IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 2, No.5, October 2013
DECISION MAKING FACTORS IN
DETERMINING THE POTENTIAL SMALL
AND MEDIUM ENTERPRISES TO ENTER
INTERNATIONAL MARKET
Dollawit Budcharoentong
Thanawan Sangsuwan
Technopreneurship and Innovation Management Program
Chulalongkorn University
Bangkok, Thailand
[email protected]
Faculty of Commerce and Accountancy
Chulalongkorn University
Bangkok, Thailand
[email protected]
Achara Chandrachai
Chaipat Lawsirirat
Faculty of Commerce and Accountancy
Chulalongkorn University
Bangkok, Thailand
[email protected]
Faculty of Sports Science and Technology
Chulalongkorn University
Bangkok, Thailand
[email protected]
Abstract—Currently, the international trade plays a significant
role in global economy, driving higher standard of living through
employment and job creation in both developing and developed
counties. It brings about not only the opportunities but also the
obstacles for the new firm to enter the international market. The
understanding of the factor that affects the decision to export is
the most important step to go outside the domestic market,
especially for the Small and Medium Enterprise (SME)
exporters. Therefore, to frame the decision making factors
conceptual framework,the study based on the literature review in
exporter characteristic, firm situation, and domestic and
international market environment. To find the critical decision
making factors, the open-ended questionnaire was also used in
face-to-face interview with firm’s owners whom received
Thailand Prime Minister’s Export Award in best exporter from
Department of International Trade Promotion. As a result, the
research identify that economic growth, legal, regulation, export
market characteristics, organization structure, business
partnership/network, marketing, intelligential property, research
and development, talented employee, working experiences and
motivation are directly impact on the exporter to make a decision
to go abroad.
Keywords– international market; internatioinal business; small
and medium enterprise exporter; decision making factors
I.
INTRODUCTION
Nowadays, Medium and Small Enterprise (SME) play a
significant role in the economic growth especially in Thailand.
According to the Office of Small and Medium Enterprises
Promotion’s White Paper in 2013, the report shows that the
number of small and medium enterprises (SMEs) in 2012 was
2,739,142enterprises which are 98.5 % of all enterprises in
Thailand. The values could be calculated equal to 4,211,262.7
million baht or equal to 37.0% of the total Gross Domestic
Product (GDP). Moreover, in 2012, the export value per the
Gross Domestic Product (GDP) was 62.34% and 28.82% for
SMEs only (the Office of Small and Medium Enterprises
Promotion, 2013). Therefore, it can be inferred that Thai’s
economy mainly relies on export. However, due to the limited
resources and capitals, SMEs with less international
experience have to understand the both external and internal
factors which affect firm performance for making the best
decision. Therefore, this paper reviews the relevant literature
on international business in order to identify the decision
making factors to propose a conceptual framework and then to
elicit the decision making factors for moving to the
international market.
II.
LITERATURE REVIEW
In order to make the best decision in sophisticated
situations especially before starting international business,
Helms and Nixon (2010) suggested that firm decision maker
should evaluate firm situation for making the best decision
under company limitation. To evaluate firm environment, the
external analysis focuses on the environmental threats and
opportunities while internal analysis is identify organizational
strengths and weakness. (Barney and Hesterly, 2006;
Chandrachai, 2010). According to the review, it was found
that external and internal environment consists of various
factors as follow;
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Vol. 2, No.5, October 2013
A. External Environment
In the competitive environment, if a firm understands firm’s
internal environment as opportunities and threats, it is a vital
step to prepare a good direction to have a competitive
advantage (Barney and Hesterly, 2006). Watters (1995) said
that the external environment affecting the decision making for
entering international business is composed of economic,
political, legislation/regulation, taxation, and language.
