Location choice of western business to business sales and trading subsidiaries in Asia

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Master Thesis

On

‘LOCATION CHOICE OF WESTERN BUSINESS TO

BUSINESS SALES AND TRADING SUBSIDIARIES IN

ASIA’

Candidate: Philippe Schyns – 11725710

Education: Master of science in Business Administration

Subject: International Management

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st

Supervisor: E. (Erik) Dirksen MSc.

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nd

Supervisor: Dr. I. (Ilir) Haxhi

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ABSTRACT

This paper investigates the location choice of western business to business sales and trading subsidiaries in Asia. The goal is to reveal which factors and which underlying indicators influence location decisions. Further, the aim is to picture additional decision-making process traits. This to better understand how these businesses expand. By analyzing literature, multiple factors are found to influence location decisions. With the help of statistical tools, these variables are structured for minimum correlation. To test the relevance of the factors found, and to reveal information about the process: surveys and semi-structured interviews are conducted. These revealed that the most important indicator influencing the location for expansion is ‘Market Growth Potential’. Leading to the factor ‘Market’ as key strategic factor. The survey also revealed that the factor ‘Infrastructure’ is of highest relevance in deciding upon a location. Further, the semi-structured interview triangulated the survey results and added several process traits. The interview results identified, that successful experienced businesses, while using the help of traditional advisors mostly operate from a trial-error approach. Furthermore, the interview revealed that decision-maker preferences are key in the ultimate decision. Finally, cultural differences between home and host country are to be found the most difficult challenge to cope with. Therefore, current businesses advise future business to mainly invest in long-term relationships with the new environment.

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STATEMENT OF ORIGINALITY

This document is written by Philippe Schyns, who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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ACKNOWLEDGEMENTS

I would sincerely like to thank my supervisor Mr. E. Dirksen. He has been very supporting and understanding in the process of forming this paper. His valuable suggestions, support, and patience lead me and this paper to the right direction. Further, it has been a great time working together, I would definitely recommend future researchers to work together with Mr. E. Dirksen. Furthermore, I would specifically like to thank the expert respondents. They have taken a lot of time to contribute to this study by answering interviews and filling in surveys. Their substantial contributions have been of great value to me and to this research. Thank you.

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TABLE OF CONTENTS

1. INTRODUCTION ... 7

1.1

LOCATION CHOICE

... 7

1.2

FINDING THE LOCATION

. ... 7

1.3

RESEARCH GOAL

... 8

1.4

THESIS OUTLINE

... 8

2. LITERATURE REVIEW ... 10

2.1

LOCATION THEORIES

... 10

2.2

PRIMARY

M

OTIVES

... 10

2.3

STRATEGIC FACTORS

... 12

2.4

OPERATIONAL INDICATORS

... 15

2.5

FLOW OF INFLUENCE

... 20

2.5.1 Primary Motive Influence ... 22

2.5.2 Strategic Factor Influence ... 22

2.6

DECISION MAKING PROCESS

... 23

2.7

DECISION MAKING MODELS

... 24

2.8

RESEARCH QUESTION

... 26

2.9

PROPOSITIONS

... 26

3. RESEARCH METHOD AND DESIGN ... 28

3.1

DESIGN

... 28

3.2

METHODOLOGY

... 29

3.3

MEASURES

... 30

4. RESULTS ... 32

4.1

SEMI

-

STRUCTURED INTERVIEW

... 32

4.1.1 Decision Process results ... 32

4.1.2 Decision Motivation results ... 34

4.1.3 Alternative Location results ... 36

4.1.4 Decision Experience results ... 38

4.2

SURVEY

... 40

4.2.1 Operational Indicators results ... 40

4.2.2 Strategic Factors results ... 41

5. DISCUSSION AND CONCLUSION ... 43

5.1

COMPARING METHODS

... 43

5.2

DISCUSSION OF PROPOSITIONS

... 46

5.3

LIMITATIONS

... 48

5.4

CONTRIBUTION

... 50

5.5

FUTURE RESEARCH

... 51

5.6

CONCLUSION

... 51

6.

REFERENCES

... 53

7.

APPENDIX

... 58

7.1

T

ABLE

1 ... 58

6

7.2

T

ABLE

2 ... 59

7.3

T

ABLE

3 ... 64

7.4

T

ABLE

4 ... 65

7.5

T

ABLE

5 ... 67

7.6

T

ABLE

6 ... 84

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1. INTRODUCTION

1.1 LOCATION CHOICE

When the world’s economy would exist of free trade, perfect goods and factor markets, there would be no need for Multi National Enterprises (MNEs). In that case there would not be any transportation costs, or differences in preferences, thus no scale or scope economies (Rugman, 1980). Nevertheless, the reality shows the economy is characterized by imperfect goods and factor markets as well as highly versatile preferences, and potential for economies of scale and scope. In a world with many local differences, location choice has thus become a major piece in the internationalization process. Choosing a location for a new business subsidiary is one of the most important decisions when expanding a business.

1.2 FINDING THE LOCATION

The location of a business affects in many ways how the firm operates. In the western world like the USA, service companies have changed their locations for a variety of reasons. Companies in many states seem to have left for more attractive locations. The extensive amount of investment in new locations indicates the significance of location decisions, it shows that the right location choice can be a big contributing factor to the competitiveness of an organization (Karakaya & Canel, 1998). In Particular, when firms are considering a location choice of a subsidiary in Asia, firms have the option to choose between 48 countries, containing more than 44 million square kilometres. In order to distinguish between all the possible opportunities, companies could rely on the extensive literature on the determinants of foreign location choices. However, the path to follow in order to find the optimal location of a subsidiary is not completely paved yet. Especially for trading and sales companies, how to decide where to locate a business is becoming increasingly relevant as the complexity of the factors influencing the decision-making process is increasing. In an interconnected world with higher

competition than ever, identifying and satisfying the relevant factors linked to a location can make or break a business.

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1.3 RESEARCH GOAL

Location Theory acknowledges that entities act on self-interest. It identifies that firms choose locations that in generally maximize profits in line with the finding that individuals prefer locations that

maximize utility. Many studies of investments abroad assume that the representative of the firm making these choices, is not a rational decision maker that does not considers all relevant attributes of all the options available. Further, research in the area of site selection has been limited mostly to rather comprehensive approaches or national views. A holistic approach toward especially property-related matters is not available yet in current textbooks (Glatte, 2013). Most of the literature on facilities location concentrates on the theoretical aspects and not many studies exist on the empirical aspects of location decisions (Karakaya & Canel, 1998). This research paper aims to approach the ‘right’ path to follow on how to decide where to locate a Business to business sales and trading subsidiary. This research aims to include all relevant factors from theory and practice, to assess what determines the best location for a subsidiary. In doing so this paper attempts to provide a description of which factors are ought relevant in which order when deciding upon a location. The aim of this paper is to improve understanding and to improve results of future location selection projects and strategies of western B2B Sales and trading companies moving to Asia.

