Optimizing International Market Selection: A Dynamic Approach Integrating Export and FDI Entry Modes

Abstract

Effectively evaluating and selecting foreign markets is essential for successful internationalization. Traditional International Market Selection (IMS) frameworks typically follow a linear, sequential process: identifying motives, selecting markets, and subsequently determining entry modes. However, such sequential frameworks inadequately account for today's dynamic global market conditions, often resulting in firms entering appropriate markets via an unsuitable entry mode—termed herein as Type III error. Addressing this dangerous error, our study proposes a novel IMS approach that simultaneously integrates market attractiveness and considerations of the suitability of the entry mode selected. Using a dual-criteria ranking method combined with a 45° line analysis, we evaluate 86 prospective international markets across 30 variables. This approach enables firms to align market selection and entry mode decisions from the outset and responds directly to recent research emphasizing their interdependent nature. Our findings reveal that not all markets are analogous, that is, equally attractive for export and FDI, and that some markets are quite distinct, requiring specific entry modes. By adopting this integrated, flexible framework, firms can make more nuanced, strategically coherent internationalization decisions, minimizing risks associated with entry mode misalignment and enhancing their global strategic effectiveness.