Moreover, Alexander and Matthias (2012) divided the external
environment into economic activity, legal and political
environment, business environment and infrastructure. Barney
and Hesterly (2006) also presented that opportunities and
threats consists of technological change, demographic trends,
cultural trends, the economic climate, legal and political
condition, and specific international events. However, when
considered the issues or factors mentioned above, it was found
that the major factors which could be considered including the
economic, political and legal, culture and social, and
communication (Chandrachai, 2010; Kuntonbutr, 2003; Helms
and Nixon, 2010; Alexander and Matthias, 2012).Thus, the
external environment consists of many factors as follows;
1) Economic factor: This factor is considered as one of the
concerning factors for making a decision on trade and
investment. The review reveals that the economic factors
include the following:
a)
Market growth. This factor shows the number of
demand and the future trend within each country
(Chandrachai, 2010; Chan et al., 2011; Rahman,
2003).
b) Gross National Product (GNP). This factor represents
the purchasing power within country. If any country
had a large population together with high income per
capita, that country would have high economic roles
(Rahman, 2003; Kuntonbutr, 2011).
c)
Population. Exporter use this information to estimate
the potential customers. (Barney and Hesterly, 2006).
d) Level of development. Chan el al., (2011) said that
developed countries had the lower costs of doing
business than developing countries because developed
countries already invested in both public utilities and
infrastructures.
e)
Geography. This factor is one of the concerning
factors for the exporter in type of geography (Casson
and Wadeson, 2012). For example, some countries are
land lock country. So, the exporter has to make a
decision to choice to best type of transportation to
export the product into that market.
2) Political, Legal and Regulation factors: This factor
represents the relationship between foreign government
and business (Barney and Hesterly, 2006). The political
factor is the significant one that affects the export decision
maker. Moreover, Chittihaworn et al, (2011) suggested
that the support from government in terms of policies was
the crucial key success factor. In addition, Alexander and
Matthias (2012) studied the factors affecting the decision
making of direct investment in the foreign countries and
the research results revealed that the law and regulations
were the crucial factors for the entrepreneurs to make their
decision about the trade and investment (Osland et al.,
2001, p159; Watters, 1995; Zou and Stan, 1998).
Moreover, regulation also is used as the crucial mechanism
to protect the domestic entrepreneurs as a tariff and nontariff barriers.
3) Culture factors: Culture is the beliefs, values and norms
that relate to the attitudes of people in each country
(Barney and Hesterly, 2006). The entrepreneurs had to
select the ways of conduction in accordance with culture
of each country (Kuntonbutr, 2011). Language is also one
of crucial factors affecting the decision making for
selecting country (Watters, 1995). Thus, failure to
understand and use language and culture can have a very
large impact exporter to make the right decision making.
4) Communication
and
Technology:
Nowadays,
communication is applied in the daily life and supported
business activities. While technological innovation also
rapidly changes, it brings about opportunities to create new
product and service, (Barney and Hesterly, 2006).
Therefore, communication and technology has a direct
impact on the cost of doing business and firm’s direction
in the targeted market (Kuntonbutr, 2011).
5) Export Market Characteristics: To identify international
demand, the exporter has focus on market environment.
The information about buyer wants, and behaviors is one
of the key decision making factors (Keller, 2009). The
Segmentation, Targeting and Positioning (STP) are the key
consideration to create the marketing strategy that suited
for the firm’s ability (Keller, 2009). So, segmentation and
targeting can be divided demographic, socioeconomic and
geographic (Chandrachai, 2010). Positioning is about the
designing firm’s offering to catch customer’s perception in
the targeted market. B. Internal Environment
Whereas external environment use to evaluate on firm’s
opportunities and threats, internal environment represents
firm’s strengths and weaknesses. To find out firm’s strengths
and weaknesses factors, the administrators could not consider
only business function but should consider all factors as a
whole (Porter, 1986) in order to link those factors to build the
advantages in business. Moreover, Barney and Hesterly (2006)
said that internal analysis can be used by firm to identify itself.
By using the resource-based approach, it provides a
comprehensive review of firm’s internal environment.
