ABSTRACT
This study examines the effect of international marketing entry strategies using (exporting, franchising, joint venture and partnership) as dimensions and export performance (export sales growth and export profitability growth) as indices. The population of the study consists of all quoted agricultural firm in the Nigerian Stock Exchange with exception of ELLAK LAKE, from where a sample size of 282 was determine using Krejoice and Morgan table. Survey research method was applied using structured questionnaire and 5-point Likert Scale was adopted for this study. The statistical tool used in analyzing data was the simple regression analysis to show the strength of each variable. The results shows that partnership strategy have significant effect on export performance. The study concluded that using more entry strategies can help increase export performance. The study recommend that the listed firms should strengthen their own research & development institution as a means of seeking for the best entry choice and the firm’s management to evaluate the factors to consider when choosing an entry strategy thoroughly so as to make sure they know the market very well and that the management to evaluate the factor influencing the choice of market entry modes. This is to ensure that they choose the best mode.
TABLE
OF CONTENTS
Title
Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgements v
Table
of Content vi
List of
Tables ix
List of
Figures x
Abstract xi
CHAPTER 1: INTRODUCTION
1.1 Background to the Study 1
1.2 Statement
of the Problem 4
1.3
Objectives of the Study 7
1.4 Research Questions 8
1.5 Research Hypotheses 8
1.6 Significance
of the Study 9
1.7 Scope
of the Study 10
1.8 Definition
of Terms 10
CHAPTER
2: REVIEW OF RELATED LITERATURE
2.1 Conceptual
Framework of the Study 12
2.1.1 International market entry strategies 13
2.1.2 Exporting 18
2.1.2.1 Direct export 18
2.1.2.2 Indirect export 19
2.1.3 Franchising 20
2.1.4 Joint ventures 21
2.1.5 Partnership 23
2.1.6 Export performance 23
2.2 Theoretical
Framework 24
2.2.1 Theory of absolute advantage 25
2.2.2 Theory of comparative advantage 26
2.2.3 The OC model 27
2.2.4 The OLI model 28
2.2.5 Resource based view (RBV) of firm 29
2.2.6 Linder theory 31
2.2.7 SWOT analysis theory 33
2.3 Review
of Empirical Studies 34
2.4 Agricultural
Firms 46
2.5 Summary
and Gap in the Literature 48
CHAPTER
3: METHODOLOGY
3.1
Research Design 49
3.2 Area of the Study 49
3.3
Population of the Study 50
3.4 Sampling Procedure 51
3.4.1 Sample
size determination 51
3.5 Data Collection Method 52
3.6
Research Instrument 52
3.7 Reliability and Validity of the
Instrument 52
3.7.1 Reliability
of the instrument 52
3.7.2 Validity of the instrument 52
3.8 Administration of Instrument 53
3.9 Scoring
of Instrument 54
3.10 Sources
of Data 54
3.11 Model
Specification 54
3.12 Data Analysis 57
3.13 Testing of Hypotheses 57
CHAPTER 4: RESULTS AND DISCUSSION
4.1 Collection of Data 58
4.2 Demography Profile of Quoted Staff 59
4.3 Test of Hypotheses 67
4.3.1 Test of hypotheses using simple regression analysis 68
4.3.1.1 Test of hypothesis one 68
4.3.1.2 Test of hypotheses two 69
4.3.1.3 Test of hypotheses three 70
4.3.1.4 Test of hypotheses four 72
4.3.1.5 Test of hypotheses five 73
4.3.1.6 Test of hypotheses six 74
4.3.1.7 Test of hypotheses seven 75
4.3.1.8 Test of hypotheses eight 77
4.4 Discussion
of Findings 78
CHAPTER
5: SUMMARY, CONCLUSIONS AND
RECOMMENDATIONS
5.2 Summary
of Findings 85
5.3
Conclusion 90
5.3 Recommendations 90
5.4 Limitations of the Study/Suggestions for
Further Studies 91
5.5 Contribution to Knowledge 92
REFERENCES 93
APPENDICES 100
LIST
OF TABLES
3.1: List of staff strength of quoted
agricultural firms 50
3.2: Summary of cronbach alpha 53
4.1: Copies of questionnaire distributed and
collected 58
4.2: Demographic
analysis of respondents 60
LIST
OF FIGURES
4.1: Graphical presentation of
respondents’ gender 61
4.2: Graphical presentation of respondents’ age bracket 62
4.3: Graphical
presentation of respondents’ marital status 63
4.4: Graphical
presentation of respondents’ qualifications 64
4.5: Graphical
