The entry mode choices of South African Financial Services multinational enterprises in the rest of Africa

Abstract

This research is in the field of international business and is located within the context of South African Multinational Enterprises (MNEs) expanding into the African continent. In particular, the research explored the issue of entry mode choice in the financial services sector, as well as the factors that impact on how the need to mitigate risk (driven by market, cultural, institutional, political and regulatory factors), acquire and protect proprietary information and market knowledge, and realise synergies with the parent company or other related businesses affects the choice of entry mode. The focus and context of the study was South African MNEs in the financial services sector expanding into the rest of Africa. Through the review of literature as well as secondary data sources we were able to establish both an academic and business need for this research. The impact of industry and economic sector differences on entry mode choice has been identified as an under-researched area. The financial services industry has attributes which are different to natural resource based or manufacturing industries, which then impact on their internationalisation process. We aimed to add additional insights as to how these attributes affect entry mode. We also aimed to establish whether there were specific issues related to a financial services industry and African context, which could be the source of new insights not obtained from traditional research. The sample included four financial services companies, with interview participants comprising ten senior executives overseeing expansion and operations in the rest of Africa. All of the companies are listed on the Johannesburg Stock Exchange and have current or recent experience of acquiring or establishing businesses in the rest of Africa. The nature of the data collected was qualitative within the context of an explanatory research exercise. The data was analysed based on an inductive approach. The findings produced were that entry modes based on a high majority shareholding of the foreign operation were preferred, notwithstanding institutional and cultural differences between South Africa and the foreign market entered. In addition, there was a preference expressed for acquisitions of foreign companies over establishing greenfield operations.