How do managers work with digital communication media in international business relationships? Focus group results of managers’ experiences of digital media use for relationship building.

How do managers work with digital communication media in international business relationships? Focus group results of managers’ experiences of digital media use for relationship building.

In a qualitative study about international business negotiations and personal business relationships carried out a few years ago, results showed that relationship building and maintenance was something that occupied most international negotiators’ minds. It was stressed that meeting in person with due frequency was a requirement and that contact was kept in between meetings via telephone and email. However, some unexpected results were found indicating that the respondents experienced problems attached to developing and maintaining business relationships via email and video conferencing.
With this in mind, the author participated in a focus group consisting of seven managers with vast experience of international negotiation, with the purpose of finding out whether digital business communication behavior has changed over the last ten years.
The new results showed that struggling with heavy workloads, the participants welcomed communication technology that could save them a trip or two, but emphasized that for relationship initiation and building, meeting physically is still a requirement. The picture given about emailing was to some extent different compared with the older study, since it was no longer looked upon as a problem but as a part of everyday work. However, it became clear that the (in) formality used in emails was adapted to the stage of development of the business relationship, to the seniority of the counterpart and to his/her cultural background. The participants also discussed their experiences of videoconferencing, stating that after having tried new technology, they had to a large extent returned to traditional telephone conferences, only now those conferences took place via Skype.
In conclusion, the results show that traditional marketing activities and communication media prevail: personal meetings, telephone conferences and emails are the preferred ways of communicating. Digital communication media is used whenever it allows for traditional B2B behavior. All communication, regardless of which medium is used, is adapted to the cultural background and seniority of the recipient, and to the stage of development of the relationship. Most likely, the choice of medium is determined by the preferences of the buying firm.

1 Introduction

Within the fields of international business negotiations and B2B marketing, personal selling and personal business relationships to customers has traditionally played a vital role for company success (Cavusgil, Deligonul and Yaprak 2005; Nilsson Molnár 1997; Brosan 2012; Houtari et al. 2015). This was further examined in a study (Torsein 2010) based on 25 in-depth interviews with company owners, executives, area sales managers and export managers employed in Swedish small and medium sized firms. The results indicated that personal relationships are initiated and developed through extensive communication, preferably in person, but with time the relationship can be maintained with the help of other communications media, such as telephone, emailing and videoconferencing. Meeting regularly in person was however still considered a necessity. It was also found that initially, cultural differences may obstruct communication, but with time and maintained frequency in communications, the impact of cultural differences tend to diminish.
The qualitative approach of the study allowed for some unexpected results: Respondents spontaneously described problems associated with maintaining business relationships via email. Although emailing was used in everyday work, respondents stressed the risks for miscommunication leading to unnecessary conflict and time delay. As a tool for initializing a business relationship, email was considered a waste of time: Some respondents clearly stated that they would never consider doing business with anyone they had not first met in person. In fact, any medium available was deemed inferior to a personal meeting, the main reason being that they did not allow for the same richness in the information provided by personal interaction, where the spoken word is complemented by mimics, gestures, tone of voice, milieu, etc.
Since the study described above was carried out, digital communications media has gone through tremendous development, and international and B2B marketers now have a number of different communication media at their disposal. Along with emailing and webpages, marketers now have the opportunity to communicate with customers and consumers via social media, such as Facebook and Linked-in, and videoconferencing can be carried out via platforms such as Skype.
Recent studies within the field of digital B2B communication and marketing tend to focus on B2B use of social media for marketing and relationship building purposes (Habibi et al. 2015; Keinänen and Kuivalainen 2015; Broekemier, Chau and Seshadri 2015; Huotari et al. 2015). These studies emphasize that the interactive qualities of social media, together with the social needs of individuals and the importance of personal relationships within B2B marketing would imply that social media could substantially support relationship building. However, they come to the conclusion that B2B firms are not taking advantage of the full potential of social media, and that B2B firms still rely on traditional marketing and communication tools including personal meetings, telephone calls and emails.
Other studies focus on the role digital channels in general play in B2B marketing (Brosan 2012; Holliman and Rowley 2014; Karjaluoto, Mustonen and Ulkuniemi 2015). These studies affirm that traditional media and marketing tools prevail in the B2B sector. Although social media may be considered a useful tool for relationship development, buyers still tend to rely on websites and emails (Brosan 2012). In fact, social media may not be suitable for B2B relationships when considering company needs for confidentiality and protection of competitive advantage (Karjaluoto, Mustonen and Ulkuniemi 2015). Buyers tend to show less interest in general information available to all, but are more concerned to get information and benefits that may solve their current problems (Keinänen and Kuivalainen 2015). Consequently, any message distributed through digital media should have value for customers, i.e. help them to solve a problem or to help them do something more efficiently (Holliman and Rowley 2014).
The studies suggest several ways to make social media more applicable to B2B firms, including educating employees in social media communication, with the purpose of empowering and encouraging them to be active on social media (Houtari et al. 2015). Factors deemed to impact B2B use of social media marketing included organizational culture and company resources, knowledge and capabilities (Habibi et al. 2015) and private use of social media, colleagues’ support, and perceptions of the usability of social media for B2B communication purposes (Keinänen and Kuivalainen 2015) among others.
The recent research within the field presented above show that the authors agree that B2B companies lag behind B2C companies in regards to identifying and grasping the market opportunities associated with digital media, in favor of traditional forms of communication and marketing. In respect to the development of personal relationships with the support of digital communication, whether traditional or not, there is a consistent lack of focus in the presented sources. Consequently, the aim of this paper is to contribute to the understanding of how managers work with digital communication as a means to initiate, develop, and maintain personal business relationships, and whether the advent of digital media has changed how such relationships are built.