Therefore, in this review, the internal environment consists of
business factions and resource-based view as follows:
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Vol. 2, No.5, October 2013
1) Business functions: This is the evaluation in terms of
function within each organization as follows;
(Chandrachai, 2010).
a)
Marketing: The
marketing
characteristics
emphasized the marketing strategy and marketing mix
which included product, price, place and
promotion.Thus, the marketing evaluation would be
evaluated by the circulation and market share by
comparing the information with the past time. In
addition, standardization versus adaptation is one of
the key considerations in the international market
strategy (Raymind et al., 2001).
b) Operation: The process of caring in terms of product
qualities to reduce the production cost via research
and development. Therefore, firm’s operation should
focus on the supply chain to speed up the product
operation and control of production cost.
c)
Human resources: This factor focuses on assigning
the right man to the right job. Human resource is
responsible for recruiting and retaining of skillful
employees in accordance with the requirement of
company.
d) Finance: This factor relates to financial management
in both short and long terms. In addition, finance also
directly impact on strategic decision for seeking
sources of fund in order to reduce the potential risks.
Moreover, the administrator could analyze the firm’s
status from the proportion of profitability ration such
as evaluation of break-even point.
e)
Both tangible and intangible assets were considered as the
resource-based concept that reflects firm internal strengths and
weaknesses (Barney, 1991). Moreover, the resource-based
view can be used to apply in the evaluation of firm decision to
enter into international market (Barney and Hesterly, 2006).
C. Entrepreneur decision marking factors
According to the finding of earlier research, knowledge and
experiences in international market directly impact on
entrepreneur’s decision marking because of the ability to
identify the opportunities (Evers, 2011) while avoiding threats
(Zou and Stan, 1998). Thus, the lack of foreign knowledge and
experiences is impediment to decision-making process to start
the international market (Sibanda et al., 2011; Morgan and
Katsikeas, 1997). Serra et al. (2012) also studied that factor
that influencing the propensity to export was ages, education
level, and communication skill. In addition, that entrepreneur’s
motivation is one of the key factors of export performance
(Zou and Stan, 1998).
According to the literature review above, external
environment, internal environment (organizational resources
and function) and entrepreneur characteristic are three key
main consideration factors in the left side. The right side is
firm’s evaluation for making a decision to go aboard.
Therefore, the conceptual framework can be presented in the
line with the factors that revealed from literature as shown in
Figure 1.
Administration: Generally, the administration focuses
on the organizational strategic management.
2) Resource-based View
To analysis firm’s strength and weakness, exporter has
to focus on the firm’s resources and capabilities as a
resource-based view (Barney and Hesterly, 2006). A
firm’s resources-based view could be defined as tangible
and intangible assets such as brand names, in-house
knowledge of technology, machinery, capital, etc.
(Wernerfelt, 1984). In addition, Collis and Montgomery
(1998) also classified resources into three categories which
are tangible assets, intangible assets, and organizational
capabilities. Thus, in this study, a resource-based view will
be divided into two as follows:
•
Tangible assets are usually the resources that show on
the firm’s balance sheet such as real estate, cash,
production facilities, customer database and raw
materials (Collis and Montgomery, 1998; Tassana,
2012).
•
Intangible assets usuallyconsist of such things as
company reputation, brand names, technological
knowledge and trademark. (Collis and Montgomery,
1998).
Figure 1The conceptual framework
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IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 2, No.5, October 2013
Furthermore, the literature also reveals that there key
factors associated with a number of sub-factors as shown
in TABLE I.
Decision making factors to enter international market
Key factors
TABLE I. – Summarize main and sub decision making factors
Decision making factors to enter international market
Key factors
Sub-factors
Authors
External Environment
Economic
Political, Legal
and regulation
factors
Social and
Culture
• Economic growth
• Gross National
Product
• Population
• Level of
development
• Geography
• Political stability
• Legal and
Regulation
• Language
• Culture
Alexander and Matthias
(2012); Evers (2011); Chan
et al. (2011); Chandrachai
(2010); Couturier (2010);
Rahman (2003);Morgan and
Katsikeas (1997).
Alexander and Matthias
(2012); Chandrachai (2010);
Omar and Marc
(2001);Osland et al.
(2001);Zou and Stan (1998)
Morgan and Katsikeas
(1998); Watters (1995).
Omar and Marc (2001);
Morgan and Katsikeas
(1997); Watters (1995).
Alexander and Matthias
(2012); Chandrachai (2010).
