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J

Ö N K Ö P I N G

I

N T E R N A T I O N A L

B

U S I N E S S

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C H O O L JÖNKÖPING UNIVERSITY

The Swedish Fashion industr y

goes abroad

A Case study of Frank Dandy Superwear AB

Paper within strategy

Author: Gasparini, Alexander

Haghighi, Ali

Lantz, David

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Acknowledgments

The authors want to thank the following persons that have made this thesis possible:

Mr. Patrick Zenno and Mr. Mattias Edenholm from Frank Dandy Superwear AB for all their help and the fact that they were willing to take part in the interviews.

Also our tutor Mr. Börje Boers, for his guidance and support throughout the process.

Furthermore we would like to thank everyone in our thesis group that has given us helpful feed-back and support the whole semester.

Alexander Gasparini Ali Haghighi David Lantz

Jönköping International Business School 2008-05-28

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Bachelor’s Thesis in Business and Administration

Title: The Swedish Fashion industry goes abroad

Case study of Frank Dandy Superwear AB Author: Gasparini, Alexander

Haghighi, Ali

Lantz, David

Tutor: Boers, Börje Date: May 2008

Subject terms: internationalization, network, Swedish fashion industry, Frank Dandy

Abstract

Purpose: The purpose of this thesis is to describe and to understand how a company within Swedish fashion industry, namely Frank Dandy, enters foreign mar-kets.

Background: The Swedish fashion industry, defined as SMEs who have produced

world-wide recognized brands created by designers and visionaries, has got a lot of coverage in media recently for its success abroad. Theories concerning in-ternationalization have previously not been applied to examine the latest development in the Swedish fashion industry or companies within it, such as Frank Dandy. A gap exists because previous studies have generalized re-tailers, textile industry, fashion houses, distributors and so on as fashion in-dustry. When in reality there is a big difference between these units, and what media refer to as the Swedish fashion industry.

Method: For this study, a qualitative method has been chosen and the abductive ap-proach of systematic combing has been applied when creating a case study concerning Frank Dandy’s internationalization process. The abductive ap-proach enables the authors to successively modify their framework as new empirical findings arise and thus match it with the best theory suited to give insight to how Frank Dandy enters foreign markets.

Conclusion: The purpose of this study has been fulfilled and the authors can conclude

that Frank Dandy enters foreign markets through agents and distributors, as predicted by the Uppsala model. However, distributors are preferred over agents since they put less strain on the organization and finally that distribu-tors and agents are handpicked from an extensive international network.

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Kandidatuppsats i Företagsekonomi

Titel: Den svenska modeindustrin går utomlands

En casestudy om Frank Dandy Superwear AB Författare: Gasparini, Alexander

Haghighi, Ali

Lantz, David

Handledare: Boers, Börje Datum: Maj 2008

Ämnesord: internationalisering, nätverk, den svenska modeindustrin, Frank Dandy

Sammanfattning

Syfte: Syftet med denna uppsats är att förklara och att förstå hur ett företag inom den svenska mode industrin, nämligen Frank Dandy, tar sig in på utländska marknader.

Bakgrund: Den svenska modeindustrin, definierad så som SMEs som har producerat internationellt erkända varumärken skapade av designers och visionärer, har fått mycket uppmärksamhet i media den senaste tiden för sina framgångar utomlands. Teorier gällande internationalisering har tidigare inte applicerats med syfte att undersöka den senaste utvecklingen inom den svenska mode-industrin eller på företag inom den, så som Frank Dandy. Ett gap existerar då tidigare studier har generaliserat återförsäljare, textilindustri, modehus, distributör och så vidare som modeindustri. I verkligheten är skillnaden stor mellan dem enheterna och vad media refererar till som den svenska mode-industrin.

Metod: För denna studie har en kvalitative metod valts och det abductiva tillväga-gångssättet systematic combing har applicerats för att skapa ett case om Frank Dandys internationaliseringsprocess. Det abductiva tillvägagångssät-tet har möjliggjort för författarna att successivt modifiera ramverket då nya empiri tillkommer för att sålunda matcha den med de mest lämpade teori-erna för att på så sätt ge insikt till hur Frank Dandy tar sig in på utländska marknader.

Slutsats: Syftet med denna uppsats har uppfyllts och författarna kan dra slutsatsen att Frank Dandy tar sig in på utländska marknader genom agenter och dis-tributörer, som förutspått av Uppsala modellen. Dock föredras distributörer över agenter då de är mindre påfrestande på organisationen och slutligen, distributörer och agenter handplockas från ett omfattande internationellt nätverk.