The research question thus is: ‘Which factors in which order are considered relevant for western B2B

sales and trading firms when deciding upon a subsidiary location in Asia?’

1.4 THESIS OUTLINE

This research paper focusses on picturing which path is followed by the case firms when deciding upon a subsidiary location. To understand which factors are relevant in theory, literature will be studied. By doing a case study containing semi-structured interviews followed by surveys with professionals, this research aims to understand which factors are relevant in practice. The case study will contain at least 10 western sales and trading companies who have already set up a subsidiary in Asia. Additionally, experts on the topic will be asked to share experiences, theories, and findings. During this research, questions will be asked with the goal to understand and optimize which factors

9 are relevant and in which order they are ought relevant. Further this research aims to picture how the decision process should take place.

The remainder of this study is organized as follows. Chapter 2 will provide a review on the literature and debate surrounding decision and location choice theories and models. Further, it will evaluate the potential gap. Chapter 3 describes the research method and design including expectations.

Furthermore, Chapter 4 dives into the research results. Lastly, Chapter 5 will reveal some important discussion points and draw some final conclusions, including the implications and limitations of this study.

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2. LITERATURE REVIEW

2.1 LOCATION THEORIES

If our world’s economy would consist of free trade, perfect goods and factor markets, there would be no need for Multi National Enterprises (MNEs). As mentioned earlier, in that case there would not be any transportation costs, or differences in preferences, thus no scale or scope economies (Rugman, 1980). Nevertheless, the reality shows the economy is characterized by imperfect goods and factor markets as well as highly versatile preferences, and potential for economies of scale and scope. In a world with many local differences, location choice has thus become a major piece in the

internationalization process. Choosing a location for a new business subsidiary is one of the most important decisions when expanding a business. Location choice is a strategic decision, a fundamental long-term decision for a company (Fischer, 1997.) The location selection process, closely related to the eclectic paradigm known as the OLI-Model, in which ownership-, location- and internalization advantages are part of the internationalization theory (John H. Dunning, 1979). Dunning found that location advantages are the outcome of the idea that different locations can provide different resources as well as different institutions and regulations in regard to the revenue and production costs. The impact on the company’s success in the near and mid-term future is highly affected by the business environment,

location decisions made by MNE’s, highly impact the performance of the investments, and later alterations are very expensive (Bartik, 1985; Duanmu, 2012). Therefore, a diligent analysis geared to the specific requirements of the type of production to be established and to the business environment is a crucial precondition to avoid mistakes (Hansmann, 1994).

2.2 PRIMARY MOTIVES

The mainstream theory on location issue identified four primary motivations for foreign direct investment (FDI). These primary motivations are market-seeking, nature resource-seeking, efficiency-seeking and strategic asset-efficiency-seeking (Dunning, 1977, 1993). Another research found multiple reasons for firms to cross national border. The major reason was the ability to gain access to low labour costs.

11 Also, the ability to gain access to markets, tax incentives, and the ability to gain access to technology or raw materials was found key in crossing borders. Finally, companies also indicated that they cross borders to counterattack against competitors (MacCarthy, 2003). In general, these are considered the terms caused by strategic factors creating a certain need to locate somewhere. However, motivations may depend on the type of business or nature of the business environment. Besides the actual motives, the scope of this research is highly dependent on the motives of sales and trading firms. Galbraith (1985) found that different industries have different motives and thus different strategic factors that determine location decisions. Therefore, the strategic factors included in this research are the ones ought to be relevant for the motives, sales and trading companies have. Likewise, experts have concerns that the importance of factors affecting the location decision is highly dependent by the sector, the market type, and geographical region of interest (MacCarthy, 2003). The strategic factors defining the motives in return are determined by the operational indicators which define the

importance of the strategic factors. The underlying indicators of the operational indicators are called deep specific indicators. Generally, those are too specific to study in strategic researches. In this research the focus is put on strategic decisions and macro management. This means the focus is finding the factors influencing a location decision and not site-specific indicators. Therefore, the deep specific indicators are only taken into account in regard of being a part of the operational indicators, but this research does not elaborate further on the deep specific indicators due to the degree of complexity a potential framework would get. An overview of the order of the variables influencing decisions can be found in figure 1.

12 Figure 1 – Order of variables influencing decisions

Source: Author

2.3 STRATEGIC FACTORS

When organisations want to achieve their mission, the location decision should be a part in achieving that mission. This includes economic strategic factors and non-economic strategic factors also known as financial or non-financial considerations. As mentioned, these are the factors creating a motive to move somewhere caused by the later explained operational indicators. Traditional theories as the elective paradigm and the Uppsala Model (Johanson & Vahlne, 1977), depict that strategic investment location choices are determined by a multitude of factors. The Uppsala model states that firms first choose to enter nearby markets with low market commitment before entering markets demanding higher commitment. These factors determining locations commitment include: type of investment activity, motivation for investment, ownership advantages, location advantages, internalization capabilities, knowledge of local practices, and characteristics of investment locations (Dunning, 2000; Johanson & Vahlne, 1977).

At a national strategic level, the presence of an investor’s prior investment in the host country was found to be significant. These findings contrast with the findings concerning the studies covering

Motives

Strategic Factors

Operational Indicators

Deep Specific Indicators

13 Europe only. This probably reflects the fact that other western firms like American firms face a much greater degree of uncertainty when investing in Asian countries (at least, the non-English-speaking ones) than when investing in Europe because of the greater cultural and language barriers and, in case of for example China, the great difference in types of government and level of economic development (Mataloni, 2011). When western (American or European) firms invest in Asian countries it is thus suggested to include strategic factors that cover cultural, language, government, and economic barriers in the rational decision process. This is in line with the CAGE distance framework (Ghemawat, 2008) which identifies Cultural, Administrative, Geographic, and Economic differences. It as well identifies distances between countries that companies should address when crafting international strategies. The CAGE framework is divided in the earlier mentioned factors nevertheless, it also enables firms to prioritize in strategies between factors focussing on internal attributes and external differences. Also, the PESTLE-analysis (Cadle, Paul, Turner, 2010) could be used, it identifies common factors in its external analysis framework of macro-environmental factors used as the environmental scanning component of strategic management. The PESTLE-analysis identifies political, economic, social, technological, environmental, and legal factors which could be seen as a tool of generic macro-factors identifying both a business position figuratively and literally. In accordance with the PESTLE and CAGE factors, results presented from a Delphi study that used a worldwide panel of experts to investigate factors affecting international location decisions found similar factors. The experts investigated the motivations of firms in seeking to manufacture across national borders and the key steps that should be followed in making international location decisions. The top six major general factors identified that may strongly influence international location decisions were: costs,

infrastructure, labour characteristics, government, political factors, and economic factors (MacCarthy, 2003).