• Communication
• Technology/Inter
net
Export Market
Keller (2009);
• Segmentation,
Characteristics
Chandrachai (2010).
Targeting and
Positioning
Internal Environment
(Business functions, Tangible and Intangible resources)
Administration
Serra et al. (2012); Evers
• Organization
(2011); Chan et al. (2011);
structure
Chandrachai (2010); Singh
• Firm’s size
(2009); Clulow et al. (2003);
• Firm’s culture
Omar and Marc (2001);
• Business
Osland et al. (2001); Zou
partnership
and Stan (1998); Smith et al.
/Network
(1996); Watters (1995);
• Information
Porter (1986).
Technology
Communication
/ Technology
Marketing
• Marketing
strategy
• Marketing Mix
• Market research
• Branding
Operations
• Reserch and
Development
• Value chain
• Intelligential
Property
Human
resources
• Talented
employee
Serra et al. (2012);
Alexander and Matthias
(2012); Chandrachai (2010);
Rahman (2003); Clulow et
al. (2003); Omar and Marc
(2001);Raymind et al.
(2001); Zou and Stan
(1998); Porter (1986);
Watters (1995)
Serra et al. (2012); Evers
(2011); Jasra et al. (2011);
Chandrachai (2010);
UNCTAD (2010); Couturier
(2010); Rahman (2003);
Clulow et al.(2003); Singh
(2009); Omar and Marc
(2001); Osland et al. (2001);
Zou and Stan (1998);
Watters (1995); Porter
(1986).
Chan et al. (2011);
Chandrachai (2010);Clulow
et al. (2003); Smith et al.
(1996).
Sub-factors
• Financial
management
• Asset
management
Finance
Authors
Jasra et al. (2011);
Chandrachai (20 10); Singh
(2009); Rahman (2003); Zou
and Stan (1998);
Watters (1995).
Entrepreneur characteristic factors
Owner /
Decision
Marker
• Oversea
experiences
• Education
• Motivation
• Age
III.
Serra et .al (2012); Chan el
al. (2011); Evers (2011);
Majocchi et al. (2005);
Omar and Marc (2001);
Osland et al. (2001);
Morgan and Katsikeas
(1997); Zou and Stan
(1998); Watters (1995).
METHODOLOGY
After intensively reviewed the literatures in the decision
factors for entering the international market, the result found
that there are a number of significant factors related to the
exporter’s decision making. To in-depth understanding of
decision making factors for entering the international market,
the qualitative research was used in this study because this
approach is suited to promoting a deep understanding and
emphasis on exploration, discovery and description
(Bloomberg, 2008). To better understand the decision making
logic of the exporter, this method is used for collecting more
in-depth information (Creswell, 2009). In addition, the face-toface interview with participant by using the open-ended
questions that starts with what or how was used to an
exploration of story (Creswell and Plano Clark, 2011).
Moreover, the open-ended interview can disclose more
information than from surveys (Yin, 2012). Thus, the research
questions consist of both central question and sub-questions.
For example
•
How do you start your business?
•
What is your turning point to make a decision to go
aboard?
•
Dose the internal and external firm’s environments
have a significant effect on decision making to go
aboard?, “what factors”, and “how” ?
•
Is it your experience or characteristic influence on a
decision to go international market?
The sample questions above based on the decision factors
from the literature review. The participants were the owners
and management levels who had the authority to make a
decision especially for entering to the international market. In
addition, to strengthen the finding as the best practice, two
successful exporters and three executives were selected from
the list of the best exporters whom received The Prime
Minister’s Export Award (Thai government’s highest official
award annually granted to outstanding Thai exporters of
products and services to showcase and acknowledge their top
quality and high standards).
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Vol. 2, No.5, October 2013
IV.
RESULTS
The interview intended to verify the conceptual framework
and to illuminate factors behind the decision making under
firm’s environment before going to the international market. To
find the factors, participants were interviewed between
December 2012 and February 2013. The discussion can be
summarized as follows;
Company A
Established in 2005,Established in 2005, company A is a
manufacturer mainly in plastic injection molding production.
