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Emerging Markets: A Case Study on Foreign Market Entry in Bangladesh
Authors: Md. Ashiqur Rahman,
Marketing, Master Programme Feleke Desta Tantu Marketing, Master Programme
Tutor: Prof. Mosad Zineldin
Subject: Master Thesis, 4FE020
Level and semester: Master, Spring 2011
Acknowledgement
This thesis is the final step of the Master Programme in Marketing at Linneaus University,
Växjö, Sweden. It has been conducted in Spring 2011.
During the journey of writing this thesis we have obtained a lot of new knowledge and
experience about the subject under investigation as well as the process of putting together a
scientific study. We would herein like to express our gratitude to all the people who has
contributed to the successful finishing of this project. Our special thanks go to:
• our tutor, Prof. Mosad Zineldin, who has given us feedback and encouraged our work;
• our programme coordinator, Dr. Sarah Philipson, who has guided us through the
process;
• the people, who carried out the physical interviews in Bangladesh;
• the 150 retailers, who participated in the study and gave us valuable information
without which this study would not have been possible;
• our opponent group and persons who have assisted with support and made
recommendations for improvements.
We hope you enjoy reading!
Växjö, May 29th 2011
___________________ _____________________
Md. Ashiqur Rahman Feleke Desta Tantu
850124-T312 850127-9593
[email protected] [email protected]
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Abstract
Title: Emerging Markets – A Case Study in Foreign Market Entry to Bangladesh
Keywords: emerging market, entry strategy, market entry, factors behind entry choice, entry
mode, entry node, entry timing
Background: Internationalism and international marketing are hot topics among the strategy
discussions of the companies and as a result companies continuously look for new, unreached
sales potential to their products and services as well as better use of their resources.
Purpose: To find the most efficient international market entry strategy for companies moving
from developed/transition economy to an emerging market.
Theoretical framework: The base for the start of internationalisation process is company’s
inner motives and resources. Motives and resources combined with the cultural distance,
competition and general external environment of host country form potential company-
specific risks for the entry to foreign market. Potential customers in combination with
company resources shows how big is the match between market demand and what company
can offer and therefore determines the potential reward. Risks and reward are both input to the
decision making process where the potential benefits and drawbacks are analysed against each
other. The output of this decision making is the entry strategy.
Methodology: Internet was mainly used to collect secondary data about company resources,
cultural distance and external environment. Interviews with 150 retailers in Bangladesh were
conducted to collect primary data about the competition and consumer behaviours in the
hosiery market of Bangladesh. Then comparative analysis was made based on the model
developed by the authors to reach to the decision.
Conclusion: The most effective entry strategy for the entry to emerging markets is indirect
exporting through an agent in case there is high location risk, moderately high competition
risk, medium country risk and moderately low demand risk, the company has no surplus
finances for big investments and no prior experience in doing business in an emerging market.
Table of content Acknowledgement 2
Abstract 3
Table of content 4
1. Introduction 6
1.1. Background 6
1.2. Problem discussion 7
1.3. Purpose 9
1.4. Delimitation and scope 10
2. Theoretical review 11
2.1. Market entry strategy 11
2.2. Market entry modes 12
2.2.1. Exporting 13
2.2.2. Licensing 15
2.2.3. Management contracting 15
2.2.4. Joint venture FDI 16
2.2.5. Acquisition FDI 17
2.2.6. Greenfield FDI 18
2.2.7. Use of different entry modes 19
2.3. Factors influencing the decision of entry mode 20
2.3.1. Company motives for entry to foreign market 21
2.3.2. Company’s internal resources 23
2.3.3. Cultural distance 24
2.3.4. Risks related entry to foreign market 25
2.3.5. Industry situation / competition in the host market 28
2.3.6. External environment 31
2.3.7. Additional aspects for the entry to emerging markets 32
2.4. Entry nodes 34
2.5. Entry timing 35
2.6. State-of-the-art 36
2.7. Research questions 38
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3. Methodology 39
3.1. Research approach 39
3.2. Data collection 40
3.3. Sampling 41
3.4. Interview methods 42
3.5. Operationalisation 43
3.6. Validity 45
3.7. Reliability 46
4. Empirical study 47
4.1. Company background 47
4.2. Product overview 47
4.3. The host country overview 48
4.3. The home country overview 50
4.4. Information received from the interviews 51
5. Analysis 64
5.1. Company motives and resources 64
5.2. Cultural distance 66
5.3. Competition 67
5.4. Potential customers 70
5.5. External environment 71
5.6. Entry strategy 72
6. Conclusions 78
7. Recommendations for further research 79
References 80
Literature and articles 80
Internet 84
Appendix 1 – Interview questionnaire 85
Appendix 2 – Additional results from the survey 90
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1. Introduction
In order to get an overview about the subject studied in the present thesis, an introductory
background on the issue is provided describing the relevance of the topic. Subsequently, a
problem discussion is elaborated and the overall purpose of the study stated. The chapter ends
with the limitation of the subject.
1.1. Background
Today’s companies, whether they are small, medium-sized or multinational, are striving to
make their products and services more global than ever. The internationalisation of firms is
occurring at an ever increasing pace. In the past 20 years, firms have changed their orientation
from domestic to international; they have shifted from multi-domestic marketing to global
marketing (Malhotra et al., 2003:1).
Internationalisation is the process of adapting exchange transaction modality to international
markets (Malhotra et al., 2003:1). Amdam adds that internationalisation is also a process
increasing commitment to foreign operations and to foreign markets in which they are already
operating (Amdam, 2009:446). According to Albaum & Duerr a firm becomes increasingly
internationalised as it becomes more involved in and committed to serving markets outside of
its home country (2008:13). They define international marketing as the marketing of goods,
services, and information across political boundaries, which could include anything from
exporting one product to one other country in response to an order, to a major effort to market a
number of products to many countries (Albaum & Duerr, 2008:14).
Different authors emphasize on the variety of reasons why companies expand to foreign
markets. Thomson et al (2005:174) mention four major motivations of the companies for going
abroad: 1) gain access to new customers for realizing the potential of increased revenues,
profits and long-term growth; 2) achieve lower costs and enhance the firm’s competitiveness as
often domestic sales volume is not large enough to fully capture manufacturing economies of
scale or learning curve effects; 3) capitalize on its core competencies; 4) spread business risk
across a wider market base so that the economic turbulences do not put the existence of the
company at risk. Couturier & Sola (2010:45) add that companies wish to acquire resources that
are more efficient than those obtainable in the home market of the firm (e.g. labour and natural
resources).
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Album & Duerr (2008:2) bring out some more reasons derived from the developments of the
markets and global environment. They believe that the importance of international marketing is
continuously growing due to: 1) research & development costs, which for many products
cannot be recovered unless they are sold internationally; 2) increasing demand from consumers
for alternative product/service selection; 3) countries’ desire to enjoy higher per-capita GDP
growth rates and lower unemployment rates.
The major external changes that force the rapid growth of international business are
technological advances and greatly reduced costs in communications, the development of
sophisticated and diverse software to support a wide variety of business functions, the further
development of logistics and supply chain management, increasing rates of entrepreneurial
innovation and technological change, changes in the location of some major economic
activities, continuing lowering of barriers to trade and investment through multilateral
agreements and increasing regional integration, the internationalisation of capital markets, an
increase in all types of strategic alliances and the excess capacity existing in a wide range of
industries in many countries (Albaum & Duerr, 2008:2).
According to Couturier & Sola (2010) both niche players and mainstream corporations must
develop globally in order to sustain. Similar idea is expressed by Albaum and Duerr (2008),
who state that most companies are now selling to, buying from, competing against, and/or
working with enterprises in other nations. They further argue that from consumers’ perspective,
international sales and marketing provides an increasing range and selection of goods and
services with lower price and better quality as well as economic health and growth for nations
(Albaum & Duerr, 2008:2).
We can sum up that we live in a global world, where customers expect the high variety of
products/services to choose from and the market competition is continuously increasing due to
endless environmental, social and technological advancements. These trends seem to be getting
stronger, which keeps the internationalism and international marketing the hot topics among the
strategy discussions of the companies. As a result companies continuously look for new,
unreached sales potential to their products/services as well as better use of their resources.
1.2. Problem discussion
When a company goes international, there are three questions that need to be answered: a)
Who are we? b) Where do we want to go? c) How will we go there? (Thomson et al, 2005:3).
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Who are we gives the idea of company’s core competencies and values. Where do we want to
go shows the (expansion) direction and ambitions, specifically the foreign markets where
company wants to establish itself. How will we go there identifies the strategies and ways of
entry. There are different options for entry ranging from licensing and franchising, through
exporting (directly or through independent channels), to foreign direct investment (FDI) (joint
ventures, acquisitions, mergers, and wholly owned new ventures) (Anderson & Gatignon 1986;
Domke-Damonte 2000 in Rasheed 2005:42). However, additionally the company when going
international must also see whether the market where they want to go have the potential to
receive their product.
Over the past two decades, globalization has profoundly affected the economies of both
developed and developing countries. By increasing the flow of trade and foreign direct
investment, trade liberalization policies have transformed and modernized the economies of
emerging markets (Javalgi et al., 2010:209). Emerging economic regions have been playing a
critical role in global economies. Since their market liberalization and privatization policies
were formally set forth, these areas have attracted many foreign investors (United Nations
Conference on Trade and Development [UNCTAD], 1997 in Isobe et al., 2000:468).
Despite the complexity and instability faced, emerging markets have become increasingly
attractive for doing business, inter alia due to the fact that growth rates in forthcoming years
will be significantly higher than in mature markets (Cavusgil et al, 2002). According to Jansson
(2007) the rapid growth of emerging country markets and their integration into the world
economy creates double effects of strong global pull from growing demand and push from
growing competition. Therefore, it may be concluded that it is or will be vital for companies
operating in developed countries, to give more business attention to expand their market to
developing countries.
Competition comes about because business firms, in their search for a niche in the economic
world, try to make the most of their uniqueness. The result, hopefully, is the establishment of
differential advantage that can give the firm an edge over what others in the field are offering.
It is this unending search for differential advantage that keeps competition dynamic (Albaum &
Duerr, 2008:158). In addition Hoecklin (1995) in Albaum & Duerr (2008) argues that
understanding and managing cultural differences can lead to innovative business practices and
sustainable sources of competitive advantage.
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According to Jasimuddin (1995) the study of host cultures is of primary importance to those in
international business because cultural differences exert a pervasive influence on all business
transactions. Cultural factors will continue to be important considerations for managers
operating in foreign, and initially strange, environment is a competitive setting (Jasimuddin,
1995:62).
Specialized marketing knowledge or access to information can distinguish an exporting firm
from its competitors. A good and perhaps unique product, a strong sales force, an efficient
marketing infrastructure, and good service technical support system, for example, may act as
incentives for exporting because a company has built up competitive marketing advantages
(Albaum & Duerr, 2008:79).
When establishing business in an emerging market, understanding the external business
environment is not the only critical component. The attractiveness of the targeted market
segment in terms of profitability prospects is a major parameter for deciding on whether to
enter the market. Analyzing and being aware of the forces driving competition in the targeted
emerging market is a critical factor, since they provide opportunities and threats for growth and
determine the attractiveness of the targeted market segment (Thompson & Martin, 2005).
Market entry in developing countries will most likely mean being exposed to unfamiliar
environments. The general business conditions might be very different from the home market
and constitute higher levels of trade barriers and socio-cultural distance may be difficult to deal
with (Petter, 2009:3). If a company lacks experiential knowledge in a volatile and unstable
foreign market, accurate market segment evaluation is a challenging process. Nevertheless,
being aware of the attractiveness of the targeted segment in an emerging market is a
precondition for deciding on whether to enter the foreign market (Pehrsson, 2002).
It can be understood, the topic of internationalisation is broad and could take hundreds of pages
of discussion. Therefore the authors of this thesis have limited their area of interest to the entry
strategies of emerging markets.
1.3. Purpose
The purpose of this thesis is to find the most efficient international market entry strategy for
companies moving from developed/transition economy to an emerging market.
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1.4. Delimitation and scope
Due to limited time and financial resources the authors limited the scope of the research as
follows:
⇒ Thesis focuses on the appropriate entry mode selection only; full scale analysis of (long-
term) internationalisation process is not done.
⇒ The emphasis is on the entry to emerging market, both in the theoretical chapter as well as
in the rest of the paper.
⇒ The development stage of home country market and its implications to the foreign market
entry are not discussed. Therefore, in the context of this thesis, it is not considered relevant
whether the home country market is developed or in transition phase.
⇒ The theory part of this study is based on the literature that was available to the authors
within the limited time. The authors acknowledge that this may be only the fraction of the
literature that has been produced on the topic. Therefore the approach and framework
developed in this thesis by no means claims to be unique in the field.
⇒ The empirical part of this thesis is based on the case, where the company is an Estonian
hosiery company and targeted market is Bangladesh. For simplification of the text and
relying on the fact that Estonia as part of European Union and Euro zone, Estonia is
referred to as developed market. The authors are aware that in the literature, Estonia is
often said to be a transition economy.
⇒ The data collection for empirical part was done being physically in Estonia. This has effects
on the amount and possibly the depth of information.
⇒ Finally, there was 8 weeks time to for writing this thesis (starting from preparation to
finalising). The limited duration set tight deadlines to the work which has negative
influence on the depth of the study.
The theoretical part of the paper gives the overview of different aspects of the entry strategy
(e.g. entry modes, nodes, timing) and the variety of considerations that influence the choice of
the entry mode. In this part the dimensions of company, market and external environment as
well as risks are covered. Wherever possible, the distinctions specifically applicable for
emerging markets are discussed. The empirical part draws the overview of the case market and
company based on the primary and secondary data collected. Finally the analysis of the
empirical data is made based on the information provided in the theoretical chapter and the
most suitable entry strategy for the companies’ entry to emerging markets is proposed.
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2. Theoretical review In this part of the paper, the authors present theories about the practices of market entry
strategy, market entry modes, internationalisation to an emerging market, risks associated with
new market entry, timing of entry and finally, the research questions that we came up with
based on the discussed theories.
2.1. Market entry strategy
As different authors tend to define the internationalisation, marketing strategy and foreign
market entry strategy slightly differently, it is relevant to specify the terms for the context of
this paper. For the overall approach, the authors are using the definitions from Jansson
(2007:135), who distinguishes two major strategic issues in the international business
marketing: 1) the entry strategy and 2) the internationalisation strategy.
Jansson (2007:135) sees the entry strategy as how firms get access to new customers in new
geographic markets by marketing their products there, for example how the business marketing
is initiated and built up in order to establish a strategic position in the local industry and how
business marketing is done to maintain such a position. The internationalisation strategy for
Jansson is how business marketing is increasingly globalised by the expansion of firm to
growing number of countries (Jansson, 2007:135). Therefore we can conclude that
internationalisation is a long term process and observes the development of the company in an
international business context whereas entry strategy is the first stage or step in entering a new
market. For the context of this paper, only the entry strategy (also referred to as market entry
strategy) is further relevant.
According to Jansson (2007:151-152) market entry strategy consists of four factors: entry mode
(determines whether company shall export, establish a company of its own or cooperate
through a joint venture), entry node (determines how shall company plug into the local
network), entry process (determines how company shall build relationships in the local market)
and entry role (determines what commercial role the company shall perform in the local
network - seller, buyer and/or manufacturer). Janssons view is quite well aligned with the
views of Albaum & Duerr (2008:275), who state that a market entry strategy consists of an
entry mode and a marketing plan and it determines the degree of a company’s control and its
commitment in the target market. Some identify another aspect – entry timing, which can be
crucial while entering to emerging markets (Pan & Chi 1999 in Johanson & Tellis 2008).
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Scholars have extensively analysed some aspects of entry strategies, especially ownership and
control (Agarwal & Ramaswani 1992; Anderson & Gatignon 1986; Hill et al. 1990 in Meyer &
Nguyen, 2005:63), which are related to entry mode. Over the last decade a considerable
attention has also been placed on the nature of business relationships, strategic alliances and
networks (Zineldin 2007:366) and analyzing company performance within different entry
modes (Zineldin 2007, Zineldin & Dodourava 2005). More recent studies have indicated that
internationalisation strategies are associated with information asymmetries and substantial
risks, especially when firms invest in emerging markets with relatively less developed legal and
business environments (Filatotchev et al. 2007:558).
The variety of theories has evolved trying to explain the motives and justification for the choice
of entry strategy, mostly for entry modes. The most widespread out of those theories is
transaction cost theory (Brouthers & Brouthers 2003; Hennart 1991; Zhao et al. 2004 in
Brouthers et al. 2008:936). Quite well known are also theories of international product life
cycle, market imperfections, resource advantage, strategic behaviour, eclectic,
internationalisation, real option and network theories (Malhotra et al 2003:8). Some of those
theories focus on the external environment as the main deciding factor for the entry strategy,
some focus on the internal resources, management views and risk tolerance of the companies,
some put the main attention towards the market aspects. No specific model has been taken as
the basis of this thesis; however, the authors have tried to capture the aspects from all of those
theories that are most relevant for making the entry strategy choice for an emerging market.
2.2. Market entry modes
The firm’s performance in the host country to a great extent depends on its mode of market
entry. The choice of market entry mode selected by a firm is one of the most crucial decisions a
firm can undertake when it decides to internationalise (Choo & Mazzarol 2001:291). Choice of
entry automatically constrains the firm’s marketing and production strategy (Johanson & Tellis
2008:2).
Root (1987) in Rasheed (2005:42) defines an entry mode as an institutional arrangement that
makes possible the entry of firm’s products, technology, human skills, management or other
resources in to a foreign country. Later on Gatingnon & Anderson (1988) in Sharma &
Erramilli (2004) refer to an entry mode as a governance structure that allows a firm to exercise
control over its foreign operations.
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As said before, the transaction cost economics is the primary theory to explain the choice of
entry modes. Based on the concepts of bounded rationality and opportunism, transaction cost
economics focuses on minimizing the costs created by uncertainties associated with protecting
proprietary assets, investing in different markets, and monitoring partner behaviour (Hennart,
1988; Williamson, 1985 in Broutherset al., 2008:936). Erramilli et al (2002:225) add that a firm
should choose an entry mode that can best transfer its re-sources or capabilities from the home
country operations to the host country operations without eroding their value. According to
Bhaumik & Gelb (2005:10), the choice of the entry mode would also depend on the rate of
growth of the local industry. If an industry is fast growing, and therefore fast changing, it may
be essential for companies to quickly have a stake in it, so as not to lose its first-mover
advantage to other multinational companies or local firms.