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Table of Contents

1

Introduction ... 1

1.1 Introduction and Background ...1

1.2 Problem discussion ...2 1.3 Purpose ...3

2

Method ... 4

2.1 Research Approach ...4 2.2 Research Method ...5 2.3 Case study...6

2.4 Primary and secondary data ...7

2.5 Interview technique...8

2.6 Reliability, Validity and Trustworthiness ...9

2.7 Data collection ...10

2.8 The process of analysis ...11

3

Theoretical Framework... 12

3.1 The Distribution Channel Literature ...12

3.2 The Internationalization Literature ...12

3.2.1 The Uppsala Model ...13

3.3 Entry Modes ...13

3.3.1 Indirect export...14

3.3.2 Direct export (Transferring) ...15

3.3.3 Foreign Direct Investment (FDI) ...15

3.4 The Network Literature ...16

3.5 Summary of the theoretical framework...18

4

Empirical findings... 20

4.1 A Case Study of Frank Dandy Superwear AB...20

4.1.1 Background...20

4.1.2 Frank Dandy Superwear goes abroad ...21

4.1.3 New CEO, new strategy...23

5

Analysis... 25

5.1 The Uppsala Model and Frank Dandy’s Mode of Entry ...25

5.2 Frank Dandy and the International Network...27

6

Conclusion ... 29

7

Further Discussions... 30

7.1 Contributions ...30 7.2 Limitations...31 7.3 Further research...31

8

References... 33

Appendix ... 37

Exhibit 1 ...37 Exhibit 2 ...37 Exhibit 3 ...38

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Table of Figures

Figure 1, Swedish Export of Clothing... 1

Figure 2, Systematic combining; an abductive to case research... 5

Figure 3, Primary and secondary data... 8

Figure 4, Entry modes. ...14

Figure 5, The actors, resources and activities model...17

Figure 6, Frank Dandy’s network of distributors and agents...22

Table of Tables

Table 1, List of interviewees ...11

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1 Introduction

1.1

Introduction and Background

Under the subject of internationalization and market entry many scholars, Cherington (1920), Grether (1937), Johansson & Wiedersheim-Paul (1975), among others, have tried to answer two major questions, why and how firms enter foreign markets.

As early as in 1920, Cherington discussed the subject of how to sell and transport goods to foreign markets within the field of distribution channels for literature. However, both early and later articles written in this field put less emphasis on how to enter foreign markets and more on how different parties within a distribution channel interact with one another and which party is most likely to become most powerful (Revzan, 1961; Grether, 1937; Balder-ston, 1964).

Others have set out to answer the second question of why firms go abroad and Root (1994) stated that there are many reasons for manufacturing and service firms to enter in-ternational markets. Some go abroad since the domestic market has stagnated or the fact that a foreign market is growing faster. Another reason for a firm to expand internationally is to follow its customers. That is often the case of suppliers to large industrial companies. A typical example of this is suppliers to the Japanese auto industry who followed their cus-tomers into new markets around the world. A fourth reason is the so-called bandwagon ef-fect which occurs when a domestic firm enters a foreign market to match the activity of a domestic competitor or when a domestic firm enters a new market due to increased com-petition in the domestic market brought on by foreign firms entering the market. Finally, firms enter foreign markets in order to increase sales volume and thus achieving economies of scale. (Root, 1994)

A Swedish industry in particular which got a lot of coverage in media recently for its suc-cess abroad is the Swedish clothing and fashion industry. Chanel 4 wrote on their website, “New record for fashion export” (Ekonominyheterna, 2008), Dagens Nyheter, a major Swedish newspaper, published an article with the headline, “New record for Sweden’s ex-port of clothing” (Gripenberg, 2008) and in E24, an online financial newspaper, one could read the article “Good times for Swedish fashion” (Magnergård, 2007).

5.8 6.1 6.6 7 7.2 7.8 8.9 9.2 0 1 2 3 4 5 6 7 8 9 10 2000 2001 2002 2003 2004 2005 2006 2007 SE K B illi on

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The reason for this media frenzy was a report published by TEKO, the Swedish Textile and Clothing Industries' Association, in connection to Stockholm fashion week and it showed that the value of clothing export had, in 2007, for the first time exceeded the ex-port of mine oar in monetary terms, 9,2 billion SEK respectively 8.5 Billion SEK. TEKO’s report also shows that the Swedish clothing and fashion industry has experienced a con-stantly positive trend throughout the last seven years. (TEKO, 2008)

Before discussing this subject any further, the authors will define the Swedish fashion in-dustry in order to clarify who they are and what they are. TEKO and the Swedish media have referred to Swedish fashion industry as individual actors, then referring to famous brands such as Filippa K, Acne, Frank Dandy Superwear, J.Lindeberg and Nudie, and not retail chains such as H&M, KappAhl and Lindex. On the other hand, when looking at pre-vious studies on the subject of internationalization and market entry, the authors have found the fashion industry to be defined and referred to as either the textile industry (Berra, Piatti and Vitali, 1994) or fashion retailers (Doherty and Alexander, 2004).

The authors have chosen to define the Swedish fashion industry in appliance with media’s and industry associations’ definition, simply because it is more closely related to recent de-velopment within the industry. When taking a closer look at these brands and the compa-nies who created them, the majority of them consist of SMEs, small and medium sized en-terprises, as defined within the European Union; they have less than 250 employees and an annual turnover equal to less than €50 million (The Commission of European Communi-ties, 2003). Based on this the Swedish clothing and fashion industry can be defined as SMEs who have created worldwide recognized brands.

“Today’s fashion companies are not run by big industrial organizations but are rather SMEs created by designers and visionaries” (Mattias Edenholm, personal communication, 2008-05-01)

A company that fits this profile is Frank Dandy Superwear AB, referred as “The unknown underwear kings” by Björk (2008). Established in 2000; it employs 15 employees, is present in 13 countries around the world and generated an annual turnover of 39 million SEK in the fiscal year 2007 (see appendix, Exhibit 3).

1.2

Problem discussion

From TEKO’s report, as mentioned in the previous section, one can draw the conclusion that the Swedish fashion industry has gone abroad. However, no previous studies have been found on the subject of how they have gone abroad, at least not when applying the definition of the Swedish fashion industry used by the authors of this paper.

In a straighter approach, when compared to what the authors mentioned in the previous section, to answer the question how firms go about entering foreign markets, Johanson & Wiedersheim-Paul developed the Uppsala Model, in which they present the internationali-zation process of a firm as a set of four stages. The stages are; no regular export activity, export via independent representative, establishment of overseas sales subsidiary and estab-lishment of foreign production/manufacturing subsidiary (Johansson & Wiedersheim-Paul, 1975). The Uppsala model falls under what is known as Internationalization literature, which was very popular in the 1970s and 1980s. However, in recent years, another area of study has tried to answer the very same question and that is the area of network literature (Ford, 2002).