2 Methodology

In consideration of the aim of this paper, an explorative approach was deemed necessary. By chance, the author was invited to a focus group organized by IUC Väst (Industry Development Centre West), an organization belonging to a nation-wide Swedish network of another 11 similar regional companies, working with development projects and innovation in collaboration with small and medium sized firms.
The focus groups consisted of seven representatives from small and medium sized Swedish companies active within the industrial sector. Their job titles and tasks were similar to those of the group of respondents who had been interviewed for the original study. The aim of the focus group was to discuss personal meetings with customers in relation to new communication technology, addressing questions about whether the conditions for building and maintaining personal business relationships have altered because of developments in communication technology, and whether there are situations where videoconferences can substitute personal meetings.
The focus group session began with the author giving a brief introduction to the topic, and discussion began spontaneously before the introduction was completed. In all, the group discussion lasted for over two hours. The participants proved to share their experiences quite openly and generously, demonstrating both interest and vast knowledge within the field. For instance, examples of communication via digital media with both Swedish and international customers and suppliers were shared.
Apart from participating in the discussion, the author simultaneously took notes, and ended up with a relatively rich material considering the intensity of the discussion. Since the author attended the focus group without the purpose of gathering primary data, IUC Väst and each participant were later asked for their permission to use the material for this paper, to which all agreed.

3 Findings

In the initial phase of the group discussion, the respondents spoke in positive terms of digital communication media and claimed to use it quite a lot in their daily work. All testified to have requiring work positions, and whenever time could be saved with the use of information technology, they experienced relief. However, as the discussion continued, it became clear that quite a limited set of digital media was used. In addition, different media was considered appropriate for different communication purposes, depending on the depth and nature of business relations and cultural background of customers.
In the original study, emailing was claimed to sometimes be a source of misunderstandings and time delays. This picture was not embraced by the focus group participants, who did not consider emailing to be a source of problems but as part of everyday work, and a natural medium for keeping contact and exchanging information with customers. Other media used for these purposes were text messaging via both Skype and mobile phones, and audio conferences, also carried out via Skype. Concerning text messages delivered via mobile phones, the participants stressed that this was only considered appropriate for business relationships that were characterized by a high degree of trust and informality. The use of mobile text messages was considered to be intruding on the other party’s privacy, and must be handled with utmost care, the respondents concluded.
Concerning email communication and messaging via Skype, the respondents stated that communication was adapted to the seniority and cultural background of the recipient, and to the degree of trust and informality characterizing the business relationship. In contact with representatives from cultures perceived as more formal than Swedish culture, such as Germans and Chinese, the respondents adhered to a more formal way of expressing themselves. In contrast, when communicating with younger counterparts, coming from more informal cultures such as the Scandinavian cultures and the Netherlands, and when the relationship was characterized by trust and informality, communication was less formal. Under such circumstances, the general view was that the use of emoticons was increasing. In contact with counterparts form more formal cultures, use of emoticons was perceived as inappropriate.
In regards to videoconferencing and the use of Skype, the respondents stated that after trying videoconferencing, they had switched to audio conferences instead, resembling traditional telephone meetings. One respondent admitted that his organization had initially used too much technology, but had soon returned to telephone meetings. The reason mentioned for abandoning videoconferencing was that the technology was insufficient and therefore caused problems and time delays. Technology must work for both parties involved, otherwise it becomes an obstacle rather than a useful communication medium. Another advantage with telephone conferencing stated was the fact that the respondents do not have to dress up, and can participate from home if necessary.
The respondents also brought up e-procurement, which was not appreciated at all, since it does not allow for communication and relationship building. On the other hand, e-fairs or “dating-sites” were mentioned in more positive terms, as traditional fairs were considered somewhat inefficient and time consuming.
Social media was not brought up as a medium for customer communication, save its possibilities for fast image transferal. Sending or receiving a picture of a damaged product was given as an example of when communication of images was more efficient than explaining the problem in words, which could be a complicated and time consuming process regardless of which medium is used.
The respondents agreed that digital communication media were useful for some types of activities and customers, such as monitoring, coordinating activities with distributors, and for maintaining existing relationships. Digital communication media were considered inappropriate for initiating and building new relationships and for exchange of complex information. For these activities, traditional B2B communication methods including physical meetings, personal interaction and selling were considered superior, whereas for relationship initiation and building, meeting physically is still a requirement. This is in accordance with the results of the original study.