There are number of international market entry modes available for companies who wish to
enter in to a new market. Entry modes vary in the degree of control the firm has over invested
tangible and intangible resources, the transaction costs associated with that resource
commitment (Anderson & Gatignon 1986; Domke-Damonte 2000 in Rasheed 2005:42),
enforceability of legal rights and ease of knowledge transfer (Hennart, 1988, 1989; Williamson,
1991 in Broutherset al., 2008:937). Dunning proposed a comprehensive framework which
stipulates that market entry modes are determined by three factors: ownership advantages of a
firm, location advantages of a market and internalization advantages of integrating transactions
within the firm (Dunning in Ohlin, 1977; Dunning, 1980 in Couturier & Sola, 2010:47).
The entry modes can be non-equity based or equity based (foreign direct investments). The
most common market entry modes described by the majority of the authors are exporting
(indirect or direct), licensing, management contracting, joint venture, acquisition, Greenfield.
The first three of them are non-equity based, the rest are different forms of foreign direct
investments – that means equity based entry modes. Following is the overview of the
mentioned entry modes with some explanation about when it may be beneficial to use one or
another.
2.2.1. Exporting
Exporting is located domestically and is controlled administratively (Anderson & Gatignon
1986 in Rasheed 2005:43). It is the easiest way to meet needs of foreign market and it has
minimal effect on the ordinary operations of the firm (Albaum & Duerr, 2008). According to
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Rasheed (2005:41) a study results indicate that firms will have a higher rate of international
revenue growth using no-equity-based (exporting) foreign market entry modes in growing
domestic environments.
According to Albaum & Duerr (2008) as well as to Kotler & Keller (2006) exporting is
classified into two categories: a) direct exporting (every responsibility is performed by the
company itself) and indirect exporting (responsibilities are done through other intermediaries).
Huei-Ting & Eisingerich (2010) categorize firms engaged in gradual internationalisation in to
two types: regional exporter/importer and global exporter/importer. The former relates to
emerging market firms that gradually deepen their commitment and investment as they gain
more market knowledge and experience and begin by exporting to, and importing from,
geographically close markets. The latter refers to firms from emerging markets that initially
limit their investments and engagement in foreign markets but export/import on a global rather
than merely regional level (Huei-Ting & Eisingerich, 2010:116).
Advantages of export from macroeconomic point of view are that it boosts employment and
allows national economies to build up their reserves by means of foreign transactions (Reid,
1983 in Claver et al. 2007:3). Advantages of exporting mode from company perspective are
that it requires low investment, has low risk/return alternative (Agarwal & Ramaswami,
1992:3) and allows a firm to achieve competitive advantage, increase productive capacity or
improve its financial position (Reid, 1983 in Claver et al. 2007:3). It also allows the company
to maintain the complete control over production and reach customers quickly.
From negative side, even though exporting provides a firm with operational control, it lacks in
providing marketing control that may be important for market seeking firms (Agarwal &
Ramaswami, 1992:3). On top of that, research has found that exporting can have negative
effect on financial performance (Lu & Beamish (2001) in Rasheed, 2005:43). That can be
caused by high transportation costs, tariffs and quotas.
Exporting is the most appropriate choice for entry mode if there are low entry barriers, home
location has cost advantage and product customization is not crucial.
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2.2.2. Licensing
Licensing is the provision of the companies (licensor’s) manufacturing, processing, trademark
or name, patents, etc to the licensee with payment (Albaum & Duerr, 2008). It can be the
process of transferring technology from one company to the other or from home country to the
host country (Mottner& Johnson, 2000:185). According to Claver et al. licenses and franchises
are the most important of the main contractual agreements (Claver et al. 2007:4).
Technology plays major role for firms to practice licensing. According to Ferreira and Ferreira
(2008:321) technological difference is important reason for cost differences between firms,
which may encourage them to share their technological information through licensing.
Advantages of licensing include low initial investment, avoidance of trade barriers, access to
local knowledge and easier possibility to respond to customer needs. Major drawbacks of
licensing are the lack of control over the operations and difficulty in transferring tacit
knowledge. In addition licensing has a potential of creating a competitor.
Licensing is the most appropriate when the company has well codified knowledge, there is
strong property rights regime and host country location advantage.
2.2.3. Management contracting
Management contracting exists when a local investor in a foreign market provides the capital
for an enterprise, while a company from ‘outside‘ provides the necessary know-how to manage
the company (Albaum & Duerr, 2008).
Advantages of management contracting for an outside firm is that it offers a low risk way into a
foreign market, allows a company to manage, and in many ways to control (in a functional
sense), another company without equity control or legal responsibility, quick return, establishes
clarity in administration and decision making. It provides the company with access to local
management skills and helps them avoid buying unwanted assets. On the other side, the
disadvantage of management contracting is the need for complex contract and expensive legal
document, which must differ for each case (Albaum & Duerr, 2008:383).
It has been argued that choosing the management contract is appropriate when the manager has
a reputation to protect (e.g. hotels or consulting companies) and when performance-based
contract provides no bad incentives.
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2.2.4. Joint venture FDI
Joint venture exists when a company joins another non-national company for common interest
(Albaum & Duerr, 2008). According to Albaum & Duerr (2008) the main feature of joint
venture is that ownership and control are shared. In long run, this approach is more profitable
than any other approach. In the literature, joint venture is the topic about which different
scholars make different conclusions and recommendations.
On one hand, it is said that entry into a country in the form of a joint venture reduces the
company’s transaction cost of doing business (Bhaumik & Gelb 2005:9). In addition,
cooperative ventures have the advantage of lower capital investment risk, lower risk of return
due to faster entry and lower political risk (Contractor & Lorange 1988 in Rasheed, 2005:45).
Kim & Hwang (1992, p.35 in Brouthers & Brouters, 2003:1184) suggest that joint venture
modes of entry provides the firm with a method to decrease the exposure of fixed assets to the
potential hazards of environmental uncertainty. An agreement of joint venture is considered the
smartest move when the chosen entry market is significantly different from that of the
enterprise’s domestic culture (Hennart & Park, 1993 in Couturier & Sola, 2010:48). Because of
this, Beamish (1985, 1993) in Isobe et al (2000:469) even argues that equity joint venture has
been a dominant and often a "forced" entry mode in most emerging regions.
Several scholars (e.g. Aulakh & Kotabe, 1997; Erramilli & Rao, 1993; Gatignon & Anderson,
1988; Kim & Hwang, 1992) argue that joint ventures provide firms with greater flexibility,
which is needed when environmental uncertainty is high in order to speed up adaptation
(Brouthers & Brouters,2003:1183). On the contrary, Williamson (1991) in Brouthers &
Brouters (2003) discusses that joint venture will be used less often in high environmental
uncertainty markets because adaptations cannot be made quickly due to the need for consent
between parties.
Beamish (1985) in Mayrhofer (2004:74) identifies important differences in the characteristics
of joint ventures between developed and developing countries. The statistics provided show
that joint ventures established between firms in developed countries are equally owned more
often than joint ventures between firms in developed and developing countries. Beamish
considers that the observed differences are mainly due to the characteristics of the external
environment in developed and developing countries. Sinha (2001) goes even further claiming
that multinational companies typically use the joint ventures as vehicles toward gaining
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knowledge about the business environment in the developing economy and once they have
absorbed this knowledge, they usually initiate their own business operations by opting out of
the joint venture (Sinha, 2001 in Bhaumik & Gelb, 2005:7).
According to the empirical study of Javorik & Saggi (2010), efficient foreign investors are less
likely to choose joint ventures and more likely to enter directly. On the other hand several
scholars (Kock & Guillen, 2001; Lane & Beamish, 1990; Osborn & Hagedoorn, 1997 in Kim et
al, 2004:15) argue that strategic alliances are an important entry mode in an emerging market.
Through alliances, western companies can share risk and resources, gain knowledge and obtain
access to markets (Kock & Guillen, 2001 in Kim et al., 2004:15).
In conclusion it may be said that joint ventures are appropriate to be used if specific conditions
apply: (1) the project depends on contributions from two or more partners; (2) the markets for
the contributions from the parents are subject to market failure, i.e. transaction costs are high;
and (3) it is not feasible to internalize the whole operation with one partner taking over the
other(s) (Buckley & Casson, 1976, 1998; Hennart,1988 in Meyer & Nguyen, 2005:74).
2.2.5. Acquisition FDI
Acquisition is defined as having a majority of interest in another company (e.g. acquisition of a
business unit) by stock purchase or exchange (Couturier & Sola 2010).
Acquisition facilitates quick entry and immediate access to local resources (Meyer & Estrin,
2001:575). Firms establishing themselves abroad for the first time often choose to do so via
acquisition. This path reduces uncertainty (Dubin 1976; Brouthers & Brouthers 2003;
Halliburton, Hünerberg & Töpfer 1993 in Couturier & Sola, 2010:47) as acquisition provides
the access to target market knowledge as well as control over foreign operations and own
technology.
From drawbacks side, acquisition may bring along the difficulty in “absorbing” acquired assets.
Also, this option is not feasible in case local market for corporate control is underdeveloped.
From an external viewpoint, acquisition is an attractive option when a firm wishes to enter an
oligopolistic, static or declining market. If investment cost is very high, acquisition becomes
unattractive too and no entry will be an optimal choice but in larger markets acquisition is
relatively more favourable (Muller, T., 2007:93). According to the report of Caves & Mehra
17
(1986) for entry into the US, and Zejan (1990) for Swedish multinational enterprises,
acquisition entry is favoured in rapidly growing or very slow-growing markets (Yung, 2006)
2.2.6. Greenfield FDI
Couturier & Sola (2010) define Greenfield as investment in a commercial office,
manufacturing plant, distribution facility or other physical structure in a country where no
corporate facilities previously existed. It is a direct investment normally entailing 100%
ownership and therefore full control. Greenfield uses the resources of the investor and
combines them with local assets, giving the investor more discretion over the organization of
the new venture, but generally permitting only a gradual establishment (Meyer & Nguyen,
2005:75). A Greenfield entry would be more likely if the multinational company has prior
operating experience in the host country or in similar developing countries or emerging
markets (Barbosa et al. 2004 in Bhaumik & Gelb, 2005:9). It is also more likely if the
“cultural” distance between the multinational’s home country and the host country of
operations is minor (Yip 1982 in Bhaumik & Gelb, 2005,:9)
According to Meyer & Estrin (2001:575) Greenfield project gives the investor the opportunity
to create an entirely new organization specified to its own requirements, but implies a gradual
market entry. Larger and more established multinationals are far more likely to choose a
Greenfield investment (Dubin, 1976; Brouthers & Brouthers, 2003; Halliburton et al. 1993 in
Couturier & Sola, 2010:47). Greenfield strategy is far more appealing when there is rapid
expansion in a market (Knickerbocker, 1973 in Couturier & Sola, 2010:48). The drawbacks are
that Greenfield requires knowledge of foreign management and has very high investment cost
(Muller, 2007:93), therefore it implies high risk and needs high commitment to succeed.
Greenfield strategy can be very appealing when there is lack of proper acquisition target in the
foreign marker, there is in-house foreign market expertise and embedded competitive
advantage.
18
2.2.7. Use of different entry modes
Agarwal & Ramaswami (1992) in Choo & Mazzarol (2001:293) in their examination of the
effect of interrelationships among ownership advantages, location advantages and
internalization advantages have found the following:
⇒ Larger and more multinational firms prefer sole venture (e.g. acquisition, Greenfield) and
joint venture modes to the other market entry modes in low market potential countries.
⇒ Smaller and less multinational firms prefer no entry or joint venture mode in high potential
markets to reduce costs and risks.
⇒ Firms having higher ability to develop differentiated products prefer to choose investment
modes to exporting in countries that are perceived as having high contractual risks.
⇒ Firms prefer the exporting mode in markets that have high potential but are perceived to
have high investment risk.
During the past several decades, there has been a significant change in the attitudes of many
countries toward inflows of foreign direct investment (FDI). From being viewed as exploiters,
foreign investors are now welcomed as a source of new technologies, know-how, better
management, and marketing techniques (Javorcik & Saggi, 2010:415). Developing country
governments are especially interested in the technology and know-how transfer that results
from FDI. To be able to assess the potential magnitude of such benefits, it is important to
understand preferences of different types of investors with respect to the entry mode (Javorcik
& Saggi, 2010:428). In addition to technology transfers, Konopielko in Kumar & Waheed
(2007:178) highlights the benefits of FDI for less developed countries as conferred to domestic
employment growth, formation of human capital, government revenue growth, and direct
expenditure.
By the end of the twentieth century, foreign direct investment had effectively replaced trade as
a driver of economic growth in less developed and emerging economies. In 2002, there were an
estimated 65,000 multinational corporations with about 850,000 worldwide affiliates
employing about 54 million employees, a rise of 141 percent over the 1990 employment figure
for MNCs (UNCTAD 2002). In 2004, FDI increased by 41% in developing countries and
reached an all-time high of $268 billion. Asia in particular took in nearly one in four FDI
dollars, which is quite an improvement from one in ten in 2000 (Kumar & Waheed, 2007:178).
Therefore, we can say that FDI plays as a source of financial resource for developing countries
and emerging markets.
19
From companies’ perspective acquisitions and FDIs are expensive and cumbersome; however,
the aging of the population and changes in regulations have placed many closely held
companies on the sales block, providing foreign companies access to safe vehicles for entry
and expansion (Kumar & Waheed, 2007:180). Foreign licensing is foreign located and is
controlled contractually; and FDI is foreign located and is controlled administratively.
Transaction costs theory views each choice of entry mode as an individual transaction that
involves a trade-off between control and resource commitment (Anderson & Gatignon 1986 in
Rasheed 2005:43). FDI is a more competitive way than exporting for operating in international
markets because the value of FDI was greater at later stages (Lu & Beamish ,2001 in Rasheed
2005:43).
An interesting fact is that over the last decade there has been the change in the nature of
business relationships, particularly the shift from adversarial to more strategic alliance
relationships (Zineldin & Dodourova 2005:460). This allows suggest that licensing,
management contract, joint venture and other cooperative forms of entry have become more
prevailing. Compared to go-it-alone strategies strategic alliances have a long list of motives
(Zineldin & Dodourova 2005:462): a) financial benefits related to cost reduction and profit
generation (e.g. joint investment, reduced inventory, stable supply prices), b) technological
benefits that facilitate supply process (e.g. sharing technology, joint new product development),
c) managerial benefits including interdependence, supply base reduction and loyalty, d)
strategic benefits related to competitive positioning of the supply process (e.g. future direction,
achieving core competency, stronger market base and identity). However, forming a successful
alliance is not an easy task to do as the barriers like clash of cultures, lack of coordination,
differences in operating procedures and attitudes, lack of clear goals, objectives and trust etc
must be overcome. (Zineldin & Dodourova 2005:462-463)
2.3. Factors influencing the decision of entry mode
While an industry may hold the promise of high growth, entry and expansion cannot be
successfully executed without a competitive position within the industry. Therefore entry mode
selection is very important, even critical strategic decision (Agarwal & Ramaswami 1992:2).
The list of the factors that influence the choice of entry mode is long. According to the results
of theoretical and empirical study by Yung (2006), FDI mode choice strategy is influenced by
three determinants: resources owned by the investor, resources specific to the host firm, and
20
risk derived from the international market. Zineldin & Dodourova (2005) showed in their
empirical study that the choice between strategic alliance and go-it-alone strategies depends on
the motives for entering to the foreign market. Claver et al. (2007) argue that the decision to
enter a foreign market should be based on balancing the risks and rewards derived from this
action. However, the evidence suggests that it is also determined by resource availability and
the need for control and choice of entry strategy also depends on the firm's surplus resources
(Claver et al 2007:2). Keillor et al (2001) argue that market/firm characteristics and
government policy/market imperfections have a significant relationship to entry strategy and
they are factors influencing choice of market entry mode. Kumar & Waheed (2007) concluded
in their study that strategic considerations for foreign market entry and expansion should take a
thorough account not only of the firms’ immediate operating needs but also of the competitive
environment in the dimensions of management, finance and macroeconomics.
In the following pages, the authors discuss more thoroughly the most important factors for the
choice of entry mode.
2.3.1. Company motives for entry to foreign market
As discussed already in the introductory part of this paper, there is the variety of motives for
the entry to foreign markets. Zineldin & Dodourova (2005) in their empirical study about
Swedish auto-manufacturers entry to Russia looked more into how these motives influence the
actual entry mode choice. They concluded that sharing research and development and vision,
common goals and new skills development as well as achieving stronger market position and
identity are the main motives when deciding to go for an alliance, while taking advantage of
emerging market opportunities seems to be more important to the manufacturers when
following go-it-alone strategy. The motives like increased customer service, reduced different
costs, increased market share and profits were equally important in case of alliance and go-it-
alone strategies.
They also found that a joint venture alliance may be more likely to be formed by partners that
have common goals and objectives and that joint venture alliance has a better chance to
succeed if the partners initially focus on financial objectives and at later stage on strategic and
managerial objectives.
21
Malhotra et al (2003:20) based on the analysis of various theoretical frameworks make three
conclusions related to the choice of entry based on company’s motives. These were:
⇒ The greater the significance of global synergy to the firm, the greater the probability is that
wholly owned FDI as a market entry strategy will occur at the maturity phase or early
standardization phase;
⇒ The greater the significance of global strategic motivations to the firm, the greater the
probability is that wholly owned FDI as a market entry strategy will occur at the maturity
phase or early standardization phase.
⇒ The greater the significance of global concentration to the firm, the greater the probability
is that wholly owned FDI as a market entry strategy will occur at the maturity phase or
early standardization phase.
When we look at the choice of international entry mode of firms from the perspectives of
transaction cost economics and real option theory, transaction cost economics focuses only on
cost minimization and does not consider opportunity costs associated with timing of entry,
omitting the impact of competitors action, fails to acknowledge the potential for future growth
generated by making investments when uncertainty is high (Leiblein 2003; Li 2007; Sanchez
2003; Zajacand Olsen, 1993 in Brouthers et al. 2008:936). On the other hand, real option
theory tries to address the short comings of transaction cost economics by focusing on cost
minimization and value creation as well as on the opportunity costs (the uncertainties)
associated with not making an investment (Buckley & Tse 1996; Buckley et al. 2002; Dixit &
Pindyck 1994; Kogut 1991 in Brouthers et al. 2008:.937).
In the existing literature, the entry mode decisions are often isolated from the sequence of
decisions. Entry mode decisions analysed in the context of transaction cost theory (Sarkar &
Cavusgil 1996; Rindfleisch & Heide 1997; Meyer 2001; Nakos & Brouthers 2002; Herrmann
& Datta 2002; Meyer 2004 and Zhao & Decker 2006) suggest that multinational enterprises
select entry mode through the minimization of the transaction costs associated with each form
of entry. North notes that firms try to minimize total cost, not just transaction costs (North
1987, 1990, North & Wallis 1994) in the choice of entry modes. While Kos (2010) believes
that cost minimization is critical in entry mode selection but it does not fully explain entry
mode choice (Kos, 2010:320).