presentation of respondents’ years of experience 65
4.6: Graphical
presentation of respondents’ departmental section 66
4.7: Graphical
presentation of respondents’ level of involvement 67
4.3: Summary of results with
respect to the hypotheses 78
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Export
is a key determinant of economic growth of any country (Lages and Lages 2014). Nations
have
been able to achieve a lot overtime and one such great achievement is the
ability to link the world together through “international trade” as no country
can survive on her own. Exporting has been the most popular and fastest-growing
mode of international market entry, favored especially by firms. Export is a
crucial business activity for nations’ economic health, as it significantly
contributes to employment, trade balance, economic growth, and higher standard
of living (Lee & Habte-Giorgis, 2004). Marketing as a business discipline
is all about getting the consumer or customer satisfied with the best
alternative goods and services, it could be either domestic or foreign
consumers or customers (Anyanwu, 2016).
Studies
have been conducted to explain export performance and its antecedents or
dimensions; there is no generally accepted conceptualization. Export
performance represents the outcome of a firm’s activities in export markets
(Papadopoulos & Martín, 2010). Export performance can also be defined as
the outcomes of the firm’s international activities. From this perspective,
export performance is the extent to which the firm achieves its objectives when
exporting a product to a foreign market (Garcia, Gaitan, Cataluna & Moreno
2016).
Most
researchers accept the multidimensionality of export performance, but there is
disagreement about which indicators should be used to measure the variable.
Most researchers consider two different dimensions; economic (objective) and
strategic (subjective).
Firms enter international
competitions because of different motives such as gaining global reputation,
assurance of long-term growth, increase of profitability, reaping from economy
of scale and for other reasons such as saturation of internal market, intensity
of competition in internal market and pressure of governmental rules and
regulations. In international competition, a proper and creative entry strategy
guaranties a long-term presence in the market and leads to the success of the
company in international markets. Those companies, which tend to enter
international markets, must decide about the type of entry strategy and its
effect on foreign operation of the company (Cateora & Graham, 2018).
Further, Firms operate in an increasingly dynamic and turbulent environments characterized
by intense competition, uncertain market conditions, faster technological
changes and shorter product life cycles. Under these circumstances, the
successful introduction of new products into the market becomes a critical
factor for the survival and growth of companies. Effective new product
development and commercialization is therefore a challenging task, and several
studies have verified that the entry or launch strategy is a key determinant of
the success or failure for any company product innovations (Pinto, Escudero &
Cillán, 2019).
Some researchers believe that apart
from the motive of companies for entering foreign markets, improvement of
export performance is their main concern (Cavusgil, Zou & Naidu, 2018).
Entry strategy is one of the most fundamental and main factors in measuring
export performance (Zou & Stan, 2018). In previous research emphasis was
put on the correlation and effect of entry strategy on export performance of
companies, little study has been done on it.
International entry mode research is important because the chosen entry
mode has significant implications for export performance (Brouthers, 2017). It
determines whether a company has full control over the foreign unit or has to
share control with a partner (Arregle, Hebert & Beamish, 2016). In
addition, once established, the mode of entry is difficult to change, because
it has long-term consequences on the company (Brouthers & Hennart, 2017).
