3.0 Methodology

In this part we will describe the approach to the research. The ambition is of this part is to describe the process of the gathering and compiling information for the project work as clearly as possible, in order to enable a critical review of the credibility of the final results.

The choice of methodological approach depends on the nature of the investigation to be carried out, its purpose and problem statement. For this research, the main approach was mainly determined by the guidelines for the tasks. The problem statement and purpose that was composed for the research in the beginning has guided the work from collection of information to analysis of findings in relation to theory.

We have divided the research into two distinctive parts. The first one is literature review and the second part is case analysis based on interviews. In the first part we tried to relate the findings of others as well as well renowned journals with our topic. We tried to relate the Bangladeshi perspective as much as possible. And for the second part we conducted interviews of different officials, who are currently working in different multinational companies in Bangladesh. By interviewing them we tried to find out whether they consider the social and cultural factors important while making strategic decision of market entry.

3.1 Literature Review
Researchers all around the world have been trying to find out a relationship between foreign investment method and the culture of the host country. Yet it is not clear how one should relate the decision of whether or not to choose an entry strategy based on the culture. None the less it is one of the most crucial decision the company faces in order to penetrate market across national boundaries.

As we have mentioned before that usually an organization conducts PEST analysis before considering entering a market. PEST is an environmental audit tool that analyzes the external environment of a business. The term, PEST (sometimes rearranged as STEP) is an acronym for Political, Economic, Social and Technological business environment. It forms part of the external macro-environment analysis when a company is conducting market research (Richet). It is claimed that PEST analysis is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations.  (Kotler, 1998). It has been a consistent argument that economic factors are the major driving force for expanding internationally (Scholasticus, 2011). Some of the factors may be: the availability of land, existence and/or costs of raw material, cost and quality of labor, availability and cost of capital, efficiency of production, access to supporting industries, availability and access to technology, closeness to potential or additional market and tax incentives and/or benefits. In the decision making process these factors play a vital role (Pushparaj, n. d.).

In general it may seem like market entry strategy always follows a similar pattern. The sequence is: exporting, international licensing, international franchising, joint ventures and foreign direct investment. It is commonly assumed that the strategy differs due to different phases the company goes through, or more simplistically due to time intervals but “in reality, firms typically do not limit their market-entry strategy solely to determination of the entry time; rather, they determine the staging of entry, the appropriate scale of production, the type of product to manufacture, etc. For simplicity, economists frequently abstract market-entry strategy to focus on the timing issue in isolation” (Chevalier-Roignanta, Huchzermeier, & Trigeorgis, 2010). 

The steps even differ from country to country. The Bangladeshi market differs from any other market because of the uniqueness in its culture. Though it is shaped by the Indian culture, but Bangladeshi social aspects differs from any other culture in numerous ways. Bangladeshi culture has a unique history of 2500 years. We have a rich heritage, full of diversity and some distinct characteristics which need to be presented in a coherent and attractive manner to the outside world. (Anam, 2010) Because of the uniqueness of the culture, marketers often find themselves in dilemma regarding making strategic decisions.

According to Zekiri & Angelova (2011, p. 574), the process of globalization represents one of the most significant trends that accelerate rapid growth of global strategies. Firms that want to internationalize must decide on a fitting mode of entry into a foreign market in order to make the best use of their resources. But it’s important to analyze companies’ motives for entering a foreign market. Therefore, companies are entering international markets for many reasons, like the following motives:
•    Foreign markets are growing faster than the domestic markets;
•    Protecting them-selves by countering foreign firms to enter a do domestic market;
•    Searching greater sales volume in order to achieve low cost.

When a company plans to expand its business beyond the national territory, a extensive planning process and several crucial decisions are to be made. The market potential has to be assessed and weighed against company capabilities and the degree of commitment that the management is prepared to make (Cateora & Ghauri, 2010). Following steps should result in the choice of a potential market, and later on, an entry mode that fits chosen marketplace. The entry modes vary; some demands larger investments of capital, resources and management effort, while others involve less stake and commitment for a limited share of the market. Each entry mode has its advantages and disadvantage, depending on the strengths and weaknesses of the company, the degree of 27 commitments the company is willing or able to dedicate and the characteristics of the particular market (Cateora & Ghauri, 2010).

In order to get some idea about social and cultural distances between India, USA and Bangladesh the findings are placed in the table is based on Hofstede’s cultural dimension parameters used by Hofstede are given below (Hofstede, 2012)–
•    Power Distance Index (PDI) – Explains how less powerful individual accepts the unequal power distribution.
•    Individualism (IDV) – Explains the degree of one’s tightness with his or her family
•    Masculinity (MAS) – Explains practice of male female equal rights distribution.
•    Uncertainty avoidance (UAI) - Explains society tolerance of uncertainty
•    Long term orientation (LTO) – Explains some cultural facts for example having a sense of shame etc.

Country            PDI    IDV    MAS    UAI    LTO
USA                   40      91       62       56      29
India                   77      48       56       40      61
Bangladesh         80      20       55       60      40

Now-a-days companies add cultural variables into the business economics and institutional context entry mode model because the costs of dealing with cultural differences are becoming recognized as a major cost in international business activities (Brouthers, 2002). Operating in cultures distant from home culture may increase the risk of faulty information collection. Frequently cross-cultural management problems occur. As mentioned, the entry mode model assumes that the mode of entry is selected using the economic criteria based on achieving operational efficiency (Brouthers, 2002). This may work where there are no confounding influences. However, as often happens with economic theories any confounding influences are ignored: In this instance it is the influence of culture on investment performance. "No matter how superior the current multinational corporation may be in replacing the skills of traders by the international extension of organizational boundaries, the managements of these firms are likely to be influenced by the dominant country culture." (Kogut & Singh, 1988)

In reality, entering the Bangladeshi market is carried out largely in the form of joint ventures. Although the performance of some of these joint ventures has not been satisfactory, the stability has been relatively high. The major reason for forming joint ventures is the attraction of the Bangladeshi partners’ local knowledge. However, this does not allow for the dysfunctional aspects of cross-cultural management from home to host countries.  In an emerging economy setting, an MNC with less experience in the host country will perform better if it engages in a joint venture instead of opting for a wholly owned subsidiary. Again In an emerging economy setting, an MNC will perform better under a joint venture compared to opting for a wholly owned subsidiary mode of entry when the MNC has no previous experience in the industry it is entering. (Kamal, 2011)

Now-a-days increasing attention is being paid to the importance of cultural differences in foreign investment, and there is a need of understanding the culture of the host nation. In order to achieve a better performance and better output out of the cross border business expansion, organizations are now focusing not only on the culture of the home country but they are focusing on the culture of the host country as well. However, there are still no satisfactory answers from research to many of the cultural related problems associated with international investment.