Entry As A Strategic Issue Business Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

25growing into a reliable and well structured information body. There are many seemingdisparities among leading theorists in the field of strategy. De Wit and Meyer indicated that "there are strongly different opinions on most of the key issues within the field and the disparities run so deep that even a common definition of the term strategy is imagined." One main reason is that the strategy alteration was developed by borrowing from different quantitative or qualitative disciplines, including economics (especially industrial economics), finance, psychology, sociology, and military arts.

Successful strategic management is particularly important for construction organizations, which have to provide increasingly complex projects within a highly stormy and economical business environment .Literature on strategic management is limited in the context of civil and architectural engineering.Noticing that the project management concept is the central focus for researchers, practitioners, and academic programs.

Strategy and strategic management in the construction area can be approximately classified in the following categories.

What is strategy? 

It is important to inspect the definitions of basic concepts so as to provide thoughtful and meaning to the subject matter so that a frame of reference may be framed where further discussions can be carried out . This is mainlyneeded regarding strategy, since there is no single, brief, and commonly accepted definition of strategy.

It has been observed as an idea that sets in place a path that responds to multiple internal and external effects. It has been used a resource based methodology and define a strategy as the arrangement of an organization's resources with the environmental conditions with which it has to deal. Within this viewpoint there are three types of strategic decisions concerned with where to compete:

 Geographic area does a company wish to participate and / or operate?

 Industries in a geographical area does a company wish to participate
and / or operate?

  Divisions within an industry in a geographical area does a 
company wish to compete and / or operate? 
In the construction context, Proposed that strategies are long rangeideas, systems, and methodologies that a company agrees in order to reach its goals in a competitive environment. That strategy is "the direction and scope of an organization over the long term, which achieves benefit for the organization through its structure of resources within a changing environment, to meet the needs of markets and to fulfill stakeholder hope." 
There are three levels of strategies"

"Business strategy explains a company's global direction in terms of its general attitude toward growth and the management of its various businesses and product lines. Business strategy is constituted of directional strategy, selection analysis, and parenting strategy. Business strategy usually occurs at the business unit or product level, and highlights improvement of the economical position of a corporation's products or services in the specific industry or market segment served by that business suit. Business strategies are comprised of competitive and supportive strategies. Functional strategy is the methodology taken by a functional area, such as marketing or research and development, to reach corporate and business unit objectives and strategies by maximizing resource production. It is concerned with developing and cultivating a distinguishing competence to provide a company or business unit with a competitive advantage."

These three levels of strategy are practicallydiscrete, particularly because of the usual organizational split between them. These three sessions of strategy can be further considered as competitive or noncompetitive.

Strategic preparation process
Strategic preparation and strategic management are, in many cases, interchangeablyused in the business domain. That strategic management provides the environment that inspires the development of strategic concepts, while strategic preparationrequires specific instructions for alike, fulfilling, and assessing the development of strategic ideas.

Warszawski suggested a five step strategic preparation process precisely focused on construction companies:

1) Examine the company's mission - the scope of its activities and objectives;

2) Survey the environment of the company - exterior parameters and constraints set by the environment;

3) Survey the company - internal parameters and decision variables;

4) Develop alternative strategies; and

5) Select the preferred strategy.

Alarcon and Ashley suggested a holistic strategic planning policy for construction firms. It includesaintangible model which is a streamlined model of the variables and connections present in the analysis of strategic decisions in the construction industry, and a mathematical model planned to predict the impact of strategic decisions by incorporating export knowledge and valuation of the strategic planning team. Strategies for long term company development such as marketing programs to developing markets, systems to contrivance total quality management, etc.

Internationalization Process

In relationship with expressing strategies for domestic markets, the international marketing strategy development involves different sets of factors of culture, international trade, language, and legal system. Strategy creation in international markets includes a number of key limitations which vary depending on the phase of internationalization.

Reliable with the ideal of Douglas and Craig (1995), Root (1987) specified that entry strategy is "a comprehensive plan that will guide a company's international business operations over a upcoming period long sufficient to accomplish sustainable progress in world markets."


Johanson and Vahlane (1977) decided with several previous studies of international business that internationalization of the firms is a procedure in which the companies gradually upsurge their international participation, and they also believed that all decisions in this procedure - decisions to start transferring to a country, to establish transfer channels, to start a selling subordinate, and so forth - have some joint features. They therefore planned an abstract ideal to explain the same basic apparatus in all steps as portrayed in Figure. The main structure of the model is the difference between the state (market knowledge and market commitment) and change facets (commitment decisions and current activities) in the distinct foreign country. The model specifies the market knowledge and market commitment distress both commitment decisions and the way current activities are accomplished and vice versa.

Figure: The Basic Apparatus of Internationalization - State and Change Facets (Source: Johanson and Vahlane 1977)

Entry barrier

From an industry corporation researcher's viewpoint, Porter defined entry barriers as types of a business that give officials intrinsic benefits over probable participants. Porter projected six major entry barriers, which are 1) cost benefits of officials; 2) product differentiation of officials; 3) capital requirements; 4) customer switching costs; 5) access to distribution channels; and 6) government policy.

Likewise, but in a more wide-ranging sense, Shepherd expressed barriers to entry as anything that reductions the possibility, capacity, or speed of the possible competitors coming into the market. Barriers contain all manners of detailed devices, such as charters, inorganic rights and grants, as well as more overall economic barriers. Based on Shepherd's description, Karakaya and Stahl acknowledged 25 market entry barriers, which are further grouped into two categories: 1) competitor-activated or manageable barriers to entry; and 2) environmental or uncontainable barriers to entry. Karakaya and Stahl also acknowledged the following barriers to entry in international markets that contrast from those in domestic markets:

Cultural differences ;


Access to distribution channels;

Customer switching costs;

Government policy ;

Product adaptation;

Permanence of the currency exchange rate;

Probable local and worldwide competition;

Changes essential in promotional activities;


Political environment;

Economic environment;

Corruption; and
Cost benefits held by homegrown companies.

