Unformatted text preview: l factors in choosing an entry
mode depends on the internal factors. As seen in Figure 2.2 (page 12), he also puts forward
two internal factors, and these are:
Root (1994) states that highly differentiated products with distinct advantages over
competitive products give sellers a significant degree of pricing discretion. These products
can absorb high unit transportation costs and high import duties and still remain competitive
in a foreign target country. In contrast weakly differentiated products must compete on a price
basis in a target market, which may be possible only through some form of local production.
Hence high product differentiation favors export entry, while low differentiation pushes a
company toward local production and choosing an entry mode such as contract manufacture
or equity investment. Furthermore, if a company’s product is a service, such as engineering,
advertising, computer services, tourism, management consulting, banking or retailing then the
company must find a wa...
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