Many studies only analyse one particular sector. Important is to understand and include relevant factors for the sales and trading industry which may contain of multiple studies of multiple sectors to improve a possible framework. In general, one can distinguish between retail businesses,

14 businesses mainly fit the factors influencing locations of the service providing industry. However, also parts of the retail industry and even the manufacturing industrial factors should be considered. When determining offshore location choices for Research and Development projects (R&D), choices require an evolutionary perspective linked with the OLI paradigm as a framework (Demirbag & Glaiser, 2010). In research conducted by Demirbag, multiple hypotheses were set on determinants of location choice of R&D projects. Hypothesis 1: The greater the Multi National Enterprise’s (MNE’s) home R&D wage costs, the greater the likelihood the MNE will choose to locate R&D projects in a lower R&D wage cost region. Hypothesis 2: The more developed the knowledge infrastructure of a region, the greater the likelihood of that region being selected by an MNE for offshore R&D projects.

Hypothesis 3: The larger the pool of experts for R&D projects in a region, the greater the likelihood of that region being selected by an MNE for offshore R&D projects. Hypothesis 4: The greater the country risk of the offshore location, the lower the likelihood of that location being selected by an MNE for offshore R&D projects. Hypothesis 5: The MNE’s prior R&D project experience in a region increases the likelihood of that region being selected by the MNE for offshore R&D project. This test resulted in all hypotheses to be proved, in which wage had the biggest impact. When these hypotheses are translated from R&D project locations of MNE’s to subsidiary locations of sales and trading companies, there are several factors that can be hypothesised to influence location decisions. Among them are wage costs, knowledge infrastructure, talent pool, country risk, and prior experience in location. As mentioned earlier, these specific factors comply with the general factors mentioned by MacCarthy. The small difference is that these specific factors can be called indicators of those earlier mentioned general factors. Moreover, these specific factors entail the factor ‘prior experience in location’, which is an addition to the scheme of factors mentioned by MacCarthy.

Another study reviewed by experts in public and private sectors and produced by expert Sir Peter Hall (2016) investigated which factors affect people to move to certain cities. The Global Power City Index (GPCI) evaluates in light of the globally intensifying competition between cities, their magnetism. The comprehensive power to attract creative people and business enterprises from around the world evaluated on six functions representing city strength and urban activities. Economy, Research and

15 Development, cultural interaction, Liveability, Environment, and Accessibility represent strength. Manager, Researcher, Artist, Visitor, and Resident are the global actors providing an all-encompassing view of the cities (GPCI, 2016). For business, one could argue the first 6 factors are more relevant than the last 5 actors. However, in a climate where B2B sales and trading companies are positioned, a satisfied working team is believed to be a key to success. This points that urban actors are also of high relevance in considering locations. This suggests an addition to the previous research, to include strategic factors like urban actors and liveability when considering location choice.

According to research on fast-growing companies in New York and New England also decision-making factors were divided into six categories: Cost, Living, Resources, accessibility, Business environment, and existing buildings (Karakaya & Canel, 1998). It was found that the factors ‘cost’ and ‘accessibility of the location’ played a most important role in the decisions process in the research conducted in 1998. On the contrary, in particular for sales and trading companies it could be suggested that the factors ‘business environment’ and ‘living’ could arise as significant factors influencing the decision process rather than the factors suggested in the paper by Karakaya and Canel.

2.4 OPERATIONAL INDICATORS

Operational indicators are the underlying variables of the strategic factors mentioned in the chapter above. The underlying indicators of the operational indicators are called deep specific indicators. Generally, those are too specific to study in strategic researches. In this research the focus is put on strategic decisions and macro management. This means the focus is finding the factors influencing a location decision and not site-specific indicators. Therefore, the deep specific indicators are only taken into account in regard of being a part of the operational indicators. The operational indicators are the basis of a motive to move to a certain location as investigated by Yuanfrei Kang (2010), who hypothesised that the choice of a firm’s FDI location is associated with market size, market growth, market openness, availability of strategic assets, difference in economic regimes, legal regimes, and political regimes (Y. Kang, 2010). In addition, Mataloni (2011) adds: labour cost, education,

16 unemployment, and transportation infrastructure. He also adds experience and infrastructure related variables as prior investment in the host country, and industrial agglomeration. He moreover agrees with Kang (2010) that market size is the number one determinant in the decision for a location. Schemenner argues mainly that costs play a role, he refers that costs can be estimated through quantitative analysis and that in location decision research intangible and qualitative indicators surely play a big role but costs are key (Schemenner, 1979). Hekman on the other hand found that the five most important factors in plant decision were state and local industrial climate; labour productivity, transport, availability of land, and cost of constructions (Hekman, 1982). Hekman, points out that that the social and cultural environment, and the proximity to the markets are important determining factors in location decisions. This is in line with the arguments of Demirbag & Glaiser (2010). Both researchers focus on industrial advantages in new locations as well the availability of multiple kind of resources.

