INTERNATIONALIZATION

Factors to Be Considered When Entering a Foreign Market

[Name of the institute]Factors to Be Considered When Entering a Foreign Market

Literature Review

The focal motive behind undertaking the process of reviewing the literature review is to imbue knowledge and information about the topic of research. Literature review is a meticulous process that endows the researcher with mammoth amount of information and lends a hand in developing in-depth understanding about the topic. The following part of the paper entails a comprehensive review of literature about factors that are imperative to take into consideration when entering a foreign market.

Factors to be Considered When Entering a Foreign Market

Money-spinning and lucrative operation of the business is the fundamental purpose of running a business. In this urge, a businessman lays down the pillars of business, takes it to burgeoning state and even expands it to international level. The way in which to expand the business and to enter a foreign market has been a topic that has caught immense attention of researchers in business and marketing.

Approaches that are Adopted to Study Factors to be Considered When Entering a Foreign Market

The review of the literature reveals that most of the studies that have been conducted in past about the factors to consider when entering a foreign market have mostly adopted two theoretical approaches. The first and the most important approach is transactional approach. According to Anderson and Gatignon (1986); Caves (1982); and Erramilli and Rao (1993) this transactional approach prescribes that cross-border activities of a business are conducted on the basis of economic rationale. This implies that an attempt would be made by organizations to deescalate the all the costs that are associated with the entire value-added chain (means the cost from production to consumption of goods) (Anderson and Gatignon, 1986, 18; Caves, 1982, 36; Erramilli and Rao, 1993, 31). This posits that the first and the most important consideration that a firm takes into consideration is the fact that whether going international or going to foreign market would aid in reducing the cost of value-added chain or not. This indubitably points out that there must be some sort of economic advantages that the foreign market must offer.

Dunning (1980, 1988) proposes the second approach to study the factors that are to be considered while entering a foreign market. The eclectic framework that is presented by Dunning integrates the variegated filaments associated with the international business theories about entering the foreign market. This framework of Dunning purports that there are categories of factors that may cast their influence on the business activities in the foreign market. These three categories of factors include: host country specific factors, ownership specific factors and internationalization factors (Dunning, 1980, 26).

Hill, Hwang and Kim (1990) put forwards the notion that within the category of the host country specific factors the elements related to country risks and familiarity with the location come (Hill, Hwang and Kim, 1990, 121). The focus of the ownership specific and internationalization factors revolve around industry related and firm related ...