4 Discussion

Drawing from the results from both the original study and the focus group, along with literature findings within the area, it is clear that marketing and communication tools, media and methods used by B2B firms tend to be quite stable over time. Even though digital media are used on a daily basis, they complement traditional forms of communication in the work of maintaining existing business relationships rather than for creating and developing new ones.
Emailing, which was mentioned both as part of everyday work but also in relation to misunderstandings and time delay in the original study, was not perceived in this way by the participants of the focus group. In the literature, emailing was concluded to be one of the most commonly used digital media (Habibi et al. 2015; Keinänen and Kuivalainen 2015; Broekemier, Chau and Seshadri 2015; Huotari et al. 2015; Brosan 2012; Holliman and Rowley 2014; Karjaluoto, Mustonen and Ulkuniemi 2015), to the extent that it is now classified as a traditional medium. The fact that the focus group participants did not experience any problems, but carefully adapted their email messages in accordance with the cultural background and seniority of the recipient, and to the depth and stage of the relationship, indicates that with extensive use and general acceptance of this communication medium for both selling and buying organizations, general etiquette rules for email behavior may have been developed and become widely used. This is an area that calls for further study.
In the original study, videoconferencing was mentioned in negative terms, and in the literature it was barely mentioned at all. The focus group participants agreed that they preferred audio conferences, which were mainly carried out via Skype. Although a digital medium is used, the communication behavior is that of a traditional telephone conference. Apparently, video transferal technology is not yet satisfactory, and thus deemed inefficient. In this case, digital media allows B2B marketers to carry on with traditional communication behavior, why the participants used Skype quite frequently.
Messaging via Skype or other media, or by mobile phones, was mentioned by the focus group participants as another communication medium used for shorter messages. This communication form was also reserved for developed business relationships with counterparts from more informal cultures, such as Scandinavians and Dutchmen. Text messaging was not mentioned at all in the literature. However, Keinänen and Kuivalainen (2015) stress that private social media use affect professional use of social media, since individuals tend to use the same behavior in both private and professional life. The use of text messaging is most probably an example of this, as the participants highlight the importance of only sending mobile text messages to business contacts where the relationship is well established and characterized by informality, which would allow for a behavior used in private life. Since text messaging as a means for B2B marketing and communication was a neglected area in the literature, it deserves to be further researched.
In line with the original study and with the literature (Brosan 2012; Holliman and Rowley 2014; Karjaluoto, Mustonen and Ulkuniemi 2015), the focus group participants agreed that meeting personally and physically is still the superior B2B marketing tool, since it is the most suitable tool available given the fact that the main objective of B2B marketing activities is to build and maintain business relationships. The participants made it clear that digital media, often used in traditional ways, should only be used for maintaining existing relationships, not for initiating and building new ones. Communication via digital media must be adapted to the stage of development of the relationship. Although many studies stress that social media characteristics should be advantageous for developing business relationships (Habibi et al. 2015; Keinänen and Kuivalainen 2015; Broekemier, Chau and Seshadri 2015; Huotari et al. 2015), they all conclude that these advantages are not fully realized by B2B firms. However, in consideration of the characteristics of industrial markets, where complex deals involving high risk and high value are negotiated over large amounts of time, the need for development of business relationships based on trust becomes obvious (Torsein 2010). In addition, in situations of fierce competition, the need for confidentiality and for the protection of competitive advantage is essential (Karjaluoto, Mustonen and Ulkuniemi 2015). Under such circumstances, traditional forms for communication are the most beneficial, whereas social media, given their characteristics of open access to information, are not. This may be the reason why buying firms tend to be quite uninterested in social media for business relationship purposes (Brosan 2012). As long as the buying firm prefers communication via traditional media and methods, the selling firm must continue to use them.

5 Conclusions

Traditionally, B2B marketing has relied on personal selling and development of long term business relationships. The aim of this paper is to contribute to the understanding of how managers work with digital communication as a means to initiate, develop, and maintain personal business relationships, and whether the advent of digital media has changed how such relationships are built.
The results show that traditional marketing activities and communication media prevail: personal meetings, telephone conferences and emails are the preferred ways of communicating. When initiating and developing new relations, personal meetings are deemed more appropriate, but when the purpose is to maintain an existing relationship, personal meetings can be complemented by telephone, audio conferences via Skype, and email. Well-developed relationships characterized by informality can be maintained with the help of text messaging. Digital communication media is used whenever it allows for traditional B2B behavior. All communication, regardless of which medium is used, is adapted to the cultural background and seniority of the recipient, and to the stage of development of the relationship. Most likely, the choice of medium is determined by the preferences of the buying firm.
The results of this study are based on a relatively small qualitative material. The results however suggest that B2B marketers select digital communication media that allow them to communicate most efficiently with their customers, and that they adapt their messages to the recipient. Since traditional marketing activities prevail in the B2B market, digital media that support those activities are used.

