Foreign market entry modes: a discussion of the alternatives, opportunities and challenges to Malaysian firms planning to enter the foreign markets.

This paper will discuss the alternatives and opportunities available and challenges to Malaysian firms planning to enter the foreign markets. To choose the most workable and effective entry mode, however, is one of the most difficult tasks and complex decision facing Malaysian firms planning to enter a foreign market. Each of the alternative strategies has its own inherent advantages and disadvantages, with the choice of strategy being influenced by a range of often conflicting forces. Upon deciding to enter a foreign market, a firm has to determine the appropriate mode for organizing its foreign business activities. Each of the modes of entry has different implications for the degree of control that a firm can exercise over the foreign operation, the resources it must commit to the foreign operation, and the risks that it must bear to expand into the foreign country. Thus, identifying the appropriate entry mode in a given context is necessarily a difficult and complex task. The choice, however, is a critical determinant of the likely success of the foreign operation. It is important to note that the discussion in this paper will be an attempt to disaggregate the many variables that have been found to have an impact on selection of market entry method in foreign markets to Malaysian firms. However, it has become clear that this decision is made as a result of a combination of variables, rather than as a result of individual variables operating independently. For example, information about or knowledge or a market will be enhanced by a company's experience of that market; a company's perceptions (of the risk of investment, of the degree of psychic distance, of country environment and government attitude) will be affected by the level of its information and knowledge; the size of a company will affect the resources available to it to enhance its knowledge. Equally, firm size a variable appears to interact with the type of industry - specifically, size appears to be of greater relevance for manufacturing rather than service firms (although both may operate in the industrial sector) in determining the market entry mode, which is, in turn, affected by the market potential. There is no, one single universal 'best' strategy of market entry mode to be used by Malaysian firms going to the foreign market. Malaysian firm should consider all alternative channel strategies when entering each market. The best strategy will be the one which is situationally best, it is optimal in that it satisfies with regard to the conflicting pressure of the foreign and domestic operating environments-industry structure at home and abroad, and company marketing strategy. This discussion of entry modes will convince anyone that the entry decision process cannot be reduced to a formula, set of rules, or even a complex computer model. Choosing an entry mode into international markets is a critical decision facing Malaysian managers. The substantial and often lasting impact of the mode decision on the success or failure of international business operations dictates that the decision should be carefully considered. Many firms have discovered that an ill-judge mode selection in the initial stages of a firm's internationalization can cripple the firm's future market entry and expansion activities. Since it is not uncommon for firms to have their initial mode choice institutionalized over time as new products are sold through the same, established channels, and new markets entered using the same entry method, a problematic initial entry mode choice can be perpetuated through the institutionalisation of this mode. In relation to subsequent international development, firms generally not inclined to change from their preferred entry mode as they developed new markets. Exporting directly or indirectly is the dominant method for most Malaysian firms in all their principal markets. Finally, regardless of the preferred choice of strategy, the company must be pragmatic, since entry mode will be affected by government policy in the target market. However, most recent research has proven that there is considerable evidence to suggest that given the dynamics of and strong economic growth in Asia and Malaysia in particular, traditional market entry theory may require a revision. A better understanding of the process of the foreign market entry strategies will be obtained by building upon all previous research in the area. Eventually internationalization theories may need some adjustments, as many of their fundamental tenets are no longer applicable.