22
2.3.2. Company’s internal resources
Choice of entry mode is affected by firms’ resources (Jansson & Sandberg 2008:67). As
compared to small firms, large firms tend to have greater levels of economic and managerial
resources for investments in the host market of entry. This view is supported by the transaction
cost view, which concludes that high control in entry strategies entails high resource
commitment. Wholly owned subsidiaries and joint ventures are high-cost entry modes because
of the level of resource commitment needed to set up operations (Pan & Chi 1999 in Johanson
& Tellis, 2008:2).
Each company is unique and this uniqueness stems from the resources it possesses, their
compability with one another and/or the way they are deployed (Sharma & Erramilli 2004:7).
Examples of such resources include all assets and capabilities, such as distinctive
competencies, technology, corporate culture, customer loyalty, brand name, machinery,
processes and procedures, market orientation and relational and intellectual assets (Hunt &
Morgan 1995, Reed & DeFillippi 1990, Srivastava, Shervani & Fahey 1998 in Sharma,
Erramilli 2004:7). The value of the a resource is defined in terms of its contribution to firm’s
competitive advantage (Madhok 1997 in Sharma & Erramilli 2004:9). The greater this
contribution, the greater the value.
When firm enters a foreign market, it typically relies on its existing resources to compete in
that market because it is generally more effective and/or efficient to transfer them to the foreign
market than develop new ones from scratch (Hu 1995, Madhok 1997, Kogut & Zander 1993 in
Sharma & Erramilli 2004:9). The challenge for entry modes is to transfer the firm’s resources
from the home country to the host country without affecting their ability to generate the desired
competitive advantage (Sharma & Erramilli 2004:9). If the key advantages are easily
transferable, the firm is able to choose the foreign production mode; if essential advantages are
difficult or costly to transfer, the firm will be confined to the exporting mode (Hu, 1995 in
Sharma & Erramilli 2004:10). Similar idea is expressed by Malhotra et al (2003), who propose
that the more tacit or higher the value of firm-specific know-how, the greater the probability is
that wholly owned FDI as a market entry strategy will occur during the new product or
maturity phase.
23
The following table summarizes the resource based view to the choice of entry mode:
PRODUCTION ACTIVITIES MARKETING ACTIVITIES
Firms likelihood of establishing comparative advantage in the host country
Firms ability to transfer advantage generating resources to host country partners
Firms likelihood of establishing competitive advantage in the host country
Firms ability to transfer advantage generating resources to host country partners
Favored entry mode (by the resource based framework)
Low N/A Low N/A Do not enter; Indirect exporting
Low N/A High High Direct exporting via host country intermediation
Low N/A High Low Direct exporting via company owned channels
High High High High Contractual mode (Licensing, franchising)
High High High Low Production Joint Venture
High Low High High Marketing Joint Venture
High Low High Low Wholly Owned Subsidiary
Table 1: Entry mode choices according to resource based view (Sharma&Erramilli 2004:11)
2.3.3. Cultural distance
Culture is usually defined as shared values and meanings of the members of a society. It affects
not only the underlying behaviour of customers in a market but also the execution and
implementation of marketing and management strategies. Thus, cultural distance has a direct
impact on the effectiveness of the entry (Kogut & Singh 1988 in Johanson & Tellis, 2008:4).
According to Choo & Mazzarol (2001) cultural differences are one of the most influential
factors of SME’s entry choice.
When a firm invests in foreign markets, it must face both national and corporate culture,
whether it invests through other organizations or not (Barkema et al., 1996 in Yung, 2006:205).
Hence, cultural differences between home and host market may affect how a firm operates in
the international market (Hofstede, 1980 in Yung, 2006:205). Such cultural differences may be
one of the most important decision-making determinants for the firm's foreign entry mode
24
choice (Barkema et al.; Kogut & Singh, 1988 in Yung, 2006:205).
Cultural distances between the home and the host country has different impacts on different
entry mode types. For example, high post-acquisition costs from international acquisition result
not only from different national cultures between home and host market but also from the
interactions between two organizational cultures (Kogut & Singh, 1988 in Yung, 2006: 205).
Thus the acquired firm is often troubled by "double-layered acculturation" problems resulting
from cultural distance between the acquirer and the acquired firm (Barkema et al., 1996 in
Yung, 2006:205). Hence, in order to reduce the risks of cultural distance between home and
host market, the investor is more likely to enter through Greenfield (Barkema & Vermeulen,
1998; Caves & Mehra, 1986; Kogut & Singh; Wu. 1990 in Yung, 2006:205). Kogut & Singh
(1988) in Muller (2007:94) found that with greater cultural distance Greenfield investment or
joint ventures are more likely than acquisition.
2.3.4. Risks related entry to foreign market
Generally speaking, a company opting to internationalise can select a market entry mode
ranging from very little risk and low capital expenditure (e.g. exporting) to relatively high risk
and high capital investment (e.g. manufacturing abroad) (Johanson & Vahlne 1977; Norvell,
Andrus & Gogumalla 1995). Meanwhile, two firms may perceive the same risk in a country but
choose different strategies because of each firm’s different tolerances of risk (Shama 1995 in
Choo & Mazzarol, 2001:298).
During the process of moving from home country to foreign market, firms face different types
of risks/barriers and each type of risks/barriers should be managed carefully. Malhotra et al.
(2003) discusses market variables during the entrance of an emerging market from country,
location, demand, and competition risks perspective:
Country risk refers primarily to the stability of the political, social, and economic conditions.
Firms tend to avoid or to limit their resource commitment in areas of high country risk.
Exporting and contractual agreements offer low resource commitment options in markets that
have high country risk. However, contractual agreements are increasingly used in countries
marked by high risk of intellectual property violation (as part of country-risk analysis) in which
the legislation and enforcement standards are weak (Kotabe, Sahay & Aulukh 1996 in Malhotra
et al, 2003:16).
25
Location risk is the perceived difference between home and host environments in terms of
culture, business, and economic practices. (Malhotra et al, 2003:18).
Demand risk is the risk taken by the firm because demand for its products or services may fail
to reach the desired level. When demand uncertainty is high or the expected demand is low,
firms favour entry modes that involve low resource commitment, e.g. exporting. Interesting is
that although contractual agreements such as franchising are a low-resource-commitment
option, studies indicate that a high demand potential is the key to their success (Alon & McKee
1999; Contractor & Kundu 1998 in Malhotra et al, 2003:18).
Competitive risk is the number and size of competitors and the aggressiveness of their
marketing efforts (Malhotra et al, 2003:19). When the intensity and competitive differential is
high, firms tend to avoid internalization. Exporting may be firms' preferred option. Strategic
alliances offer a promising alternative to exporting as they enhance knowledge and build
competitiveness (Madhok 1997, Sengupta & Perry 1997, Das & Teng 2000 in Malhotra et al,
2003:19).
On the basis of the preceding discussion, Malhotra et al (2003) make several conclusions
(however, not empirically validated) about which types of entry modes companies would most
probably prefer for the certain product phase in case of the high level of certain risk. The
conclusions are the following:
High degree of risk Product phase The most probable entry mode
Country risk Early standardization Exporting
Country risk Late standardization Contractual Agreement
Location risk Early standardization Exporting
Location risk Late standardization Contractual Agreement or Joint venture
Demand risk Early standardization Exporting
Competition risk Early standardization Exporting
Competition risk Late standardization Strategic alliance
Table 2: compiled by the authors based on Maholtra et al (2003:19)
Root (1987) in Rasheed (2005:44) describes foreign transactional risks from the perspective
of the host country’s political and economic stability and the host country’s policies and
regulations related to transnational business activities. Risk factors related to foreign
transactions include general stability risk, ownership/control risk, operating risk, and
26
transfer risk. General stability risk refers to management’s uncertainty about the future
viability of the host country’s political system (Root 1987). Ownership/control risk is defined
as management’s uncertainty about host government actions affecting the entrant’s ownership
position. Operations risk refers to the possibility of sanctions that could constrain an
investor’s operations in the host country. Transfer risk is defined as limitations on the
entrant’s ability to transfer capital out of the host country (Root 1987 in Rasheed, 2005:44).
There are additional risks for doing business in emerging markets. These include an
inadequate marketing infrastructure, such as poorly developed distribution systems; limited
communication channels; lack of regulatory discipline and frequent changes in regulation; a
high level of product diversion; various market failures; and political and economic instability
(Arnold & Quelch 1998, Garten 1997, Khanna & Palepu 1997, 2000 in Kim et al.,2004:15).
However, according to some authors, entering to developing markets can also have some
additional benefits. For example Huei-Ting & Eisingerich (2010:116) argue that markets to
developing countries are generally less expensive and less risky to enter due to lower
competition than in markets that are already developed and geographically farther away.
Host countries with greater probability of restrictive policies impede foreign investment and
encourage non-equity modes. On the other hand, firms with a proprietary product or
technology have a greater amount of leverage in countries characterized by high investment
risk and consequently may choose higher control modes (Agarwal & Ramaswami, 1992 in
Rasheed, 2005:45).
Doing business in foreign countries is deemed to be substantially more risky than remaining in
the domestic market (Ghoshal, 1987, Vernon, 1985 in Brouthers et al 2000:183). Miller (1992)
suggests that companies should consider evaluating several dimensions of international
environmental uncertainty in an effort to allow the firm to optimize its returns for the risk
assumed (Brouthers et al 2000:183). Agarwal & Ramaswami (1992:3) state that, with respect
to international markets, a firm is expected to choose the entry mode that offers the highest
risk-adjusted return on investment (Brouthers et al, 2000:183).
Each firm needs to define its risk tolerance, which is the basis factor for the firm to make entry
mode decisions (Kos, 2010:322). When company has low risk tolerance, then in case the
excessive return is higher than risk, company chooses joint venture or strategic alliance. When
company has high risk tolerance, then in case the excessive return is higher than risk, company
27
chooses wholly owned enterprise. In both cases, when the returns are smaller than risk,
company chooses not to enter (Kos, 2010:322). The following chart illustrates the firms’ entry
mode decision based on its risk tolerance level:
Figure 1 – An explanatory model for the decision to enter emerging markets: A shareholder
perspective (Kos, 2010:323).
2.3.5. Industry situation / competition in the host market
Competition is often defined too narrowly, not taking into account forces except from today’s
direct competitors (Porter, 2008). In order to formulate market entry strategies, understanding
and coping with different forces influencing the level of competition is essential. Porter (2008)
argued that the profitability of an industry is determined by five forces. Except from rivalry
between existing competitors, industry attractiveness is additionally influenced by the four
following forces, illustrated in figure 3: customers and suppliers in the vertical dimension,
potential market entrants and substitute products in the horizontal dimension. Whether the
forces are intense or benign, determines the extent to which a company earns returns on
investment (Thompson et al. 2005).
28
Figure 2 – Five forces that shape industry competition (Porter, 2008)
Rivalry among existing competitors describes how strong the competitive pressures
stemming from the efforts of rivals are to gain better market positions, higher sales and market
shares and competitive advantages. Price discounting, innovation, service improvements and
advertising campaigns are major forms through which existing competitors in an industry
compete against each other. High rivalry among competitors leads to low attractiveness and
profitability of an industry. The degree of rivalry depends on the intensity with which
companies compete and on the base on which they compete. The intensity of competition is
high, if there is a high number of competitors which are equal in size and power, industry
growth is low, exit barriers are high, competitors are highly committed to the industry and seek
industry leadership, and firms have different business models or different goals (Thompson et
al. 2005).
The bargaining power of suppliers describes how strong competitive pressures are stemming
from supplier bargaining power and seller-supplier collaboration. Through charging higher
prices, and limiting quality or services, powerful suppliers can capture more value for
themselves. Usually, companies depend on a wide range of inputs from different groups of
29
suppliers. A supplier group is powerful, if it is more concentrated than the industry it sells to,
the supplier group does not depend heavily on the industry for its revenues, industry
participants face switching costs when changing suppliers, suppliers offer products which are
differentiated, there are no substitutes for what the supplier group provides, and the supplier
group can credibly threaten to integrate forward into the industry. These factors can increase
the power of supplier groups, which negatively influences the level of attractiveness and
profitability of an industry (Thompson et al. 2005).
The bargaining power of customers describes how strong the competitive pressures are from
buyer bargaining power and seller-buyer collaboration. Powerful customers can play industry
participants off against each other, at the expense of industry profitability. Powerful customers
are able to capture more value by demanding lower prices, higher quality and more services.
Customers have a high negotiating power if: there are few customers, the industry’s products
are standardized or undifferentiated, customers face switching costs in changing vendors or
customers can integrate backward into the industry. A customer is price sensitive if: the
product it purchases accounts for a significant share of its cost structure or procurement budget,
the customer earns low profits or is under pressure to lower purchasing costs (Thompson et al.
2005).
Threat of entry expresses how strong competitive pressures are associated with the entry
threat from new rivals. If new companies enter an industry, they aim to gain market shares
which puts pressure on costs, prices and the rate of investment necessary to compete in the
industry. There are seven major sources for entry barriers, which have the potential to prevent
companies from entering an industry and therefore contribute to high industry profitability:
supply-side economies of scale, demand-side benefits of scale, high switching costs of
customers, high capital requirements, incumbency advantages independent of size, unequal
access to distribution channels, and restrictive government policy. Additionally, a company’s
decision to enter or stay out of an industry is influenced by the anticipated reaction of
incumbents (Thompson et al. 2005).
The threat of substitutes describes how strong the competitive pressures are coming from the
attempts of companies outside the industry to win buyers over to their products. Substitute
products are present for any product, but they are likely to be overlooked in a competitive
analysis, since they can be very different from the industry’s product. A substitute product is
characterized by having the same or a similar function as an industry’s product by a different
30
means. The higher the threat of substitutes, the lower is the profitability of the industry. The
threat of a substitute is high if the customer’s costs of switching to the substitute are low, and if
the price performance trade-off to the industry’s product is attractive (Thompson et al. 2005).
2.3.6. External environment
Jansson (2007) argue that business environments in emerging country markets might be
different from Western markets due to differences among institutions. Large emerging markets
are regarded to be uncertain and complex. Therefore, the business environment is regarded to
be relationship-oriented and institution-building, which results in the characteristic of being a
network society. By using the institutional network approach, the description and analysis of
these uncertain and complex business environments can be enhanced. The institutional network
approach aims to reduce the risk of doing business in an emerging market by making
environmental factors more transparent and predictable before entering the foreign market
(Jansson, 2007).
According to Jansson’s (2007) basic institutions model, the company’s internal and external
environment can be divided into three layers of description for the rules prevailing for the
institutions in the respective layers, which are embedded into each other. Institutions are
characterized by predictability and standardized behaviour. Uncertainty can be reduced by
anticipating recurring behaviour. Furthermore, institutions are described to be stable which
results in established patterns of behaviour (Jansson, 2007).
The central layer contains micro institutions, e.g. the multinational company, which is
surrounded by institutions impacting on it. These institutions can be divided into two layers.
Firstly, the meso institutions level is represented by the organizational fields. Meso institutions
such as the government, the financial market, the product and service market and the labour
market have a direct impact on the multinational company but are also characterized by
influencing the societal institutions. Secondly, the societal institutions contain macro
institutions, influencing the multinational company in one direction, from the sector via the
organizational fields towards the multinational company. This layer contains the country
culture, the educational and training system, the political system, the legal system, professional
and interest associations, business moral, the religion and family/clan (Jansson, 2007).
31
The institutional network approach is visualized in figure 3 by the basic institutions model,
illustrating the constellation of the three layers and the institutions which they contain.
Religion
Family/Clan
Country Culture
Legal System
Political System
Professional and Interest Associations
Business Moral
Educational / Training System
Government
Financial Market
Product / Service Market
Labour Market
BUSINESS NETWORK
ORGANIZATIONAL FIELDS
SOCIETAL INSTITUTIONS
Figure 3 – The basics institutions model (Jansson, 2007)
2.3.7. Additional aspects for the entry to emerging markets
Emerging economic regions are generally characterized by relatively high market growth rates,
short histories of economic liberalization, and a lack of established institutional systems that
support domestic business activities (Isobe et al. 2000:471). Emerging markets exhibit high
growth potential and present a mixture of opportunities and risks for western companies
(Cavusgil 1997; Garten 1997; Kock & Guillen 2001 in Kim et al. 2004:15). Kim et al. (2004)
argue that emerging markets attract not only in cheap raw materials but also in the potential to
generate revenue and also they are not only suppliers but also buyers of goods and services.
Smallness is usually considered a disadvantage in internationalisation, as small and medium
enterprises often lack resources necessary to enter foreign markets. Compared to large
enterprises small and medium enterprises are less competitive. For instance they may not be
able to capture business opportunities due to inferior products, shortages of finance and limited
administration capacity (Jansson 2007, Mayer & Skak 2002 in Jansson & Sandberg 2008:66).
32
However, Johanson & Tellis (2008) have come up with the following findings in their study
regarding entry into an emerging market:
⇒ Smaller firms tend to be more successful than larger firms in entering emerging markets.
⇒ Entry strategies that involve high levels of control (e.g., wholly owned subsidiaries) are
more successful than those that involve low levels of control (e.g., licensing).
⇒ Earlier entrants enjoy greater success than later entrants.
Foreign investors entering emerging markets have to take strategic decisions on where and how
to set up operations (Meyer & Nguyen, 2005:63). According to the internationalisation process
theory firms tend to invest and expand in countries with a short psychic distance to the home
country (Amdam, 2009:445). The psychic distance between two countries depends on
differences in their languages, education, business practices, culture and industrial
development. The uncertainty related to foreign markets and the impact of psychic distance can
be reduced by means of interaction and integration with the market environment (Johansonet
al., 1977 in Reiljan, 2003:10).On the other hand Sim & Ali (2001) argue that firms originating
from countries at different levels of economic development seem to exhibit differences in
internationalisation (Sim & Ali, 2001:58).
Journal of accountancy (2001) has enlisted three steps a company should take before entering
the international emerging market: 1) conduct preliminary market research, 2) plan the market
entry and 3) arrange for distribution. According to Lord & Ranft (2000) in Pedersen & Petersen
(2004), the acquisition of local-market knowledge is critical for successful planning and
implementation of entry to an emerging market. Madhok (1998) in Kos (2010:321) found that
the organizational capability is a key determinant of firm boundaries of multinational
enterprises entering emerging markets.
Maximizing risk adjusted reward is the key aspect of investing in an emerging market (Ollson,
2002 in Kos, 2010:321). A major challenge for foreign investors in emerging economies is the
rapid change of institutions. In transition economies, reforms initially concern primarily formal
institutions at the central level (World Bank, 1996 in Meyer & Nguyen, 2005:69).
