FOREIGN MARKET ENTRY MODE CHOICE IN SERVICE FIRMS: A BUSINESS MODEL PERSPECTIVE

Abstract

The topic of foreign market entry in service sector could benefit from a more granular approach, since the business model (BM) employed varies greatly across different types of services. It is argued that this in turn would affect the internationalization strategy to be employed in each service case. In this paper, services are classified along three dimensions (inseparability, capital intensity, degree of customization), and propositions are developed regarding the right foreign market entry mode for each of the eight service variations. The propositions are grounded in business model and general strategic management theories, since it is argued that service firms design their activity systems in host countries via tradeoffs between adjustment costs and transaction costs involved. As the service classification defines the nature of these costs for the focal firm, previous findings regarding the choice of foreign market entry mode reflects BM designs to optimize such costs. The scientific value of this paper is the introduction of the business model concept as a new perspective for research on decision making in service firm internationalization.

Keywords

• Business Model,Foreign Market Entry,Service Marketing

References

1. Akbaba, Atilla. (2006). “Measuring service quality in the hotel industry: A study in a business hotel in Turkey”.International Journal of Hospitality Management 25(2), 170-192.
2. Argyres, Nicholas, Joseph T. Mahoney, and Jackson Nickerson. (2019). “Strategic responses to shocks: Comparativeadjustment costs, transaction costs, and opportunitycosts”.Strategic Management Journal 40, 357-376.
3. Ball, David A., Valerie J. Lindsay, and Elizabeth L. Rose. (2008). “Rethinking the Paradigm of Service Internationalisation: Less Resource-intensive Market Entry Modes for Information-intensive Soft Services”,Management International Review 48(4), 413-431.
4. Benito, Gabriel R. G., and Lawrence S. Welch. (1994). “Foreign Market Servicing: Beyond Choice of Entry ModeGab”,Journal of International Marketing 2(2), 7-27.
5. Bigelow, Lyda, Jackson A. Nickerson, and Woo-Yong Park. (2019). “When and how to shift gears: Dynamic trade-offsamong adjustment, opportunity, and transactioncosts in response to an innovation shock”.Strategic Management Journal 40, 377-407.
6. Carman, James M. (1990). “Consumer Perceptions of Service Quality: An Assessment of the SERVQUAL Dimensions”,Journal of Retailing 66(1), 33-55.
7. Cheng, Jenny and Hanna Sundell. (2011). “Foreign Market Entry Modes of Running Events -the Internationalization of GöteborgsVarvet Half Marathon”.University of Gothenburg.
8. Ekeledo, I., and K. Sivakumar. (1998). “Foreign Market Entry Mode Choice of Service Firms: A Contingency Perspective”,Journal of the Academy of Marketing Science 26(4), 274-92.

9. Ekeledo, I., and K. Sivakumar. (2004). “International Market Entry Mode Strategies of Manufacturing Firms and Service Firms”,International Marketing Review 21(1), 68-101.
10. Erramilli, M. K. (1990). “Entry Mode Choice in Service Industries”,International Marketing Review 7(5).
11. Erramilli, M. K., and C. P. Rao. (1993). “Service Firms’ International Entry-Mode Choice: A Modified Transaction-Cost Analysis Approach”,Journal of Marketing 57(3).
12. Fladmoe-Lindquist, Karin, and Laurent L. Jacque. (1995). “Control Modes in International Service Operations: The Propensity to Franchise”,Management Science 41(7), 1238-1249.
13. Grönroos, C. (1999). “Internationalization Strategies for Services”,Journal of Services Marketing 13(4/5), 290-97.
14. Jensen, Peter D. Orberg, and Bent Petersen. (2014). “Value Creation Logics and Internationalization of Service Firms”,International Marketing Review 31(6), 557-575.
15. McQuillan, Deidre, and Pamela Sharkey Scott. (2015). “Models of Internationalization: A Business Model Approach to Professional Service Firm Internationalization”.Business Models and Modelling 33, 309-345.
16. Pla-Barber, Jose, Esther Sanchez-Peinado, and Anoop Madhok. (2010). “Investment and Control 57 Decisions in Foreign Markets: Evidence from Service Industries”,British Journal of Management 21(3), 736-753.
17. Pla-Barber, Jose, Fidel Leon-Darder, Cristina Villar. (2011). “Theinternationalization of soft-services: entrymodesand main determinants in the Spanish hotel industry”. Service Business 5, 139-154.
18. Herrmann, Pol, and Deepak K. Datta. (2006). “CEO Experiences: Effects on the Choice of FDIEntry Mode”. Journal of Management Studies 43(4), 755-778.
19. Sanchez-Peinado, Esther, Jose Pla-Barber, and Louis Hebert. (2007). “Strategic Variables That Influence Entry Mode Choice in Service Firms”,Journal of International Marketing 15(1), 67-91.
20. Teece, David J. (2010). “Business Models, Business Strategy and Innovation”,Long Range Planning 43(2-3), 172-94.
21. UNCTAD. (2019). “e-Handbook of Statistics”.stats.unctad.org/handbook/Services/Total.html
22. Vargo, Stephen L., and Robert F. Lusch. (2007). “Service-dominant Logic: Continuing the Evolution”,Journal of the Academy of Marketing Science 36(1), 1-10.
23. Visnjic, Ivanka, Andy Neely, and Marin Jovanovic. (2018). “The Path to Outcome Delivery: Interplay of Service Market Strategy and Open Business Models”.Technovation72-73, 46-59.
24. Volberda, Henk, Frans van den Bosch, and Kevin Heij. (2015). “Reinventing Business Models: How Firms Cope with Disruption”.Oxford University Press.
25. Williamson, Oliver E. (1996). “Transaction cost economics and the Carnegie connection”.Journal of Economic Behavior & Organization 31(2), 149-155.
26. Zott, Christoph, and Raphael H. Amit. (2009). “Designing Your Future Business Model: An Activity System Perspective”,SSRN Electronic Journal.
27. Zott, Christoph, and Raphael Amit. (2010). “Business Model Design: An Activity System Perspective”,Long Range Planning 43(2-3), 216-26.
28. Zott, Christoph, Raphael H. Amit, and Lorenzo Massa. (2011). “The Business Model: Recent Developments and Future Research”,SSRN Electronic Journal.
29. Zott, Christoph, and Raphael Amit. (2013). “The Business Model: A Theoretically Anchored Robust Construct for Strategic Analysis”,Strategic Organization 11(4), 403-11.