Another researcher, Trofimenko (2010) researched economic headliners in location decisions. Using a data set of 1,409 firms in China who report, among other things, why they have chosen a particular location, she found that the perceived importance of various site attributes differs considerably for those two types of firms: foreign-owned firms are attracted by the local market size, supply of skilled workers, and the quality of (telecommunications!) infrastructure; future exporters are driven by low rents, and fewer regulatory requirements and taxes; both types of firms care about the availability of government services (Trofimenko.N, 2010). On the other side, Harris (2014) founder and member of the international law firm Harris Bricken, who is an expert in getting clients the best way into Asia, researched indicators that companies consider when determining the locations. He found that the indicators: Labour resources, wages and language skills, Environment, labour and visa laws, play a huge formal role in the process. As well, taxes and import duties, Physical, financial and transportation infrastructure, Political, economic, legal and crime risks were found to be scoring high in his research. He finally found that utility access, consistency and costs, Cost of Living, quality of life, health care, education, and access to international schools were considered important by companies his law firm helped. One must keep in mind this set of indicators is solely based on the clients of Harris and

17 Bricken. One could thus take this as a biased set of indicators, however, the firm operates out of multiple western locations among others out of Seattle, Portland, San Francisco, and Barcelona which creates a more encompassing view. It also operates out of Beijing which means it sees both sides of the decision process. Therefore, one could argue it fits the criteria, so it is included in this paper (Harris.D, 2014). Heizer and Render (2017) wrote a paper about investments in Europe, it has been found that, at the regional level, location attributes related to high worker productivity – such as worker skills, industrial agglomeration, and extensive transportation infrastructure are key indicators. Further, factor prices, such as access to low-wage labour are considered alternative operational indicators, mainly concerning costs. Heizer and Render (2017) as well identified different layers of operational factors. Heizer and Render (2017) identified three main layers of operational indicators influencing location decisions: Country factors, Region factors, and Local factors. The country factors are mainly focussed on regulatory and cultural indicators. Country factors as: government rules and attitudes, political risk and incentives, culture and economy are identified to play a broader role in the process. Further, specifically: market location, labour availability, attitudes, productivity and costs, availability of supplies, communications, energy, exchange rates and currency risk are indicators companies should evaluate when selecting a country of a subsidiary. Moreover, Region factors are concerned about the attractiveness of region, like culture, taxes, and climate. The hub advantages of a region could be indicated by: Labour availability and costs, availability of utilities, environmental regulations of state and town, government incentives and proximity to customers. Finally, local factors are: site size and costs. Infrastructural decision indicators should according to Heizer be: air, rail, highway, and waterway systems, zoning restrictions, nearness of services and supplies needed, and environmental impact issues. Additionally, MNEs’ location choice has relevant factors such as (i) endowment effects (why a particular economic activity would be ‘naturally’ drawn to a given location); (ii) agglomeration effects (referring to the availability of labour, and to the easy and cost-effective access to specialized inputs and to knowledge spill overs) and (iii) policy-induced effects (Mariotti, Piscitello & Elia, 2010). In this paper those three effects are referred to as Hub effects.

18 On the one hand, as mentioned above operational indicators can be divided in layers, on the other hand it can be divided in quantitative and qualitative indicators that are considered relevant to the location decision of manufacturing businesses and service businesses. On the quantitative side being: Cost of site, availability and cost of labour, transport costs, market potential, issues, and government

incentives. The other division consists of the qualitative indicators being: size of site, legal controls, and infrastructure. The indicators, a business could consider when deciding which country to locate its operations in are suggested to be: Barriers to trade, economy of the country, legal controls, costs, cultural differences, - communication problems, ethical concerns, and quality issues (Cambridge, 2015).

The most important factors influencing business location decisions according to research on fast-growing companies in New York and New England were divided per strategic factor Karakaya & Canel (1998) (see chapter 2.3 , p.12). New York and New England, are western cities that very well fit the criteria of this paper, therefore, the underlying values of those strategic factors from the year 1998 are included. The strategic factors contained multiple very specific variables based on scored mean levels. (see appendix table 1 , p.60) These operational indicators can be divided into six groups. All indicators are based on one or multiple of the following: costs, living, accessibility, resources, business environment, and existing buildings. The underlying indicators can thus be categorized by strategic topic. However, another paper by Bognanno (2005) structures indicators by the level of economic association. He distinguishes between economic and non-economic indicators (see chapter 2.3 , p.12). These economic indicators would in return determine economic factors. The economic factors would determine the profitability of the enterprise. Under economic factors, costs that need to be evaluated are production costs, which would include indicators as cost of energy (electricity), cost of materials, cost of taxation, cost of wage, and procurement costs (Bognanno, 2005). This is in line with the findings of Spee and Douw (2003). They found that various infrastructural costs, and

telecommunication costs within the new location, determine a part of the level of the economic factors (Spee & Douw, 2003). On the contrary, non-economic indicators do not necessarily have any fixed monetary value. These indicators contribute significantly to the enterprises’ productivity. Top of the

19 list are government and political issues, like: policies, trade licenses, patent protection, legal processes and environmental laws (Talley-Seihn, 2004). Also, Labour characteristics, HRM practices, and government stability are considered relevant non-economic indicators of the location decision process (Brush, 1999).

Karl Heil (2017) identified in revision by R. Anthony Inman, trends in location strategy. They found that in formulating location strategies, typically certain indicators contribute to a decision. They found that the level of the quality of facilities, the feasibility, logistics, and labour contributed to location strategies. They added the indicators: labour, community, site and, trade zones to the list of variables relevant in the strategic process of choosing a location. Furthermore, they mentioned legal topics as: political risk, governmental regulation, environmental regulation, and incentives as formal variables to be included in a location analysis. For the specific factor ’Location’, liveability, Security and safety where found to be key in site selection (GPCI, 2017). This is for a great part in line with the theory of the forum experts from MSG (Management Study Guide). MSG’s instructional content is developed and regularly updated by management experts who have substantial educational and industry experience. The management study guide depicts that proximity to customers, value of the business area, availability of skilled labour, and trade zone agreements are important factors in location selection in practice. Also, quality and reliability of suppliers in certain regions even as the environmental policies are found most relevant in selecting locations (MSG, 2017).

The top ten key ‘sub-factors’ or as this paper calls them ‘operational indicators’, identified by B.L. MacCarthy were: quality of labour force, existence of modes of transportation, quality and reliability of modes of transportation, availability of labour force, quality and reliability of utilities, wage rates, motivation of workers, telecommunication systems, record of government stability and industrial relations laws. Additional sub-factors or operational indicators of increasing importance include: protection of patents, availability of management resources and specific skills and system and integration costs (MacCarthy, 2003). Many of the indicators given are studied for manufacturing companies. For sales and trading companies and especially for sales companies, indicators relevant for

20 service companies are interesting. According to experts in the service industry locating a business near its customers could be very important for certain types of service. These are usually services where direct contact between the business and the customer is required. On the other hand, technological developments create opportunities for companies, some services can be conducted via other media which could leave location decisions to be of secondary significance. As well according to his research, the personal preferences of the owner seem to be a significant indicator of locations

decisions. Finally, rent, taxes and general costs always play a role since they directly affect a business’ turnover to profit rate. The availability of preferred labour in the location even as the climate were discovered as playing an operational role. Being next to other businesses in regard of brand image but mostly because of being close to the market affected location decisions. In particular for trading companies, trade barriers and trade tariffs, availability of government grants and other incentives are suggested to be significant operational indicators

2.5 FLOW OF INFLUENCE

All indicators and factors influencing the decision-making process according to the literature review above are given in table 2 of the appendix. The indicators and factors given in table 2 of the appendix are generally difficult to test. First, because the number of variables are of such high amounts that testability would be unrealistically time-consuming. Secondly, the variables are of varying order and relevance to the motives. Thirdly the variables are not exclusive and coded differently. Further, the variables are highly correlated causing difficulties to analyse results.