According to the theoretical and empirical study result, Chung & Neamish (2005:58) suggest
that foreign firms can proactively pursue opportunities in emerging economies, but with
calculated risk-taking strategies. And further, they propose that firms can take the form of joint
venture, minority joint venture or manufacturing operations in emerging economies.
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2.4. Entry nodes
Firms entering emerging markets face several barriers according to Meyer (2001) in Jansson &
Sandberg (2008:67). These barriers include lack of information, unclear regulations and
corruption. In order to overcome those barriers, the relationships in the host country are needed
as through them the adequate information and know-how about the new external environment
is built. In terms of research in this area, scholars have found that relationships are the core of
the internationalisation process and according to network approach to internationalisation,
entries into local market networks take place through establishing relationships (Axelsson &
Johansson 1992, ford 2002, Hakansson 1982, Hakansson & Snehota 1995, Hammarkvist et al
1982, Jansson 1994, 2007, Johanson & Vahlne 2003, Majkkgard & Sharma 1998 in Jansson
& Sandberg 2008:67).
Establishment points in foreign market networks are defined as entry nodes. There are various
routes into these networks, or nodes by which a firm can enter a network. Entries through trade
either take place directly with customers or indirectly through intermediaries. Direct
relationships, dyads, can be established between buyer and seller in the respective countries.
Indirect relationships, triads, involve an outside party or other type of entry node, usually an
intermediary such as an agent, dealer or distributor (Jansson & Sandberg 2008:68).
One factor influencing the entry node is the structure of the local market network – if it has
loose or tight coupling (Jansson & Sandberg 2008:68). For instance structural changes and
economic reforms in the transitional markets can lead industrial networks to become less
tightly structured (which have happened in CEE, for example). With old regulations moved,
companies are now free to decide by themselves on new business partners and business
relationships. In transition economies, relationships tend to move from being fragmented to
being integrated relations. (Hallen & Johanson 2004 in Jansson & Sandberg 2008:68).
The empirical study conducted by Jansson & Sandberg (2008) about the internationalisation of
small and medium sized companies in the Baltic Sea region concluded that third-party
relationships (the entry node triad) are vital for SMEs. The relationship with the agent provides
the seller with the linkage to the market: to obtain information on the market and to manage the
communication with customers in the foreign language, and with parties belonging to another
business culture. The point of attention, however, is that the indirect relationships could cut-off
the seller from its customers as large social and cultural distances tend to prevent sellers from
34
being involved in the market and build up network experiential knowledge and institutional
knowledge. The learning of the seller is especially low when the relationship with the agent is
weak. In addition, due to high uncertainty in emerging markets, low cost and flexible entry
nodes tend to be chosen which means that firms develop less own experience. To overcome
this lack of opportunity for local knowledge development, the best alternative seems to be
taking over the customer relationships by setting up a subsidiary, thereby changing the entry
node to dyad. This would be helpful to overcome poor experiential organizational learning by
the exporter (Jansson & Sandberg 2008:7-74)
2.5. Entry timing
In addition to the entry mode and node, the role of market entry timing is critical in emerging
markets (Pan & Chi 1999 in Johanson & Tellis 2008:4).
On the one hand, early entry has many advantages. First, the early entrant can lock up access to
key resources, such as distribution channels and suppliers. Second, early entrants have the
opportunity to set the pattern of consumer preference (Carpenter & Nakamoto 1989; Mitchell
1999 in Johanson & Tellis 2008:4) which may disadvantage later entrants. Third, early entrants
can benefit from being the first to exploit governmental concessions and incentives, which
governments often offer to attract such entrants (Pan & Chi 1999 Johanson & Tellis 2008:4).
Fourth, early entrants can time their entry to exploit the “strategic window” of an expanding
market and observe and learn market attributes for a longer period.
On the other hand, Golder & Tellis (1993) in Johanson & Tellis (2008:4) found that pioneers
are often not the long-term winners in a market. First, firms that rush in first may not be aware
of the pitfalls of the newly opened emerging market. Second, returns to the early entrants might
be too low compared with their investments, especially because infrastructure is not yet fully
developed. Third, latter entrants have a flatter learning curve because they can learn from the
early entrants’ errors (Fujikawa & Quelch 1998 in Johanson & Tellis, 2008:4). These three
factors may be responsible for the failure of many early entrants in some markets (Arnold 2004
in Johanson & Tellis 2008:4).
35
2.6. Stateoftheart
In this thesis, our major aim is to conduct a study on choosing an entry strategy for an
emerging market. So far, we have developed an understanding about what an emerging market
entry strategy is and reached to the conclusion that it consists of an entry mode, entry node and
entry timing. We have also discussed quite thoroughly what the different aspects of
consideration are when taking the decisions about entry strategy (that means entry mode, node
and timing).
Whenever the entry strategy is discussed (no matter in the context of developed or emerging
markets, multinational corporations or small and medium sized enterprises), the topic of entry
modes is covered. Other aspects of the entry strategy are less cited in the literature. The
theories of entry modes have been presented, validated and accepted for example by Root
(1987), Agarwal & Ramaswami (1992), Sharma & Erramilli (2004), Rasheed (2005), Meyer &
Nguyen (2005), Bhaumik & Gelb (2005), Jansson (2007), Muller (2007), Albaum & Duerr
(2008), Ferreira & Ferreira (2008), Brouthers et al (2008), Huei-Ting & Eisingerich (2010),
Couturier & Sola (2010). The focus of different scholars when researching on this topic can be
slightly different, but in general, there is common understanding about which kind of entry
modes exist and what their benefits/drawbacks are. Therefore we can conclude that the theories
about entry modes are dominating.
Another widely discussed topic related to entry to foreign markets is risks; especially from the
perspective of which kinds of risks are there to be considered by the entrants of foreign markets
(Johanson & Vahlne 1977, Root 1987, Choo & Mazzarol 2001, Malhotra 2003, Kim et al 2004,
Rasheed 2005). Fewer researchers turn their focus on how exactly the existence of different
risks influences the entry strategy (Malhotra et al 2003).
When discussing the driving factors behind the choice of an entry mode, scholars are scattered
among different approaches. Transaction cost theory is one of the most referred and studied
theories in this field (Sarkar & Cavusgil 1996; Rindfleisch & Heide 1997; Meyer 2001; Nakos
& Brouthers 2002, Herrmann & Datta 2002, Meyer 2004, Bhaumik & Gelb 2005, Rasheed
2005, Zhao & Decker 2006, Brouthers et al. 2008), therefore it can also be considered as
dominating theory. Less discussed, even though theoretically and empirically validated are the
resource based view (Sharma & Erramilli 2004) and network approach (Johanson & Vahlne
2003, Jansson 2007, Jansson & Sandberg 2008). Therefore it can be concluded that these are
36
the emerging theories in the field. There are also few scholars who have analysed different
market entry theories in comparison with each other and proposed the list of conclusions for
entry mode choice (Malhotra et al 2003). These comparative studies however tend not to be yet
empirically validated.
In the context of emerging markets, it seems that scholars generally agree that transaction cost
theory is not enough to explain the entry to emerging markets and there is need for new
theories (Kim et al 2004, Pedersen & Petersen 2004, Chung & Beamish 2005, Jansson 2007,
Johanson & Tellis 2008, Kos 2010). However, the dominating theory for the entry mode
decision to emerging market could not be identified. Even though the authors of this thesis feel
that the network approach (Jansson 2007, Jansson & Sandberg 2008) is becoming more
important and also the risk-reward based model (Kos 2010) at least partially explains the
rationale behind these decisions.
While investigating the topic, the authors of this thesis noticed that even though the
internationalisation is considered very important and widely studied by the high number of
scholars there is limited amount of broad frameworks explaining how the decision making
process for entry strategy choice takes place. Accordingly, it can be considered as the gap of
this research field. The authors would like to propose a model which could fill this gap (Figure
4).
ENTRY STRATEGY Entry mode Entry node Entry timing
RISK
REWARD
Ext. environment
Competition
Cultural distanceCustomers
COMPANY MOTIVES COMPANY RESOURCES
Figure 4: Model for making the entry strategy decision (created by the authors).
37
38
The model tries to consolidate the variety of theories that are especially relevant in the context
of the entry to emerging markets and address the link between different points of
considerations and the choice of entry. The base for the internationalisation process is
company’s inner motives and resources. Motives describe the reasons and (long-term)
objectives for entering to the foreign market. Resources include all types of resources be it
finance, assets, technology, product, know-how, people, management style or any other, which
help the company create value and achieve competitive advantage. Cultural distance refers to
how different the values, norms and overall social set-up between home and host country are.
Competition describes the rivalry in the industry under the interest of the company and external
environment is formed by the rest of the societal institutions (religion, political and legal
system, business moral etc), government, financial and labour market which affect the
operations of any company operating on the host market. Motives and resources combined with
the cultural distance, competition and general external environment of host country form
potential company-specific risks for the entry to foreign market. Customers are the main source
of potential success for the company. By customers we mean the consumption habits and
wishes of the customers, which in combination with company motives and resources shows
how big is the match between market demand and what company can offer and therefore
determines the potential reward. Risks and reward are both input to the decision making
process, where the potential benefits and drawbacks are analysed against each other. The
output of this decision making is the entry strategy.
Described decision making framework has been developed keeping in mind the entry to the
emerging markets; however its usage may not be limited to emerging markets only.
2.7. Research questions
⇒ What is the most effective entry strategy for a company who wishes to enter to an emerging
market?
⇒ Can the model developed by the authors give good guidance for making the choices of
entry?
3. Methodology
The methodology chapter outlines the research approach of the study. Different sources of data
are described as well as the methods for data collection and the quality of the research is
discussed.
3.1. Research approach
In order to answer the research questions, the authors decided to use the case study approach.
The authors have chosen the Estonian company SUVA as the case company and Bangladesh as
the target market. The main reason for choosing the case study approach is that the theoretical
framework which has been developed by the authors can be used as a tool for an organization’s
decision making process about the strategic choice for the foreign market entry. This will give
us the answer to the first research question. Through a single case we will also test the
application of the model, which will give us the answer to the second research question.
The main reason for choosing SUVA as the organization under investigation was the authors’
personal experience with the hosiery products of SUVA, namely silver socks (also known as
X-static), and strong belief that it has export potential. There was no specific reason for
choosing Estonia as the home country; however it does give an extra value to investigate the
internationalisation possibilities of a company that is originated from what generally is
considered to be a transition rather than developed economy. Based on the fact that Estonia is
part of EU and Euro system, Estonia will from now on in this work be referred to as developed
country. The rationale for choosing Bangladesh as the host country was the following: a) it is
an emerging market, b) SUVA is not yet present there, c) one of the authors is originated from
Bangladesh, which eliminates the language and cultural barriers for conducting the research; d)
the support network exists in Bangladesh, which made it possible to collect the reasonable
amount of data within limited time.
As the model which serves as the basis for our research has several different variables, we have
decided that the combined approach is the most reasonable choice for the research method.
That means that both qualitative and quantitative data was collected from several sources and
both qualitative and quantitative analyses were performed in order to answer the research
questions.
39
3.2. Data collection
For the purpose of the study multiple data sources were used and both primary and secondary
data was collected. The main source of secondary data was internet. For company information
the company web-page and the local (Estonian) newspaper articles were used. For assessing the
cultural distance between Estonia and Bangladesh, external environment of Bangladesh and
partially the competition/industry situation in the host country, internet was used – namely
web-pages of investment boards, governments, tourist information and business portals etc.
Primary data was collected for getting the relevant customer-related and competition-related
information – this was the key part of the empirical study as the customer and competition
information reveals the most vital conditions for market entry to Bangladesh.
One of the important limitations of the data is that it was not possible to get close access to the
company and source the inside information, which is not available publicly. This concerns for
example information about company motives, know-how, management styles and risk-
tolerance of the leaders of the organization. The initial plan was to get another part of the
primary data directly from the company. But due to time limitations and the need to prioritize
the activities of conducting this study, it was not possible. Therefore in the end only the public
data about the company was used. In addition, few assumptions were made about the motives
of the company:
⇒ Assumption 1: SUVA is interested in entering to Bangladesh market
⇒ Assumption 2: The product line under consideration for entry to Bangladesh is silver socks
(X-static) only.
⇒ Assumption 3: There are no legal or other similar limitations (e.g. franchise contracts etc)
which would prevent SUVA from taking silver-socks to foreign market.
The primary data was collected in the form of structured interviews with retailers with the
output of written questionnaires. The retailers were chosen as the source for several reasons:
⇒ Retailers are the link between the consumers and the suppliers, which gives them a unique
position to provide data about both sides.
⇒ The limited time of the study forced us to minimize the data sources.
⇒ Questionnaire for retailers proved to be quite efficient for collecting information about
competition in the hosiery market as well as the customer demands.
⇒ Retailers are easily accessible and not hard to convince for the participation in the study.
40
The combination of interviews and questionnaires was used in order to benefit from the
advantages of both methods and avoid the drawbacks of a single method. The advantages of a
questionnaire (especially if many closed ended questions are used) include: a) they can be
administered to the large group of individuals; b) they are less time consuming to administer.
The advantages of the interviews include: a) if the question is not understood by the
interviewee, there is a possibility to explain it further and still get the “right” answer, b) once
the interview has started it will most probably come to an end as well; the rate of incomplete
questionnaires is small. We were not able to avoid one of the drawbacks of questionnaires,
which is that data entry can be time consuming.
The authors also considered collecting primary data directly from the potential customers.
However, this approach was discarded as on one hand it is not easy to identify and find
potential customers as well as to make them interested in contributing to a market study and on
the other hand, we faced the time pressure.
The following table gives the overview of the necessary information for our research, the data
sources and collection methods.
Information needed Data source Data collection method Company motives - Assumptions Company resources Internet Individual investigation Cultural distance Internet Individual investigation External environment Internet Individual investigation
Competition in the industry Internet Retailers
Individual investigation Structured interviews
Customers Retailers Structured interviews
Table 3: Data sources and collection methods used in the empirical study
3.3. Sampling
For the collection of primary data the sample of 180 retailers were chosen from Dhaka city
(capital of Bangladesh). Dhaka city was chosen as the research area because it has the highest
concentration of people with a potential need and possibility to afford hosiery products.
Keeping in mind that silver socks are not a low-end product, especially in the context of
Bangladesh, first the overall list of the established well-known outlets (e.g. street-side sellers
were not included) was created totalling in about 250 – 300 shops. It is difficult to state the
exact number as all the information is not available online and had to be collected in different
41
ways – personal contacts, business unions, newspapers, phone-books, internet etc. From the
total list a random choice of about 180 outlets (60-70% of coverage) was made considering that
all the 5 areas of Dhaka would be equally covered. As the concentration of the shops is
different in different areas, the final number of contacted outlets was also different in different
areas. To ensure the quality of data, the shop owners, outlet managers or in bigger outlets
marketing/product managers were targeted as interviewees.
3.4. Interview methods
First the questionnaire was developed. Then we carried out couple of test interviews over the
Skype/phone in order to check whether the questions are understandable to interviewees and
whether the expected answers are coming. Then the small number of revisions was made and
the questionnaire was translated into Bengali language. As the most efficient way of gathering
data is face-to-face interviews, but both of the authors were in Europe, we decided to utilize the
local network from Bangladesh to get the interviews done. In total 5 people were thoroughly
briefed over the Skype and sent to the outlets for interviews.
All the interviews took place in the outlets either with the shop owner, manager or sales
executive. The interviews were structured according to the questionnaire and during the
discussion the questionnaire was filled in by the interviewer. Using this method was important
in order to ensure the comparability of the answers and get similar results despite the fact that
multiple interviewees were used. Both open and closed-end questions were asked. One
interview lasted 20-30 minutes.
As some of the outlets refused to cooperate, answered partially or were not accessible, the end
result was 150 finalized interviews, which is approximately 50-60% of the total market
coverage and representative enough to make the conclusions for our study. Below is the table
(table 4) with the final results of the interviews.
Area name Nr of targeted outlets
Nr of finalized interviews
% of total finalized interviews Hit ratio
Palton-Gulistan 62 52 35% 84% Dhanmondi-Mirpur 62 50 33% 81% Gulshan 26 22 15% 85%
Uttara 18 16 11% 89% Malibag-Mouchak 12 10 7% 83% 180 150 100% 83%
Table 4: Finished interviews by area
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3.5. Operationalisation
The interview questionnaire had 25 questions (see Appendix 1). We realize that this is a long
questionnaire, but necessary for us as the relevant areas we needed to cover were broad as well.
To make it easier for the answerers, ensure the comparability of the responses and use the time
as efficiently as possible, most of the questions were in the form of multiple choice or required
single straightforward answer. In the following paragraphs the rationale behind the questions is
explained. The full questionnaire can be seen in the appendix 1.
The questionnaire started with the introductory message explaining the objective of the
research and motivating the respondents to participate in the study. This section was put down
in written on two purposes: a) to constantly remind the objective of the study to the
interviewers and ensure that they didn’t forget the polite introduction when they established the
contact with the retailer; b) to have a back-up option of leaving the questionnaire behind and
not conduct an interview in case some of the retailers wished it. However, the latter option was
not used.
The introduction was followed by the general questions about the retailer and the answering
person (name, area, address of the shop, name, phone number and the designation of the
contact person) – in case something needed to be clarified later, to be able to do data analysis
based on different areas and evaluate the reliability of the data (e.g. most probably the owner or
manager knows gives more accurate answers than floor sales-person).
The first seven questions were asked with the objective to get the broad level overview of the
competition in the hosiery market. The first question (How many companies’ socks are sold in
your store?) gives the idea of how many players there are in the market. Keeping in mind that
the needs for clothing (including socks) are different for men, women and children and the
companies often specialize, the answers were expected in three different categories
accordingly. On the same reason whenever applicable, the answers for several other questions
were asked to be provided separately for men, women and children. The second question (How
many of those companies/sock providers are international?) indicates the amount of
international players and shows how fierce is the import of socks to Bangladeshi market. The
third question (How many of those socks are branded?) shows the awareness and importance of
the branding in the market. The next question (What are these brands?) specifies the brand
names as well as gives the indication of the most well known brands, because we could expect
43
that most or the retailers would not enlist all the possible brands in their shop, but would limit it
to up to five (we could later see that this assumption was quite right, the highest number of
brand names mentioned was 5). The fifth question (What is the price range for the socks in
your store?) gives the overview of the price level of the market. This allows us to compare
whether the price of SUVA products is competitive at all. Sixth and seventh questions (What
are the prices of three highest/lowest priced socks in your store? Mention price and brand
name) specifies the answers received from fifth question.
