Reducing risk in foreign market entry strategies: standardization versus modification

Abstract

Purpose

The purpose of this paper is to investigate empirically the influence of six key contextual determinants upon the degree of standardization for firms who enter a new market directly. In the context of international business market entry, much research emphasis has been placed upon the issues of standardization versus modification. Generally, however, this research focuses on promotion and advertising.

Design/methodology/approach

This paper investigates the research variables that influence standardization/modification decisions in a framework comprising “firm or company context” and “host country context”. The research, undertaken with a sample of 700 UK‐based for‐profit organizations, adapts and further develops Hofstede's study.

Findings

It identifies that the elements of competition and political risk are negatively significant in relation to the degree of standardization. In addition, economic development and international experience are positively significant in relation to the degree of standardization. Firm size and culture differences have no impact upon the degree of standardization.

Research limitations/implications

Research is only conducted among British companies operating cross border.

Originality/value

This paper's originality is in providing specific types of elements as risk reducers in a firm's market entry strategy.

Citation

Omar, M. and Porter, M. (2011), "Reducing risk in foreign market entry strategies: standardization versus modification", Competitiveness Review, Vol. 21 No. 4, pp. 382-396. https://doi.org/10.1108/10595421111152174