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In comparison to internationalization literature, which has the perspective of a single firm, network literature sees a firm as part of a relationship web of firms and thus it aims at studying the relationships between firms in a network. “…the network approach sees in-ternationalization in terms of a company’s existing home or overseas relationships, those that it may have to establish to operate in a new market (and perhaps break elsewhere) and the actions of both the company itself and others around it.” (Ford, 2002, pp. 229)

There is a gap between the authors´ definition of the Swedish fashion industry and the definition used by academics in previous studies. The theories mentioned above have not been applied to examine the latest development in the Swedish fashion industry and com-panies within it, such as Frank Dandy Superwear. Furthermore, no connection has been found between theories and reality, when referring to the author’s definition of fashion in-dustry as reality. The gap exists because previous studies have generalized retailers, textile industry, fashion houses, distributors and so on as fashion industry. When in reality there is a big difference between these units, and the authors of this thesis will shed light on the Swedish fashion industry, as defined by the authors, and namely Frank Dandy Superwear.

1.3

Purpose

The purpose of this thesis is to describe and to understand how a company within Swedish fashion industry, namely Frank Dandy, enters foreign markets. Furthermore, the following question will arise;

• How does a company within the fashion industry, namely Frank Dandy Superwear AB, choose between different entry modes when entering foreign markets?

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2 Method

When conducting an academic research it is important to know how to implement theory and how to gather empirical data and how to analyze it. The authors have chosen methods and approaches that they think fis in with the research and objective.

2.1

Research Approach

The three most common research approaches used when conducting academic research are induction, deduction, and abduction (Johnson & Onwuegbuzie, 2004). First, a deductive approach is the process where the researcher can arrive at a rational conclusion by logical generalizations of a specific fact (Sekaran, 2003). This implies that the researcher uses a theory and hypothesis and on that basis creates a research strategy to test that hypothesis (Saunders, Lewis and Thornhill, 2000). The deductive reasoning is sometimes called a "top-down" approach, going from a more general to a more specific level. This means that the research obtains specific data from a general theory, it is narrower in nature and it is con-cerned with testing or confirming hypotheses (Saunders et. al. 2000). The deductive ap-proach is often used in traditionally scientific research since it is conducted to develop a re-search that can test the theory, while the inductive approach is more used to collect data and develop a theory as a result of the data gathered (Saunders et. al. 2000). Since the au-thors do not aim at testing any specific theory, this approach is believed to be to narrow and thus, is not a suitable approach for this thesis.

Second, through an inductive approach the researcher can understand why a certain phe-nomenon will occur, rather than describing what is happening, moving from specific ob-servations to broader generalizations and theories, and on this basis arrive at conclusions (Sekaran, 2003). If the topic of the research is new and there is little existing literature, it is more suitable to use an inductive approach. By its nature, the inductive reasoning is unlim-ited and exploratory, especially at the beginning of the research process (Saunders et. al. 2000).

With an inductive approach, the research starts with specific observations. Furthermore, the patterns will form and the researcher can formulate a hypothesis that they can explore, and finally emerge some general conclusions or theories (Saunders et. al. 2000). This ap-proach is suitable for understanding why a phenomenon will occur and not how a phe-nomenon occurs thus it is not suitable and does not fit the purpose of this thesis which is to describe and to understand how Frank Dandy Superwear enters foreign markets.

Thirdly, abduction is believed to be a logical reasoning with emphasis on discovery rather than on justification. It can also be seen as the search for how scientific hypothesis come to be rather than testing whether they are true or false (Miller & Fredericks, 2003). The con-cept of abduction was first introduced by Peirce in 1903. According to Shelley’s (1996) in-terpretation of Peirce’s view of how a scientific investigation should be conducted it should include the following three stages: “(1) observation of an anomaly, (2) abduction of hy-potheses for the purpose of explaining the anomaly, inductive testing of the hyhy-potheses in experiments, and (3) deductive confirmation that the selected hypothesis does predict the original anomaly (which is thereafter no longer an anomaly.” (Shelley, 1996 pp. 279)

Furthermore, abduction can also be seen as something completely different and thus not related to neither an inductive, nor a deductive research approach, as discussed by Dubois and Gadde (2002). They present a new approach for case study research, based on

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abduc-tion, called systematic combining and argue that an abductive approach is the best ap-proach if the objective is to discover new things. It is not suitable for testing existing theo-rie but rather for developing new theotheo-ries and concepts. However, they stress refinement of existing theories over development of new theories. Through systematic combining, empirical field work, theoretical framework and case analysis evolve simultaneously. Sys-tematic combining can be divided into two processes. First, matching reality with theory, second, directing and redirecting which implies going back and forth between theory and empirical findings in order fully to understand the observed anormality, thus the anomaly no longer is an anomaly. These processes are affected by, and affect, the gradual develop-ment of the case, what is going on in reality, the analytical framework and available theo-ries. (Dubois and Gadde, 2002)

Figure 2, Systematic combining; an abductive to case research by Dubois and Gadde, 2002, p 555

The authors of this thesis find abduction, and especially how it is presented by Dubois and Gadde (2002) in their systematic combing approach, to be the best and most suitable re-search approach since the objective of this thesis is to describe and to understand how Frank Dandy Superwear enters foreign markets. This is due to the fact that an approach based on abduction enables researches to successively modify their framework as new em-pirical findings arise and due to a greater insight into theory acquired throughout the proc-ess. According to Dubois and Gadde (2002) “This approach creates fruitful cross-fertilization where new combinations are developed through a mixture of established theo-retical models and new concepts derived from the confrontation with reality.” (Dubois and Gadde, 2002. p. 559)

2.2 Research Method

There are different methods of research that can be applied when performing a study; qualitative and quantitative methods are the most common ones (Bryman, 2002). Which method that is most suitable for the research at hand depends on the research problem and its purpose (Jankowicz, 1991).