To cope with the above-mentioned difficulties, a factor analysis is used. The variable reduction technique: Exploratory Factor Analysis (EFA) investigates the structure of interrelationships or correlations among variables. It identifies groups of variables that share communalities that are called the factors (Hair, Anderson, Tatham, Black, 1995). EFA thus identifies the number of latent constructs and the underlying factor structure of a set of variables. It hypothesizes an underlying construct, a variable not measured directly, it estimates factors which influence responses on observed variables.

21 Further, the analysis allows to describe and identify the number of latent constructs (factors).

Traditionally this has been used to explore the possible underlying factor structure of a set of measured variables without imposing any preconceived structure on the outcome (Child, 1990).

So, the factors and indicators that will be tested are limited to improve the conductibility of this research, nevertheless, the factors are not imposing any preconceived structure on the outcome. As mentioned earlier (see chapter 2.2 , p.10), the ‘Deep Specific Indicators’ are not being tested. This, to keep a helicopter view in international management. The ‘Operational Indicators’ on the other side, are being tested to investigate which influence they have on the ‘Strategic Factors’ and ultimately, which influence they have on the ‘Primary Motives’. An example of the structure of the flow of influence of all variables can be found in figure 2.

Figure 2 – A hypothetical example of the flow of influence of the variables tested

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2.5.1 Primary Motive Influence

Below, the Primary Motives are given in bold, followed by the strategic factors. The strategic factors are underlying factors, influencing these primary motives.

Nature resource-seeking: market

Market-seeking: market, legal and politics, business environment, and economy

Strategic asset-seeking: workforce, infrastructure,

Efficiency-seeking: legal and politics, costs and Taxes, culture, site, liveability, business environment,

and economy

2.5.2 Strategic Factor Influence

Below, the Strategic Factors are given in bold, followed by the operational indicators. The operational indicators are underlying indicators, influencing these strategic factors. In return, the operational indicators consist of ‘deep specific indicators’ as mentioned earlier (see chapter 2.4, p.14).

Market: market size, market growth potential, market openness, proximity to the market, proximity to

customer

Legal and Politics: legal regimes, political regimes, political stability, government rules and attitudes,

government incentives, environmental regulations, barriers to trade, protection of patents

Costs and Taxes: labour cost, tax rates, cost of utilities, procurement costs, costs of

telecommunications and energy, factor prices (production costs), system and integration costs, trade tariffs, cost of land and construction of potential site

Workforce: average regional education level, worker productivity, availability of skilled workers,

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Infrastructure: transportation infrastructure, air, rail, highway, and waterway systems, proximity to

major highways/seaports, proximity to major airports

Culture: social environment, cultural environment, local attitudes, communications, cultural

difference to prolonged market, ethics of the region, language

Site: availability of buildings, location image, hub effects

Liveability: quality of utilities, cost of housing, availability of medical services, availability of

colleges/universities, availability of recreational facilities, the climate, availability of fresh water, security, and safety

Business Environment and Economy: availability of capital financing, presence of competing

businesses, value of business area, trade zone agreements, economic strength of the region, regional research and development, industrial agglomeration, reliability of the businesses in the region, difference in economic regimes, energy- exchange rate and currency risk, country factors and region factors (economic growth)

Decision Preferences: available facilities, feasibility, decision maker preferences, prior experience in

region, influence of current employees, convenience, time zone preferences

2.6 DECISION MAKING PROCESS

People have preferences that can sometimes not be explained in a rational way. Asking a person his or her favourite colour might not be very complex, asking a favourite colour including a motivation why certain colour is more beautiful than others is very complex. The preferences people have can thus not always be explained in a model. Creating sets of investments to ‘consider’, managers appear to follow fairly rational rules. However, the choice of actual ‘investments’ appears less aligned to traditional models (Buckley, P., Devinney, T., & Louviere, J. 2007). It was found that the desire of the owner of a company or the CEO to live in a certain area is hugely impacting location decisions although they cannot always be explained (Galbraith 1985). Furthermore, Mataloni (2011) suggest that in general groups and individuals look for ways to reduce the number of options they must consider

24 when choosing a location. Independent of the number of variables taken into account, groups and individuals prefer to narrow down the number of alternatives in consideration. This would mean, there is a certain filtering or logic reasoning process, in which for example gut feeling makes the first rough selection. This is in line with the concept of bounded rationality (H.A Simon, 1972) which is the idea that in decision-making, rationality of individuals is limited by the information they have, the

cognitive limitations of their minds, and the finite amount of time they have to make a decision. Therefore, some use decision making models to make the decision-making process more efficient.

2.7 DECISION MAKING MODELS

Against the background of the severity of the risk involved in any mistakes in site selection, the choice of the “right” evaluation method is particularly important. However, selecting the right method is not an easy task because of the large number and scope of the site criteria to be considered. It is even harder in the case of international site comparisons due to their increased complexity. Thus, at first glance, comprehensive and exhausting consideration of all the criteria mentioned so far seems to be impossible (Glatte, 2013). Nevertheless, there are models approaching a holistic method that copes with complexity. According to Mataloni (2011), location choices for new manufacturing investments in AsiaPacific are consistent with a sequential choice process in which they first select a country based on national attributes and then a region within that country based on regional attributes. The key findings from a Delphi study identify five steps in making international location decisions. First, make clear overall business strategies. Secondly, investigate in regional and country specific factors. Thirdly, identify relevant factors for each location alternative. Fourthly, evaluate the alternatives against established criteria. Fifthly, select location and implement (MacCarthy, 2003).

The strategy and target of a company influences the order in which the strategic and thus operational factors are ought to be relevant in regard of internationalization (Chung & Alcácer, 2002). Heizer and Render divide the factors influencing location decision like Mataloni (2011) in multiple categories. As mentioned earlier Heizer distinguishes between three layers of categories, country factors, region

25 factors, and local factors. This three-layer framework is suitable for all companies in general.