Questions 9 and 10 were also related to the competition in the market, they specifically targeted
the topic of new market entrants (How many new sock companies have been added to your
partner list during last 1 year? How many of those companies/sock providers are
international?). We took one year as the period when you can consider the company still new
in the market; on the other hand we also thought that this would be short period enough to
expect accurate answers.
The second broad topic in the questionnaire was customer preferences and demand. Like
competition topic, this was also divided into different subtopics. The first subsection of
questions under this topic, namely questions 11, 12 and 13 (Which kind/solid colours/special
features of socks are sold in your store?) have two objectives: a) they show what type of socks
are currently available in the market (supply side); b) however, the answers also reflect the
demand of the customers because the retailers would not sell the products that would not get
bought. These three questions were provided with multiple answers and the retailers could
choose the unlimited number of options. This allows us compare the results more easily.
Secondly, questions 8 (Name the producers of the most popular socks that are bought from
your store/company?), 15 (Describe the most popular sock product in your shop.) and 19 (In
your opinion, what are the most important factors customers consider while buying socks) help
to identify the current preferences of the consumers. Thirdly, questions 14 (In your opinion, for
which occasions people buy socks from your store?) and 16 (Who is the customer who mostly
buys socks from your store?) characterize the customer who buys socks. These questions
combined with relevant answers from the price and type questions would give us the target
customer of SUVA. Questions 17 (How many pairs of socks do you sell weekly?) and 18 (The
demand of socks during the last 1 year has increased/decreased/remained the same?) give us
straightforward answers about the overall demand of socks and help us to identify whether it is
lucrative market at all. Finally, in order to get the indication about the potential demand of
44
silver socks, questions 20 and 25 were asked. We do realize that it would be more efficient to
evaluate potential demand if we had a chance to ask directly from potential customers. The
reasons why we did not have this chance were explained before.
Last section of the questions (questions 21, 22, 23, 24) was related to the supplier-retailer
relations, which on one hand help us see the relevant business practices (Where do you buy the
sock for your shop? What is the policy for buying the stock of socks for your shop? In case you
buy on credit, how often do you pay?) and on the other hand give us indication what is the
commission charge of the retailers (What is the average profit margin (per pair) you are
looking for while selling socks?).
The overview of the topics covered by the questionnaire is indicated in the table 5. Questions
during the interview (and in the questionnaire) did not follow the exact order of the topics as
we saw them and as described above. We rather tried to set up the questionnaire in a way that
was the most logical to answer from the retailers perspective.
Topic/subtopic Questions
Competition in the hosiery market Number of competitors 1, 3 Type (local/foreign) of competitors 2, 4 Brand importance 3, 4 Price level 5, 6, 7 New market entrants 9, 10 Product availability 11, 12, 13
Customers of the hosiery market Current demand 11, 12, 13, 17, 18 Potential future demand 20, 25 Customer preferences 8, 15, 19 Customer profile 14, 16 Supplier-seller relations 21, 22, 23, 24
Table 5: Coding for interview questions.
3.6. Validity
To get high validity of a research it is important to have the right research design based on the
purpose, get a sample which reflects the entire population and to operationalize the theoretical
framework to be correctly understood in the empirical investigation.
45
46
The validity for our research is acceptable. We managed to measure what we premeditated to
and our interview method was well connected to the theory. Our sample size was 50-60% of
the entire population relevant to our study and therefore it is representative enough to measure
what we intends to measure. We believe that in generic terms, the data we have collected can
be considered valid for the purpose of our study. A thorough operationalisation was made and
the clear understating of why certain questions were asked during the interview or why certain
data was looked up from the internet contributes to the high level of validity. A simple random
sample approach was used to increase the possibility that the sample reflects the entire
population.
However, the validity of this research could be improved by using different data source for
identifying the potential demand. For example customers instead of retailers could have been
interviewed. There is also room for imporvement in operationalisation, which is shown by the
fact that by rewording some of the questions, more specific answers could have been possible.
3.7. Reliability
We believe that the reliability of our thesis can be considered high and other researchers would
get similar results when conducting a similar study.
This is proved by the fact that even though several interviewers were used, no major difficulties
were faced during conducting the interviews. In addition the straightforward set-up of the
questions, out of which several were with multiple choices or where the single answer was
expected, helped to reduce the interviewer’s influence to the answers.
For the data collected from the internet about other input aspects of our model, the reliability
can be considered moderately high. The reasons are: a) statistical data is always made up based
on the things happened in the past and may therefore be slightly behind the time; b) we have no
assurance about how often the information is updated on the webpages, which were used to
fulfil the purpose of this study; c) emerging markets like Bangladesh are generally in rapid
change.
4. Empirical study
In this chapter the information gathered from primary and secondary sources is presented. The
chapter is divided into several sections. It starts with the overview of the company and product.
Then host and home countries are described. The biggest part of the chapter is devoted to the
results from the interviews with the retailers.
4.1. Company background
SUVA AS is based on 100% private Estonian capital and is the oldest hosiery manufacturer in
Estonia, with more than 80 years of experience in the field. There are 180 employees working
at SUVA and total area is 14 000 m2. As for the equipment, there are more than 450 knitting
machines (Nagata, Bentley, Matec, Fantasia, Wera, Sangiacomo), over 100 finishing and
packing machines (Takatori, Tricoset, Rosso, Mauserlock, Heliot, Colourmat etc.). SUVA has
its own dye-house and laboratories. (SUVA, 2010)
SUVA product range includes different jersey products for men, women and children, mainly
socks, tights and knee-socks, but also shirts. The quality of products is in accordance with
European standards. SUVA currently produces about 3 million pairs of socks annually and sells
half of their production in Nordic countries and the rest of Europe. (SUVA, 2010).
4.2. Product overview
The product line that we find attractive for Bangladeshi market is called Silver Socks. The
composition of these new socks of SUVA includes silver fibre X-Static, what makes socks
healthy and nice to wear. The silver thread is combined with high quality cotton that assures
high comfort standards during the sport practice with elevated energy consumption and heat
excretion. Thanks to the combination of silver thread and cotton a triple protection shield
against foot odour is assured, which makes those socks a) antibacterial (the hot ions released by
the silver fibre lead a direct attack against fungi and bacteria breathing that are the main cause
of bromidrosis), b) antistatic and c) thermo regulative (prevent the typical yet uncomfortable
swelling due to a long working hours and flight discomfort). (SUVA, 2010).
Silver is known by its healing and purifying powers, which is why for decades it has been
widely used in drinking water filters as well as swimming pool filtration systems. Now it is
also possible to use silver in hosiery manufacturing. Starting from the year 1987 X-Static is the
47
best antimicrobial solution on the market, yet it is a fibre system that is uniquely suited to meet
several additional market demands (SUVA, 2010):
⇒ Antimicrobial: eliminates odour-causing bacteria and athlete’s foot fungus.
⇒ All natural: safe and non-toxic, containing no chemicals or pesticides.
⇒ Heat transfer: cooler in the summer, warmer in the winter.
⇒ Anti-static.
⇒ Therapeutic: with its conductive properties (silver is the most conductive metal), the fiber
system has many health benefits.
Compared to other antimicrobial products, X-Static has several distinct performance
advantages (SUVA, 2010):
⇒ Speed: X-Static eliminates 99,9% of bacteria in less than one hour of exposure. (Most
antimicrobial products test over 48 hours and still do not reach this level of effectiveness.)
⇒ Catalysts: the hotter and wetter is the environment, the more effective X-Static becomes.
This is perfect, because bacteria are more prevalent in these environments.
⇒ Safe & natural: X-Static is made with pure silver, a naturally occurring element. There are
no chemicals and there is no fear of toxicity for the consumer. Silver is one of the safest
and most being substances to mammals.
⇒ Permanent: X-Static is not a surface treatment. Silver is irreversibly bound to a polymer so
it becomes a physical part of the fiber. In fact, X-Static has been tested for more than 250
washes with virtually no reduction in antimicrobial performance.
X-Static has been researched and tested by leading institutions around the world and is widely
accepted in the medical community. The X-Static brand is growing rapidly in the world-wide
consumer marketplace and X-Static products have won prestigious awards for outstanding
performance and function. (SUVA, 2010).
4.3. The host country overview
Asia is an eclectic collection of different languages, cultures and, subsequently, business
practices. Fifteen countries in Asia are either in a less developed or underdeveloped group
(Kumar & Waheed, 2007, p.181). Bangladesh, which is situated in Southern Asia, bordering
the Bay of Bengal, between Burma and India, is among one of those less developed countries
in Asia with the population of 158,570,535 as of July 2011. This makes the country the seventh
most populous country in the world and the population growth rate is 1.56 %.
48
Most Bangladeshis (about 83%) are Muslims, but Hindus constitute a sizable (16%) minority
(Central Intelligence Agency, 2011). Ethnically Bangladeshis consist of 98% of Bengali, the
rest are tribal groups and non-Bengali Muslims. The official language is Bengali. It is the first
language of more than 98 percent of the population. It is written in its own script, derived from
that of Sanskrit. Many people in Bangladesh also speak English and Urdu. The climate of
Bangladesh is tropical; mild winter (October to March); hot, humid summer (March to June)
and humid, warm rainy monsoon (June to October). (Kwintessential, 2009).
Urbanisation is proceeding rapidly, and it is estimated that only 30% of the population entering
the labour force in the future will be absorbed into agriculture, although many will likely find
other kinds of work in rural areas. The areas around Dhaka (13 mln people) and Comilla are the
most densely settled. The Sundarbans, an area of coastal tropical jungle in the southwest and
last wild home of the Bengal tiger, and the Chittagong Hill Tracts on the south-eastern border,
are the least densely populated (U.S. Department of State, 2011).
Economic policies aimed at encouraging private enterprise and investment, denationalizing
public industries, reinstating budgetary discipline, and liberalizing the import regime have been
accelerated (U.S. Department of State, 2011).
Bangladesh has experienced steady economic growth at a rate of approximately five percent
annually during the past decade. Manufacturing of ready-made garments provides employment
for over 2 million people, many of them women and generates nearly 75 percent of the export
earnings of the country.
Chart 1: Bangladesh export by major products (2008-09). Source: Board of Investment, 2009
49
The discovery of substantial reserves of natural gas in Bangladesh could significantly boost the
country's economy and the people's well-being (USAID/Bangladesh, 2011). The country’s
annual GDP growth rate (FY 2008) is 6.2 % and total imports (FY 2008) USD 21.6 Billion
including capital goods, food grains, petroleum, textiles, chemicals, vegetable oils. Growth rate
over previous fiscal year: 25.95%. The country’s economy and GDP is predicted to grow near
6% over the next 5 Years (U.S. Department of State, 2011).
Bangladesh is a hierarchical society. People are respected because of their age and position.
This is valid both in family and in businesses, the majority of which are family owned/run.
Bangladeshis are quite indirect communicators. They tend to communicate in long, rich and
contextualized sentences which only make sense when properly understood in relation to body
language. Their communication styles may be seen as rude and the information provided
inadequate for someone from the culture with direct communication. (Kwintessential, 2009).
Communication is formal and follows a hierarchical structure. Deference to the most senior
person in the group is expected. This is especially true when dealing with government officials.
The need to avoid a loss of face is also reflected in communication styles. Rather than say no or
disappoint people Bangladeshis will phrase sentiments in such as way that it is up to people to
read between the lines to understand what is being implied. Silence is often used as a
communication tool. (Kwintessential, 2009).
4.3. The home country overview
Estonia is situated in Eastern Europe, bordering the Baltic Sea and Gulf of Finland, between
Latvia and Russia. It has the population of 1,341,664 (July 2004), which makes it one of the
smallest countries in Europe and in the world. Ethnically there are about 65% of Estonians and
28% of Russians living in Estonia. The rest of the population consists of Ukrainians,
Belarusians, Finns and other nationalities. The most widespread religion is Lutheran, but
Orthodox, Catholic and Jewish is also represented. However, religion is not playing a major
role in the society or in people lives; therefore about 65% of the population is considered to be
not religious at all. (Kwintessential, 2009).
The official language is Estonian, which belongs to Finno-Ugric language group. As the
country is small, the foreign languages are spoken widely, especially English, Russian,
German, less French and Spanish. Older businesspeople are generally only fluent in Estonian
50
or Russian. The climate is maritime with wet, moderate winters and cool summers.
(Kwintessential, 2009).
Estonia is a hierarchical society. Age, experience and position earn respect. Due to seniority
titles are very important when addressing people. Estonians on the whole are quiet and
reserved. They tend to speak softly and do not like to draw attention to themselves. Being
rational, calm and not going to emotional extremes are all qualities that respected. Once the
relationship warms up the communication style becomes a lot less stiff. (Kwintessential, 2009).
Estonians mean what they say and do what they say they will do. They expect foreign
businesspeople to keep their word. They are generally polite and courteous speakers, but
pragmatic and reserved, especially in the early stages of developing a business relationship.
Although they are direct communicators, Estonians temper their directness in order to protect
the feelings of all concerned. They are slow to pay compliments and may become suspicious of
compliments offered too readily and without sufficient reason. Passive silence is very much
part of the communication style. (Kwintessential, 2009).
4.4. Information received from the interviews
All of the interviewed shops sell socks. 99% of them sell socks for men, 41% sell socks for
women and 44% sell socks for children. 30% of all the shops sell socks for all three groups:
men, women and children. 45% of the shops sell only men’s socks. Looking at the area-wise
data, it may be concluded that generally outlets in the areas with smaller concentration of the
shops are less specialized (that means they sell socks for all customer groups). Table 6 gives an
overview of the answers to question 1.
Number of shops in the area selling those socks
% of shops in the area selling those socks
Area name Total shops Men Women Child Men Women Child
Palton-Gulistan 53 53 17 13 100% 32% 25% Dhanmondi-Mirpur 50 49 16 25 98% 32% 50% Gulshan 22 21 14 11 95% 64% 50% Uttara 16 16 7 8 100% 44% 50% Malibag-Mouchak 9 9 7 9 100% 78% 100%
TOTAL 150 148 61 66 99% 41% 44%
Table 6: Results for question 1: How many companies socks are sold in your store?
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The highest number of companies represented in one outlet was 20 for men’s socks (one
retailer declared that they sell men’s socks from 20 different companies), 10 for women’s socks
and 10 for children socks. However, the question does not allow saying whether companies for
men, women and children are all different or not. If we take the assumption that most of the
companies are not specialized only to one target group, we can say that maximum 20
companies’ socks are sold in the same store. 36 outlets (24%) sell socks from one company
only. If we leave those companies aside, then on average a retailer is selling men’s socks from
5,3 companies, women’s socks from 4,3 companies and children’s socks from 4,0 companies.
Out of all the interviewed companies 125 (83%) sell international products out of which
majority (if not all) are branded. As the overall amount of branded socks is far higher than
international socks, we may conclude that the local companies are also paying attention to
branding their production. Availability of international products is different in different areas,
which probably depends on the profile of inhabitants in the area. (For example we know from
our experience that Uttara is fairly new area in Dhaka where mostly wealthy people live. It may
influence the product choice in Uttara.). Table 7 gives a overview of all the areas.
Number of shops in the area
selling those socks % of shops in the area selling
those socks*
Area name Total shops Int.-l. Brands
men Brands women
Brands child Int-l. Brands
Men Brands Women
Brands Child
Uttara 16 15 16 7 8 94% 100% 100% 100% Palton-Gulistan 53 48 53 17 13 91% 100% 100% 100% Dhanmondi-Mirpur 50 44 49 14 21 88% 100% 88% 84% Gulshan 22 13 21 12 10 59% 100% 86% 91% Malibag-Mouchak 9 5 9 6 9 56% 100% 86% 100% TOTAL 150 125 148 56 61 83% 100% 92% 92%
Table 7: Results for question 2 and 3: How many of those companies/sock providers are international? How many of those socks are branded?
*For branded products only those shops are considered who sell men’s, women’s or children’s socks respectively.
The highest number of brands represented in one outlet was 15 for men’s socks, 10 for
women’s socks and 10 for children socks. There are 102 retailers (68%) who claim that they
sell only branded socks, out of them 34 retailers are those who are specialized on selling the
products of only one company.
52
In total 108 brand names were mentioned. Out of them 86 was mentioned for men’s socks, 50
for women’s socks and 47 for children’s socks. 22 brand names were mentioned in all three
categories (men, women and children). The following table shows ten most popular brand
names in each of the categories with the number and the percentage of the shops who
mentioned it. (For the calculation of the percentage only those shops who actually sell
respective category were counted). The full list of the brands can be seen from the appendix.
Men Women Children
Brand Nr of shops
Percentage of shops Brand Nr of
shopsPercentage
of shops Brand Nr of shops
Percentage of shops
Nike 65 44,5% Nike 10 17,9% Bata 7 12,7% Adidas 59 40,4% Adidas 9 16,1% Zara 7 11,3% Puma 37 25,3% Bata 9 16,1% Adidas 6 9,7% Zara 18 12,3% Zara 5 8,9% China 6 9,7% Levis 17 11,6% China 4 7,1% Nike 6 9,7% Reebok 17 11,6% Massi Clair 4 7,1% Apex 5 8,1% Bata 12 8,2% Swan 4 7,1% Swan 4 6,5% Guccy 12 8,2% Levis 3 5,4% B.First 3 4,8% Crocodile 11 7,5% Perag 3 5,4% Perag 3 4,8% Swan 8 5,5% Puma 3 5,4% Puma 3 4,8%
Table 8. Results for question 4: What are these brands?
The price of the socks shows quite big variety (see chart 1 below). Firstly, men’s socks are
generally more expensive than women’s and children’s socks – the ratio of higher and lower
priced socks is much higher in case of men’s socks. This can be clearly seen visually from
chart 1. The children’s socks are the cheapest, which is rather expected result. The majority of
the men’s socks cost more than 110 taka. The average price range for women’s socks is 70-200
taka, for children’s socks 70-150 taka.
Chart 2. Results for question 5: What is the price range for the socks in your store?
53
61 brand names where mentioned as an answer to the question about highest priced socks in the
outlet. Almost same amount of brands was cited as the brands of lowest priced socks.
Interestingly 31 brand names appeared both among the list of cheapest and the most expensive
brands. This could be explained so that many of the shops were either single brand shops or
that the quality (and therefore price) levels of different products within one brand are big. For
example Adidas could make products with the price of 500 taka as well as with the price of 60
taka. The range of replies for highest prices was 70-1000 taka, while the range of replies for the
lowest prices was 30-695 taka, which shows that shops can be focused on certain standard or
customer group (e.g. low-end or high-end shops). The highest price mentioned was 1000 taka
(Nike) and the lowest price mentioned was 30 taka (for a local product). The (weighted)
average price for expensive socks was 295 taka and for cheaper socks 130 taka.
