Strategic Marketing

Critically analyze the role of strategic marketing planning in relation to an organizations'

decision to enter new markets in a global marketing environment. Justify your choice of strategies
with examples to support where possible.
A critical issue in international market entry strategy is the selection of an appropriate entry
mode. Although some important studies have analyzed entry mode choice in the service context
(see, e.g., Agarwal and Ramaswami 1992; Bouquet, Hbert, and Delios 2004; Erramilli and Rao
1993; Li and Guisinger 1992), they analyze specific service sectors and thus fail to address the
heterogeneity problem of the service sector as a whole.
In addition, the high costs of integration that economic theories stipulate may not be strictly
true for many service firms. For example, professional services are characterized by low capital
intensity (Erramilli and Rao 1993). For many service firms, the switching costs may be comparatively
small because valuable assets rest more on human capital than on physical assets; thus, investment
patterns observed in the manufacturing sector could be different in the service sector (Carman and
Langeard 1980).
The key issue in entry mode choice is the compatibility between the firms existing
capabilities and those it needs to be successful in a particular market (Johanson and Vahlne 1977).
As Madhok (1997) proposes, an operation seeking the development of capabilities to create future
value will result in a greater proclivity toward collaborative ventures. Firm-specific capabilities, such
as firm size, international experience, and tacit know-how, may also play a role.
Firms should reduce their ownership levels, seek locally based assets, and solicit the
participation of local partners (Anderson and Gatignon 1986; Hennart 1991; Hill, Hwang, and Kim
1990). One major source of uncertainty is cultural distance. Perceptions of significant cultural
distance between the country of origin and the target country in terms of culture, economic systems,
and business practices have been found to support the use of modes that involve smaller resource
commitment (Johanson and Vahlne 1977).
Setting up in an environment with a culture that is different and unfamiliar to the investor
increases the difficulty. Another factor of uncertainty is host-country risk. Hostcountry risk reflects
uncertainty about the continuation of current economic and political conditions and government
policies that are deemed to be critical to the survival and profitability of a firms operations in that
country (Agarwal and Ramaswami 1992). A highly volatile environment will result in firms that want
to minimize exposure to risk through entry methods that offer the necessary flexibility in the face of
environmental variability (Erramilli and DSouza 1995; Kim and Hwang 1992).