Quantitative data is particularly useful when the authors wish to discover how common something is and try to generalize a specific theory (Bryman, 2002). When performing a quantitative study, the research should have a high level of reliability and validity, so that

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the research and the conclusions can be reproduced. Generally, for quantitative research methods are questionnaires and structured interviews (Bryman, 2002). Since the authors do not aim at generalizing theories or having numerous companies to investigate, the quantita-tive method is not suitable for this thesis.

Qualitative data is particularly useful when the authors wish to find out why a certain the-ory is used and this helps them to a more in-depth analysis. Qualitative research is flexible and used to generate information that is very detailed and with emphasis on developing a better understanding of the subject (Bryman, 2002). A qualitative method emphasis under-standing and focus on the respondent’s point of view (Ghauri, Gronhaug and Kristians-lund, 1995). Research problems that focus on recognizing and understanding a phenome-non about something, which little is known, is typical examples of problems that requires qualitative research (Ghauri, et. al.. 1995).

Since the purpose of the thesis is to create a deeper understanding of how Frank Dandy enters foreign markets, the authors believe that the best method to conduct the research is by qualitative research. By means of gathering information to a case study and interviewing people, with the needed knowledge of the subject, which will enable the authors to a more in-depth analysis of the phenomenon.

2.3 Case study

Case studies are a more in-depth and contextual analyses of specific situations in organiza-tions, where the nature and definition of the problem happens to be the same as experi-enced in the current situation (Sekaran, 2003). The main focus is on seeking insight rather than testing existing hypothesis, the features and characteristics of the object studied will be investigated (Ghauri, et. al.. 1995).

When trying to answer “how” and “why” questions and when the researcher has little con-trol over events and current real-life phenomenon, as in this thesis, the researcher should conduct a case study (Yin, 1994). It should also be noted that case studies usually provide qualitative rather than quantitative data for analysis and interpretation (Sekaran, 2003). Since the authors have chosen to conduct qualitative research and the purpose is to get a greater and deeper understanding of the phenomenon of how Frank Dandy enters foreign markets, the preferable tool to collect data is by a case study. Since the authors are trying to answer “how” questions according to the purpose, a case study method is favored as a re-search strategy.

According to Ghauri, et. al..(1995) it is argued that case study is the preferred method to be used when studying a single organization and indentify factors in specific aspects of behav-ior. The authors have chosen to examine one organization, namely Frank Dandy Superwear AB, and how they enter foreign markets, and therefore case study will be the optimal method to conduct.

Yin (1994) suggests that case study is the preferred method if the researcher wants to study a situation or organization that is unique in its nature. The researcher expects to learn something new and important about the phenomenon (Yin, 1994).

According to Williamson (2002), case study research is a useful tool to investigate a phe-nomenon in its natural surroundings, which on the other hand helps to achieve a greater

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understanding in its context. These justifications of case study defends the authors choice of conducting a case study, since the purpose of the thesis is to get a greater understanding of how Frank Dandy Superwear enters foreign markets and gets a more in-depth insight into the phenomenon, the case study method is the proper choice of collecting empirical data.

The researcher needs to collect data personally and be fully aware of the research problem and purpose, not only to be able to ask relevant questions, but also to have the ability to lis-ten and interpret the answers given by the interviewee (Ghauri et. al., 1995).

Researchers should be able to read between the lines and understand not only what is said but also what is meant. The researcher should be careful not to let their biases influence the interpenetration, particularly when conducting single case studies, as the researcher has no other case to compare with (Ghauri et. al., 1995).

The presentation of a case study should be interesting and convincing, just like a “story” (Yin, 1994) According to Yin the case report should be composed in an engaging manner and attract the reader to continue reading (Yin, 1994). Furthermore, the case study should contain sufficient evidence to support the data and findings, and the secondary data that are not important for the understanding and analysis process should be left out from the “story” (Williamson, 2002). Due to the great volume of data collected, the authors have chosen to present the findings from the case by writing down a “flowing story” that is in-teresting and convincing. The authors will include important facts from the interviews and only include the most vital parts from the secondary data findings

2.4 Primary and secondary data

When conducting a research, the authors have the choice of collecting the empirical data either from primary and/or secondary data (Ghauri et. al., 1995). When collecting secon-dary data, the information has been gathered by somebody else for another purpose, which means that you collect it second hand. This can be done by looking at web-sites, already conducted interviews, newspapers, information brochures sent out from companies and so on (Saunders et. al.. 2006). Ghauri et. al. (1995) argues that the greatest benefit from secon-dary data is the enormous savings in both time and money. They also point out that one advantage is that the secondary data can suggest and recommend certain suitable methods in order to solve problems. Disadvantages you get by using secondary data are that the data is collected for a different study with perhaps a different objective and purpose than the one of the authors (Saunders et. al.. 2006). The units of measurement may also be different (Ghauri et. al., 1995).

If secondary data for a study is not available, then the data must be collected directly from the source. The data collected in this way is called primary data (Saunders et. al., 2006). The primary data collection consists of tools and activities, such as observations, surveys and in-terviews. The interviews can be made on the phone, through e-mail or personal communi-cation as can be seen in the following figure:

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Figure 3, Primary and secondary data, data Collection by Ghauri et. al., (1995 p.57)

However, when collecting primary data, time and money is not efficiently used, and it is of-ten used to collect data that usually is not available to collect in other ways. If time and money is limited then it must be considered if a survey or interview is the best choice (Mar-schan-Piekkari and Welch, 2004).