Given its high relevance, numerous empirical studies have addressed the entry
mode decision (e.g by Sarkar & Cavusgil, 2006; Brouthers & Hennart,
2017; Canabal & White, 2018). Modes of entry into international markets are
the third most researched field in international marketing (Brouthers,
Brouthers & Werner, 2008).
Entry strategy is a method used by
firms to start doing business in a foreign country (Shama, 2016). Entry strategy is an institutional
arrangement that makes it possible for the entry for a firm’s products,
technology, human skills, management, or other resources into a foreign country
(Karkkainen, 2005). Many forms of market entry strategy are available to firms
to enter international markets. One classification first distinguishes between
equity and non-equity modes. Equity modes involve firms taking some degree of
ownership of the market organizations involved, including wholly owned
subsidiaries and joint ventures. Non-equity modes do not involve ownership and
include exporting or some form contractual agreements such as licensing or
franchising (Wilkinson & Nguyen, 2015).
Caves (2012) identified four basic
ways to expand internationally, from the lowest to the highest risk: exporting,
licensing and franchising, strategic alliances and wholly owned foreign
subsidiaries. Cateora and Graham (2018) stated there are six basic strategies
for entering a new market: export/import, licensing and franchising, joint
venturing, consortia, partially-owned subsidiaries, and wholly-owned
subsidiaries. Generally, these represent a continuum from lowest to highest
investment and accompanied by risk-return potential. In choosing a particular
strategy, a company constructs a fit between its internal corporate risk
“comfort level” and the externally-perceived risk level of the target entry
market. Two companies may perceive different risks as they evaluate the same
market and therefore choose different entry modes. Two companies also may
perceive the same risks in a country but still choose different strategies
because of their firm’s differing tolerances of risk.
This dissertation is aimed at
providing the reader with a detailed description and evaluation of the
international market entry strategies on export performance with specific
reference to quoted agricultural firms. The reasons for undertaking a study and
literature review of international market entry strategies are to be found not
only in the fact that exporting success is generally considered to be the vital
first step on the road towards full internationalization. The main aim of every
business firm is to establish itself in the global market. Thus, the process
calls for developing an effective international marketing strategy in order to
identify the opportunities, explore resources and capabilities and utilize core
competencies in order to better implement the overall international strategies.
The decision of how to enter a foreign market can have a significant impact on
the performance.
1.2 STATEMENT OF
THE PROBLEM
The choice of entry mode has become
a crucial strategy decision for firms wishing to enter international markets,
as it will have an important influence on their future business success
(Peinado & Barber, 2016). These international market entry strategies influence
performance and its duration through determining the method and allocating
essential and sufficient resources (Ekeledo & Sivakumar, 2018). According
to Acheampong and Kumah (2012), international entry strategies can also affect
performance by determining the control level, risk level and company share in
foreign markets and end up with success or failure of the company.
International entry mode performance is defined in terms of efficiency or
profitability. Non-profit motives, such as resource and knowledge development
or strategic moves against competitors, are assumed to be reflected in long
term profit.
Also, the choice for a particular
entry mode is a critical determinant in the successful running of a foreign
operation. Decisions of how to enter a foreign market can have a significant
impact on the results. There are several strategies that agricultural firms can
select from when they want to gain entry to a new international market such as
exporting; licensing and franchising; strategic alliances; and wholly owned
foreign subsidiaries. Studies on the relationship between the choice of
international market entry strategy and firm performance are abundant at global
level. These include Taylor and Zou (2000); Zekir and Angelova (2011) Studies
on the choice of international market entry strategy and export performance
seem to concentrate on the developed and emerging countries. Within the
Nigerian context, there is scarcity of studies on the international marketing
strategies techniques used by firms in Nigeria and in particular those that
attempts to examine the relationship between international market entry
strategies on export performance of agricultural firm in Nigeria.