Entry Timing

Matter of entry timing has established very incomplete courtesy in international business research. Initial entry includes both benefits and35 damages. For example, first movers have quasi monopoly andconsequently detention greater economic rents than in a competitive marketplace.they can easily obtain insufficient assets like locally existing input factors and geographic space; and they can progress an exceptionalresident buyer network. Though late applicants can gain benefits over an first mover when they holdcompetences to procure the same technology at a lesser cost; use greater technology to create better or cheaper products; detention shifts in consumers' tastes more quickly; and make more concentrated investments than first movers.

In an international market background, studies recommend that first movers incline to have higher failure rates equated to first followers because the latter benefit from the experience of the former. But the numerousview has been that first movers enjoy durablebenefits over the late applicants. Some studies on China report that firstapplicantsaccomplish high performance.

3.1.5 Market Selection

International market selection has been distinct as the procedure of launchingmeasures for selecting markets (countries), examining market potentials, categorizing them conferring to the agreed criteria. Selecting new markets is often basically understood as an information-processing and enhancing problem.

Numerous market selection models have been projected in the prose, and can be categorized into two categories: general and context-specific. Utmost models examination the market selection process as composed of threestages:

Screening: Macro-level displays are used to monitor

Countries that do not meet the objectives of the firms or criteria like market size, growth rate, basic fit between customer likings and the current product line, and competitive competitiveness.

Identification (or in-depth screening): Industry-level factors like market size and growth, level of competition, entry barriers and market segments are examined to measure industry fascination of each short-listed country.

(Final) selection: Firm-specific factors like effectiveness and product compatibility with the exiting assortment are examined to select the markets to enter.

An information processing model in Figure for a business's globalizing decision, which relates a definitive Go vs. No Go decision. It comprehends principal categories for analysis thought vital by both experts and researchers in international business.

(1) The company's strategic intention; (2) Assessment of market opportunity; (3) estimate payback risk; and (4) discern synergistic effects. One characteristic of this model is that it changes the market selection issue into a Go / No-go decision regarding individual markets.

Figure: Decision Framework for Global Market Entry

Entry Mode Selection

Foreign market entry mode is an established preparation for establishing and leading international business transactions. There are many entry modes accessible, but the four most mutual modes of foreign market entry are exporting, licensing, joint venture, and onlyspeculation. A natural gradingoccurs among the various modes of entry, although this hierarchy takes different forms in different studies. Figure portrays a hierarchical model proposed.

Figure: A Hierarchical Model of Choice of Entry Modes

Meanwhile entry modes include great resource commitments, and change of them will reason substantial loss of time and money, entry mode selection is a very important strategic decision and it has been a topic of strong interest and significant inquiry in the international business and marketing literature. The main objective of these studies is to classify and analyze the factors that determine the best entry mode, which supports the entrants'

Furthermost past studies on foreign market entry selection can be categorized into three approaches:

1) Measured incremental participation approach, which contends that when the firm first enters a foreign market, a low resource commitment mode such as export is needed. As the firm obtains more information and thoughtful in that foreign market, modes with higher levels of resource commitment, risk, control and profit return will be pursued, e.g., sole venture (see Figure)

2) Transaction cost methodology, which suggests cross-border activities according to the economic foundation that firms will minimize all costs related with the entire value-added chain (from production to consumption of goods) by adopting those activities that they can perform at a lower cost, but authorizing those activities externally if other providers have a cost benefit.

3) Eclectic framework approach. It recommends that cross-border business activities are inclined by three types of factors: location specific factors; ownership specific factors; and internalization specific factors (see Figure). While many researchers argued that ownership and internalization factors share some similarities with the deal cost viewpoint.

International Project Go / No-Go Decision

The market entry decisions consist of three sequentially related stages:

1) Which countries are more favorable or less risky to do business in?

2) Within a candidate country, which potential candidate projects should be selected to evaluate in more detail? And

3) Finally, whether to "go or not to go" on a specific project opportunity? (See Figure 3.11)This sequential process neglects the entry mode decision issue. This may be explained by the project-based nature of the construction industry.

Multinational contractor maneuvers abroad are project -specific; offices and key employees are assembled and set up prior to construction and are usually closed and withdrawn following project conclusion. When involved in multiple projects in one country over a continued period of time, the project office may acquire a greater degree of durability and at some point can become predictable as a branch office of the firm. It rarely, however, develops the kind of durability showed by a wholly owned subordinate of a typical multinational business.

Figure: Entry Decision Process for International Projects

Figure: Project Evaluation Process Model

Cross-Impact Analysis (CIA) method as an indecisioncognitive tool for measuring risks elaborate in international project assessment, and developed a risk-based Go / No-Go decision model. The model includes a total of 32 variables belonging to one of the following five groups:

1)  Country conditions, such as political conditions and economic conditions;

2)  The contractor's decision strategies for international business.

3)  Transitional variables, i.e., uncontainable variables obstructed by either the 
country conditions or the decision strategies, such as currency exchange rate 
and need for work

4)  Replacement variables, i.e., variables sparkly the possible outcomes of the 
project, such as project cost ambiguity and possibility of future work; and

5) Outcome variables, by which the Go / No-Go decision is made. They areproject effectiveness, other welfares to a firm, and overall project outcome.