By employing education background in product design and
professional experience in manufacturing business since 1977,
the owner realized that the plastic domestic market had not
only gradually growth but also less profit because of the
importation of low cost plastic product from other countries to
penetrate local market. As a young entrepreneur, he made a
decision to go to the international market because he believed
that going to international market was the best opportunity for
his business. To find the potential market, before making a
decision to go aboard, the owner analyzed the export market
characteristics, economic growth, gross national product, level
of development, legal and regulation, communication through
market survey and attending international trade fairs. He had
decided to export the product to Germany because of the
potential demand. The important reasons to choice this country
is the location of the country which connected though other
countries and the level of development due to the transportation
cost. The prevalent of communication, especially the internet
usage, is also one of the concerning factors to make a decision
as a communication channel with the customers.
For the internal environment, from the company owner’s
education and oversea experience, he realized that foreign
buyers usually looking for the product that meet with high
quality and equip with international regulation. Therefore, to
meet with customer needs and international regulation, the
owner decided to produce high quality plastic which guarantees
all products are safe for customers and friendly to the
environment. In addition, the owner also contacted with bank
to obtain the special interest rate for the small and medium
enterprise. Moreover, the owner also established product
design team to research and develop functionality and
aesthetics products which focuses on bathroom accessories,
kitchen accessories and plastic containers. To make product
difference from the others, the designer team created the
colorful collections of kitchenware and households items that
reflect about the global warming trend to convey the message
to the customers. In addition, before launched the product, the
owner registered the product intelligential property to protect
the product. To test the potential market, the owner decided to
use marketing mix by making a decision to open a few shops
with under the company’s brand in the leading department
stores in Thailand as a place to show the product which caught
the eyes of domestic and foreign shoppers. For international
market, the owner worked with Department of Foreign Trade,
Ministry of Commerce, to join the international trade fair in
many counties to pursue more opportunities to meet with the
foreign dealer to export the products. Today, consequently,
Products under the company A’s brand are shipped to 50
countries which sell mainly in Germany, France, Italy, Japan
and Hong Kong. Furthermore, some products also win the
awards and prizes for design from Germany and Japan. Finally,
the owner said that the philosophy of us is to balance all
functionality, aesthetics, creativity and environmental issue into
the design”.
Company B
Founded in 1959, the company B was the first beverage
company that received “the Best Exporter” and “Thai-owned
Brand” award from Department of International Trade
Promotion in Thailand. At that time, the company focused to
produce soy milk as a core product. The turning point of the
company to make a decision to enter into the international
market came from the positive comments in product flavor and
quality by the foreign travelers who had a chance to try
company B’s product. As a result, from the working
experience, the owner believed that the product had high
potential in the international market. As a result, before making
a decision to go aboard, the owners searched for the potential
market or targeted country by identified market characteristic,
economic growth, legal and regulation and drinking culture.
To handle with the international demand, for the internal
environment, the owner decided to find international working
experience staffs and to setup the international division to take
full responsibility for global market. The role of this division is
to identify the opportunity and the barrier to enter the new
market. Moreover, the division has also searched for the
foreign partnership to distribute the product into the targeted
market as well. In addition, before moving to targeted country,
the owner has registered the product’s intelligential property
and trademark. To meet with the customer need, the owner has
done a number of market surveys to catch customs trends. In
addition, the company not only focuses on produce high quality
beverages for the consumers but also research and development
a number of products to meet the market’s diverse demands.
The owner also invested in the information technology as a
commutation channel with the customers. As a result, recently,
the company had developed four new products with the
packaging innovation to meet the customs trends and to
complete with the competitor in both domestic and
international market. In addition, the owner has utilized
manufacturing and invested in production equipment to meet
with the international standard and food regulatory such as ISO
9001-2000, GMP, HACCP, Halal, EFSIS, TLS 8001-2003,
ISO 14001, and OHSAS 18001 to guarantee product quality as
the core competency of the company. As a result, nowadays,
the company B’ products achieved the international standard in
food safety and exported to Asia, Australia, America, Africa,
and Europe.
