The Effects of Foreign Market Entry Strategies on Financial Performance of Listed Multinational Firms in Kenya

The objective of this study was to establish the effects of foreign market entry strategies on the financial performance of listed multinational firms in Kenya. Internationalization theory was used as the theoretical foundation of the study. Empirical studies reviewed revealed that several studies had been done on the direct relationship between performance of multinational firms and their modes of entry into foreign firms. However, none of these studies focused on the financial performance of listed multinational firms. The study utilised a cross-sectional descriptive design. Secondary data collected from firms’ annual reports and financial statements for a period of four years (2014 to 2017) was used. The firms’ financial indicators of Sales Growth, Return on Equity, Return on Assets and Return on Capital Employed were employed to measure their performance. Franchising, exporting, wholly owned subsidiary and acquisitions were assessed as the entry strategies used by multinational firms. Data was collected from all the 62 listed multinational companies in Kenya and analysed using quantitative methods. This analysis was most preferred for data collected was quantitative in nature. The relationship between the independent and the dependent variable was tested using simple linear regression. The results show that the performance of multinational firms operating through franchises and as wholly owned subsidiaries as well as acquisitions was lower than the performance of multinationals operating as export companies. The study concludes that the mode of entry into foreign markets chosen by a firm significantly affected its financial performance in the said market. It is therefore recommended that multinational firms wishing to expand their operations globally to come up with long term strategies that have gone through rigorous scrutiny for the benefit of the firm. The study gave a contextual understanding of the internationalization theory. The theory managed to emphasize on reasons why multinational firms should expand their operations beyond their national boundaries. Actual ingredients for policy makers to undertake a well thought through policy formulation to fully understand the importance of choosing the right entry strategy was provided for in the results. Recommendations of the study are that a thorough marketing evaluation of the country of interest should be undertaken to ensure that proper measures are put in place for the selection of an entry strategy that will address the goals and objectives of a firm. The study also recommends that employees of a firm who are at the forefront in the internationalization process should be well informed and trained ahead of the firm’s plans. Policy makers and advisories in countries are advised to streamline the processes of foreign firms’ registration so to attract foreign investors.

Challenges of the Internationalization Process

This chapter analyzes the internationalization strategy of a Portuguese knowledge-based service firm. It is based on a case study and the main objective is to discuss what internationalization theory best explains the company's internationalization strategy. The literature reviews the main internationalization patterns—Uppsala model, born globals, born again globals, and born regionals—so that a comparison of the main characteristics of each theory is discussed and analyzed. At the end of the chapter, a table summarizes the main characteristics of the internationalization process of each model presented. The case study is based on the analysis of both primary data from the firm and data obtained from an interview obtained with the CEO.

Inward Internationalization

This chapter analyzes the internationalization strategy of a small hotel firm of Central region of Portugal. It is based on a case study and the main objective is to discuss what internationalization theory best explains the company's internationalization strategy. This chapter explores a gap in the literature on inward internationalization involving a player of service-based firm of the hotel industry. The literature reviews the main internationalization patterns—Uppsala model, network-based model, and inward internationalization—in order to analyze behavior of small hotel and its internationalization. At the end of the chapter, a table summarizes the main characteristics of the internationalization process of each model presented. This chapter adds value by explaining how a small service-based firm of the hotel industry manages to address its inward internationalization process.

Internationalization: Case of an Emerging Home Decor Family Business

Komal International, India is a family-run enterprise [also called small and medium enterprises (SMEs) in India] catering to the home decor business. In its mission to become a ‘direct’ business partner (supplier) to several MNCs1, Komal International noticed specific challenges to become a ‘compliance-ready’2 export company. Consequently, the company embarked on identifying the relevant external and internal factors. The external factors were identified after assessing several MNCs that indirectly procured products manufactured by Komal International or were listed as their prospective buyers. This assessment and restructuring of its internal functioning allowed alignment with the needs of ‘compliance-ready’ export business. And in turn it provided the ability to survive in a competitive market. Purpose: This case study aims to identify challenges faced by the prospective family businesses (a supplier) to become a ‘compliance-ready’ supplier for the offshore MNCs (buyer) in the home decor market. The challenges were identified by conducting a structured questionnaire followed by a personal interview with existing and prospective buyers; further, modifications in the internal company policies lead to making a ‘compliance-ready’ supplier, useful in finding new export markets. Methodology: The approach was qualitative and included a series of in-person interviews3 with the management of the company over one year, assessing the concepts of family business internationalization as a theory, and from secondary published sources on home decor sector. As such, it was a case analysis to comprehend best practices in a family business to fulfil its vision. Basis of the Case: Phenomenon based. Type of the Case: Applied decisional. Protagonist: Present. Theory: The approach is to examine the relevance of ‘internationalization theory’ for a family business in India. Specifically, we shall, through a case study, investigate the business model adopted by an export ‘compliance-ready’ small family business to thrive in a competitive environment. Research Question: Komal International is a decade-old family business with a vision to provide home decor items globally. The protagonist, having examined the existing business model by considering the internationalization theory and the regulatory environment, has identified two specific challenges. The first is to understand the ‘compliance-ready’ strategy that in turn necessitates the internal policies to be streamlined for its business growth as a ‘direct’ exporter to MNCs. And the second is to meet an ambitious export prospect. The research question is attempted by using the internationalization theory and analysing its role as a supplier to MNCs and becoming ‘compliance-ready’ by modifying its internal company policies. Findings: The significant results suggested are the possible best practices that family businesses such as were embraced by Komal International that are aspirant to become a direct supplier to offshore MNCs may be considered for adopting. These include reworking many internal policies of the company considering (a) the internationalization theory, (b) opportunities from the revised regulatory environment established for Indian SMEs and (c) the opportunities in the global marketplace. By adopting changes within the company, the supplier side (for the buyers’ acceptance as a compliance-ready company) can be strengthened. The findings can be useful to entrepreneurs, specifically family businesses, keen on internationalization. It will be of value to researchers and other SMEs (this definition includes family-run business) in India and globally. The limitations of the study include defining quality parameters based on product specifications and small sample size in interviewing MNCs. The research experiment can be extended to include country-specific analysis, trade trends and cultural analysis.