Selecting the most appropriate mode
of international market entry in a foreign market is a crucial and strategic
decision for any international firm (Osland, Taylor & Zou, 2017). Improper
international entry mode selection may result in financial loss and disastrous
entry as experienced by Merrill Lynch in Japan (Hill, 2012). Merrill Lynch was
unsuccessful in its initial entry mode to Japan because it adopted an approach
that was inconsistent with the restrictive and conservative legislation in
Japan at that time. The experience here implies that even if a company has been
successful in the past, success cannot be guaranteed when it comes to advancing
internationally and doing business with different countries or culture.
Gallego, Hidalgo, Acedo and Jose
(2017) states that because of increase in international competition that can be
generally noted in all sectors, internationalization is now a growth option for
almost all companies throughout the world, irrespective of their size and in
order to understand internationalisation process, three questions must be
considered: where to internationalise? When? and how to internationalize? Many
companies enter foreign market due to the desire to increase sales,
profitability, gain more potential customers, and create brand awareness or to
introduce their products or services to new customers. Meanwhile, Isa et al. (2012) stated that some of the
factors that can influence the foreign international market entry strategies
include the distance between the home and the host country, the attitude and
intervention of the host government, existence of other foreign competitors,
trade barriers, political stability, environment, infrastructure and economic
growth. On the other hand, risk management perception also plays a very crucial
role in the firm’s decision before entering into a foreign market based on
their internal knowledge and experience acquired.
Kamau (2011) argues that various
alternative entries strategies can be used to enter into foreign market, these
strategies can be through joint ventures, Greenfield project, mergers,
acquisition, exporting, strategic alliance, foreign direct investment, whole
subsidiary ownership and franchising.
Unlike other several alternatives
entries strategies, franchising offers companies opportunity to expand their
market base especially those firms that have services that are more cumbersome
to export (Altinay & Wang, 2006). Franchise is a contract granted by
regional or national body giving a right to operate one of their channels
within specified areas, based on payment of an initial percentage of sales by
using the parent company merchandising and advertising, equipment and supplies
(Constance & Lieberman, 2012). Furthermore, according to Salar and Salar
(2014) franchising eliminates the problem of entering into a new market by
providing the franchisee the franchisor's entire business format and easy
access to financial support due to the low failure risk rate in franchising,
banks and other financial institutions provides credits to the franchisee From
the above discussion, more knowledge is needed on this phenomena to describe
the most appropriate entry mode strategies that a firm should use when entering
into a foreign market including factors that may influence the choice of entry
strategy and the challenges that such a firm would encounter due to different
barriers.
1.4
OBJECTIVES
OF THE STUDY
The main purpose of this study was
to determine the effect of international market entry strategies on export
performance of quoted agricultural firms in Nigeria. Based on the problems of
the study, the following specific objectives were the study intended to
achieve:
i)
ascertain the effect of exporting on export sales growth of
quoted agricultural firms,
ii)
determine the influence of exporting on export
profitability growth of quoted agricultural firms,
iii)
analyze the effect of franchising on export sales growth of
quoted agricultural firms,
iv)
ascertain the influence of franchising on export
profitability of quoted agricultural firms,
v)
examine the extent of effect between joint venture and
export sales growth of quoted agricultural firms,
vi)
examine the extent of relationship between joint venture and
export profitability of quoted agricultural firms,
vii)
determine the extent of effect between partnership and
export sales growth of quoted agricultural firms,
viii)
ascertain the influence of partnership on export
profitability of quoted agricultural firms.
1.4 RESEARCH
QUESTIONS
The following research questions were
formulated for this study:
i)
to what extent does exporting affect export sales growth of
quoted agricultural firms?
ii)
to what extent does exporting affect export profitability
of quoted agricultural firms?
iii)
to what degree does franchising affect sales growth of
quoted agricultural firms?
iv)
to what degree does franchising affect export profitability
growth of quoted agricultural firms?
v)
to what extent does joint venture strategy contribute to sales
growth of quoted agricultural firms?
vi)
to what extent does joint venture strategy contribute to
export profitability growth of quoted agricultural firms?
vii)
to what extent does partnership affect sales growth of
quoted agricultural firms?
viii) to what extent does partnership
affect export profitability growth of quoted agricultural firms?