Company C
Established in 2001 as an Original Equipment Manufacturer
(OEM) in plastic, company C is the leaders in the manufacture
of plastic cups and plastic containers. At the beginning of the
plastic business, the owner focused on the whole sale of the
plastic cap and food containers with low price and quality to
penetrate the market. However, the company’s sale growth
gradually dropped due to the lower price plastic cups from the
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Vol. 2, No.5, October 2013
other counties. By employing the working and oversea
experience in marketing, the owner changed the way to do
business from the original equipment manufacturer to the made
to order with the company C’s brand to enhance customer
perception and to respond the competitor. To boot the sale
growth, he strongly believed that going to international market
is the key success factors in his business. As a result, he
continually searched for the opportunity in the international
market. Before making a decision to go aboard, for the external
environment the owner used the information that related to
economic growth and level of development to evaluate the
market. In addition, the owner also studied law and regulation,
especially import regulation.
For the internal environment, the owner decided to join with
the government agency to receive the necessary information as
a market research to enhance market opportunity and
supporting fund. To find the plastic demand, the owner decided
to go to foreign market to investigate the targeted market
characteristics by attended the international trade fair.
Moreover, the owner decided to improve the infrastructure on
information technology particularly computer hardware and
software for increasing corporate capability. Before export the
product, the owner decided to register the intellectual property
which including product’s design and trademark in the targeted
country to protect the product. Moreover, to make a customer
in both domestic and international market confident in using
the product under the company C’s brand name, the owner has
decided to improve manufacturing with a new technology and
the quality control such as GMP/HACCP, ISO 9001, ISO
14001, TIS/OHSAS 18001. For the human resource side, the
company C searched for the talent employees to develop new
product to meet the customer needs. Thus, the company C has
not only worked closely with the customers as a customer
product innovation but also suppliers with a new technology
and machineries together with continuous research and
development to serve the diversified market demand with a
variety of products. Nowadays, the company C’s products are
exported more than 30 countries.
Company D
Started up business in 1956, Company D was one of the
leading Thai rattan furniture companies. At that time, Thai
rattan furniture was a very unique product and had a few
suppliers in this industry. So, the rattan product became
exceptionally popular in both Thai people and foreigner,
especially among the American soldiers who living in Thailand
during the Vietnam War. However, after the end of the
Vietnam War, the selling was gradually decline because of the
returning of US soldiers. Therefore, from the working
experience, owner believed that Thai rattan furniture had a
huge opportunity in the international market because company
D’s brand name and product was recognized from foreigner
customer as leading Thai rattan furniture. Before made a
decision to go aboard, the owner focused on the exported
market characteristics, economic growth and import regulation
to find the best opportunity that equipped with firm ability.
For the external environment, the owner has searched for
talented employees and setup the export division to handle all
export activities. The role and responsibility of this division
analyze the targeted market such as export/import regulation,
customer trends and market research to prepare international
market strategy. In addition, the owner used strategic alliance
with the supplies to supply and guarantees the availability of
raw material. After the success with natural rattan product, to
expand the manufacturing capability, the owner contacted the
bank to gain the financial fund. Company D has focused on
research and development and worked with Ministry of
Industry to develop new materials that meet the customer
needs. For example, the synthetic rattan table which flexible,
resistant to UV rays and deterioration to all weather.
Furthermore, like other fashion industries, furniture market
trends swiftly change in shapes, styles and colors. So, company
D has concentrated not just only research and development but
also research and design to create the best pieces of is natural
rattan or synthetic rattan as an integral part of the house.
Currently, the company D has huge success in export market
with the production capacity of 400 containers per year.
Company E
Established in 2003, The Company E is the leading
manufacturer in the VIP theater seat. The owner has the
education background in the product design and development
and working experience the furniture business. At that time,
many furniture companies focused on the furniture for using at
home or office but company E has developed and designs its
own products that meet customer’s special need. As a result,
the company E’s product was selected to use in the VIP seat in
many reputable theaters in Thailand. After a huge success in
domestic market, she realized that there were a number of
demands for theater seat, especially for the international
demand. As a result, before going to the international market,
she analyzed export market characteristic, economic growth,
gross national product, regulation, and culture to identify the
potential international demand.
