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It can be established that the duration of time leading up to a switch of market entry
strategy varies significantly, based on the type of the market entry strategy (ME-
Mode). Switching away from importers, which is the most common market entry
mode, takes the longest amount of time: 19 years on average. For the other four top
entry modes, the first switch occurs on average after 5 to 10 years. The average time
until the first switch is 11 years.
Possible reasons for the long maintaining of the importer mode include extensive and
binding contracts with the partners which render a switch only possible on long term.
Further reasons might be fears of losses, risk-aversion on the part of the decision
markers, counter reactions to be expected, unclear and uncertain market conditions
(resulting in little clarity and transparency regarding a market) or a change in
management which bears effects over a long period of time leading up to the switch.
Possible reasons for the low dwelling time with direct export without middlemen and
with own sales personnel could lie in the better quality of market information and the
associated market transparency. Management increases its knowledge of market
requirements and can more quickly decide on the optimal mode. Further reasons lie
in the low level of binding to this mode which manifests itself in rather low switching
costs. Reactions due to a business loss, by importers, are not to be expected here –
this can also result in lower perceived switching costs.
When considering the destination mode of the first switch, the variations lose their
significance. Only switching to a joint venture takes significantly less time, an
average of 6 to 7 years, whereas all others take an average of 12 years. The
underlying reason might be that the configuration of the target mode influences the
time duration up until a switch to a lesser extent than the dismantling of the previous
mode structures. Possible reasons could lie in the various interests of the actors tied
to the previous mode structures and the resistance this involves.
With regard to the characteristics of successful internationalisation pathways, the
influence of switching patterns on the duration of the selected modes will be
analysed.
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The findings for the four most frequent pathways for the first switch after market entry
are shown in Figure 8.7.
25
20
15
10
5
0
Importer to
Subsidiary
Agent to Subsidiary
Importer to Importer
Without Other middleman to
Importer
Switching pattern
Figure 8.7: Mean duration from market entry until first mode switch for most frequent switching patterns (in number of years)
The most frequently taken pathway of “importer – subsidiary” has a mean duration of
20 years from market entry to the first switch. The pathway “agent – subsidiary”
requires only half the time, and the pathway “importer – importer” requires nearly 20
years.
When considering the modes individually, there seems to be a much higher rigidity
when it comes to switching from an importer than as with the other modes of
operation. Having an importer as a basis for a pathway of internationalisation
requires nearly twice the time to change than the other strategy options until the
destination mode has been achieved.
From the perspective of the first mode switch (here target mode), however, the
various modes present relatively little variations in time. This allows the assumption
that, with regard to the length of time, it is irrelevant which mode is being strived for.
What matters is which market entry strategy was initially selected. If, for example, a
pathway begins with “importer”, then the duration up until a switch is twice as high as
with other forms of market entry, but this time can not be related to the target mode.
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If one considers the most frequent target mode of “subsidiary”, there are no
significant variations in terms of time duration for the switch.
For the subsidiary mode as destination this also applies: the time depends on the
previous mode.
However, with subsidiary as well it is of importance from which basis this mode is
being strived for. In the sample group, there were time differences from “importer –
subsidiary” and “agent – subsidiary” of over 10 years (Figure 8.7).
From these results, it seems that importers possess a higher rigidity than agents. The
reasons for this could generally lie in the perception of higher switching costs. Agent
relationships seem easier to dismantle because the relationship is less binding. The
perceived switching costs are therefore lower with an agent than they are with an
importer.
Dwelling time and performance
Furthermore, the question can be asked as to the influence of the period duration on
satisfaction with market operations in the foreign market. The dwelling time in years
after the time of market entry and the degree of satisfaction are examined as the
main indicators.
It was examined as to whether there is a correlation between satisfaction in the most
important foreign market, behaviour of the management and a switch of mode at a
certain point in time. For measuring the dwelling time, the duration was formed into a
six-point scale from less than one year to more than 12 years. In addition, a possible
correlation between the dwelling time and satisfaction with the foreign business was
analysed. Measurement of satisfaction as a performance indicator was first made
with a five-point scale (1=very good to 5=bad) which was later reduced to a two-point
scale (good: 1=very good to 3=satisfactory and poor: 4=ok to 5=bad).
As a test method, the Pearson correlation coefficient was used to find directions,
strengths and significances in the relationship between pairs of variables and t-tests.
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The aim is to find significant differences between means in the duration measures for
the two distinct groups of satisfaction levels.
The statistical analyses however did not show significant differences between
satisfied and dissatisfied companies and the dwelling time after market entry until a
switch is made.
In the following two tables, the number of cases for the sample with regard to country
satisfaction (Table 8.21) and satisfaction with the foreign business in general (Table
8.22) are presented.
Table 8.21: Duration after market entry until first switch and satisfaction
Duration after market entry until first switch
Country Satisfaction Total
Poor Good
0-3 years
4-9 years
10-12 years
more than 12 years
Total
11 (19%)
9 (11%)
1 (10%)
2 (9.5%)
23 (13.5%)
48 (81%)
72 (89%)
9 (90%)
19 (90.5%)
148 (86.5%)
59 (35%)
81 (47%)
10 (6%)
21 (12%)
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Note. Using the binomial test there are no significances at the 5% level.
Table 8.22: Time after market entry until first switch and satisfaction
Duration after market entry until first switch
Satisfaction with international Total business
0-3 years
4-9 years
10-12 years
more than 12 years
Total
Poor
18 (30%)
26 (32%)
2 (20%)
4 (19%)
50 (29%)
Good
42 (70%)
56 (68%)
8 (80%)
17 (81%)
123 (71%)
60 (35%)
82 (47%)
10 (6%)
21 (12%)
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Note: Using the binomial test there are no significances at the 5% level.
The time period from market entry until the first mode switch bore, for the companies
surveyed, no significant influence on the level of satisfaction. Based on the actual
research subject of timing and the mode switch, the dwelling time and assumed
relation to satisfaction offers no statistically significant explanation approach.
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The question is whether objective indications for correct answering of the research
question can even be achieved with the selected measurement values (Chapter 7.5).
The measurement value of satisfaction is strongly influenced by the current mode,
own expectations and individual perceptions of the internal and external situation. In
the individual case, satisfaction provides interesting indications of performance. In
comparison with other companies in the sample, it does not, however, give a valid
picture of the opinion and behaviour. Furthermore, the measurement indicator of
dwelling time in connection with satisfaction is apparently not suitable for providing
an indication of time-related optimality of a certain action, such as the mode switch.
Companies can switch modes both as a result of positive satisfaction and as a result
of dissatisfaction.
In the alternative research hypothesis H6 it was assumed that the decision-making
period leading up to the switch influences success in the foreign country. The
decision-making period is essentially defined as the time period from the first idea of
a switch to the implementation (Chapter 6.1). The dwelling time is therefore the time
period in which decision-making and implementation takes place.
No significant results could be found with regard to dwelling time and its influence on
success (satisfaction).
Therefore, the initially formulated alternative hypothesis (H6) has to be rejected.
H6: The longer the mode switching decision process takes, the more positive
the outcome is.
Further indications regarding the question of the optimal timing of a switch can be
found in the analysis of the survival times of the foreign operation modes up to the
switch. This is discussed in the following section.
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