Nevertheless, when solely concentrating on western B2B sales and trading firms, factors like ‘raw materials available’ (see chapter 2.4 , p.15) are not applicable at all. Moreover, the earlier mentioned factors of other frameworks already cover these indicators. The three-layer model is thus mainly providing indicators of the general factors mentioned earlier in for example the GPCI (see chapter 2.3 , p.14). Traditional factors mainly have a country-level unit of analysis with models that are in many cases too simplified. This could cause an unreal location difference pallet. In which, features and behaviours within countries of the MNEs target are given. Factors having indicators on a sub-national level of analysis: regional agglomeration, cluster formation, and the “global cities” phenomenon, contain a shift in focus. Meaning an analysis specified on global city location choice, is becoming more important in the domain of IB theory (Goerzen, Asmussen, & Nielsen, 2013). The fast pace of increasing economic globalization in this world, has an emerging effect on cities becoming more interconnected. As the “global cities” phenomenon becomes more relevant and applicable, the theory stating that the nature of a global city is unique and different from regional clusters, industry clusters, and megacities, and therefore exhibits specific characteristics (Speek, 2017). (Goerzen et al. 2013) describes these characteristics to be the global interconnectedness, cosmopolitanism, and abundance of advanced producer services available in global cities and depict that they have an important impact on the location choices of firms. In line with global cities being more relevant than regions or counties the Global Power City Index (GPCI), suggests using a city-oriented decision framework which is

completely contrary to the earlier mentioned layer theories.

Additionally, some studies do not suggest using a three-layer model nor a city-oriented strategy but distinguish between quantitative factors influencing location decisions and qualitative factors influencing location decisions. In principle, this is used mainly in the manufacturing industries

because of indicators like ‘transportation costs’ (see chapter 2.4 , p.15) which influence manufacturing businesses’ success to a great extent. This does not influence sales and trading firms to large extents.

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2.8 RESEARCH QUESTION

‘Which factors in which order are considered relevant for western B2B sales and trading firms when deciding upon a subsidiary location in Asia?’ This question is aimed to be answered by a case study

research in forming a picture of a contemporary phenomenon within its real-life context. By using multiple evidence to form a description and partly an explanatory decision framework that eventually helps to picture and partly understand decision making preferences. To add value to the future of decision-making processes including the ultimate decisions upon subsidiary locations.

2.9 PROPOSITIONS

On the basis of the literature review and the statistical reduction method, one can propose several statements to be revealed in answering the main research question. To answer the question: ‘Which

factors in which order are considered relevant for western B2B sales and trading firms when deciding upon a subsidiary location in Asia?’, this paper investigates six topics within the preferences and traits

of the decision-making process. The topics tested are: Motives, Factors, Order, Process, Model, and Reasons. So, on the basis of the analysed literature, this case study research expects the propositions below to be revealed in answering the main research question.

Proposition 1 (Motives): Western B2B sales and trading firms have one or multiple of the following

motives to enter Asia: Market-seeking, Nature resource seeking, efficiency seeking, strategic asset seeking.

Proposition 2 (Factors): There are different Strategic Factors considered relevant for western B2B

sales and trading firms than for firms in general when expanding to Asia. For western B2B sales and trading firms the factors: Market, Legal and Politics, Costs, Workforce, Infrastructure, Culture , Site, Living, Business Environment and Economy, as well decision preferences are considered relevant.

27 Proposition 3 (Order): There is a certain order of relevance among the factors considered relevant for

western B2B Sales and trading firms when deciding upon a subsidiary location.

Proposition 4 (Process): Western B2B sales and trading firms acknowledge their current location

decisions are limited because of a certain bounded rationality (limited resources).

Proposition 5 (Model): Western B2B sales and trading firms acknowledge that a standardized

decisions model or framework would/did improve their decision-making process.

Proposition 6 (Reasons): The main reasons for western B2B sales and trading companies to move to a

certain location in Asia. This is expected to point to market-seeking motivations including the underlying strategic factors and operational indicators as shown in chapter 2.5.

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3. RESEARCH METHOD AND DESIGN

3.1 DESIGN

This research focusses on picturing and understanding the process of how western business to business (B2B) trading and sales firms make decisions when investing in subsidiaries in Asia. Which ultimately aims to contribute to an improved decision framework. To begin with, the aim is capturing the motives of firms of foreign direct investments (FDI). This will be done by investigating relevant underlying strategic factors which is in return done by reviewing the underlying operational indicators that are ought relevant in theory, in literature, and in experts’ opinions. Secondly, by assessing in a case study format including a survey and a semi-structured interview, which strategic factors and operational indicators need to be considered in practice. Thirdly, by understanding the structure of the process of finding a location. This includes the process of human reasoning and the possible use of structured decision-making models. Finally, this to picture the path that is followed by firms to find the optimal location. In figure 3, an overview is given of the structure of the research design that is used.

Figure 3 – Structure of the research design

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3.2 METHODOLOGY

This research is executed in a case study setting. Specifically, it is done in a mixed (qualitative and quantitative) research method (Saunders et al, 2012). There has been chosen for a case study design to capture an elaborated picture of the factors influencing location decisions. Most other and earlier researches on this topic, only make use of surveys to gather information. Other studies were able to do this because of the high number of respondents available. On the contrary, this research has to cope with the limited number of respondents available that are within the earlier defined scope of this research. Therefore, there has been chosen to do an interview and an additional survey, to capture the most realistic and broad information case by case.

This research’ aim is to describe and explain the complete decision behaviour including underlying factors. This is known as a multi-case holistic research, an empirical inquiry that investigates a contemporary phenomenon within its real-life context (Yin, 1984). The Multiple case study design is often considered more compelling in evidence. On one hand this approach is more time consuming and requires more resources. On the other hand, this approach, provides a larger picture of a complex phenomenon. The strategy is not only a literal replication, by analysing more of the same cases, but it also serves as theoretical replication comparing the individual cases in the results section. This approach contains descriptive and explanatory elements. Additionally, this approach contains triangulation because of the underlying topics both the interview and the survey aim to capture.

After literature on the topic is reviewed and structured. The case-study follows with a semi-structured interview to reveal if the expectations based on the literature review are found to be correct. The interview contains structured and unstructured questions. Secondly, a short survey will be conducted directly after the interview. The survey will contain results of 20 respondents. The first part is mainly to understand the structure of the decision process and to discover additional factors that need to be included in a potential decision-making framework. The second part mainly functions to understand to what extend the existing factors according to literature and experts, play a role in deciding upon a

30 location in practice.

