Table of Contents

Sustaining Growth and Performance in East Asia

Sustaining Growth and Performance in East Asia

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

This third book in the series focuses on how small and medium sized enterprises (SMEs) contribute to achieving and sustaining growth and performance in their economies, as well as the ways in which governments can assist and enhance that contribution. This is of particular concern given the trauma suffered by East Asian economies in the wake of the financial and economic crisis of 1997–98.

Chapter 10: Entry Mode Decisions of Indonesian Small and Medium-Sized Manufacturers in the Export Market

Heru Satyanugraha

Subjects: asian studies, asian business, business and management, asia business, international business, organisation studies, economics and finance, industrial organisation


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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