XLIII Encontro da ANPAD - EnANPAD 2019 São Paulo/SP - 02 a 05 de outubro Foreign Market Selection: Reducing The Uncertainties Caused By Distance Dimensions Through Strategic Objectives Autoria Narayana de Oliveira - [email protected] Prog de Pós-Grad em Admin/Cursos de Mestr Acad em Admin e Dout em Admin e Turismo/UNIVALI - Universidade do Vale do Itajaí Wouter Niels de Vries - [email protected] Master in Strategic Entrepreneurship/Halmstad University Dinorá Eliete Floriani - [email protected] Prog de Pós-Grad em Admin/Cursos de Mestr Acad em Admin e Dout em Admin e Turismo/UNIVALI - Universidade do Vale do Itajaí Svante Andersson - [email protected] Master of Strategic Entrepreneurship/Halmstad University Resumo Organizations inserted on the international business automatically deal with the perceptions of distance that result in differences and similarities between countries. Therefore, the aim of this paper is to analyze the strategic objectives of a firm balancing the uncertainties caused by the perceived distances at the moment of foreign market selection. Through an in-depth cross-country single case study methodology, this study analyzed a Swedish company with subsidiaries in different countries and highlighted the distance symmetry mainly focused on the Swedish and German markets. This research contribute for the international business studies by presenting the importance of the distance dimensions aligned with strategic objectives for foreign market selection. Moreover, this research contributes by proposing that the (lower) level of both objective and subjective (cultural, administrative, geographic, economic, psychic) distances contribute for distance being symmetric. XLIII Encontro da ANPAD - EnANPAD 2019 São Paulo/SP - 02 a 05 de outubro Foreign Market Selection: Reducing The Uncertainties Caused By Distance Dimensions Through Strategic Objectives ABSTRACT Organizations inserted on the international business automatically deal with the perceptions of distance that result in differences and similarities between countries. Therefore, the aim of this paper is to analyze the strategic objectives of a firm balancing the uncertainties caused by the perceived distances at the moment of foreign market selection. Through an in-depth cross- country single case study methodology, this study analyzed a Swedish company with subsidiaries in different countries and highlighted the distance symmetry mainly focused on the Swedish and German markets. This research contribute for the international business studies by presenting the importance of the distance dimensions aligned with strategic objectives for foreign market selection. Moreover, this research contributes by proposing that the (lower) level of both objective and subjective (cultural, administrative, geographic, economic, psychic) distances contribute for distance being symmetric. KEY WORDS - Distance dimensions, Strategic Objectives, Foreign Market Selection 1 INTRODUCTION On the international business (IB) literature, internationalization is a well-researched concept that have been approached through different views, theories and models. It can be described as the sum of strategies and managerial decisions that result in business cross border (Ellis, 2007). The questions that permeate this strategical phenomenon are usually Why, Where and How. Therefore, the reasons why a company should internationalize is the most important question to be asked, since having a good reason to perform business in an international market is a key factor in order to succeed in the operation (Floriani; Fleury, 2010). Even though having a good and clear reason to internationalize is important, the reason by itself is not synonymous of success. Among with the managerial strategies and decisions that permeate the internationalization process, an extremely important question to be discussed is the ‘where’, by the choice of foreign market for internationalization. This question become important in order to analyze and decide which international market fits better the proposed operation resulting in a better performance cross border (Andersson, 2004; Cui; Walsh; Zou, 2014; Magnani; Zucchella; Floriani, 2018). Even tough innovational factors tend to increasingly provide a better global communication and result in countries approximation, the distance between countries still exists and affect business performances (Ellis, 2007). Therefore, distance is defined as a multidimensional construct approached, perceived and measured through different dimensions, not barely by the geographical distance between countries, but by the cultural, administrative, economic and psychic distances as well (Ghemawat, 2001; Ojala, 2015). Literature divide these different dimensions of distance in two main approaches, which are objective and subjective. While the objective approach includes for example the geographic and administrative distances, that are perceived without the influences of personal backgrounds, the subjective approach takes the personal opinion and point of view in consideration, as for example in the psychic distance (Magnani et al., 2018). Researches concerning the influences of distance in the foreign market selection have been performed and controversial findings have been presented (Ambos; Håkanson, 2014). Some of these studies found that the selection of an international target market relies on the analysis of the impacts of the different dimensions of distance in order to select close countries to obtain success on the operations (Ghemawat, 2001). These results are based on the multicultural challenges faced by organizations that involve the differences mainly on language, consumer XLIII Encontro da ANPAD - EnANPAD 2019 São Paulo/SP - 02 a 05 de outubro behavior and culture (Tanure; Barcellos; Fleury, 2009). Still, despite the importance of analysis of the distance dimensions, some researchers found that organizations that aim to enter high potential markets may ignore this importance and enter the foreign market anyhow (Malhotra; Sivakumar; Zhu, 2009), while others argue that the distances should be analyzed in combination to other variables, as for example the transactional costs (He; Lin; Wei, 2016). In this meaning, Magnani et al. (2018) proposed that the combination of distances and strategic objectives influence the selection of a foreign market for internationalization. Moreover, that these distances can contribute for asymmetry and relativity. In response to their call for contributions, this study is characterized as a deductive descriptive research, adopting a qualitative approach with a cross-country in-depth single case study strategy. Therefore, this research aims to analyze the strategic objectives of a firm balancing the uncertainties caused by the distance perceived at the moment of foreign market selection. 2 THEORETICAL FRAMEWORK 2.1 Strategic Objectives For Foreign Market Selection The internationalization process of a firm requires an engagement between financial and managerial resources through strategic decisions. In this process, the foreign market selection is considered one of the most important strategic analysis and decision an organization should assume (Mitra; Golder, 2002). Selecting the right foreign market for internationalization may lead the organization to achieve a better performance on the international market (Cui, Walsh; Zou, 2014) and in order to make the right choice, organizations should set clear strategic objectives (Magnani et al., 2018). In order to explain how an organization should strategically choose a foreign market for internationalization, Cui et al., (2014) suggested a combination of approaches considering the distance perceptions as an important variable. The first one is based on Johanson and Vahlne (1977) and assumes that in order to reduce the risks and possibly have a better performance on the international market, organizations should select countries through the psychic distance perspective, where countries should have similarities when it comes to cultural and social aspects. While the other approach adopts the transaction cost analysis based on Erramilli and Rao (1993). In this perspective, organizations should strategically choose markets considering the economic and geographic distances, in order to reduce the possible transactional costs of the operation. Therefore, in order to choose a foreign country to perform business abroad, an organization should consider the similarities between countries and analyze how the similarities would affect the internationalization process (Ghemawat, 2001). Still, researches have been considering not only the perceptions of distance, but the firm-specific factors for foreign market selection as well, in the meaning that even though distance can create barriers in business through different countries, strategic objectives for foreign market selection may enable distant markets to relate and perform business (Oviatt; Mcdougall, 1994). He and Wei (2011) analyzed the foreign market selection for internationalization through the market orientation perspective. According to the authors, organizations aiming to reach the international market while selecting a foreign market should allocate their resources in order to emphasize the market orientation, because high levels of market orientation would facilitate the exploration of cultural distant markets. Nevertheless, there are researches that analyze the combination of the construct of distance with other variables in order to select