External Factors Influencing the Choice of Entry into International Ma

Questions: Research Proposal on External Factors Influencing the Choice of Entry into International Markets by Multi-National Companies in Australia. 1. What external factors influenced Australian-based multinational companies to choose between equity-based and non-equity based modes of entry into international market? 2. What other conventional external factors could influence other international companies from moving into the Australian market? Answers: Problem Statement Different studies have been carried out in different countries to ascertain the internal and external factors to a multinational company, which affect the choice of entry into a foreign market. Since a business could enter a foreign company using either the equity mode or the non-equity-based mode of entry, then there is need to establish the factors that influence the choice between these two(Amasuomo 2014, p.15). Currently, no studies have been carried out in Australia, to ascertain, the external factors that influenced Australian multinational companies to choose between the two modes of entry, while entering international markets. Australia has a lot of MNCs, headquartered within it and this study will target 20 of them, in order to obtain first hand information on this particular study. Therefore, this study particularly focuses on companies headquartered in Australia, an area where little studies have been done Research Questions What external factors influenced Australian-based multinational companies to choose between equity-based and non-equity based modes of entry into international market? What other conventional external factors could influence other international companies from moving into the Australian market Theory, Assumptions, Background Literature Different scholars in the world of business and international economics have delved deep into establishing the external factors that influence the choice of entry into a new region or country by multinational companies. The main modes of entry include the equity mode of entry and the non-equity modes of entry (Chanakira 2012, p1-5). Both these entries are affected by the existing companys external factors within the potential host country. Equity mode of entry involves using many resources into enter the market, while the no-equity approaches involve a minimal use of resources (Chanakira 2012, p1-5). Further, studies indicate that the equity mode of entry usually involves very high costs at the time of entry and even at the time of exit from the foreign market. On the other hand, the non-equity approach involves the use of fewer resources both at entry and during the exit phase of an MNC. The first external factor that influences the choice of the mode entry for an MNC, as noted by Amasuomo (2014, p.15), is the cultural distance between the companys home country and the foreign country to enter. The closeness between the home and host country in culture means that the two could be having a similar language, business governance norms, and industries, among other cultural characteristics. However, the larger the cultural distance that may exist between a companys home and the host country, the more the uncertainty regarding the business performance, including higher costs that will be incurred in collecting of information and in communication (Amasuomo 2014, p.15). In that connection, a company will not use the equity mode to enter, instead, it will opt to use the non-equity modes of entry where it will involves committing lower resources. However, an MNC that wants whose host country is close to the home country in terms of cultural distance, is likely to use equity mo de of entry, as there will be lesser uncertainty and similarity in business policies. According to Zhu and Quan 2011, p. 45-7), the market size and its growth in the host country is a huge determinant in the mode of entry. If the size of the market of particular goods and services in the host country is large, then a company will find it appropriate to invest heavily through equity modes in this particular country. The potential of the market to grow in the near future could also make a company be able to move into a foreign market, by investing heavily in the business (Zhu and Quan 2011, p. 45-7). A company will be ready and willing to commit more physical, financial and human resources, where the demand for their goods and services is very high. On the other hand, a multinational business will opt to use lesser resources in entering an area, where there is currently a low level of demand for its goods and services. Perhaps it is the desire to follow their customers in the foreign market. For instance, the Bank of China has its branches in more than 43 countries, to serve mostly, the Chinese citizens within these countries Zhu and Quan 2011, p. 45-7). This is a non-equity approach, as it is clear that there a smaller demand for their goods and services in these countries. Other companies could just opt for indirect export business, as one of non-equity market-entry modes. There are other factors including a countrys risk situation, to be considered in determining the entry mode. The risks in a country may include the political, social, and economic factors, which may influence the economy and thus the market for goods and services. Politically and economically unstable countries do not attract committed investments from multinational companies, when compared to those that are suitable, with healthy business policies. In this case, an MNC, will opt to use more resources to invest in a country whose security apparatus and economy can allow their long-term presence within it (Chanakira 2012, p1-5). Legal barriers are also a