Poznámky/Notes

The author wishes to express her sincere gratitude towards IUC Väst (Industrial Development Centre West) for inviting her to participate in many interesting and rewarding focus groups, and to the focus group participants for allowing her to use their comments as a basis for the empirical findings of this research paper.

Literatúra/List of References

[1] Cavusgil, S. T., Deligonul, S., and Yaprak, A., 2005. International Marketing as a Field of Study: A Critical Assessment of Earlier Development and a Look Forward. In: Journal of International Marketing. 2005, 13(4), pp. 1-27. ISSN 1069-031X.
[2] Broekemier, G., Chau, N. N., and Seshadri, S., 2015. Social Media Practices Among Small Business-to-Business Enterprises. In: Small Business Institute Journal. 2015, 11(1), pp. 37-48. ISSN 1944-1169.
[3] Brosan, F., 2012. What works where in B2B digital marketing. In: Journal of Direct, Data and Digital Marketing Practice. 2012, 14(2), pp. 154-159. ISSN 1746-0166.
[4] Habibi, F., et al., 2015. E-marketing orientation and social media implementation in B2B marketing. In: European Business Review. 2015, 27(6), pp. 638-655. ISSN 0955-534X.
[5] Holliman, G. and Rowley, J., 2014. Business to business digital content marketing: marketers’ perceptions of best practice. In: Journal of Research in Interactive Marketing. 2014, 8(4), pp. 269-293. ISSN 2040-7122.
[6] Huotari, L., Ulkuniemi, P., Saraniemi, S., and Mäläskä, M., 2015. Analysis of content creation in social media by B2B companies. In: Journal of Business & Industrial Marketing. 2015, 30(6), pp. 761-770. ISSN 0885-8624.
[7] Karjaluoto, H., Mustonen, N. and Ulkuniemi, P., 2015. The role of digital channels in industrial marketing communications. In: Journal of Business & Industrial Marketing. 2015, 30(6), pp. 703-710. ISSN 0885-8624.
[8] Keinänen, H. and Kuivalainen, O., 2015. Antecedents of social media in B2B use in industrial marketing context: customers’ view. In: Journal of Business & Industrial Marketing. 2015, 30(6), pp. 711-722. ISSN 0885-8624.
[9] Nilsson Molnár, M., 1997. Internationella affärsförhandlingar: Svenska affärsmäns erfarenheter av att förhandla med fransmän, japaner och utlandskineser. Göteborg: Kompendiet AB, 1997. ISBN 91-628-2362-0.
[10] Torsein, E., 2010. International Business Negotiations – Cultural Distance and Adaptation. Gothenburg: BAS Publishing, 2010.

Kľúčové slová/Key Words

digital communication, digital media, international business, focus group
digitálna komunikácia, digitálne média, medzinárodný obchod, focus group

JEL klasifikácia

M31

Résumé

Ako pracujú manažéri s digitálnymi komunikačnými médiami v medzinárodných obchodných vzťahoch? Výsledky focus group o skúsenostiach manažérov s používaním digitálnych médií pri budovaní vzťahov.