Among the most expensive socks Adidas and Nike were mentioned more than others followed
by Zara, Bata and Apex. Among the cheapest socks Nike, Puma, Bata and Zara got the most
„votes“. Comparing the price related answers to the answers for the most popular socks, it
appears that the first 20 most popular brands are the same as the brands which are said to be
most expensive (as well as the cheapest). That fact shows that a) high price does not decrease
the popularity of the products and b) the small number of (international) brands are dominating
the market (available in the highest number of outlets). These brands are: Adidas, Nike, Bata,
Zara, Apex and Puma.
Table 9 on the following page summarizes the replies to the questions 6, 7, 8 and the above
discussion. These questions were: What are the prices of the highest priced socks in your store?
(6); What is the price of the lowest priced socks in your store? (7); Name the producers of the
most popular socks that are bought from your store (8).
19 retailers (13% of total) said that they have started partnering to new sock companies within
last one year. Half of them started relation with one new partner, the rest with 3 or more. Out of
those new partners majority were international. Only four retailers declared their new partners
being locals. It is not possible to say whether different retailers have new relations with the
same new companies or different ones. However, these figures at least allow us assume that
there have not been many new entrants to the sock market in Bangladesh.
54
The most popular brands
The most expensive brands The cheapest brands
Brand Popularity Frequency
Popularity % Max Min Frequency Max Min Frequency
Adidas 27 18,0% 500 60 23 200 90 3 Nike 19 12,7% 1000 110 14 290 100 17 Bata 11 7,3% 106 390 7 120 50 11 Zara 8 5,3% 300 120 9 50 250 10 Apex 6 4,0% 250 200 6 120 70 6 Smart 4 2,7% 500 100 2 50 40 3 China 4 2,7% 150 150 2 160 50 7 Cat's eye 4 2,7% 160 150 3 160 100 3 Puma 4 2,7% 650 150 5 200 70 15 Sports 4 2,7% 180 250 3 200 100 3 Payari Garden 4 2,7% 750 450 4 250 150 3 Perag 3 2,0% 300 300 3 70 40 3 Crocodile 3 2,0% 575 200 3 100 90 2 GQ 3 2,0% 300 320 2 350 350 1 Asaf 2 1,3% 250 200 2 120 120 1 Jennys 2 1,3% 250 250 2 150 100 2 Reebok 2 1,3% 800 200 3 150 110 2 For man 2 1,3% 250 250 2 190 100 4 Levis 2 1,3% 240 220 2 150 150 1 Hush puppies 2 1,3% 890 890 2 390 390 2
Table 9. Results for questions 6, 7, 8: expensive, cheap and popular socks.
Type of socks Retailers % of total
Basic 128 85,3% Ankle high 67 44,7% Low cut 65 43,3% Fashion 62 41,3% Solid colour 60 40,0% Solid white 58 38,7% Sports 56 37,3% Knee high 36 24,0% Pattern 33 22,0% White with coloured heel/toe 17 11,3% White with coloured foot bottom 14 9,3% Medium 1 0,7%
Table 10. Results for question 11: Which kinds of socks are sold in your store?
55
As shown in table 10, the most widespread are basic socks. These are available in 85% of all
the shops. 40-45% of the retailers sell ankle high, low cut, fashion and single coloured socks.
Slightly fewer outlets sell sports socks and solid white socks, which probably for many means
quite the same. Knee-high, patterned and socks with different heel/toe/bottom are less
common.
According to colours by far the most common are black socks, followed by plain white, which
are sold in 99% and 79% of the outlets respectively. Less available are grey, blue, brown, beige
and khaki; and the rest of the colours are quite rare. Table 11 gives the overview about the
availability of socks by colours.
Type of socks Retailers % of total
Black 149 99,3% Plain white 118 78,7% Grey 60 40,0% Blue 52 34,7% Brown 43 28,7% Ivory/ Beige 37 24,7% Khaki 36 24,0% Navy 14 9,3% Red 14 9,3% Denim 10 6,7% Royal 5 3,3% Ash 3 2,0% Coffee 3 2,0% Chocolate 2 1,3% Off white 1 0,7%
Table 11. Results for question 12: Which solid colours of socks are sold in your store?
Special feature of socks Retailers % of total
Extra cushioning 126 84,0% Odour control 54 36,0% Dryness / moisture control 37 24,7% Blister control 24 16,0% Reinforced heel / toe 23 15,3% Grey/coloured heel / toe 19 12,7% Therapeutic / medical features 7 4,7% Arch support 5 3,3% 100% cotton 4 2,7% Long lasting 2 1,3% Short socks 1 0,7%
Table 12. Results for question 13: Which socks with special features are sold in your store?
56
Surprisingly the most popular special feature of socks was said to be extra cushioning – 84% of
the retailers are selling these kinds of socks. One third of the outlets offer socks with odour
control and 25% percent have socks which control dryness and moisture. Special features like
blister control, reinforced heel/toe or grey/coloured heel/toe are less available, but not entirely
unknown. The rest of the options were chosen by less than 5% of the outlets. Please see table
12 for details.
We also asked the retailer’s opinion about for what occasions customers actually buy socks.
The most common answer was “work”. That means that office people are those who mostly
need and buy socks. 77% of the retailers thought so. Closely following (63%) was the opinion
that socks are part of the school or work uniform. This answer is surely in correlation with the
previous one. Slightly less than half of the retailers thought that the socks are bought for casual
use. 35% said that sports and exercising are the activities for which socks are used by
customers. This is supported by one of the previous answers about the availability of sports
socks, which was 37%. Quite a few retailers also mentioned special occasions as a reason to
put on socks, however evening activities and home received much less opinions. Details are
given in the table 13.
Occasions for wearing socks Retailers % of total
Work 116 77,3% Part of Uniform (School/Work) 95 63,3% Casual / Everyday 72 48,0% Participant in sport / exercise 53 35,3% Special Occasion / Dress-Up 27 18,0% Evening Activity 10 6,7% At home 9 6,0%
Table 13. Results for question 14: For what occasions people buy socks from your store?
Based on the answers to question 15 we can say that the most popular socks in Bangladesh are
free size, black, comfortable, internationally branded socks which are made of cotton and cost
about 232 taka a pair. The second popular colour was white, size short, special feature
international and material rubber, but it must be said that all of those were far behind the first
answers. In table 14 the details are presented. For the price a graph 2 is added to illustrate how
expensive socks are most often bought. This clearly shows that the most popular sock prices
are 150 taka, 200 taka and 250 taka, which again indicates that the cheapest products are not
bought the most often, rather customers are looking for the best price-quality ratio. As for the
57
brands, then answers repeated the results of question 8: the five most popular brands were
Adidas (28 shops), Nike (17), Zara (11), Bata (9). Apex (6), Cat’s Eye (4), Payari Garden (4),
Puma (4) and Smart (4) were following. In total 54 brands were mentioned.
Popular Colour Shops %
Popular Special Feature
Shops % Popular Size Shops % Popular
Material Shops %
Black 125 83% Comfortable 74 65% Free 94 63% Cotton 142 99% White 28 19% International 10 8,8% Short 27 18% Rubber 9 6,3% Grey 5 3% Cotton 9 7,9% Medium 22 15% Elastic 5 3,5% Brown 2 1,3% Elastic 6 5,3% Quarter 3 2,0% Silk 1 0,7%
Chocolate 2 1,3% Long Lasting 3 2,6% Half short 2 1,3% Ash 2 1,3% Odour Control 3 2,6% Big 2 1,3% Red 1 0,7% Soft 3 2,6% Blue 1 0,7% Other* 6 5,3% Navy 1 0,7% * 100% quality, local product, export quality, moisture control, made of rubber (1=0,9% each)
Table 14. Results for question 15: Describe the most popular sock product in your shop?
Chart 3. Results for question 15: Describe the most popular sock product in your shop? (Price)
According to retailer’s opinion, mostly working men in the age of 20-40, can be single or
married, buy the socks. This result is aligned with one of the previous answers which revealed
that majority of the socks are bought for wearing at work. Table 15 shows all the responses.
Age Marital Status Occupation
Gender Shops 20 or younger
20-30
30-40 Single Married With
Kinds Working Studying Staying Home
Man 141 1 41 99 57 78 6 122 17 2 Women* 7 0 1 5 0 4 2 2 0 4 Child 2 2 0 0 2 0 0 0 2 0
* In case of women, there was one "don't know" answer in every section. Table 15. Results for question 16: Who is the customer who mostly buys socks from your shop?
58
The following two tables (16 and 17) present the weekly sales of socks. The total sales of all the
interviewed retailers was 15 494 pairs of socks weekly, out of which 70% is men’s socks, 13,6% is
women’s socks and 16,4% is children’s socks. Considering that with our study we covered
approximately 50-60% of the targeted segment of socks market, we can conclude that the weekly
demand of this market segment is approximately 25 823 – 30 988 pairs. It makes 1,34 – 1,61
million pairs annually.
Looking at the results by outlets, we can see that the majority of the shops are selling less than
70 pairs of socks weekly. This indicates that the majority of the outlets selling socks in Dhaka
are not specialized only to hosiery products, but must also have the variety of other products
(e.g. footwear, clothing etc). One retailer said that his average weekly sale for men’s socks is
2500 pairs, which is clearly an exception. Leaving this exception out, our calculations show that
the market average weekly sales for men’s socks per outlet is 56,4. The same figure for women’s
socks is 33 and for children 34. In the calculation for women and children also the highest figure
of weekly sale has been left out (in case of women 300 pairs, in case of children 500 pairs).
Weekly sales of socks (in pairs)
Men's Woman's Child's Total Total weekly sales 10842 2114 2538 15494 Average per outlet 72,8 37,8 41,6 103,3 Average without maximum value 56,4 33 34 87,2
Table 16. Results for question 17: How many pairs of socks do you sell weekly?
Number of outlets by pairs sold in week
Pairs sold per week Men's Women's Child's 1-10 35 21 22 10-30 52 17 23 30-70 39 11 12 70-150 14 5 0 150-300 5 2 3 300-600 2 0 1 >600 3 0 0 150 56 61
Table 17. Results for question 17: How many pairs of socks do you sell weekly?
51,3% (77) of the retailers think that the demand for socks has increased during the last 1 year,
36% (54 retailers) think that it has remained the same and only 12,7% (19 retailers) believe that
the demand has decreased.
59
The retailers were asked to rate the variety of factors according to the possible importance for the
customers in the scale of 1 to 5 where 1 meant “not important at all” and 5 meant “very
important”. Overall all the factors were rated generally high. However, the results show that the
retailers consider comfort to be the most important factor for customers when buying socks –
91% of retailers rated comfort with 4 or 5. Closely following was longevity – 84% of the
retailers marked it with 4 or 5. Other important factors for customers are the foreign origin of the
socks and material (both ranked on average slightly more than 4). It can be concluded that there
is correlation between different factors. It seems that customers generally believe that socks with
foreign origin are more comfortable and last longer. As discussed also earlier, price, even though
important for people, is not consideration number one for the majority of the customers.
How many times mentioned by the retailers Factors for
consideration / importance 1 2 3 4 5 Total
Average importance
Comfort 3 1 9 32 105 150 4,57
Longevity 3 1 20 38 88 150 4,38
Foreign 3 11 26 39 71 150 4,09
Material / Texture 7 4 30 46 63 150 4,02 Price 4 8 37 61 40 150 3,83
Colour 3 9 39 58 41 150 3,83
Performance / Special features 16 5 30 73 26 150 3,59
Packaging 7 15 45 50 33 150 3,58
Style 17 11 41 51 30 150 3,44
Fashion 16 17 37 51 29 150 3,4
New brands 27 14 34 47 28 150 3,23
Local 1 1 3
Table 18. Results for question 19: What are the most important factors customers consider when buying socks?
When asked whether the retailers would like to get any specific product which they currently
don’t have (open ended question), 44 retailers (36%) answered “yes”. Amongst those 24%
wanted socks that protect for smell or sweat, 20% wanted socks from good company. 14% of the
retailers would have been happy with any new product and 12% said that they would like to get
the socks for which there is demand. A few retailers were expressing their interest for the
products with good price or for international sports brands. Also good colour, material, size and
longevity were mentioned, but only for one shop for each of them. 62% of the outlets (76) did
60
not wish for any new product and 3 retailers did not have an opinion. In addition to the shops
just mentioned, there were 29 outlets who were excluded from the analysis of this answer,
because they are single brand shops and are therefore limited to the options within this brand
only.
82% of the outlets use one type of source for their products (either international or local
manufacturer, wholesaler or agent) and 15% use two different types of sources. It is the most
common to buy products directly from international manufacturer – 29% of the retailers do so.
This is not so surprising considering how many international products and brands are available
in the market. Approximately the same amount (20%) of retailers buys their products either from
wholesaler or an agent. 15% of retailers buy their products directly from local manufacturer.
6% of the retailers use both wholesaler(s) and agent(s). However, the set-up of the question does
not allow identifying how many different wholesalers or agents there are for the socks. 3
companies said that they are selling the products of their own company. Table 19 gives the
specifics of the answers.
Source of the socks Retailers Percentage
International manufacturer 43 29% Wholesaler 30 20% Agent 28 19% Local manufacturer 22 15% Wholesaler and Agent 9 6% International manufacturer and Agent 9 6% Local manufacturer and Wholesaler 3 2% Company's own product 3 2% Don't know 2 1% International manufacturer and Wholesaler 1 1% Local manufacturer and Agent 0 0%
150 100%
Table 19. Results for question 21: Where do you buy the socks for your shop?
The most common payment method for the stock of socks is cash. Nearly 43% of the retailers
(64 of them) said that they always buy the products of cash. Additional 25% are mostly buying
on cash, but occasionally may also buy on credit. About 15% of the retailers are mostly buying
on credit, occasionally on cash and only 6% are always buying on credit. 14 retailers (9,3%) said
that they are following the policy of the provider.
61
Payment method for the stock Retailers Percentage
We always buy on cash 64 42,7% We usually buy on cash, occasionally on credit 37 24,7% We usually buy on credit, occasionally on cash 22 14,7% Company own made this 14 9,3% We always buy on credit 9 6,0% Don't know 4 2,7%
150 100,0%
Table 20. Results for question 22: What is the policy of buying the stock of socks for your shop?
73 retailers answered to the question about the payment policy in case of credit payment. The
most widespread frequency for credit payments is one week. 53% of the respondents chose that
option. 15% of the retailers said that they follow monthly schedule and 12% mentioned that they
pay according to the policies of the providers. 8 outlets (11%) said that they pay every two
weeks and 6 (8%) said that they do it quarterly.
When it comes to the profit margin of the socks, then the answers were unexpected. Table 21
gives the frequencies of all the answers. 62% of the retailers said that their profit margin is 20
taka or more which was the highest amongst the options we gave them. This shows that we were
not able to predict the answers very well and did not set good ranges for the retailers to choose
from. It also shows that the retailers’ income from the socks is not small. What exactly is the
ratio between the product price and the profit margin cannot be said due to the problems with the
question set-up. However, by comparing the profit margin with the price of the most popular
products, it is possible to say that the margins by absolute amount get bigger as the product price
increases (see Table 22 on the next page).
Profit Margin Frequency Percentage
20 Tk or more 93 62,0%
15-20 Tk 20 13,3%
10-15 Tk 14 9,3%
5-10 Tk 10 6,7%
Provider sets the margin 7 4,7%
Don't know 5 3,3%
5 Tk or less 1 0,7%
150 100,0%
Table 21. Results for question 23: What is the average profit margin per pair you look for?
62
Average price for most popular socks
Retailer's profit margin (per pair)
Profit margin expressed in %
331 Tk Provider sets the margin 259 Tk 20 Tk or more app. 7,7 % 201 Tk 15-20 Tk app. 7,5 - 10 % 156 Tk 10-15 Tk app. 6,4 - 9,6 % 140 Tk 5-10 Tk app. 3,6 - 7,1 % 120 Tk 5 Tk or less app. 4,2 %
Table 22. Results for question 23: What is the average profit margin per pair you look for?
The last question was asked in order to indicatively measure whether there is a demand for the
product similar to silver socks. The main features of silver socks were described (like
antibacterial, antistatic, thermo and moisture regulating, suitable for diabetics, prevent from
sweating and smelly feet) and then asked whether any customer has ever inquired about these
kinds of socks. The results are presented in chart 3.
Chart 4. Results for question 25: Has any customer ever asked for socks with features like…?
In the following chapter the secondary and primary data is put together and further synthesized,
which will eventually lead to the conclusions and recommendations for SUVA for entering to
the hosiery market in Bangladesh.
63
5. Analysis
In this chapter the results of empirical information is analysed and compared to the theoretical
framework that has been presented in the theory part of this thesis. The results of the empirical
study will be interpreted and the model created by the authors for decision making of the entry
strategy choice tested.
There is widespread understanding that a company opting to internationalise can select a
market entry mode ranging from very little risk and low capital expenditure (e.g. exporting) to
relatively high risk and high capital investment (e.g. manufacturing abroad). This statement has
been expressed for example by Johanson & Vahlne (1977) and Norvell et al (1995). According
to the results of theoretical and empirical study by Yung (2006), FDI mode choice strategy is
influenced by three determinants: resources owned by the investor, resources specific to the
host firm, and risk derived from the international market. Zineldin & Dodourova (2005)
showed in their empirical study that the choice between strategic alliance and go-it-alone
strategies depends on the motives for entering to the foreign market. Claver et al. (2007) argue
that the decision to enter a foreign market should be based on balancing the risks and rewards
derived from this action. However, the evidence suggests that it is also determined by resource
availability and the need for control and choice of entry strategy also depends on the firm's
surplus resources (Claver et al 2007). Keillor et al (2001) argue that market/firm characteristics
and government policy/market imperfections have a significant relationship to entry strategy
and they are factors influencing choice of market entry mode. Kumar & Waheed (2007)
concluded in their study that strategic considerations for foreign market entry and expansion
should take a thorough account not only of the firms’ immediate operating needs but also of the
competitive environment in the dimensions of management, finance and macroeconomics.
All these aspects have been considered in the model which authors have created and will be on
the following pages one by one compared to the results of empirical study.
5.1. Company motives and resources
Johnson & Tellis (2008) have found that smaller firms tend to be more successful than larger
firms in entering emerging markets. However, even more scholars (like Jansson 2007, Mayer &
Skak 2002 in Jansson & Sandberg 2008) have stated that compared to large enterprises small
and medium enterprises are less competitive and may not be able to capture business
64
opportunities due to inferior products, shortages of finance and limited administration capacity.
The latter makes SMEs less risk-tolerant – potential loss of an investment is a very serious
threat to the existence of an entire company.
SUVA AS is a small and medium sized company which sets certain limitations to its activities.
We can assume that SUVA like many other SMEs is influenced by the lack of surplus finances,
which would not allow them to go for big scale investments and also makes them less risk-
tolerant.