This case study researches 10 individual modern (after the year 2000) cases that satisfy the needs of a decent case study (One could be enough (Dyer & Wilkins, 1991) and 4 to 10 cases is ideal

(Eisenhardt, 1989). The people interviewed are experienced decision-makers that in the last 15 years

expanded to a B2B sales and trading a subsidiary in Asia. Specifically, these people are: Chief Executive officers, location selection or site selection specialists, or consultants within the company fitting the criteria. The boundaries on who can fill in the survey and who can answer the interview questions are limited to these persons, so the most realistic answers can be gathered. By doing so, the factors ought relevant in theory are tested by the research on the topic. Literature provides a set of factors suggested, expected, or proven to be relevant. Practice teaches which of those factors are taken into account and why certain factors are taken into account including in which order they are ought relevant. Because of the limited scope of this research, the sample size is relatively limited as well. Generalizing results based on the sample to the original population of ‘Western B2B sales and trading companies’ is not the aim. This paper tries to stress that the aim is not to generalize results, nor to make hard arguments but to form a holistic picture of the case situation.

3.3 MEASURES

As mentioned, this research will be done in two parts. The first part will contain the interview which is semi-structured (see table 3 in the appendix, p.66). The interview will be held in English and will be coded afterwards. The semi-structured interview consists of open and closed questions and structured and unstructured questions. Respondents will be asked for personal and company demographics such as occupation, business title, company size, industry, and years of experience (nominal and ratio variables). The respondents will also be asked open question on how they approached the decision process. The structure of the interview leaves room for follow-up questions on significant topics. The open answers will be coded by a main-message scheme.

31 The second part of the research is the survey. For the constructs, the existing and validated Likert scales will be utilized on a 5-point scale (Armstrong.R, 1987). The respondent will be given the option to rate a construct within the categories ‘Not applicable’, ‘Slightly important’, ‘Moderately important’, ‘Very important’, and ‘Extremely important’ (0,1,2,3,4). The constructs tested, are given in the

appendix Table 4. Furthermore, the respondents are given the option to mark construct that were of extreme relevance in their decision process. This enables to stress that certain variables could have more influence than others when ranked with the same average score. All surveys will be held in English. All survey data will be analysed by Statistical Package for the Social Sciences (SPSS) (Bryman. Alan. Cramer. Duncan, 2011). So, after the EFA (see chapter 2.5 , p.20) the theoretical variables are tested in practice by a survey. The referential score used to compare the test results of the surveys, is the mean score. In addition, to analyse operational indicators, the exploratory factor score (EFS) is given. The EFS rates the tested constructs’ mean score on a scale from zero to one.

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4. RESULTS

This chapter presents the results of both research method analyses. First, the semi-structured interview analysis describes general data on the subsidiary selection process. Secondly, the survey analysis describes data about decision preferences. The decision preferences are divided into strategic factors which in return capture operational indicators. To picture all relevant strategic factors and operational indicators, both research methods are used. This chapter provides a description of the decision process including which strategic factors and operational indicators are ought relevant and in which order they are ought relevant when deciding upon a location.

4.1 SEMI-STRUCTURED INTERVIEW

The semi-structured interview mainly served as a tool to naturally reveal information about the process of selecting a subsidiary location. All company officials were asked the question that can be found in table 3 of the appendix. Further, all results of the semi-structured interview can be found in table 5 of the appendix. Table 5 also provides additional information about the companies that are interviewed. The additional information contains: company, industry, subsidiary locations, subsidiary country, company official, subsidiary size, and company size information. Furthermore, the results given below are covered by four main subjects. The results mainly cover the subjects: Process, Motivation,

Location, and Experience.

4.1.1 Decision Process results

The questions covering the subject decision process were divided into 3 topics. First the approach of going abroad. Secondly, the usage of decision frameworks. Thirdly, the pre-selection of cities or regions before analysis. See figure 4.

33 Topic / Company C1 C2 C3 C4 C5 Decision hindered by resources Enough resources available for the process No resource constraints No resource constraints

No constraints No resource constraints

Approach of going abroad Outsourced Research is the basis, Trial-Error approach with the outcome. Accountants, network, trade-agents, trial-error Advisors, trial-error Advisors, agents and local experienced managers

Most by ourselves and advise of big 4 Usage of decision framework No framework because of low perceived validity No decision frameworks used

yes No, but maybe by advisors No Form of help used Market research outsourced Trade agents, accountants, and business agreements Advisor of the big 4 consultancy firms

Consultants Accountants and local advisors Do frameworks improve decisions? No clear advantage seen in use of frameworks

Yes, when other factors as due diligence are present.

Yes Yes Maybe, unknown

Were regions and cities pre-selected before analysis? Regions and big cities were pre-selected. Greater China was pre-selected Advisors analysed this. Yes yes Topic / Company C6 C7 C8 C9 C10 Decision hindered by resources No resource constraints No resource constraints No resource constraints Yes, we should have invested more in better advisors No constraints Approach of going abroad

Trial error Not given First sustainable business than open office.

Use of network

Mainly gut feeling with some help of local agents Usage of decision framework No No use of frameworks No framework used No No use of framework Form of help used

No help used Trust advisors Mainly done by ourselves, help used: traditional accountants and consultants

accountants Local agents helped

Do frameworks improve decisions? No Maybe, unknown No probably Yes Were regions and cities pre-selected before analysis? China and southeast Asia Preselection on trading, sales, and client hubs

Yes, only when there is sustainable business it comes on our radar. No Yes, we preselected cities

34 As shown in the table above, many businesses use help and advice of traditional accountants like the big four accountancy/consultancy companies. However, they all state that most work was done by themselves in which they almost all used a trial-error approach. While doing this trial error approach only one company official felt that they had coped with resource constraints in expanding their business. In return, only one of the interviewed companies made use of a decision framework. Nevertheless, quite contradictory only two companies state decision frameworks would not have helped. Meaning most companies are open for improvements like frameworks, however do prefer to still use the trial-error approach. Further, most companies pre-selected regions or cities before making an analysis where to locate their subsidiary. This is in line with the findings of Galbraith (1985) influence of the decision maker preferences, as earlier stated in this paper (see chapter 2.6 , p.23).

4.1.2 Decision Motivation results

The next part of the semi-structured interview consisted of questions to identify motivations of moving somewhere. In figure 5, it is shown, which motivations companies had to go to Asia including the motivation to move to a certain country, region, city, or combination of cities.