The authors of this thesis have combined both the collection of primary and secondary data. The secondary data collected have been from websites, mainly Frank Dandy’s, infor-mation material from TEKO – Svenska Textil & Modeföretag, Frank Dandy’s annual re-port and different articles from newspapers regarding the fashion industry going abroad. Furthermore the authors choose to conduct interviews in order to collect primary data. Just looking at secondary data would not give the authors the deeper understanding that is needed to follow the purpose of the thesis. To gather more in-depth information regarding Frank Dandy, and how they enter foreign markets, interviews have been conducted with key-personnel within the organization. The advantage of in-depth interviews is that the au-thor can get a more truthful and clear overview of the phenomenon (Ghauri et. al., 1995).

2.5 Interview technique

As suggested by Ghauri et. al. (1995), interviews referred to as face to face verbal exchange, where the interviewers attempt to obtain information and understanding from an inter-viewee

There are three frequently used techniques when conducting interviews, structured, un-structured or semi un-structured interviews (Lantz, 1993). A un-structured interview implies a procedure where the interviewer has predetermined questions and lets the interviewee an-swer. With this interview technique it is easier to compare different people’s opinions and answers (Lantz, 1993). When conducting unstructured interviews the interviewer gives the correspondent full liberty to discuss the specific issue (Ghauri et. al., 1995). Furthermore, semi structured interviews are more open to discussion and encourage interplay between the interviewee and the interviewer. Semi-structured interviews can be more in-depth and the greatest advantage with this kind of interview is the possibility to gather accurate in-formation to give a clear picture of a respondent’s opinion (Lantz, 1993). The disadvantage is that it requires a skilled and cautious interviewer who has great knowledge about the sub-ject and research problem (Ghauri et. al., 1995). A semi-structured interview guide should consist of a list of some specific areas of interest that are under investigation (Bryman 2002). Semi-structured interviews are conducted with a rather open structure that allow for conversational and two-way communication. Some of the questions are prepared in ad-vance but not all. The majority of questions are made up during the interview, allowing both the interviewer and the interviewee, the flexibility to explore for details or discuss

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is-sues regarding the subject. The questions are quite open which allows the interview to be more relaxed and chatty (Bryman 2002).

Since comparable answers are not important in this thesis and the purpose is to get a deeper understanding of a phenomenon, the authors have chosen to exercise a semi struc-tured interview technique. Semi-strucstruc-tured interview is the most suitable technique since it will help the authors to obtain crucial information that will answer and describe the prob-lem questions. Conducting an interview where there is interaction between the interviewer and the interviewee will help the researchers to find qualitative data and pursue the chosen method of this thesis.

2.6 Reliability, Validity and Trustworthiness

Validity is a matter that is needed to take into consideration regardless if you make a quali-tative or quantiquali-tative research, compared to the reliability which will be different depending on the approach you choose (Svenning, 2003).

Validity is how valid a finding is and how true it is (Ghauri et. al., 1995). Validity is also de-fined by how well the empirical findings fit the theoretical framework. Further, the col-lected data must be in line with the purpose of the research and also the real world so that the researcher can interpret the findings to useful knowledge (Svenning, 2003).

The reliability is defined as how reliable and trustworthy the information, found within the empirical findings, is. This is more a matter of consideration when conducting a quantita-tive research, where more generalizations are made, since the qualitaquantita-tive are more an exam-ple provider. Further it is discussed that the reliability is affected by many factors, such as the influence of the interviewer, environment and misunderstandings for example (Sven-ning, 2003).

When conducting a qualitative study, as the authors aim to do, Sandelowski (1993) argues that validity is not a matter of neither truth nor value but rather of trustworthiness. Thus, a paper is consider to be trustworthy if the reader is able to back track the researchers steep and verify what has been done (Sandelowski,1993). Rolfe (2006) interpretation of San-delowski (1986); “A study is trustworthy if and only if the reader of the research report judges it to be so.” (Rolfe, 2006, p. 305)

Furthermore, according to Lincoln and Guba (1985) trustworthiness can be broken down into four sub criteria; credibility, transferability, dependability and conformability. Credibil-ity is fulfilled if the research is believed to be a credible interpretation of the original data. Transferability takes into consideration to which extent empirical findings can be trans-ferred and used in another project. Dependability is a measurement of quality and consid-ers how data is processed and analyzed. Finally, conformability is a measurement of how much the empirical findings are a product of the objective of the study and not a biased re-sult produced by the researchers (Lincoln and Guba, 1985).

The authors of this thesis are aware of the issues of validity, reliability and above all trust-worthiness. By providing readers with insight to how this study was conducted the readers will be able to backtrack the process and in addition, through constant evaluation by fellow students the authors aim at achieving trustworthiness, thus taking Sandelowski’s thoughts concerning trustworthiness into consideration. The authors are also well aware of the fact that due to the narrow scope of this research Lincoln’s and Guba’s (1985) criteria of

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trans-ferability cannot be fulfilled since it will be almost impossible for anyone to use the empiri-cal findings in this thesis in another project.

Furthermore, this study might be considered to have a low level of conformability due to the fact that most data collected to the case of Frank Dandy were acquired through inter-views with employees of Frank Dandy where the authors were very much in control and thus the empirical findings might be considered to be biased. By using additional sources such as newspaper articles and annual reports the authors aim at increasing the level of conformability.

2.7 Data collection

Data collection in case study is crucial since the whole study depends on it. The authors will conduct an empirical case study of Frank Dandy Superwear, who already have started their internationalization and have entered different foreign markets. The empirical study will be based on interviews and information about the company found on internet, infor-mation from TEKO and Frank Dandy’s annual report together with articles written about Frank Dandy Superwear. Through this process, the authors will be able to reach the objec-tive of acquiring the knowledge of how Frank Dandy Superwear goes about when entering new foreign markets, and thus answering the research questions and purpose raised by the authors.