V kvalitatívnej štúdii o medzinárodných obchodných rokovaniach a osobných obchodných vzťahoch vypracovanej pred niekoľkými rokmi výsledky ukázali, že budovanie a starostlivosť o vzťahy je niečo, čo zaberá pozornosť väčšiny medzinárodných vyjednávačov. Bolo dokázané, že osobné stretnutia s náležitou frekvenciou opakovania sú vyslovene požiadavkou a že kontakt medzi stretnutiami bol udržiavaný naďalej prostredníctvom telefónu a e-mailu. Avšak objavili sa aj niektoré neočakávané výsledky, ktoré naznačujú, že respondenti mali problémy s rozvíjaním a udržiavaním obchodných vzťahov prostredníctvom e-mailu a videokonferencie.
S ohľadom na túto skutočnosť sa autor zapojil do výskumu s cieľovou skupinou skladajúcou sa zo siedmich vedúcich pracovníkov s bohatými skúsenosťami z prostredia medzinárodného vyjednávania s cieľom zistiť, či sa digitálne správanie v obchodnej komunikácii zmenilo v priebehu posledných desiatich rokov.
Nové výsledky ukázali, že v boji s ťažkým pracovným vyťažením účastníci uvítali komunikačné technológie, ktoré im môžu zachrániť kúsok pracovného času, ale zdôraznili, že pre začatie a budovanie vzťahov je fyzický kontakt stále nevyhnutnosťou. V tomto kontexte je posielanie e-mailov do istej miery odlišné v porovnaní so staršou štúdiou, pretože tento druh komunikácie už nepredstavoval problém, ale bol súčasťou každodennej práce.
Avšak, bolo jasné, že (ne) formalita používaná v e-mailoch bola prispôsobená konkrétnej fázy vývoja obchodného vzťahu, napríklad sa menila v závislosti od veku náprotivku a od kultúrneho zázemia. Účastníci tiež diskutovali o svojich skúsenostiach s videokonferenciami poznamenajúc, že potom, čo si vyskúšali novú technológiu sa museli do značnej miery vrátiť k tradičnej telefónnej konferencii, až teraz sa tieto konferencie uskutočňujú cez Skype.
Záverom možno povedať, že výsledky ukazujú, že tradičné marketingové aktivity a médiá prevládajú: osobné stretnutia, telefónne konferencie a e-maily sú preferované spôsoby komunikácie. Digitálne komunikačné médiá sa používajú vždy, keď je to možné pre tradičné B2B správanie. Všetka komunikácia, bez ohľadu na používané médium, je prispôsobená kultúrnemu pozadiu a seniority príjemcu a hlavne stupňu vývoja vzťahu. S najväčšou pravdepodobnosťou je voľba média daná tým, čo preferuje nakupujúca firma.

Kontakt na autorov/Address

Ellinor Torsein, PhD, School of Business, Economics and IT, Dep of Business administration, University West, Gustava Melins Gata 2, SE-461 86 Trollhättan, Sweden, e-mail: [email protected]

Recenzované/Reviewed

17. február 2016 / 2. marec 2016




Market entry mode predictors: Evidence from Austrian companies targeting Central European markets

Market entry mode predictors: Evidence from Austrian companies targeting Central European markets

 

Market entry mode choice has been one of the core topics in international business literature. The study contributes to the discussion about predictors for a particular entry mode. The findings, based on the 2013 barometer study among 244 Austrian companies with substantial market presence in CEE markets, reveal that company size, strategic orientation and overall international experience may play a significant role when committing resources and establishing a subsidiary in a country. The evolutionary approach to market entry strategies represented by the Uppsala model may still be valid even when examined on the regional (CEE) level.

Introduction

There has been a lot written on the evolutionary nature of market entry modes and on factors which influence behaviors of companies when entering a new territory. Firms, as they expand, become experienced new entrants and shall be able to deal with inherent challenges and risks associated with international markets. The Berlin Wall was dismantled during one night 25 years ago and from that perspective the markets of Central Eastern Europe, broadly defined as any country east of Western Europe, were in 2014 anything but new territories for established Western European companies.
The paper is based on a barometer study conducted in 2013 among Upper Austrian companies, for which the region of Central and Eastern Europe has been of business interest. During the times of the world economic crisis in 2008, the companies learned and adapted to new business realities, yet the question remains whether the long established models of market entry held for the region during the difficult times.
First, the paper resorts to the literature review focusing on emergence of international business climate in Eastern Europe and on current research in the area of international market entry modes. A model of market entry is then developed and tested, leading to conclusions and managerial implications.