Sharma & Erramilli (2004) find that each company is unique and this uniqueness stems from
the resources is possesses. Their definition of resources is quite wide including all assets and
capabilities, such as distinctive competencies, technology, corporate culture, customer loyalty,
brand name, machinery, processes and procedures, market orientation and relational and
intellectual assets (Hunt & Morgan 1995, Reed & DeFillippi 1990, Srivastava, Shervani &
Fahey 1998 in Sharma & Erramilli 2004).
According to our understanding, the resources of SUVA include a very good product (silver
socks), their production know-how and capacity and experience of selling their products in
foreign markets, namely Northern Europe. These recourses give the advantage to SUVA on the
following reasons. Silver socks are of high quality, have several special features and fit
perfectly to hot and sticky climate as Bangladesh has. In fact, the product features even
accelerate in warm climate. SUVA has developed good infrastructure (machinery park) and
knowhow for the production of those socks. The company is already exporting (even though
only to closer European countries), which gives them the basic knowledge of exporting and
doing business in an international environment as well as shows the high standard of the
product. From the perspective of which resources SUVA lacks, then they have no knowledge
of operating in developing, emerging or Asian markets. This is definitely a disadvantage when
considering starting business in Bangladesh.
Sharma and Erramilli (2004) further specify how the resources affect the entry mode. Their
conclusion is that if the key advantages are easily transferable, the firm is able to choose the
foreign production mode; but if essential advantages are difficult or costly to transfer, the firm
will be confined to the exporting mode. Looking this from SUVA’s perspective we can say that
the company’s resource advantages are not so easily transferable. Firstly, moving the
production from Estonia to Bangladesh is an expensive exercise and it is not really
65
recommended as the first step because SUVA doesn’t have any connections to Bangladesh.
Their knowledge of exporting to Northern Europe also does not give much extra benefits due to
very different nature of the markets of Bangladesh and Northern Europe.
Regarding the motives of foreign entry, Thomson et al (2005) mention four major reasons of
the companies for going abroad: 1) gain access to new customers for realizing the potential of
increased revenues, profits and long-term growth; 2) achieve lower costs and enhance the
firm’s competitiveness as often domestic sales volume is not large enough to fully capture
manufacturing economies of scale or learning curve effects; 3) capitalize on its core
competencies; 4) spread business risk across a wider market base so that the economic
turbulences do not put the existence of the company at risk. Couturier & Sola (2010) add that
companies wish to acquire resources that are more efficient than those obtainable in the home
market of the firm (e.g. labour and natural resources). Comparing these with the situation of
SUVA, we may say that SUVA’s biggest motivations for entering to Bangladeshi market could
be gaining access to new customers for realizing the potential of increased revenues, profits
and long-term growth and spreading business risk across a wider market base. However,
considering the global trend of garments manufacturing moving to less developed countries
with lower labour cost, we believe that in long-term acquiring resources that are more efficient
than those obtainable in Estonia will also become a motive of moving its business for SUVA.
5.2. Cultural distance
According to Jasimuddin (1995) the study of host cultures is of primary importance to those in
international business because cultural differences exert a pervasive influence on all business
transactions. This is echoed by the number of other researchers (like Kogut & Singh 1988 in
Johanson & Tellis 2008 and Choo & Mazzarol 2001), who say that culture affects not only the
underlying behaviour of customers in a market but also the execution and implementation of
marketing and management strategies, which makes cultural differences as one of the most
influential factors of SME’s entry choice.
Culturally Bangladesh and Estonia are very different. So the norms, values, customs and
business practices are very different as well. The most obvious difference is language. Without
an interpreter it is impossible for an Estonian company to do business. The main reason is that
most of the retailers would not be able to speak English well enough – so it would be extremely
challenging to establish good relations with them directly. This was also the reason for us to
66
translate our questionnaires and arrange the interviews with retailers in English.
Secondly – the communication channels as well as the entire concept of communication in
Estonia and Bangladesh are very different. In Estonia a lot of business is done though internet,
by email or by phone. Written communication is very common. In Bangladesh, on one hand the
infrastructure is not in the level, which would allow using similar model and on the other hand,
close personal relations are with the utmost importance in Bangladesh. That means that most of
the deals and communication between partners is done orally, less by phone, more directly
face-to-face.
Religion is another aspect which should be considered when doing business in Bangladesh.
Religion plays an important role in the society of Bangladesh and influences significantly the
values, norms and believes of people. This should be considered very carefully when
communicating with locals, setting up business meetings and advertising campaigns etc. For
people coming from religiously distant (especially distant from Islam) country like Estonia the
entire concept of religion is quite unknown. Operating in an Islamic country for Estonians
would be like swimming in unknown waters and therefore the local assistance would be
necessary.
Malhotra et al (2003) has defined location risk as the perceived difference between home and
host environments in terms of culture, business, and economic practices. Based on the
discussion above, we can conclude that location risk for entry to Bangladesh is high.
5.3. Competition
Porter in Thompson et al (2005) explains that the profitability of an industry is determined by
five forces: except from rivalry between existing competitors, industry attractiveness is
additionally influenced by customers and suppliers in the vertical dimension, potential market
entrants and substitute products in the horizontal dimension. The intensity of competition is
high, if there is high number of competitors which are equal in size and power, industry growth
is low, exit barriers are high, competitors are highly committed to the industry and seek
industry leadership, and firms have different business models or different goals (Thompson et
al. 2005). A supplier group is powerful, if it is more concentrated than the industry it sells to,
the supplier group does not depend heavily on the industry for its revenues, industry
participants face switching costs when changing suppliers, suppliers offer products which are
differentiated, there are no substitutes for what the supplier group provides, and the
67
supplier group can credibly threaten to integrate forward into the industry. (Thompson et al.
2005). Customers have a high negotiating power if: there are few customers, the industry’s
products are standardized or undifferentiated, customers face switching costs in changing
vendors or customers can integrate backward into the industry. (Thompson et al. 2005). There
are seven major sources for entry barriers, which have the potential to prevent companies from
entering an industry and therefore contribute to high industry profitability: supply-side
economies of scale, demand-side benefits of scale, high switching costs of customers, high
capital requirements, incumbency advantages independent of size, unequal access to
distribution channels, and restrictive government policy. (Thompson et al. 2005). The threat of
a substitute is high if the customer’s costs of switching to the substitute are low, and if the price
performance trade-off to the industry’s product is attractive (Thompson et al. 2005).
Based on the information received from the interviews with the retailers it may be concluded
that the competition in the hosiery market in Bangladesh is moderately high. There are 20+
players with 108 brands competing in the market. The companies are different in size and
power. The biggest competition risk comes from the fact that the market is dominated by small
number of big international players (Adidas, Nike, Bata, Zara, Apex, Puma). These companies
can afford to arrange large-scale advertisement campaigns, make regular discount offers to the
customers and pay attention to constant product innovation. They are usually able to react fast
and fiercely if they feel any competition pressure themselves.
However, on positive note about big international companies on Bangladesh market, it may be
said that these companies are mainly export oriented. Their main focus in Bangladesh is
manufacturing for the rest of the world. Bangladesh is generally not their first market, which
can mean that their reactions to new market entrants or increased competition may not be too
strong.
Interesting fact that came out from the interviews is that the market leaders of hosiery market
are mostly international sports brand holders – Adidas, Nike, Puma, Apex, which on one hand
could mean that silver socks are not competing in their segment (as they are concentrated on
making sportswear). On the other hand, the highest selling socks are black, cotton socks for
wearing in the office, which makes us believe that market leaders even though generally
perceived differently also seek for opportunities in other market segment (like working people).
68
It can be concluded from our study, that entry to hosiery market of Bangladesh is possible
without major restrictions. Potential reactions from the competitors were already discussed. No
high capital investments are needed in order to enter (unless it is a clear choice) – the product
as well as its production capacity already exists. The potential customer-base is available and
demand for socks is increasing. There are many players in the market and customers have fairly
low switching costs. Government is rather supporting the growth of foreign business in
Bangladesh than restricting it.
Our study showed that the sale of men’s socks is clearly dominating over the sale of women’s
and children’s socks. We believe that this is due to the effect of local culture and practices. The
clothing style of (office) working men is similar to that in Europe and in the world – men wear
suit or if not entire suit, then at least suit trousers and shirts. Suit requires closed shoes, sandals
are not accepted. Closed shoes require socks. This means that there are no good substitutes of
socks when it comes to men as casual wear is not accepted in the office environment and silver
socks fit to office environment perfectly!
When it comes to women then the most common types of dress are saree and salwar kamez.
For both of them generally open shoes are worn. And even though western clothing style
(jeans, trousers, even skirts) is getting more popular, the widespread norm is that women can
wear open shoes. This limits the need for wearing socks. In western world the closest substitute
of socks in case of women is tights. However, doe to climate (they would simply be
uncomfortable) and customs (costumes and short dresses/skirts are not worn), women never
wear tights in Bangladesh. So we can conclude that when SUVA enters to Bangladeshi market,
then silver tights should be left out of the product range. As for children, then many school
uniforms require socks. However as kids play a lot we can assume that sport socks are more for
them and we do not consider them very attractive market segment for silver socks.
Malhotra et al (2003) define competitive risk as the number and size of competitors and the
aggressiveness of their marketing efforts. When the intensity and competitive differential is
high, firms tend to avoid internationalisation or prefer exporting. Strategic alliances offer a
promising alternative to exporting as they enhance knowledge and build competitiveness
(Madhok 1997, Sengupta & Perry 1997, Das & Teng 2000 in Malhotra et al, 2003:19). Based
on the previous discussion we may conclude that competitive risk of Bangladeshi hosiery
market is moderately high, therefore unless the company has an access to trustworthy partner,
export seems to be the most preferred choice of entry.
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5.4. Potential customers
Based on our research we can say that there is potential demand for silver socks in Bangladesh
and the market is quite attractive. There are several reasons for that, which could be
summarized as following:
⇒ Customers want to buy socks with special features;
⇒ Features for which customers have shown interest (like odour-control, protection for sweat,
comfort, longevity) are all the attributes of silver socks;
⇒ The most wanted material for socks is cotton, which is exactly the material used for
producing silver socks;
⇒ Having an international brand automatically gives an advantage in the market as customers
are very attracted to it;
Comparing the price of the socks in Bangladesh to the price of silver socks in Estonia we can
conclude that silver socks are a high-end product for Bangladeshi market costing about 450
taka a pair (the retail price of silver socks is slightly over 5 EUR in Estonia. 1 EUR = 90 BDT).
However, the empirical data has shown that the price is not the factor number one which
influences people’s decision to buy – other features, specially comfort and longevity, are the
ones which are much more important. This allows suggesting that it would be possible to sell
silver socks with similar price in Bangladesh (especially considering that even higher priced
socks are available in the market). However for capturing larger market segment the price
should be adjusted to around 300 BDT. But it has to be considered that lower price should not
affect the main competitive features of the socks – otherwise people would not buy them.
Another observation that we did is that even though people ask for the special featured
products, they are not so wide-spread yet. We believe that there is high potential to increase the
demand in this segment and capture it. Moving fast would give the prime movers benefits – for
example being able to establish the brand.
Malhotra et al (2003) define demand risk as the risk taken by the firm because demand for its
products or services may fail to reach the desired level. When demand uncertainty is high or
the expected demand is low, firms favour entry modes that involve low resource commitment,
e.g. exporting. Based on the discussion in this sub-chapter we may conclude that demand risk
for silver socks in Bangladesh is moderately low. It is possible to lower the risk by lowering
the price of silver socks.
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5.5. External environment
Jansson (2007) argue that business environments in emerging country markets might be
different from Western markets due to differences among institutions. Large emerging markets
are regarded to be uncertain and complex. Therefore, the business environment is regarded to
be relationship-oriented and institution-building, which results in the characteristic of being a
network society. Cavusgil et al (2002) say that despite the complexity and instability faced,
emerging markets have become increasingly attractive for doing business, inter alia due to the
fact that growth rates in forthcoming years will be significantly higher than in mature markets.
As mentioned in the theory chapter, during the past several decades, there has been a
significant change in the attitudes of many countries toward inflows of foreign direct
investment, which are now welcomed as a source of new technologies, know-how, better
management, and marketing techniques (Javorcik & Saggi, 2010). Developing country
governments are especially interested in the technology and know-how transfer that results
from FDI. In addition, Konopielko in Kumar & Waheed (2007:178) highlights the benefits of
FDI for less developed countries as conferred to domestic employment growth, formation of
human capital, government revenue growth, and direct expenditure. These are all the reasons
which make governments of the emerging economies (but not only!) develop supportive
measures for the start and development of foreign businesses.
The positive effects of the external environment in the context of entering to Bangladesh with
silver socks include the following:
⇒ The rate of economic growth is quite high (more than 6%), which allows to believe that
people’s purchasing power will increase as well;
⇒ Increase in urbanisation allows believing that the amount of people who work from office is
increasing as well;
⇒ Even if relatively small segment of the market is captured it is already a significant revenue
source for SUVA considering that SUVA is an SME who currently produces 3 million pairs
of socks annually and Bangladesh is a country with 158,6 million people;
⇒ The policies of Bangladeshi government are encouraging towards international businesses.
Direct investments in the country are specially supported.
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The negative effects from the environment for SUVA could be:
⇒ Lack of regulatory discipline and potential changes in regulations especially after the
elections (partially related to regulatory capacity, partially with political stability);
⇒ Less developed or limited communication channels;
Country risk by Malhotra et al (2003) refers primarily to the stability of the political, social,
and economic conditions. Firms tend to avoid or to limit their resource commitment in areas of
high country risk. (Malhotra et al 2003). We can conclude that the country risk of Bangladesh
is medium.
5.6. Entry strategy
The attractiveness of the targeted market segment in terms of profitability prospects is a major
parameter for deciding on whether to enter the market (Thompson & Martin 2005). Based on
the discussion above, we believe that SUVA should enter to Bangladesh. There is enough
customer base as well as potential to create new market. The match between SUVA silver
socks and customer needs is good: socks are widely worn by (office) working men, customers
are attracted to international brand, the features of silver socks fit to the climate and are asked
for, price does not have the primary role in purchase decision as long as the quality of the
product is high.
We believe that the most appropriate choice for entry mode for SUVA is exporting.
Advantages of exporting mode from company perspective are that it requires low investment,
has low risk/return alternative (Agarwal & Ramaswami, 1992) and allows a firm to achieve
competitive advantage, increase productive capacity or improve its financial position (Reid,
1983 in Claver et al. 2007). It also allows the company to maintain the complete control over
production and reach customers quickly. Exporting allows SUVA to enter without major
investments, which is important for an SME, who does not have a lot of surplus finances. It
would allow the company quite fast benefit from emerging market opportunities that
Bangladesh offers. The company already has a well set-up production unit in Estonia, which
can start producing for new market even today. As SUVA has no experience in doing business
in emerging market or developing country, exporting would allow them to get the experience
and learn from it, and therefore potentially prepare them for bigger moves in the future.
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According to Albaum & Duerr (2008) as well as to Kotler & Keller (2006) exporting is
classified into two categories: a) direct exporting (every responsibility is performed by the
company itself) and indirect exporting (responsibilities are done through other intermediaries).
According to Meyer (2001) in Jansson & Sandberg (2008) firms entering emerging markets
face several barriers lack of information, unclear regulations and corruption. In order to
overcome those barriers, the relationships in the host country are needed as through them the
adequate information and know-how about the new external environment is built. Scholars
have found that relationships are the core of the internationalisation process and according to
network approach to internationalisation, entries into local market networks take place through
establishing relationships (Axelsson & Johansson 1992, ford 2002, Hakansson 1982,
Hakansson & Snehota 1995, Hammarkvist et al 1982, Jansson 1994, 2007, Johanson & Vahlne
2003, Majkkgard & Sharma 1998 in Jansson & Sandberg 2008:67).
Lack of experience in working within culture and environment similar to Bangladesh are the
main reasons why we recommend indirect exporting to SUVA. That means SUVA should use
triad as an entry node – establish relations in foreign market networks through third parties,
for example an agent. Agency relationship would help the company to overcome the language
and other communication barriers as well as get less affected by the corruption and unclear
regulations; it would allow smoother entrance to distribution networks and establish the
relations with the retailers. Good agency relationship would be the main source of information
and learning for SUVA about how to do business in Bangladesh. Compared to distributor
relationship, agency gives more management control and is thus more attractive.
Exporting does have a disadvantage that it lacks marketing control (Agarwal & Ramaswami,
1992), but good marketing seems to be quite important to get a good grip on customers in
Bangladesh. SUVA would need to establish the brand and educate customers about the benefits
of silver thread, especially for creating a new strong customer segment (and we have seen that
there is a potential). Good agency relationship would allow SUVA to influence the way the
marketing is done more than in case of other third party.
According to Bhaumik & Gelb (2005), if an industry is fast growing, and therefore fast
changing, it may be essential for companies to quickly have a stake in it, so as not to lose its
first-mover advantage to other multinational companies or local firms. Johnson and Tellis
(2008) add about emerging markets, that earlier entrants enjoy greater success than later
entrants. They bring out several reasons why an early entry is beneficial: a) can lock up
73
access to key resources, such as distribution channels and suppliers; b) have the opportunity to
set the pattern of consumer preference; c) can benefit from being the first to exploit
governmental concessions and incentives; d) can exploit the “strategic window” of an
expanding market. On the other hand, Golder & Tellis (1993) in Johanson & Tellis (2008)
found that pioneers are often not the long-term winners in a market, because they may not be
aware of the pitfalls of the newly opened emerging market, their returns might be too low
compared with their investments, especially because infrastructure is not yet fully developed
and latter entrants have a flatter learning curve because they can learn from the early entrants’
errors.
As for entry timing of SUVA to Bangladesh is concerned, then on one hand there are many
players already on the market, so SUVA would have to compete against the existing players.
The benefit of this is a possibility to learn from the competitors and therefore make less
mistakes. However, when we look from the perspective of capturing the market segment for
special featured socks, then we can conclude that the market is not yet developed. There are not
many providers of special featured socks, not even from big players. We recommend that
SUVA would take this focus when entering and then they would be able to capitalize on the
prime movers advantages.
In order to further justify the best entry strategy – indirect exporting – for SUVA, we will
shortly point out some reasons why other strategies are not so suitable.
From companies’ perspective acquisitions and foreign direct investments are expensive and
cumbersome (Kumar & Waheed, 2007). This also includes wholly owned subsidiaries and joint
ventures, which are high-cost entry modes because of the level of resource commitment needed
to set up operations (Pan & Chi 1999 in Johanson & Tellis, 2008). This is also the main reason
for SUVA to avoid these entry strategies – similarly to most of SMEs SUVA does not have
excessive finances as big multinationals would have.
