conducting additional experts’ interviews

the goal is to understand and evaluate how well each entry strategy suited to the South

American business environment. The research questions are in a Finnish context as the focus

is on Finnish case companies and interviewed experts.

Research question:

• What types of market entry modes Finnish SMEs have used in South America?

Sub question 1:

o Which factors affected Finnish SMEs market entry decisions?

Sub question 2:

o Have Finnish SMEs combined or changed their market entry strategies since

the first entry to South America?

Sub question 3:



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o How are the market entry modes of Finnish SMEs to South America seen by the

area experts?

Theoretical framework

Definitions

Delimitations

Structure of the study

The aim of this research is to examine the market entry modes of Finnish SMEs entering

South America. As acknowledged in the literature review, the entry mode studies are focusing

mainly on the initial entry phase and tend to ignore the mode actions after the executed entry.

However, many SMEs are forced to change their entry mode strategies or combine different

strategies to meet the needs of the changing and turbulent business environment in South

America.

The study will be conducted as a qualitative within-case and cross case research. The case

companies (6-8 companies) will be carefully selected and interviewed face-to-face in South

America in spring 2012. In addition, several experts, such as FinPro Country Analysts,

Authors, and Professors, who have in-depth knowledge and experience of the business

environment of South America, will be also interviewed for the research. The aim is comparethe practical founding’s of the within-case analysis and the recommended practices by the

experts.



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LITERATURE REVIEW

Once the organization has chosen target markets and countries as part of its

internationalization process the question arises as to what is the best strategy and way to enter

these chosen markets. Hollensen (2010, 315-316) argues that for most SMEs the market entry

mode is a critical first step of the process, whereas for established companies the question is

more of how to exploit opportunities more effectively with the context of their existing

network of international operations, not just how to enter new markets. Welch et al. (2007, 3)

sees also the choice, use, management and change of foreign operation methods as a critical

component of international business activity. The importance of the issues has also been

acknowledged by researchers, lecturers and practitioners as basic to any discussions about

organizations’ international business strategies.

In terms of what kind of strategy should an organization use for the entry mode selection,

Root (1998, sivu?) proposes three different rules and argues that many SMEs are probably

using the pragmatic or even the naive rule:

1. Naive rule: The organization uses the same entry mode for all foreign markets. Naivi rule

tends to ignore the heterogeneity of the individual foreign markets.

2. Pragmatic rule: The organization uses a functional entry mode for each individual foreign

market. In the beginning of the entry, the organization typically starts executing a low-risk

entry mode and if the chosen entry mode is not feasible or profitable, it will start looking for

another entry mode. Pragmatic rule can ignore the screening of all potential entry modes andthus, the chosen functional entry may not be the best entry mode available.

3. Strategy rule: Strategy rule dictates that all alternative entry modes are systematically

analyzed and compared prior to any choice is made. Strategy rules would be to choose the

entry mode that maximizes the profit contribution over the strategic planning period subject to

the organizations resources, risk and non-profit objectives.



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A large number of theories have been used to explain the entry mode choice decision of an

organization. Among the most commonly applied theories are transaction cost analysis,

resourced-based view, institutional theory, and eclectic framework which are used as a

theoretical base for a large share of the published entry mode studies. (Brouthers & Hennart

2007, 400.) In additional, Uppsala model is also included to the theoretical framework review.

Transaction cost analysis (TCA)

Rindfleisch & Heide (1997, 30) acknowledged over a decade ago that transaction cost

analysis (TCA) had already received an increased amount of attention from a wide range of

audiences. Today, TCA is the most widely used theoretical perspective in international entry.

It argues that managers suffer from bounded rationality whereas potential partners may

opportunistically act if given the chance.

In TCA framework, three factors are hypothesized to influence decision: asset specificity,uncertainty and frequency.

(Brouthers & Hennart 2007, 400)



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Resource-based view (RBV)

Institutional theory

Eclectic framework

Uppsala model

Characteristics of South American business environment

South America as an opportunity and challenge

The role of government

Corruption

Overcoming the barriers and challenges

Market entry modes of SMEs in South America

The choice of market entry strategy

Mode switching strategies

Mode combination strategies



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THE INTERNATIONALIZATION OF FINNISH COMPANIES TO

SOUTH AMERICA

EMPERICAL ANALYSIS OF FINNISH SMES IN SOUTHAMERICA

Research method

Case selection process

Case descriptions and within-case analysis

Case A

Case B

Cross-case analysis

6.4. Expert descriptions and analysis

DISCUSSION AND CONCLUSIONS

Summary of major findings

Managerial implications

Limitations and suggestions for futher research



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REFERENCES

Bessant, J. & Tidd, J. & Pavitt, K. (2005) Managing innovation – integrating technological,

market and organizational change. 3 th edition. John Wiley & Sons.

ClearSMS. (2009) History of SMS Messaging [www document] [accessed 08 December

2010] available http://www.clearsms.com/blog/2008/3/5/history-of-sms-messaging.html

Hollensen

Welch

Root

TCA: http://doc.isiri.org.ir/documents/10129/21025/JUN+3.pdf s.400

Transaction cost analysis: Past, present, and future applications

Aric Rindfleisch; Jan B Heide

Journal of Marketing; Oct 1997; 61, 4; ABI/INFORM Global

pg. 30

http://doc.isiri.org.ir/documents/10129/21025/JUN+3.pdf

http://doc.isiri.org.ir/documents/10129/21025/JUN+3.pdf

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