Entry mode selection of multinational enterprises entering high risk countries in sub-Saharan Africa

Abstract

Throughout the years, different theories and models have been developed regarding multi-national enterprises' (MNEs') entry into foreign markets. One such model is the Organisational Model, identifying three different types of enterprise, each selecting a different mode of market entry during foreign market expansion. These are: massproduction enterprises, disaggregate-production enterprises and project-based enterprises. This model was based on studies focusing mainly on the US, Europe and Asia. Research indicates, however, that MNEs increasingly identify sub-Saharan Africa (SSA) as a region for possible expansion. In view of persistent risk within the SSA region, this study's focus is on determining which entry modes MNEs use when entering a perceived high-risk market in SSA. This research study focused on MNEs that have expanded or are currently expanding into a perceived high-risk country in SSA. A qualitative research design was selected, applying an in-depth case study analysis to six different MNEs two MNEs representing each type of enterprise as categorised by the Organisational Model. Semi-structured personal interviews were conducted with each participant. Each interview focused on elements relating to the MNE's perception of, and approach to selecting entry mode into, high-risk markets. Findings predominantly did not find support for the Organisational Model, indicating that MNEs entering perceived high-risk markets in SSA preferred different entry mode strategies and approached risk consideration differently. Some findings did confirm the literature, by indicating that MNEs consider country risk when entering a foreign market in SSA.