The authors chose Frank Dandy because they fitted the profile of a typical company within the Swedish fashion industry, as defined in the problem discussion. Dandy Superwear AB was established in 2000, it employs 15 employees, it is present in 13 countries around the world and it generated an annual turnover of 39 million SEK in the fiscal year 2007 (see appendix, Exhibit 3). This is a company that was founded in and is still located in Jönköping, which makes it very attractive for further investigations from a practical point of view since it enables the authors to establish a close relationship with the company due to its geographical closeness.

The first contact was made by telephone and then further on through face to face inter-views with people from the firm, with knowledge in the specific fields that are relevant to this study.. The choice of the persons to interview was made after a discussion with Mattias Edenholm (personal communication 2008-04-01) at a fashion show in Jönköping. The per-sons that suited this thesis best were Mattias himself, the head of export and sales, and Pa-trik Zenno, the head of Marketing. Both with a very good insight in the internationalization process of Frank Dandy and they have been at the company since the very beginning. Both of them together with the CEO are the ones responsible for the establishment of Frank Dandy in foreign markets. With these persons covering the fields of interest, relevant to this thesis, the authors are able to collect primary data in order to fulfill the purpose of this thesis.

Unfortunately, the CEO could not participate in the research due to difficulties with sched-uling. However, the authors chose to interview Mattias Edenholm twice due to the re-search’s approach of abduction and systematic combining, where it enables the authors to modify their framework as new empirical findings arise and due to a greater insight to the-ory acquired throughout the process. The reason why Mattias was chosen for the second interview is because he is the sales and export manager, hence having a great knowledge about Frank Dandy’s operation overseas, and due to availability.

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Name: Date: Place: Length:

Mattias Edenholm 2008-05-01 JIBS 1 h 20 min

Patrik Zenno 2008-05-09 JIBS 1 h min

Mattias Edenholm 2008-05-16 JIBS 35 min

Table 1, List of interviewees

When conducting the case, the authors will code the interviews as follow: Mattias Eden-holm, 2008-05-01 as M.E.1, Patrik Zenno, 2008-05-09 as P.Z and Mattias EdenEden-holm, 2008-05-16 as M.E.2. Thus shows which information and findings came from which inter-view.

The interviews were located at JIBS facilities, in one of the seminar rooms on the fourth floor. All three of the authors were present at the interviews and provided the interviewees with beverages and snacks throughout the sessions. The authors conducted the interviews in Swedish, due to simplicity of using native tongue both for the interviewers and inter-viewees. The authors decided not only to type the answers on paper, but also to record the interview on tape, since there is a possibility that the authors may overlook some informa-tion. By recording, the authors can be certain that they have covered the whole interview and that they can go back and listen to the information found when analyzing the empirical findings. The author’s translation from Swedish to English has been sent to the correspon-dents and has been accepted so no misunderstandings or no misquotations can occur (see exhibit 5 and 6 for more information about the interviews).

2.8 The process of analysis

According to systematic combining, as discussed in section 2.1, it implies that the theoreti-cal framework and the case analysis evolve simultaneously. By matching reality with theory, thus going back and forth between theory and empirical findings and throughout the proc-ess the case and the analysis of the case evolve simultaneously. When all of the needed in-formation has been obtained concerning a specific phenomenon, namely how Frank Dandy enters foreign markets, and when theories have been collected to answer how these phenomena occur the purpose has been for filled. (Dubois and Gadde, 2002)

When put into practice, the authors of this thesis will connect theories of internationaliza-tion to theories of network to form a theoretical framework and build the case of Frank Dandy Superwear simultaneously. By comparing reality, then referring to the case of Frank Dandy, with the theoretical framework and then analyzing how Frank Dandy enters foreign markets, the purpose has been fulfilled.

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3 Theoretical Framework

This chapter will discuss the theoretical framework on which the study will be based. A selection of theories concerning different styles and views of how to enter new markets will be presented and described in order to elaborate empirical findings. Since this thesis is based on an abductive approach, the theoretical framework and the empirical findings, as the case of Frank Dandy, evolves simultaneously. This enables the authors to direct and redirect the theoretical framework towards a theory that is well suited to describe and further ana-lyze the empirical findings.

3.1

The Distribution Channel Literature

First out is the distribution channel literature, which is the oldest of the three literatures presented and it discusses the fundamentals of the international business process. The dis-tribution channel view is focused on the different functions performed by the different companies and the phenomenon concerning handling, assembling, financing, selling and transporting by many things (Cherington, 1920). Alderson (1967) proclaims that the main focus is the creation of utilities by the marketing activities within these companies.

The channel literature during the 50’s and 60’s was busy developing methods and concepts, according to Ford (2002), in order to be able to investigate the different attitudes of the companies. This was made in order to set the shape and direction of the companies within the channel. In addition, the literature was interested in the processes of control and change/evolution within the channel. This literature was also interested in to what extent the company was able to control and affect their collaborative partners and the activities that they conducted (Ford, 2002).

3.2 The Internationalization Literature

Distribution channel literature and the internationalization literature are, although the dif-ference in time, highly connected to each other. The most obvious connection between them is the channel, in which the companies reach foreign markets, evolves over time. The major difference is that the distribution channel literature is built on the awareness of the other companies’ views and what they did influenced and affected the strategy of a single company. The internationalization literature on other hand looks through the eyes of a sin-gle company that operates within a certain environment. The outcomes are believed to be the result of the single company’s performance, actions and how they handle skills, atti-tudes and experiences (Ford, 2002).

Many studies have shown that this single company´s orientation tries to refine the stages within the internationalization process. These studies have also shown that the company builds their experience and expertise in the first stage. Later on, they use their knowledge in order to move to the next stage (Johanson & Wiedersheim-Paul, 1975).

When discussing internationalization, the discussion of stages of internationalization is in-evitable. One of the most known internationalization model is called the Uppsala model, by Johanson & Wiedersheim-Paul (1975) and Johanson & Vahlne, (1977), who discuss the stages that a company goes through when entering foreign markets. By doing so, they can estimate how far a firm has come in its internationalization process.

