The Role of Small and Medium Sized Enterprises
Studies of Small and Medium Sized Enterprises in East Asia series
Edited by Charles Harvie and Boon-Chye Lee
Chapter 10: Entry Mode Decisions of Indonesian Small and Medium-Sized Manufacturers in the Export Market
Heru Satyanugraha 10.1 INTRODUCTION In exporting its products, a ﬁrm has to make two strategic decisions: ﬁrst, to choose the target country market, and second, identify the most suitable type of export entry mode to use. The structural mode decision is considered as the key factor in any international marketing strategy, as it aﬀects all marketing mix variables and will have a major impact on the ﬁrm’s export business performance (Wind and Perlmutter, 1977; Anderson and Gatignon, 1986; Terpstra, 1987; Hill et al., 1990; Klein, 1993; Root, 1994). The relative importance of the export entry mode decision may even be greater for industrial products, because brand names, advertising and pricing are usually less critical for industrial products than for consumer products (Davidson, 1982; Haas, 1986; Kim and Daniels, 1991). The export entry modes, or types of organizational systems employed to bring products into the market, can be viewed as the varying degrees of channel integration. At one extreme, the ﬁrm can integrate forward and perform all the marketing and distribution functions itself by establishing a sales subsidiary in a foreign market. At the other extreme, a ﬁrm can choose not to perform any of these functions and instead leave the tasks to independent ﬁrms. A ﬁrm may also use intermediate options such as commission agents and forming distribution-related alliances with foreign ﬁrms (Anderson and Coughlan, 1987; Klein et al., 1990). Several theoretical frameworks have been oﬀered to explain the export entry mode decision. The degree of forward integration...
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