1 Market entry strategies for Central and Eastern Europe

The region of Central and Eastern Europe (CEE) emerged on the global business map after the fall of the Iron Curtain at the very end of 1980s. 1990s marked significant transitional changes in political, societal as well as business environment in the region and attracted a plethora of international companies, which attempted to gain additional competitive advantages in the rapidly changing and growing CEE markets. From 1998 to 2008, the economic output of the region grew by factor 2.3 with GDP adding cumulative 137% to the base level (WKOOE 2014). A number of marketing opportunities for western firms in CEE were at arms-length, including large, skilled workforce, low wages, population size (Freeman and Reid 2006), and growing consumer appetite.
In 2008 and 2009, however, global economic uncertainty hit Central and Eastern European markets rather severely. The impact of global crisis is estimated to have caused the region’s GDP slide by 6.4% (WKOEE 2014). In spite of surpassing the average economic growth of the European Union since then, the GDP growth of CEE markets has been lower than the world average. Corrupt business environment, formerly one of the key concerns for multinational companies when entering the CEE markets (Jansson and Sandberg 2008), has been gradually improving over the years (Transparency International 2014). 19 CEE countries still belong to the upper half of most attractive business destinations worldwide according to the Ease of Doing Business index, eight of them are among the top 30 worldwide, and four score higher than Austria (World Bank 2014).
The entire CEE region has been especially important to the established Western European countries, which share common borders. Austria has served as the entrance to door to Eastern Europe for many global players. It takes less than 400 km to reach five CEE capitals from Vienna (Bratislava, Prague, Budapest, Ljubljana, and Zagreb). Many CEE countries share common history with Austria in politics as well as trade. Between 1989 and 2013, Austria doubled its share of exports to the CEE, representing now around 20% of its overall outward trade. Austria is among the top 3 sources of foreign direct investment in 10 CEE countries and in 4 countries Austria is the largest investor (Slovenia, Croatia, Bosnia, and Serbia). The Austrian Chamber of Commerce estimates that Austrian expansion to the CEE region created domestically around 500.000 additional jobs just between 1989 and 2009 (WKOOE 2014). In Upper Austria, around 40% of all exporting companies feel CEE markets play a vital role in their commercial achievements (WKOEE 2014). It remains a question however, how much the companies were following the established models of international market entry when stepping in the region of CEE back then and how much have they adapted their market entry strategies to this day.
Entering CEE markets has been discussed in recent literature from several perspectives. Freeman and Reid (2006) highlighted several constraints for entering CEE markets, related at large to the “turbulent” and “transitional” business environment (p. 187). Nakos and Brouthers (2002) identified determinants for selecting a certain mode of CEE market entry valid for SMEs. They found that SMEs with more differentiated products show a tendency to prefer equity modes of entry. Firm size and international experience were not identified as significant predictors of SME entry mode choice, arguing that general international experience might not be helpful for rather specific situation of the CEE markets. Bitzenis (2004) underlined the specific role of smaller companies for CEE countries, being more likely to choose markets by geographic proximity and knowledge of the market. Wiesinger and Zehetner (2014) shed more light on main reasons for Austrian companies entering the CEE markets: perceived strategic importance, desire to strengthen competitiveness, employment, and perceived market potential were the key forces behind CEE expansion.
Researchers report that greater levels of corporate foreign direct investment and more active approach to internationalization lead to higher performance levels (Lu and Beamish 2001; Nisar et al. 2012) and positively affects the firm’s ability to innovate (Pinho 2007). Early international business literature views foreign market involvement as a gradual or network coordination process (Johanson and Vahlne 1977, 1990; Vahlne and Johanson 2013). Such an approach has been termed the Uppsala internationalization model. For instance, Claver et al. (2007) confirmed that Spanish family owned businesses followed the propositions of the Uppsala model, adding that age, size and generation of the firm may significantly influence the establishment of international strategic alliances. In contrast (or addition to), some later generic approaches to internationalization highlight the importance of transaction costs (e.g. Williamson1986; Beamish and Banks 1987) or location specific factors (Dunning 1993) suggesting that internationalization in general and market entry modes in particular shall be examined on a country or region specific level.
Beyond transaction cost and location specific advantages, there might be other company-specific reasons for international market entry (e.g. Deresky 2000). All factors for international market entry are finally manifested through a particular market entry mode and mark the path of corporate internationalization process. The particular company’s pattern of internationalization is highly affected by the degree of similarity between foreign and domestic external and internal factors, the number of foreign countries in which a firm does business, internal or external handling of foreign operations, mode of operations, and the overall impetus for international business (Daniels et al. 2004). Internationalization of a firm can be seen as an evolutionary process heading from risk-conscious exploration of foreign markets to gradually deeper foreign commitments.
Pan and Tse (2000) distinguished between non-equity and equity-deploying entry modes. Among less risky and resource-demanding non-equity forms of entering an international market are indirect and direct exporting, licensing, and franchising (Griffin and Pustay 2013). In contrast, joint-ventures and foreign subsidiaries require larger capital equity-based investments, which are more difficult to handle for less experienced organizations (Daniels et al. 2004). For SMEs, in particular, it can be an effective strategy to form alliances with local partners as a way of overcoming deficiencies in resources and capabilities when entering foreign markets (Lu and Beamish 2001).

2 Market entry model

As mentioned earlier, there has been a lot written on firms’ motivation to internationalize in general and across Central and Eastern Europe in particular. The discussion in literature leads to the assumption that (especially with SMEs) previous experience with international market entries, the size of a company and the time of market entry might play a non-negligible role for market entry mode choice and internationalization performance (Agarwal and Ramaswami 1992), which is why we hypothesize below that company size, company strategy and its previous experience with the CEE region could be predictors of a particular entry mode choice.

Company size
Almost by definition, companies with older history and of bigger size hold larger and more developed combinations of various (financial, personnel, material, knowledge) resources (Helfat and Lieberman 2002) and therefore it shall be easier for them to internationalize and overcome the burden of inherent new market entry risks. Especially when initiating an international activity, a firm’s size might play a significant role with respect to resources, competencies, investments and risk reduction (Pinho 2007). Katsikeas and Morgan (1994) reported that smaller firms seem to fail more in communication with the international market, have lower degrees of product adaptations and face more exogenous constraints. Firm size can be connected with equity (medium-sized forms) or non-equity entry modes (SMEs) (Osborne 1996).
On the other hand, Brown et al. (2003) controlled for the parent company size when examining international expansion of hotel chains and found it was not a factor. Firm size is relative and perhaps needs to be considered vis-à-vis main competitors in a given market (Ekeledo and Sivakumar 2004). Company size is also related to its overall export propensity (Bonaccorsi 1992). As current research is inconclusive in the role of company size in entry mode selection, hypothesis 1 is formulated:

H1: Company size is linked to a particular entry mode choice.