1.5 RESEARCH
HYPOTHESES
The following hypotheses were
formulated in null form.
Ho1: There is no significant effect of exporting
on export sales growth of quoted agricultural
firms in Nigeria.
Ho2: There is no significant effect of exporting
on export profitability growth of quoted agricultural
firms in Nigeria.
Ho3: There is no significant effect of
franchising on export sales growth of quoted agricultural
firms in Nigeria.
Ho4: There is no significant effect of
franchising and export profitability growth of quoted agricultural firms in Nigeria.
Ho5: There is no significant effect of
joint venture on export sales growth of quoted agricultural
firms in Nigeria.
Ho6: There is no significant effect
between joint venture on export profitability growth of quoted agricultural firms in Nigeria.
Ho7: There is no significant effect
between partnership on export sales growth of quoted agricultural firms in Nigeria.
Ho8: There is no significant effect of
partnership on export profitability growth of quoted agricultural firms in Nigeria.
1.6 SIGNIFICANCE
OF THE STUDY
This
study will be of immense benefits to the export firms and some agencies of
Nigerian Government charged with the responsibility of managing the
agricultural sector. The information from this study will be used as an input
for planning, organizing, directing and controlling relevant policies and programmers
that would improve agricultural export activities of firms in Nigeria.
Furthermore, the attractive managerial suggestions that will come from this
study could enhance the country’s export orientation and contribute
significantly to the economic development of the country.
This study will also add to the body of
knowledge and literature and will be of great benefit to researchers as they
will use the study as a reference point or material when carrying out further
research work in this stud area. It is believed that the general findings of
this study will contribute to existing literature, and also to the knowledge
about international market entry strategies on export performance and to the
researchers who are interested in investigating related issues.
1.7 SCOPE OF THE
STUDY
There are three aspects of scope
for this research study; they are content scope, geographical scope and level
of analysis/unit of analysis.
Study
scope provides boundaries or parameters within which the study will be
operating. There are three major shapes to this study. They are content,
geographic, and level/unit of analysis. In this study therefore, the content
scope focuses on the nexus between international market entry strategies and
export performance.
Geographically,
the study involves all agricultural firms at the Nigerian Stock Exchange in
Nigeria (Appendix 1). In terms of level of analysis, this will elicit responses
from the firms and Export Quality Assurance Unit, Export Supply
Chain/Marketing, Finance Department, and Non-Executive Staff.
1.8 DEFINITION
OF TERMS
Contract Manufacturing: is a process that establish a
working agreement between two companies.
Contractual agreement: are long-term, non-equity
association between a company and another in a foreign market.
Export Performance: is the outcome of a firm
international activity.
Export Profitability Growth: is additional profit made by a firm
abroad
Export Sale Growth: is the additional sales made by a
firm abroad
Exporting: is the process of involvement or carrying goods abroad; it
can be either direct or indirect. It is marketing of goods produced in one
country into another.
Franchising: is a specialized form of licensing in which the franchisor
not only sells intangible property to the franchisee, but also insist that the
franchisee agree to abide by strict rules as to how it does business.
International Market Entry Strategies: is the planned method of
delivering goods and services to a new target market and distributing them
there.
Joint Venture: is an enterprise in which two or
more investor(s) share ownership and control over property rights and operation.
It is a very common strategy of entering a foreign market.
Licensing: an arrangement whereby a licensor grants the rights to
intangible property to another entity for a specified period and in return, the
licensor receives a royalty fee from the licensee
Partnership: a form of business where two or more people share ownership,
as well as the responsibility for managing the firm income or losses the
business generates.
Login To Comment