35 Topic / Company C1 C2 C3 C4 C5 Motivation moving to Asia Market Growth Potential Cost, quality ratio was more favourable in greater china region, the in the west. Cover worldwide presence, in every time zone Market expansion, need of legal local presence Market growth potential, Distance to clients, Motivation for opening office in specific country Need of Improved local presence Hub, business environment and manufacturing advantages Central, great environment, infrastructure

Market Size Market Size division

Motivation for Specific cities Current Market Size Being close to improve communication, as well as infrastructure advantages. Favourable environment especially for trading companies Business environment and hub advantages

Singapore: costs, tax, infrastructure, central. Beijing: network advantage Motivation for the presence in the combination of cities in Asia Favourable Business Environment and supply chain No combination of cities No Combination

Not applicable Cover both parts of Asia Topic / Company C6 C7 C8 C9 C10 Motivation moving to Asia Growth: Increasing business and service Expansion for local presence

Market Size, local presence, supply chain Manufacturing, and market potential Market expansion & positioning Motivation for opening office in specific country Central location to serve both Asian markets

Singapore: south east Asia. Hong Kong and Shanghai China. serving markets

Better serve the clients and the demand in local markets.

Market potential Market & Market potential Motivation for Specific cities Great infrastructure, central to clients, trade hub advantages, safe working environment, attractive for expats. Singapore: Tax, talent, legislation, financial, technological environment. Shanghai: sales close to customer and clients. Hong Kong: trading hub, infrastructure, financial and technological sector Sales, manufacturing and hub advantages, local clients, and business network Close to manufacturing, business network, and local sales, trade fairs Hub advantages, financial & commercial Motivation for the presence in the combination of cities in Asia

Covering the Asian market, central location, trade hubs, Covering the whole market in Asia Market Growth Potential, distance to business network

Not applicable To serve all clients over the world

36 According to the semi-structured interviews conducted, the main motivation to move to Asia in general were related to the operational indicator ‘market growth potential’. As well, the need of presence in local markets was identified as a key in expanding the business to Asia. The motivation for opening a business in a certain country in Asia was quite similar to the motivation to move to Asia in general. Companies identified the need of improving local presence to better serve local- and greater markets. In return, the favourable business environment, hub advantages, and smaller distance to general business partners were motives to locate in specific cities. In addition, the question why businesses settled in a specific combination of cities could not be answered by all companies. Not all companies were present in multiple cities. The companies that were present in multiple cities mainly identified it improved complete market coverage.

4.1.3 Alternative Location results

The third subject of the semi-structured interview focussed on the alternatives considered during the process of choosing a location. In figure 6, four topics serve as framework to better picture the process companies go through when expanding.

37 Figure 6 – Alternative Location results

Topic / Company C1 C2 C3 C4 C5 Current locations Shanghai, Guangzhou, Beijing

Hong Kong Singapore Shanghai Beijing, Singapore

Alternative locations considered Alternative: ‘western’ Hong Kong and Singapore Greater China among others Shanghai, Dongguan China, Hong Kong and Kuala Lumpur Singapore, Beijing, Hong Kong No alternatives considered Reasons behind not Choosing the Alternatives Smaller market potential, smaller local presence need Infrastructure, business environment, costs were less favourable in the alternative options No need, less central, less favourable in work and tax conditions Business environment Existing network advantages Location Changes made No Changes made in location No changes made in location

No Changes Not applicable No change made, but if we change, we go to Shanghai. Topic / Company C6 C7 C8 C9 C10 Current locations Shanghai, Singapore Singapore, Shanghai, Hong Kong Hong Kong, Shanghai, Tokyo, Taipei Shenzhen Shanghai Alternative locations considered Beijing and Hong Kong. Alternatives are among others Beijing and Shenzhen. Singapore as alternative

Hong Kong Beijing

Reasons behind not Choosing the Alternatives We are less dependent on Tax or Governmental conditions Other offices are chosen in the end and will be opened.

Less turnover potential

Too far away from employees, manufacturing , and fairs

Too much focus on government

Location Changes made

No changes No, changes but additional offices opened No changes made only additions No changes made No changes Source: Author

38 Most companies moved to the countries Singapore or China. In which most companies that moved to China choose for Shanghai or Hong Kong. Most companies considered the same alternatives: Hong Kong, Singapore, and Beijing. The reasons the companies gave for not choosing to move to the alternative locations were very similar to each other. The reasons given for not choosing the alternatives were: less central, more costs/tax, and less returns. Further, for Beijing specifically, in many cases Beijing was not chosen because the business environment in Beijing is too much focussed on governmental oriented institutions. As companies explained their motivations for not choosing their alternatives, they indirectly also stated the most relevant operational indicators in choosing a location. ‘Being central in the market’, ‘having less costs or taxes’, and ‘high returns’ are accordingly to the interview the apparent most relevant key indicators in the process of choosing a location.

4.1.4 Decision Experience results

Finally, the last part of the semi-structured interview created the opportunity for company officials to share their experience. In figure 7, a structured overview is given of the biggest challenges companies coped with while expanding their business. Figure 7, as well gives an overview of advices for future businesses undergoing the same process.

39 Figure 7 – Experience results

Topic / Company C1 C2 C3 C4 C5 Main Advice for future businesses Situate close to customer, focus on long-term relationships. Employ right people, learn from the Asian systems Use network, and known businesses, do not use unknown advisors / accountants. Invest in long-term people to work with. Use help of experienced and good advisors. Cultural difference in social life and business life

Understand the workload, legislation, culture, and locals.

Biggest Challenges in Expanding the business Difference in Culture, finding right people. Overcoming cultural differences, behavioural expectations. Further, high costs. No big challenges everything went smooth. Use of internets and media Cultural differences Topic / Company C6 C7 C8 C9 C10 Main Advice for future businesses Focus on relationship and pay great attention to culture and way of doing business

Use help of trust offices, understand cultural differences Invest in people, talent, long-term focus Make use of networks and traditional advisors and accountants Yes, we preselected cities Biggest Challenges in Expanding the business Finding and keeping qualified personnel Establishing long term relationships. And commodity trade moments Smooth expansion Creating same culture within multiple offices situated in multiple cultures Culture, trust, legal and financial systems

Take it easy, have patience, and use experienced consultants or accountants, don’t move to reduce costs

Source: Author

As shown in figure 7, the biggest challenge companies had to cope with, was identified as coping with the cultural difference between Western and Asian business. Therefore, the main advice companies gave to future businesses can be generally described in two parts. First, invest in the cultural

differences. This means: invest in long term relationships with the business environment, this counts for partners, clients, and employees. Secondly, invest in good advisors, this can be a persons’ network, traditional consultants, or agents.