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3.2.1 The Uppsala Model

Many firms start international business when they are relatively small and gradually develop their operations abroad (Johanson & Wiedersheim-Paul 1975). According to the Uppsala Model, by Johanson & Wiedersheim-Paul (1975) and Johanson & Vahlne, (1977), there are four stages of internationalization a company can go through. They distinguish the four dif-ferent stages as:

1. No regular export activities

2. Export via independent representatives (agent)

3. Sales subsidiary/establishment of subsidiary 4. Production/Manufacturing

The four stages, also known as the establishment chain, describe the different phases a com-pany goes through when going abroad and at the same time explaining a growing process of a firm (Johanson & Wiedersheim-Paul 1975).

Buckley, Newbould and Thurwel (1979), argue that the first movement up the establish-ment chain happens as early as when the domestic market has become saturated. Further they suggest that a single company follows the 4 steps of the Uppsala model in order to meet the certain possible routes for the company to take. Johanson & Wiedersheim-Paul (1975) shed light on the concept of psychic distance between markets. Psychic distances are the factors that restrain the exchange of information. Example of factors can be differences in education, culture, language, economic development, political systems and so on (McDonald and Burton, 2002).

While mentioning the matter of psychic distance, discussed in the Johanson and Vahlne (1977), is that it can be overridden with the network theory (which will be discussed in sec-tion 3.5) (Johanson and Vahlne, 1992), as well as the matter concerning the predetermined steps of international growth (The Uppsala Model by Johanson & Wiedersheim-Paul (1975) and Johanson and Vahlne (1977).

It is assumed that the firm’s choice between different internationalization operations are based on carefully collected data about the potential foreign markets, including macro eco-nomical factors such as geographical, socio-cultural, political and economic conditions (Root 1987). It is also assumed that the choice of entry mode is made simultaneously with the marketing-mix, price, products, promotion and place (McCarthy, 1960). In connection to the internationalization process three major types of enter were formalized; indirect ex-port, direct export and foreign direct investment (Ball, McCulloch and Frantz, Geringer and Minor, 2006).

3.3 Entry Modes

When the choice of going international is made, a company has to decide how they are go-ing to enter the targeted market. The choices are many and the factors that could affect their choices are at least as many. The company can either do export or trans-ferring, which requires relatively low investments of resources (Lane, DiStefano and Mazernevski, 2000). Some companies starts in fact with selling parts of their regular production overseas (Ball et. al., 2006). They can also undertake other entry modes that requires larger amount of capital and human resources but allows total control over the activities. These entry modes are also a calculation of the degree of risk that the company can afford, or is willing, to take (Lou, 1999).

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Therefore, a company is expected to choose an entry mode that gives them the highest re-turn on investment, with respect to the factors previously mentioned (Lou, 1999).

Figure 4, Entry modes by Ball et. al.. (2006) p. 431. Authors own interpretation.

The first entry mode, and the least resource demanding entry mode, is the export and transfer mode. Within export, there are two ways a company can go about, indirect or di-rect exporting/transferring (Ball et. al., 2006).

3.3.1 Indirect export

Indirect export is when a company export goods straight, or through a middleman, to a foreign market. The different exporters according to Ball et. al. (2006) are as follows:

1. Manufacturer’s export agents: Agents selling the products from the same or an-other country that the company is situated in, also known as a distributor.

2. Export commission agents: Agents selling a firm´s products in a foreign market. 3. Export merchants: Firms that buy and sell for their own accounts.

4. International firms: Firms who buy directly from someone for their own use in their work/production overseas.

This way is relatively risk-free for the exporting producer, but it has its costs. These three first entry modes take a “middle-man” commission for handling their products. The risk that the exporter can deal with is if the “middle-man” switches to another producer and the producer gains very little experience from these kinds of transactions (Ball et. al.., 2006). Cavusgil, Yeoh and Mitri (1995), stress the need for evaluating potential partners before en-tering a partnership of any kind, as with an agent or with a distributor. They suggest that partner evaluations should be based on the following five criteria and they are: financial and company strength, product factors, marketing skills, commitment and facilitating fac-tors. The financial strength of a partner, although a good indicator, simply does not fully represent its overall strength. Therefore, it is important to look at other indicators of strength such as what are their areas of expertise, who are their customers and how they handle and treat their customers. Furthermore, a strength that often is, but should not be, overlooked is a partner’s readiness to expand and handle the possible growth of the export-ing company’s products (Cavusgil et. al.. 1995).

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By product factors Cavusgil et. al.. (1995) implies that a partner should be in the same or in a similar line of business as the exporting firm in order to have the industry specific know-how needed to sell and distribute a product. This is very important if the product is techni-cally complex. Sometimes a potential partner already has engaged in a partnership with a competitor, thus they should be rejected. Finally, a partner should be able to have the abil-ity to take legal actions if patents, trademarks or other intellectual property has been vio-lated. Marketing skills are an essential part of a partner’s responsibility and it is very impor-tant to question their market coverage. Do they really cover the whole nation and all seg-ments or has something been left behind? Marketing skills are more than just the market coverage such as advertising, sale force, sale service and after sales support. These respon-sibilities are equally important to evaluate and scrutinize (Cavusgil et. al.. 1995).