Company strategy

There has been a lot written on the need to adapt corporate strategy to suit local markets. “The overall management trends and business dealings characterizing CEE societies are still not identical to those in the West, highlighting the importance for top management teams to consider local approaches and practices when entering novel markets” (Koles and Kondath 2014, p. 386). Product and service strategy are closely connected to the entry mode choice (Ojala and Tyrväinen 2006). Rugman and Verbeke (2004) distinguish between a regional and a global approach and treat a group of similar countries as a region. Perhaps, companies shall treat their strategic directions in a hierarchical manner, where global strategy is always translated into a specific local one (Svensson 2001). Specific local strategy may result in local product offerings, different positioning or pricing, distribution, advertising, human resource approaches and many other management and marketing functions. There needs to be an overall strategic competence of a company to successfully enter foreign markets (Knight 2001), therefore we hypothesize:

H2: Company international strategy is linked to a particular entry mode choice.

Company international experience

International experience has been one of the core elements of the established Uppsala internationalization model (Johanson and Vahlne 1977, 1990) for progressing across the various entry modes from non-equity to the equity-related ones. Already Erramilli (1997) proved that prior international experience plays an important role in the selection of market entry mode, such findings were later verified for instance by Pinho (2007). According to some, only experience in similar countries affects entry mode choice (Dow and Larimo 2009). Later entrants may also capitalize on experiences of other firms when entering a particular territory and hence may exhibit isomorphic behavior (Lu 2002). Firm’s previous international experience has been even reported to have a moderating impact on the choice of entry mode (Lu 2002). Evidence on the impact of previous international experience on the entry mode strategy has been mixed (Brouthers and Hennart 2007) and warrants further reconceptualization and investigation. Hence our third research hypothesis:

H3: Previous company international experience in the region is linked to a particular entry mode choice.

3 Methodology

The paper is based on the data gathered in a quantitative Barometer Study, which was conducted through personal in-depth interviews with Austrian B2B Marketing and Sales CEE-managers in 2013. In order to gain insights about main issues faced by Austrian businesses in CEE countries, the questionnaire was developed on the basis of existing literature and refined through five expert interviews with international sales managers. The data was collected through computer-assisted telephone interviews. The methodology and other findings from the study have been published elsewhere (e.g. Zehetner and Wiesinger 2008; Wiesinger and Zehetner 2014). However, hypotheses assessed in this paper have not been previously examined. The sampling frame included company listings from various business databases (mainly in Hoppenstedt). A list of 30-100 companies for each country was compiled by selecting Austrian companies with significant activities in at least one of the eight CEE key markets (Poland, Czech Republic, Slovakia, Ukraine, Russia, Hungary, Romania, and Bulgaria).
Quota sampling was used to select interviewees with adequate experience in marketing and sales in the relevant markets, resulting in a determined sample size of 35 companies from each country. In 2007 (not reported here) and again 2013, identified companies were contacted by telephone to identify marketing/sales managers responsible for the selected country markets. The company representatives were provided the questionnaire in advance; therefore, preparation was possible before the actual telephone interview took place. The 2013 barometer yielded 244 completed surveys.

4 Results of the Barometer study

In line with the hypotheses developed above and capitalizing on the Barometer study data, market entry modes for Austrian companies with significant market presence in Central and Eastern Europe were either exporting, licensing/franchising, or their own subsidiary. Such an approach mirrors the Uppsala model as well as other international business literature (Griffin and Pustay 2013; Hill 2013). In this analysis, only subsidiary mode of entry is inquired. Measures of company size vary widely in previous studies (note [1]), here the study utilizes the scale for a number of employees in the home country (Austria) as a proxy of company size. For measuring international experience, we asked how many markets out of 23 CEE markets were entered on or before 2000 and inquired the overall number of CEE countries, in which respondents’ firms are active. In the study, companies were also asked to determine their predominant international strategic direction: threating all international markets as one (global strategy), adapting a strategy to one market and a group of international markets (local strategy), or not having an international strategy at all (domestic strategy). Previous experience is measured by the number of countries in the CEE region, in which the company operates. Means, standard deviations, and correlations are shown in the following tables.

Variable

N

Minimum

Maximum

Mean

Standard Dev.

