Foreign Entry Mode Choice Patterns and Subsequent Performance- Finnish Companies Operating in India

Abstract

More than ever before the issue of how to enter and develop international markets is a crucial dimension in competitive advantage internationally. Developing countries are becoming increasingly important targets for international operations of Western companies. India as a market area has grown so fast in the past decade that the term “India-phenomenon” has been adopted to describe the economic growth and the rush of foreign companies entering the country. Finnish companies, too, have started to discover the benefits of the Indian marketplace at a rapid pace.

The literature on the choice of entry mode is extensive, mainly dividing into three separate approaches: the economic, stages-of-development and business-strategy approaches. The main purpose of this study is to find out what are the factors behind a company’s decision making in choosing an entry mode. In addition, the subsequent performance and experiences are under investigation. The empirical part was conducted as a qualitative case-study on four Finnish companies operating in India. The case-study is the primary research of this study. Secondary research was conducted as a desk study analysing the business environment in India.

The main findings of this study suggest that the primary factor that has attracted companies to enter India is the country’s large size and the market potential it provides. It also became evident that when entering a developing country or India in particular, companies consider it important to have some type of knowledge and experience on the country before making further commitments. Therefore, most of the case-companies had used export entry modes when entering India. The most important determinants in terms of performance seemed to be management commitment and attitude towards the entry operations, control mechanisms and promotion. India as a target country currently provides vast market opportunities, but also has some business deteriorating factors, such as bureaucracy and poor infrastructure.