Adaptation of the Management Model of Internationalization Processes in the Development of Railway Transport Activities

The paper analyzes the importance of the system of management of internationalization processes in developing railway transport. The article also highlights the synergistic effect of a multilevel management model in internationalization processes. The main purpose of the paper was to establish a new model of management of internationalization processes in the frame of railway transport development, presenting a related management model. The article analyzes possibilities of integration of the national railway transport sector into global railway networks and provides a model for the management of internationalization processes in developing railway transport. The developed model was approved in an expert survey conducted in application of a questionnaire method. The goal of the expert evaluation was to ascertain the suitability of the theoretical management model of internationalization processes. Expert evaluation consisting of a questionnaire, the evaluation of concordance of expert opinions, and the results obtained were used in the analysis. The research led to the development of a new railway transport model using the “alliance + cluster” system, which is based on the management of internationalization processes. Many theoretical sources on internationalization processes were analyzed with the aim to adapt main advantages of the internationalization theory in the field of development of railway transport and its prospects for further research.

Does Theory Really Fit Real Life Situations?

This chapter analyzes the strategic international formulation of a SME technological service-based firm to perceive the internationalization theory that best suits the company throughout its history. The literature review of the most studied internationalization patterns—Uppsala Model, Born Globals, Born Again Globals, and Born Regionals—allowed comparison of the main characteristics of each theory vis-à-vis the firm's internationalization. A synthesis table summarizes the main characteristics of the internationalization process of each model and presents a clearer view of the particularities of each. Analysis of the primary data and interviews provided by the company's CEO made it possible to compare the internationalization process adopted by the company with those characteristics, facilitating the process of identifying the strategy followed. The present case study took into account the theoretical model with the greatest similarity of characteristics with the path followed by the firm, as well as its learning and future plans.

The Importance of Market Orientation in Creating a Competitive Advantage of Micro, Small, and Medium-Sized Companies in the Internationalization Process

The chapter concentrates on the concept of market orientation. It uses data from an empirical quantitative study conducted by the author in which more than 1,200 companies were examined. Market orientation intensity has been measured with the use of the MKTOR scale, which over the years has been tested by many researchers and is widely accepted in literature. The chapter consists of four parts. The first one presents internationalization theory and contains a thorough presentation of the concept of market orientation, as well as an explanation of its importance to micro, small and medium-sized enterprises. The following parts contain the methodology and results of the empirical study. Its analyses compare companies of various sizes that operate only locally with those undergoing an internationalization process in terms of market orientation intensity and competitiveness. At the end of the chapter, there are conclusions and practical advice concerning market orientation for contemporary micro, small and medium-sized companies.

Strategy under Uncertainty: Empirical Evidence from Swedish Companies Operating in Russia

The objective of this paper is to describe and explain company strategies under uncertainty. The study attempts to examine closer interaction between research on strategic management and internationalization theory. Recent escalation of conflict between Russia and the EU/USA in combination with economic recession increased the level of uncertainty. The article explores how this deterioration is reflected in a strategy of Swedish companies operating in Russia. This study builds on the empirical data from a survey conducted in 2015 among 73 Swedish firms. The findings of the study contribute to knowledge regarding diversity in commitments shown by different companies at one particular point of time under the same circumstances. The study reveals a domination of expansion strategy chosen by Swedish firms during the current escalation of uncertainty in Russia. A growing strategy under uncertainty has seldom been reported and analyzed by scholars. The study demonstrated that uncertainty is not only a threat to companies operating on the market, but can lead to expanding strategies attempting to exploit the opportunities that uncertainty might offer. Appraising the risk concept, the study provides implications for companies’ managers on the importance of a commitment decision to face the deterioration caused by the uncertainty. Empirical data from this study also suggest that uncertainty is handled by companies better than one might expect. The article questions whether companies and managers are really risk-averse in their behaviour.

Internationalization of Professional Service Firms

This chapter examines the internationalization of Professional Service Firms (PSFs), outlining its drivers, varying forms, and organizational implications. It argues that conventional internationalization theory does not apply straightforwardly to PSFs. The authors identify three key sources of PSF distinctiveness—governance, clients, and knowledge—and show how these generate not only differences between PSFs and other types of organizations but also heterogeneity amongst PSFs themselves. Based on this, four different forms of PSF internationalization are identified—network, project, federal, and transnational—and the authors note that scholarly interest has mostly focused on the last two of these. The chapter highlights change towards the transnational model as an underlying theme in PSF research. It finds little convincing evidence that this model has been successfully implemented and it is argued that, in general, PSFs are better understood as federal structures controlled by a few powerful offices than as transnational enterprises.