major concern for multinational companies considering a move into another country. Tariff and/or quota imposition on foreign products and services imported into a country, including many restrictions on trade within a country makes a company opt to use equity mode of entry (Chanakira 2012, p1-5). This is of course if the demand for go ods and service is high. This may involve a subsidiary or coming up with joint ventures with companies already operating in the potential country of entry for business. Variables and Hypotheses The variables in this study will include both independent and dependent variable. Independent variables Equity-based modes of entry into foreign markets Non-equity-based modes of entry into foreign markets Dependent Variables Legal barriers Countrys risk situation Market size and growth Cultural distance between home and host country for MNCs The hypothesis is as stated below; Variation in factors such as legal barriers, countrys risk situation, market size and the cultural distance between the host country and the home country for an MNC, determine the mode of entry for businesses into a foreign market Operational Definitions and Measurement The study will involve 20 MNCs within Australia and therefore, the researcher will visit the nearest ones for convenience, since the lack of randomization will not affect the collected data in any way. The variables will be measured quantitatively, as the responses will be tallied and their totals used to generate crucial conclusions for the study. Research Design and Methodology The researcher will use interviews and questionnaires to collect information from the above 20 companies regarding the external factors that influence choice of entry into foreign markets, and those factors that exist within Australia. Thus, the research will take a descriptive survey research design, in obtaining the variation between the choices made by the 20 different companies in entering foreign countries. The questionnaires will consist of the Lickered scale, where the company will indicate their levels of agreement, that a particular factor influences a move into a foreign market. Possible Constrains Some companies may be uncooperative and not allow the researcher to serve them with the questionnaires, and deny time for interview Since the company headquarters are situated in different towns of Australia, the researcher will incur a high cost travelling and booking appointments for the interviews. Instrumentation/Sampling The researcher will use standardized questionnaires and face-to-face interviews, to collect data. Interviews will be recorded using an audio-recorder, while the company correspondents at each of their secretariat will fill in the questionnaires. The sample population will be 20 Australian-based multi-national companies. In order to ascertain the quality of the questionnaires in terms of accuracy and make appropriate corrections, the researcher will carry out a prior trial with one of the international companies, whose responses will not be included among the 20 companies as sample. Data Analysis The collected data will be analyzed using the SPSS software, which enable the generation of the modes of central tendency. The data will be presented in terms through tables, graphs and charts and the trends indicated. Further percentages will e used to distinguish the most and the latest influential external factors external to a business that influence the mode of entry or Australian-based companies. Expected Research outcomes In regard to the external factors that influence Australian based MNCs in choosing mode of entry into foreign markets, it is likely that all the four factors were considered by the 20 companies. However, a foreign countrys risk situation would more likely be the leading in terms of percentage as a major determinant for a country to enter into a foreign market using the equity mode of entry. On the other hand, the cultural distance between home and host country is likely to influence an MNC to consider non-equity modes of entry into the foreign market. In Australia, the external factors that have attracted MNCs include political and economic stability, friendly economic policies, and lesser restrictions on international trade. Conclusions, Interpretations, Recommendations From the expected outcomes above, the hypothesis that variation in factors such as legal barriers, countrys risk situation, market size and the cultural distance between the host country and the home country for an MNC, determine the mode of entry for businesses into a foreign market is supported. My findings imply that MNCs must consider first, a countrys risk situation in terms of politics and economic policies before entering it using particularly the equity-based approach. The other factors including legal barriers, cultural distance, and the size of the market must also be considered before making any move, which could determine the future of any company, based in Australia and across the world. References Amasuomo, J. (2014). Factors Influencing Choice of Occupational Area among Technical Education Students with Differing Entry Qualifications. Mak. J. High. Edu., 6(1), p.15. Chanakira, M. (2012). Factors Affecting the Choice of Market Entry Modes in the African Telephony Industry. International Journal of Applied Behavioral Economics, 1(2), pp.1-15. Doherty, A. (2007). The internationalization of retailing. Int J of Service Industry Mgmt, 18(2), pp.184-205. Jeong, G., Chae, M. and Park, B. (2016). Reverse knowledge transfer from subsidiaries to multinational companies: Focusing on factors affecting market knowledge transfer. Can J Adm Sci, p.n/a-n/a. Schuster, T. and Holtbrgge, D. (2012). 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