Explain why “entry mode” is not an appropriate term in the International Business literature
In the event that a firm decides to expand its operations into a foreign market, so many factors come into play. Key among them is a mode of entry the firm will use. When a firm enters a foreign market, it is imperative that they change their mode of operation to suit their new environment. Most companies have the urge to have an international presence. However, for other companies, that may be a new challenge. The market entry decision entails when to enter, how to enter and where to enter. Some firms go into foreign markets early enough due to local saturated markets. Others go abroad as a result of strategic expansion plans and the expected benefits.
The term ‘entry mode’ is widely used in the International Business Literature. Benito, Petersen and Welch (2009) defines entry mode as a means by which a firm enters an international market (p. 1457). Entry mode is considered one of the most significant strategic choices since it has a direct effect on the future decisions and operations of the firm in its new foreign market. The existing literature on “Entry mode” postulates that it encompasses multiple modes existing in different types of combination. Hence, it appears to create a greater mode of diversity and a wider range of change options. Firms entering the international market need to find a specific mode of entry and operation (Benito et al., 2009, p. 1458). However, “entry mode” encompasses a broad range of term and does not delve into the specifics of an operation in a foreign market. Additionally, different researchers in the business realm have coined its definition using different criteria based on different forms of mode classifications. Hence, contributors in International Business Literature should avoid using the term.
What are the main drivers of mode change?
Mode change is as an essential part of the operations of the firm in an international market. Some of the main drivers of mode change entail adding a mode(s) to the present contractual agreement. Such agreements may not have been in existence before. However, firms can instigate their addition in order to drive mode change. Such adjustments might prove effective and enable the firm to position itself and act alone, thereby easing the path to mode change (Benito et al., 2009, p. 1458). Additionally, mode configuration can play an important part in driving mode change. Mode configuration involves configuring or arranging multiple modes using diverse ways. This results in a configuration matrix that includes various modes that falls into levels such as value chain level, governance form, and country.
What should be the criteria for designing mode packages?
According to the article, mode packages have and will still continue to dominate the international market activities. Hence, it is vital to evaluate the criteria for designing mode packages. First, it is vital for companies to fully modify their operation modes if the form intends to transform the way it functions in a foreign market. Secondly, where the company has substantial operations abroad, it will prove beneficial to audit the company’s use of different modes. It includes how and where the modes are employed. Thirdly, managers should also be aware of the wide array of techniques for mode adjustments. This information is significant in countering any mode bias. The Kone-Toshiba story also illustrates an important criterion integral in designing mode packages. From the story, it is possible to design a mode package by building the basic pictures of the mode packages first and making within mode adjustments over some time (Benito et al., 2009, p. 1467).
What is the contribution of the article to the International Business literature?
The article has a lot of relevance in the in the International Business Literature. Benito et al. (2009) aim of writing the article was to highlight the discrepancies that existed between theory and practice with regards to firms’ modes of operation in international markets. The article has contributed to the literature by addressing the disconnect existing between the International Business view of modes of foreign operations, and how firms pick and change their modes of operation. The article also contributes to the literature by redefining, re-evaluating and broadening the concept of operation mode. As a result, it enhances the study of the adaptation and evolution of modes, consisting of mode inertia, mode dynamics and mode learning (Benito et al., 2009, p.1456).
List of References
Benito, G R G , Petersen, B and Welch, L S, 2009. Towards more realistic conceptualisations of foreign operation modes. Journal of International Business Studies, 40, 1455-1470.