A Framework for the Selection of an Entry Mode into International Markets for Practical Green Energy Limited

Abstract

Given the global reality of businesses this day, the world even though it may seem a small place still necessitate the requirement of a strategic plan, and to evaluate and implement an entry into a foreign market where that market is not indigenous to the parent company because of the inherent political risk, financial risk, and foreign exchange risk of repatriation of funds. Should this evaluation not be carried out, which will form the basis of the strategic decision making with regard to a foreign investment, then the company’s whole investment plan could be at stake. Planning for international market entry is a continuing open-ended process. There are a number of important factors that relate to how investors can operate in a foreign country; such factors include the rules and regulations pertaining to the entry and operations of foreign investors, standards of treatment of foreign affiliate, the functioning and efficiency of local markets, trade policy and privatization policy, business facilitation measures and incentives, and restrictions. This study is motivated by the need to understand and evaluate the different entry modes available to PGEn, a UK-based R&D company in a bid to helping it decide on the best entry mode for achieving its international expansion objective. The study looked to evaluate the overall risks by analysing relevant qualitative aspects of foreign investment entry; however the eventual decision with regard to a yes or a no rests with the Directors of PGEn. The main aim of this project is to build a model which highlights the important considerations for the selection of an entry mode. The considerations include external (country-specific and industry-specific) factors and internal (firm-specific) factors that influence entry mode decision. The model is to be used as a guide for the company’s entry mode selection decision into different countries. This project then details recommendations to PGEn as to the choice of its entry mode into its first target country, India. Primary data from interviews with the key decision maker of the company, and theoretical findings from secondary sources of data such as journals, websites, text book and other publications were analysed to obtain in-depth understanding of the company, the market and existing policies for use in the construction of the model