As said in the theory part of this thesis, Greenfield strategy can be very appealing when there is
lack of proper acquisition target in the foreign marker, there is in-house foreign market
expertise and embedded competitive advantage. However the drawbacks for SUVA are again
high investment need and the lack of knowledge about Bangladesh market.
74
Hennart and Park (1993) in Couturier & Sola (2010) claim that an agreement of joint venture is
considered the smartest move when the chosen entry market is significantly different from that
of the enterprise’s domestic culture. This is also supported by Agarwal & Ramaswami (1992)
in Choo & Mazzarol (2001:293), who have found that smaller and less multinational firms
prefer no entry or joint venture mode in high potential markets to reduce costs and risks. As
well as by Zinledin & Dodourova (2005), who has proved that during last decade there has
been shift from go-it-alone strategies to strategic alliance relationships. Beamish (1985, 1993)
in Isobe et al (2000:469) further argues that equity joint venture has been a dominant and often
a "forced" entry mode in most emerging regions.
It is definitely true that Estonia and Bangladesh are significantly different from each other,
which would make joint venture and attractive option to consider (especially as it would come
along with smaller resource cost), however the threat for SUVA is that due to no experience
and prior connections to Bangladesh they may not be able to find good and trustworthy partner.
It is smarter to make the first move through exporting, establish some relationships and then
consider direct investments through joint venture or other modes. This finding can be supported
by Zineldin & Dodourova (2005), who explain that forming a successful alliance is not an easy
task to do as the barriers like clash of cultures, lack of coordination, differences in operating
procedures and attitudes, lack of clear goals, objectives and trust etc must be overcome.
The thesis was limited to finding the entry strategy for the initial entry of the foreign market.
There was no scope for further discussing internationalisation stages with long-term effect.
However, we would like to say that we see quite big potential for SUVA to move its
manufacturing to Bangladesh in long-term perspective. It requires further research as well as
insights into company’s strategic plans, but based on current information we believe that
wholly owned company (e.g. acquisition or Greenfield) would be the strategy for SUVA to
follow in Bangladesh long-term. There are several reasons for that:
⇒ Garments industrialisation has moved from Europe to Asia already. And Bangladesh has
proved itself as a very efficient garments manufacturing country.
⇒ Estonia has just (1st of January 2011) entered to euro zone, which means that there will be
high pressures for labour cost increase, which would mean for SUVA an increase in
operating costs. Therefore they might be forced to think of moving their production to the
location with cost-advantage.
75
76
⇒ Moreover, it would give the entire new dimension to the agency relationship – the company
would be much more interested in learning the ins and outs of business in Bangladesh if
they have a strategic goal to move there in later phases of internationalisation.
⇒ Lastly, it is relatively easy to move out of the agency relationship and establish direct
contacts with the retailers. Retailers in Bangladesh are used to it already.
RESOURCES OF SUVA 80 years of know‐how and experience in producing hosiery products.
Silver socks as product (antimicrobial, all‐natural, heat transfer, antistatic, therapeutic) Own machinery park with 450 knitting machines
Export experience within Northern Europe
RISKS
⇒ High location risk
⇒ Moderately high competition risk
⇒ Moderately low demand risk
⇒ Medium country risk
REWARD
⇒ Good match between the product features and what companies want
⇒ High potential demand
⇒ Opportunity to build market and customer preferences
Ext. environment ⇒ Population of 158 million ⇒ Trend of urbanisation ⇒ Religion: Islam ⇒ Tropical climate ⇒ Economic policies
encourage private investment and import
⇒ Good know‐how & capacity for garments production
Competition ⇒ 20+ players ⇒ 108 brand names ⇒ Internat. products are
widespread ⇒ Small nr of internat.
brands dominate the market – they sell products for different customer groups in different price categories
⇒ Few new entrants ⇒ Silver sock features
available in 25% of shops
Customers ⇒ Annual demand of socks
1,34‐1,61 million pairs ⇒ Most popular socks: free
size, black, comfortable, internationally branded, made of cotton, 232 BDT
⇒ Most important features: comfort, longevity, foreign origin
⇒ Average customer: working men, 20‐40 years old, married or single
⇒ 70% of socks sold to men ⇒ Prices does not
(significantly) decrease the popularity of socks
⇒ 50% of retailers claim that demand for socks has increased, 36% believe it is steady, 13% claim it has decreased
⇒ 8% of shops sell mostly socks with price 450 BDT or more
Cultural distance ⇒ Indirect vs direct
communication ⇒ Religious vs non‐religious
society ⇒ Estonian vs Bengali ⇒ Outgoing/emotional vs
reserved/rational ⇒ Restricted vs liberal
dress‐code
ENTRY STRATEGY Entry mode: Indirect exporting
Entry node: Agency relationship (triad) Entry timing: Possibility to capture prime movers advantage
Figure 5: Making the entry decision of SUVA to Bangladesh market (based on author’s model)
77
6. Conclusions
We can generalise from the case study that indirect exporting through an agent is the most
efficient entry strategy for any emerging market in case there is high location risk, moderately
high competition risk, medium country risk and moderately low demand risk, the company has
no surplus finances for big investments and no prior experience in doing business in an
emerging market. Therefore we can conclude that the research objective of this thesis got
fulfilled and the first research question answered.
The main concern is whether the assumptions that were made about the motives and resources
of the case company are true in reality. However, the heaviest part of the analysis was on the
competition and potential customers and less on the company side. We assess the market and
customer information collected from retailers fairly reliable. So, in conclusion, we believe that
considering the information we had, we made well reasoned and reliable choice for the entry
strategy, which could also be applicable for the entry of other emerging markets in case the
other conditions are similar.
The second research question was whether the model developed by the authors can give good
guidance for making the choices of entry. We believe it can. The model allowed us analyse the
problem step by step and then bring different aspects into one picture. Based on the model it
was easy to make the connections between many considerations and the choice of entry. We
believe that the model could be used as a tool for making the entry decisions by the companies
as well as give the guidance to researchers.
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7. Recommendations for further research
We do believe that it would be interesting and beneficial to make more comparative studies of
the foreign entry of the companies from transition economies to emerging markets. There
seems to be gap about this in the theoretical works that has been done so far as most of the
works are concentrating on the movements from developed economy to emerging markets. On
the other hand it would also be a good test to see whether the result of our model application
for one case is aligned with the generic study.
The model itself definitely suits well for a case analysis, however, the same framework could
successfully be applied also to the study where several companies and their entry strategies are
known and some other variable is to be found. For example the model could help to identify
how different companies perceive risks under similar conditions. The model could also be used
for making a comparative study of different foreign entry cases.
79
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Appendix 1 – Interview questionnaire
Dear Sir/Madam, The following is the market research for socks in Bangladeshi market conducted by Swedish university students for Master thesis. We believe that you as a retailer can give the best insight nto the market of socks in Dhaka. We therefore kindly request you to help us by participating in ithis survey. It should take about 15‐20 minutes. lease be informed that the answers will be treated as confidential and the information will be Pused only in generalized format.
ard to your response latest by May 14, 2011. We are looking forw With kind regards, Md. Ashiqur Rahman Feleke Desta Tantu ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ Q UESTIONNAIRE FOR RETAILERS
Name of the retail‐shop:
City: Dhaka Area:
Address: Contact number:
Contact person: Designation:
1. How panies' so ur store? many com cks are sold in yo
a) For men Nr of companies
b) For women Nr of companies
c) For children Nr of companies
2. How many of those companies/sock providers are international?
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3. How socks are branded? many of those
a) For men
b) For women
c) For children
. 4 Wha e brands? (Write down the names of the brands.) t are thes
a) For men
b) For women
c) For children
. 5 Wha ge for the socks in your store (choose all that apply)? t is the price ran
a) For men
Below 50 Tk 50‐70 70‐90 90‐110 110‐150 150‐200 200‐250 Above 250
b) For women
Below 50 Tk 50‐70 70‐90 90‐110 110‐150 150‐200 200‐250 Above 250
c) For children
Below 50 Tk 50‐70 70‐90 90‐110 110‐150 150‐200 200‐250 Above 250
. 6 Wha rices of th ee highest priced socks in your store? (Mention price & brand names). t are the p r
a) For men
b) For women
c) For children
. 7 Wha ice of the lowest priced socks in your store? (Mention price & brand names). t is the pr
a) For men
b) For women
c) For children
8. Name the producers of the most popular socks that are bought from your store/company.
. 9 How many new sock companies have been added to your partner list during last 1 year?
0. 1 How many of those companies/sock providers are international?
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11. Whic s of socks are sold in you tore l that apply) h kind r s ? (choose al
a) Basic g) Solid white
b) Sports h) White with coloured heel/toe
c) Fashion i) White with coloured foot bottom
d) Knee high j) Solid colour
e) Ankle high k) Pattern
f) Low Cut l) Other (please specify):
12. Whic rs of socks are sol yo re? (choose all that apply) h solid colou d in ur sto
a) Plane white g) Blue
b) Ivory/Beige h) Black
c) Red i) Grey
d) Navy j) Khaki
e) Denim k) Brown
f) Royal l) Other (please specify):s
3. 1 Whic ecial features a sold at apply) h socks with sp re in your store? (choose all th
a) Odour control f) Dryness/Moisture control
b) Reinforced heel/toe g) Arch support
c) Grey/coloured heel/toe h) Therapeutic/medical features (e.g. blood circulation)
d) Extra cushioning i) Other (please specify):
e) Blister control j) None
4. 1 In yo ion, for which occasions op ? (choose all that apply) ur opin pe le buy socks from your store
a) Work e) Special occasion/dress‐up
b) Casual/everyday f) Participate in sport/exercise
c) At home g) Part of uniform (school or work)
d) Evening activity h) Other (please specify):
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5. 1 Desc most popular sock product in your shop? ribe the
Colour:
Size:
Material:
Brand:
Price:
Special features:
6. 1 Who is stomer who mostly buys so your store? (choose o each row) the cu cks from ne from
a) Man Woman Child
b) 20 or younger 20‐30 30‐40 40‐50 More than 50
c) Single Married with kids
d) Working Studying staying home
7. 1 How s of socks you sell weekly? many pair do
a) For men:
b) For women:
c) For children:
8. 1 The deman socks during the last 1 year has (choose one) d of
a) Increased
b) Decreased
c) Remained the same
9. 1 In your opinion, what are the most important factors customers consider while buying socks? Ran tors from 1 (not important at all) to 5 very imp rtant)). ( k all the fac ( o
Longevity 1 2 3 4 5
Comfort 1 2 3 4 5
Price 1 2 3 4 5
Material/texture 1 2 3 4 5
Performance/special features 1 2 3 4 5
Colour 1 2 3 4 5
Style 1 2 3 4 5
Fashion 1 2 3 4 5
New brands 1 2 3 4 5
Packaging 1 2 3 4 5
Origin of the socks (e.g. foreign/local) 1 2 3 4 5
Other (please specify): 1 2 3 4 5
88
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20. Would you like to have some kind of socks in your store, which you currently don’t have? If es, please describe what type of sock you would like to have: y
1. 2 Whe (choose all that apply) re do you buy the socks for your shop?
a) Directly from the local manufacturer
b) Directly from the international manufacturer
c) Wholesaler
d) Agent
e) Other (please specify):
2. 2 Wha e stock of socks for your shop? t is the policy for buying th
a) We always buy on credit
b) We always buy on cash
c) We usually buy on credit, occasionally on cash
d) We usually buy on cash, occasionally on credit
e) Other ( please specify):
3. 2 In ca uy on credit, how often do you pay? se you b
a) Weekly
b) Every two weeks
c) Monthly
d) Quarterly
e) Annually
f) Other (please specify):
4. 2 What is the avera rgi ou a while sellige profit ma n (per pair) y re looking for ng socks?
a) 5 Tk or less b) 5‐10 Tk c) 10‐15 Tk d) 15‐20 Tk e) 20 Tk or more
5. 2 Has any customer ever asked for socks with features like: antibacterial, antistatic, thermo and ting r diab event from sweating and smelly feet? moisture regula , suitable fo etics, pr
a) yes, several b) yes, few c) none
Thank you for your time and consideration.
90
Appendix 2 – Additional results from the survey
Target groups for socks Nr of shops % of shops Only Men 68 45,3% Men, Women, Children 45 30,0% Men, Women 15 10,0% Men, Children 20 13,3% Only Women 1 0,7% Only Children 1 0,7% Women, Children 0 0,0% TOTAL 150 100%
Table 1. Results from question 1: How many companies’ socks are sold in your store?
Area name Sold Man
Sold Women
Sold Child
Sold Total Int.-l
Int.-l percentage
of total Dhanmondi-Mirpur 231 32 62 325 130 40,0% Gulshan 58 41 24 123 42 34,1% Malibag-Mouchak 18 8 15 41 14 34,1% Palton-Gulistan 245 68 38 351 183 52,1% Uttara 54 17 20 91 35 38,5% TOTAL 606 166 159 931 404 43,4% Average per shop 4,1 2,7 2,4 3,2 Average per shop without 1 5,1 4,3 4,0 4 % of branded socks in the market
Table 2. Results from question 2: How many of those companies/sock providers are international?
Area name Man Brand
Woman Brand
Child Brand
Total Brand
Brand percentage of
total Dhanmondi-Mirpur 159 23 40 222 68,3% Gulshan 53 35 18 106 86,2% Malibag-Mouchak 14 6 13 33 80,5% Palton-Gulistan 232 66 36 334 95,2% Uttara 51 16 16 83 91,2% TOTAL 509 146 123 778 83,6% Average per shop 3,5 2,6 2,1 Average per shop without 1 4,3 3,6 3,3 % of branded socks in the market 84 % 88 % 77,4%
Table 3. Results from question 3: How many of those socks are branded?
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Men Women Children
Brand Nr of shops
Percentage of shops Brand Nr of
shops Percentage
of shops Brand Nr of shops
Percentage of shops
Nike 65 44,5% Nike 10 17,9% Bata 7 12,7% Adidas 59 40,4% Adidas 9 16,1% Zara 7 11,3% Puma 37 25,3% Bata 9 16,1% Adidas 6 9,7% Zara 18 12,3% Zara 5 8,9% China 6 9,7% Levis 17 11,6% China 4 7,1% Nike 6 9,7% Reebok 17 11,6% Massi Clair 4 7,1% Apex 5 8,1% Bata 12 8,2% Swan 4 7,1% Swan 4 6,5% Guccy 12 8,2% Levis 3 5,4% B.First 3 4,8% Crocodile 11 7,5% Perag 3 5,4% Perag 3 4,8% CR 8 5,5% Puma 3 5,4% Puma 3 4,8% Payari Garden 8 5,5% Smart 3 5,4% Comfort 2 3,2% Sports 8 5,5% Apex 2 3,6% For man 2 3,2% Swan 8 5,5% Comfort 2 3,6% Pegasas 2 3,2% For man 7 4,8% For man 2 3,6% Phara 2 3,2% GQ 7 4,8% Hamim 2 3,6% Shotorupa 2 3,2% Smart 7 4,8% Miss 2 3,6% Smart 2 3,2% China 6 4,1% Reebok 2 3,6% Ambassator 1 1,6% Hazazed 6 4,1% Sckich 2 3,6% Armani 1 1,6% D&G 5 3,4% Ambassator 1 1,8% Baby Light 1 1,6%
Tomy 5 3,4% Aktel 1 1,8% Bubble Gumler 1 1,6%
Apex 4 2,7% Bearigali 1 1,8% Depra 1 1,6% Cat's eye 4 2,7% Behademo 1 1,8% Dingyani 1 1,6% Ero 4 2,7% Cado 1 1,8% Fashon 1 1,6% Man's 4 2,7% Crocodile 1 1,8% Galodice 1 1,6% Polo 4 2,7% Diana 1 1,8% Gold 1 1,6% Jennys 3 2,1% Disel 1 1,8% Guccy 1 1,6% Perag 3 2,1% Fashon 1 1,8% Guku 1 1,6% Power 3 2,1% Girl's KHI 1 1,8% Hamim 1 1,6%
Ambassator 2 1,4% Hush puppies 1 1,8% Hizball 1 1,6%
Armani 2 1,4% Hongland 1 1,8% Hung 1 1,6% Asaf 2 1,4% Kangaroo 1 1,8% Jangsu 1 1,6% Badmi 2 1,4% Kika 1 1,8% Jennys 1 1,6% Cado 2 1,4% Jangsu 1 1,8% Kangaroo 1 1,6% Comfort 2 1,4% Jennys 1 1,8% Lakos 1 1,6% Consol 2 1,4% Ladies 1 1,8% Maril 1 1,6% Depra 2 1,4% Luna fashion 1 1,8% Meishaoyu 1 1,6% Fashon 2 1,4% Mans Club 1 1,8% Move 1 1,6% Hamim 2 1,4% Moon Star 1 1,8% National 1 1,6%
Hongland 2 1,4% National 1 1,8% Payari Garden 1 1,6%
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Hush puppies 2 1,4% Ouomes 1 1,8% Prira 1 1,6% Kangaroo 1 0,7% Polo 1 1,8% Raymond 1 1,6% B.First 1 0,7% Pegasas 1 1,8% Reebok 1 1,6% Bearigati 1 0,7% Phara 1 1,8% School Socks 1 1,6% Disel 1 0,7% Power 1 1,8% Soyam 1 1,6% Galodice 1 0,7% Sights 1 1,8% Spiderman 1 1,6% Guku 1 0,7% Soyam 1 1,8% Sujan 1 1,6% Kika 1 0,7% Stylish 380 1 1,8% Thai socks 1 1,6% Mans Club 1 0,7% Shotorupa 1 1,8% Moon Star 1 0,7% Sujan 1 1,8% Pegasas 1 0,7% Tomy 1 1,8% Prira 1 0,7% Shotorupa 1 0,7% Sights 1 0,7% Sujan 1 0,7%
The following brands are only for men: ASF 1 0,7% Heaven 1 0,7% Park Aveneue 1 0,7% Athlatic 1 0,7% John henry 1 0,7% Play boy 1 0,7% Belly 1 0,7% Ladies 1 0,7% Right life style 1 0,7% Ben's 1 0,7% Lakos 1 0,7% S D Dupon 1 0,7% Buy socks 1 0,7% Lear 1 0,7% Sprint 1 0,7% Classic 1 0,7% Londi 1 0,7% Super Cats 1 0,7% Coloun Plus 1 0,7% Luna fashion 1 0,7% Superlon 1 0,7% Cuffa 1 0,7% Maril 1 0,7% Timber Land 1 0,7% Dolce 1 0,7% Massi Clair 1 0,7% Try 1 0,7% Falcon 1 0,7% Parda 1 0,7% Unex 1 0,7% Havac 1 0,7%
Table 4. Results from question 4: What are these brands?
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