For the internal environment, the owner made a decided to
setup the export division to manage the activities for the
international market such marketing strategy, she gained the
finance support from the Thai Government as a source of find
to expand the manufacturing. She employed skillful employee
to increase corporate capability in product design and
development as a product design term. In addition, the
company also continually improves the product from the voice
of customs through customers commend. She joined with Thai
Furniture association and Department of Export Promotion’s
activates to receive information especially in the international
trade data and export regulation. For example, she made a
decision to export her chair to Hong Kong because the product
was received the tax exemption as a free trade area. Moreover,
she usually attended both domestic and international furniture
exhibitions to meet with the traders and customers from other
countries to find the business connection and network in
furniture business. Nowadays, the company E’s product has
successfully export the VIP theater seat to many countries such
as Hong Kong, the Philippines and Korea.
According to the finding from the interview above, it can be
summarize the concerning factors which directly impact on the
firm’s owner to make a decision as shown in TABLE II;
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Vol. 2, No.5, October 2013
TABLE II – Summarize decision making factors from the
interview result.
External Environment
(Targeted country)
Decision factors
Main factors
Economic
Political and
Legal
Social and
Culture
Communication\
Technology
Export market
characteristics The affected decision
making factors
Sub-factors
Economic growth.
Gross National Product
Population
Level of development
Geography
Political stability
Legal and regulation
Language
Culture
Communication/Technology
(Internet)
Segmentation,Targeting and
Positioning
Frequency
5
2
0
2
1
0
5
0
1
Percents
100%
40%
0%
40%
20%
0%
100%
0%
20%
1
20%
5
100%
Internal Environment
(Business functions, Tangible and Intangible resources) Administration
Marketing
Operations
Human resource
Finance
Organization structure
Firm’s size
Firm’s culture
Business partnership
/Network
Information Technology
Marketing strategy
Marketing mix
Market research
Branding
Reserch and Development
Supply Chain
Intelligential Property
Talented employee
Financial management
(Exchange Rate,
Government support)
Asset management
(Cash, Land, Building)
5
0
0
100%
0%
0%
5
100%
2
5
5
5
5
5
2
5
5
40%
100%
100%
100%
100%
100%
40%
100%
100%
3
60%
2
40%
Entrepreneur characteristic factors
Owner /
Working experiences
Decision Marker Oversea experiences
Education
Motivation
Age
V.
5
3
2
5
1
100%
60%
40%
100%
20%
DISCUSSION
The interview result revealed that external environment,
internal environment and entrepreneur decision making factors
has directly impact on the decision making factors for Thai
small and medium size enterprises owner to make a decision to
enter in the international market. However, unlike decision
making for foreign direct investment (FDI) which usually focus
on the macro level (Groh and Wich 2012), Thai exporters focus
on more internal firm environment than external environment
because the export is just only the first step to go aboard. So,
the exporters are not necessary to invest or operate the business
in the targeted country.
all
In the external environment side, the finding indicated that
exporters totally agreed that the export market
characteristics, economic growth, legal and regulation are the
most concerning decision making factors before going to the
international market. The main reason is to find the potential
demands and possible opportunity in the targeted market. The
export market characteristics show market segmentation,
targeting and product positioning to compete with domestic
competitors in targeted country. The exporters use this
information as the key indicator to find the potential
opportunity in the targeted country before making any decision.
In addition, the legal or regulation is one of the major barriers
for exporting the product to the foreign company. The
government usually set high level of standard for the importing
goods to protect the local business. So, the exporter has to
deeply understand legal or regulation especially the
international standard such as ISO 9001-2000, GMP and
HACCP before making any decision to get into the
international market. In addition, the finding suggested that the
exporter should consider gross national product, geography,
culture and communication/Internet are the second concerning
factors in the external environment. To find the customer’s
purchasing power in foreign market, the gross national product
is usually a good indicator for the exporter to measure the
purchasing power (Rahman, 2003). The level of development
and geography are the concerning decision factors as a
transportation cost. So, the advancement in transportation and
logistics is one of the vital key influences to the decision
making to enter into the foreign country (Evers, 2011). Like
legal and regulation, culture can be realize as opportunity and
thread for the exporter. Culture also reflexes the social
perception. So, the exporter should understand the culture to
avoid the conflict with the social perception. Nowadays,
communication/internet plays a vital role in the daily life
especially for doing business. It brings about very high
effective and efficient for the company to connect with the
clients.