Subsidiary

244

0

22

4,06

5,219

Nr_countries

244

1

23

13,32

6,181

Nr_empl_AT

244

1

3

1,88

,738

Pre_2000_entry

244

0

23

7,39

7,002

Strategy

244

1

3

2,02

,501

TOTAL

244

Table 1: Descriptive statistics
Source: Authors

Subsidiary

Nr_countries

Nr_empl_AT

Pre_2000_entry

Strategy

Subsidiary

Pearson

1

,228**

,168**

,125

-,138*

Nr_countries

Pearson

,228**

1

,207**

,653**

-,107

Nr_empl_AT

Pearson

,168**

,207**

1

,002

-,127*

Pre_2000_entry

Pearson

,125

,653**

,002

1

,036

Strategy

Pearson

-,138*

-,107

-,127*

,036

1

**. Correlation is at 0.01 level significant (two-tailed).

*. Correlation is at 0.05 level significant (two-tailed).

Table 2: Correlations
Source: Authors

Analysis of correlations shows that with the exception of early CEE market entry all other factors have been significant for the choice of market entry mode. However, early market entry is strongly correlated (0.653) with the number of countries in which the company operated in 2013. When testing the model with three significant factors identified through correlations (number of countries, number of employees at home and strategic orientation), the model is significant at 0.01 level.

Modela

R square

df

Mean square

F

Sig.

1

Regression

512,181

3

170,727

6,711

,000b

Residuum

6105,897

240

25,441

Total

6618,078

243

a. Dependent variable: Subsidiary

b. Predictors: (Constant), Strategy, Nr_countries, Nr_empl_AT

a. Dependent variable: Subsidiary
b. Predictors: (Constant), Strategy, Nr_countries, Nr_empl_AT
Table 3: ANOVA results
Source: Authors

5 Conclusion, implications and limitations

Other entry modes need to be examined and statistically verified, however initial outcomes of the statistical analysis have been encouraging. It seems that CEE market entry is not a random task but is linked to the size of the company, its previous international experience measured by the number of countries rather than by the timing of entry, and by the level of strategic adaptation to international markets. Previous international experience in respective markets was also directly named by the respondents as an increasingly important factor for a successful CEE market entry (54 index points in 2013, i.e. plus 12 points in comparison to 2007 barometer study) (anonymized for a review). As both large and medium-sized companies were included in the barometer study, it seems that both core dimensions of the Uppsala internationalization model – increasing geographic coverage and increasing market commitment – have been validated for Austrian companies entering international markets. H1 and H2 were supported, whereas based on the two selected measures of prior international experience, the study found only support for the previous experience measured by the number of countries in the region in which an individual company is active.
The research suffers from obvious sample size, sampling method and analytical apparatus (linear regression, data multicolinearity) limitations related to the particular tool set. Further studies and additional statistical analyses need to be performed to bring the outcomes forward and possibly reach the level of journal article publication. There could even be other significant factors for the market entry mode choice, which our recent study overlooked (for instance the role of cultural distance in entry mode choice – Ahsan and Musteen 2011). Last but not least, having longitudinal data for 2007 available as well and planning for a new barometer study later this year, it may be worth exploring the phenomenon in a longitudinal way.

5. Poznámky/Notes

[1] See Brouthers and Hennart (2007) for a discussion on the topic.

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7. Kľúčové slová/Key Words

CEE countries, market entry, international business, Uppsala model

krajiny strednej a východnej Európy, vstup na trh, medzinárodné podnikanie, Uppsala model

8. JEL

M31

9. Résumé

Predikčné modely vstupu na trh: Dôkaz rakúskych firiem zameraných na stredoeurópske trhy
Výber predikčných modelov vstupu na trh bol jednou z hlavných tém v literatúre zameranej na medzinárodné podnikanie. Štúdia prispieva k diskusii o prediktoroch pre jednotlivé modely vstupu. Zistenia, vychádzajúce zo štúdie Barometer Study 2013 medzi 244 rakúskymi spoločnosťami s podstatnou prítomnosťou na trhoch Strednej a Východnej Európy, odhaľujú, že veľkosť firmy, strategická orientácia a celkové medzinárodné skúsenosti môžu hrať významnú úlohu pri získavaní zdrojov a zakladaní dcérskych spoločností v krajine. Evolučný prístup k stratégiám vstup na trh reprezentovaný modelom Uppsala môže byť stále platný, aj keď bol preskúmaný na regionálnej úrovni krajín CEE.

10. Kontakt na autorov/Addresses

MMag. Sophie Wiesinger, Upper Austria University of Applied Sciences, School of Management, Study Programme Global Sales and Marketing, Wehrgrabengasse 1-3, 4400 Steyr, Austria, e-mail: [email protected]

doc. Ing. Pavel Štrach, Ph.D., Ph.D., Upper Austria University of Applied Sciences, School of Management, Study Programme Global Sales and Marketing, Wehrgrabengasse 1-3, 4400 Steyr, Austria, e-mail: [email protected]

11. Recenzované

1. marec 2015 / 24. marec 2015