Factors Affecting the Foreign Market Entry Mode Decision

For Flow Spring Alkaline Water it was suggested that they internationalize and do business in Australia and China.

a. State the entry mode and provide a strong reason for this decision.

b. In making the decision, what are the advantages and disadvantages?

There are (4) groups of factors that influence the entry mode decision in a specific country which are: 1. Internal Factors 2. External Factors 3. Desired Mode Characteristics 4. Transaction-specific Behavior (only analyze "Tacit nature of know-how" and neglect the other ones)

Figure 9.1 Factors affecting the foreign market entry mode decision in a specific country Internal factors Product + = Increasing Product internalization International Product Firm size differentiation = = Decreasing experience complexity advantage internalization (= increasing externalization) Desired mode characteristics Risk averse Control Flexibility + Entry mode decision A Hierarchical modes Transaction-specific [internalization) factors (increasing - Intermediate modes Tacit nature + Internalization) of know-how Export modes + (externalization) Opportunistic Transaction behaviour costs External factors Sociocultural Country Small number Market Direct and Intensity distance between risky of relevant export size and Indirect of home country and demand intermediaries growth trade barriers competition host country uncertainty available