Unlike the external environment, the internal environment is
the factors that the owner fully takes control to enhance firm’s
strength and decrease weakness. To compete with foreign
competitor, all participants agree that organization structure,
business partnership/network, marketing, research and
development (R&D), intelligential property and talented
employee are the vital decision making factors. To deal with
the dynamic and sophisticate environment, firm has to setup the
special business unit to take full responsibility in the
international market. A partnership or network is bridge to
connect with dealer or customer in the foreign market. Most
participants said that while they went to the trade exhibition to
present their product to the customers, they usually looking for
the partnership as a product distributer and the knowledge of
the aboard market (Evers, 2011). The cooperation between
domestic firm and foreign friends enhance the firm
performance to respond with the foreign customer needs and
increase the local capabilities of international firm (Gupta and
Malhotra, 2013). Marketing strategies, marketing research and
branding are also the significant factors to make a decision to
export the product. The market research enables the exporter to
understand targeted market environment. The export market
knowledge had a significant firm’s export decision making
(Beleska-Spasova et al., 2012). In addition, firm’ branding or
firm’s reputation is the accelerator of the customer product
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Vol. 2, No.5, October 2013
acceptation. Moreover, currently, the global market has swiftly
changed. Customer is usually looking for a new product that
meets with endless needs. Thus, to respond with the need, the
research and development is the crucial part to achieve the
global completion. International company with a high export
orientation usually focuses on developing new product and
improving existing manufacturing (Bagchi-Sen, 1999).
Furthermore, employee is a source of firm’s competitive
advantage. The lacking in in-house expertise is the significant
firm’s internal obstacle (Bagchi-Sen, 1999). Most participants
believed that acquiring talented employees especially who has
experience will strengthen internal operation. Finance also
played an important role to run the operations. Due to limited
resources, the owner usually looking for sources of fund in
both in short and long terms from government agency or
financial institution in order to reduce the potential risks in the
internal market. For example, Jamaluddin and Dickie, (2011)
found that financial conditions influence the making of
decision to the expansion of the business. In addition, firm’s
owner typically uses assets management to utilize firm assets
more efficiency. For the entrepreneur characteristic factors, the
study shown that working experience and motivation is the
most important factors for the firm’s owner to make a decision
to go to international market. Firm’s owner usually uses the
make a decision under working experience to evaluate the
market. Entrepreneur push can be reflected the firm’s goal or
target as motivation. In addition, oversea experience also is
one of the important factors to prepare the company before
going to the international market. The overseas experience of
management is also one of the key variable factors that are
associated with export success (Evers, 2011; Sibanda et al.,
2011).
VI.
to observe of the same decision making factors over long
periods of time. Finally, while this decision making in this
study came from many sources as an exporter guide line, it
may not fully apply in every export categories. Therefore,
specific export area should be a subject to study.
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The understanding of the sub-factors under internal
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AUTHORS PROFILE
Mr.Dollawit Budcharoentong is Ph.D. candidatcy in Technopreneurship
and Innovation Management Program at Chulalongkorn University
Bangkok, Thailand, [email protected]
Prof. Dr.Thanawan Sangsuwan is director in MBA program at Faculty of
Commerce and Accountancy, Chulalongkorn University, Bangkok,
Thailand, [email protected]
Prof. Emeritus Dr. Achara Chandrachai, Ph.D., has been a Professor in
Faculty of Commerce and Accountancy, Chulalongkorn University,
Bangkok, Thailand, [email protected]
Prof. Dr. Chaipat Lawsirirat is a professor in Faculty of Sports Science
and Technology, Chulalongkorn University, Bangkok, Thailand,
[email protected]
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