Commitment deals with how willing a potential partner has dedicated his or her time to a product, spent money on advertising, trained a sale force and provided feedback. Further-more, the exporting firm must consider the risk of how likely it is that a partner will dropped their product and exchange it for a competitor’s product. On the other hand, one of the best indicators of commitment is a potential partner’s willingness to drop a compet-ing product in order to acquire an exportcompet-ing firm’s product (Cavusgil et. al.. 1995). Facilitat-ing factors deal with managFacilitat-ing cultural difference such as language, accountFacilitat-ing standards and legal regulations. Furthermore, they also stress the importance of previous experiences with a culture and more specifically the culture’s management principles. Finally, if not all of these criteria’s of evaluating a partner are considered, and carefully examined, before en-tering a partnership the risk of failure is very high. (Cavusgil et. al., 1995)

3.3.2 Direct export (Transferring)

By direct export it is meant that someone from the producing firm handles the export ac-tivities (Ball et. al., 2006).

Licensing. Contract-controlled arrangements that make it possible to get access to another

company’s trade secrets, patents or technology by paying the other company a fee (Ball et.

al., 2006).

Franchising. This is when a company uses another company’s name in order to conduct a

certain type of business. This contractual agreement usually follows strict rules. Examples of franchising are McDonald’s and Subway (Ball et. al.., 2006).

This way is a good way for companies that do not want to bear all their costs themselves. This entry mode allows the licensee and the franchisee to take most of the starting-up costs and risks (Lou, 1999).

3.3.3 Foreign Direct Investment (FDI)

FDI is a capital and resource demanding undertaking (Lane et. al., 2000). Furthermore, this entry mode enables firms to a higher level of control over their operations in foreign mar-kets. However, a capital investment abroad also implies a lot of risk.

Wholly owned subsidiary. According to Ball et. al. (2006), there is three ways; a company

can go about when to acquire a wholly owned subsidiary in a foreign market.

1. Doing a so-called ‘Greenfield investment’. Building a totally new plant from scratch.

2. Acquire a part of an already existing plant. 3. Acquire one of its distributors.

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Joint venture. This is when companies with the same interests, within a business

enter-prise or undertaking, do a cooperative effort (Ball et. al.., 2006). A good example of joint venture is the joint venture Kemax. This is a joint venture between Kemira in Sweden and Akzo Nobel in the Netherlands. Kemax distillates the waste product of Akzo Nobel’s pro-duction and sells the product through Kemira’s distribution channels. The benefits for Kemira is pure economic. But for Akzo Nobel, the benefit is more intangible as an im-provement of their environmental image (Boersma, Buckley and Ghuari, 2003).

Contract manufacturing. When a firm contracts another firm in order to produce

some-thing by certain specifications pointed out by the contracting firm. The company that manufactures does not have any responsibility for marketing towards the contracting firm (Ball et. al., 2006).

The management contract. A contract that enables one firm to take care of all, or

spe-cific, management issues within a firm in exchange for percentage of sales (Ball et. al., 2006). This can be made in three different levels or ways acc. to Ball et. al. (2006).

1. In a firm where they have no ownership, for example the Hilton Group. Hilton contracts a hotel and takes care of the management issue. In exchange, the hotel operate sunder the name of Hilton Hotel.

2. Joint venture partner. 3. Wholly owned subsidiaries.

3.4 The Network Literature

The network literature focuses on relationships within a network, rather than in a value chain, as in the distribution channel literature. The network literature does not focus on the internationalization process from an individual firm’s point of view, as the internationaliza-tion literature, but rather how a firm is a part of a lager internainternationaliza-tional network. The phe-nomenon of how firms operate within a network was first introduced in the 1980’s (Ford, 2002). The network literature, in a way, is very similar to the distribution channel literature, which focuses on the managerial actions in the networks that the company is involved in; thus the network literature has given new insight to the industrialization process (Ford, 2002).

The things that differs network literature from the other, older, views are that the distribu-tion channel literature focuses on inter-company problems and conflicts. The network view is on the other hand concerned with questions such as cooperation, complementary and coordination (Easton, 1992). The internationalization literature spoke about how the inter-nationalization process was an outward extension of the target company’s current opera-tions and its outcomes when it came to decision-making (Johanson and Wiedersheim-Paul, 1975; Johanson and Vahlne, 1977; Bilkey and Tesar, 1977). The network approach looks at relationships between companies and networks, as well as the domestic and/or foreign ac-tivities that they have to pursue in order to conduct successful business ventures in the market. This includes the actions in and around the firm, a process driven by everyone around the company and within the network. This implies that the network approach takes into consideration all firms within the network and does not focus on a single firm (Johan-son and Matt(Johan-son, 1988; Forsgren and Johans(Johan-son, 1992; Hallen, 1992; Blankenburg, Holm and Johanson, 1997)

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Researchers in Sweden have been in the front line of developing the Swedish School of Networks as a view of the network phenomena (Håkansson & Snehota, 1995). It has been considered as independent relationships within a larger context, shown here by Håkansson (1982).

Activities: Include the

transformation act, the transaction, activity cycles, and transaction chain.

Resources: Heterogeneous,

human and physical, and mutually dependent

Actors: At different levels – from

indi-viduals to groups of companies – actors aim to increase their control of the net-work

NETWORK

Actors control resources – some alone and other jointly. Actors have certain knowledge of resources.

Actors perform activities. Actors have certain knowledge of activities.

Activities link resources to each other. Activities change or exchange re-sources through uses of other

Figure 5, The actors, resources and activities model by Håkansson (1982) found in Johnsen and Johnsen, (1999) p.303.

Håkansson (1982) considers the network to be built up by Actors, Activities and Re-sources. In the Håkansson network model (1982) the three components, resources, actors and activities are truly dependent of each other.

“Actors are defined by the activities they perform and the resources they control, and through exchange processes with the other actors’ activities and resources, relationships are developed” (Johansen and Johansen, 1999, p. 300)

The activities that take place between them are truly delicate because what happens in one relationship affects the whole network, either positively or negatively (Blankenburg and Jo-hanson, 1990).

The internationalization is, from a network perspective, an investment in the development, defense as well as the desire to defend the firm’s current position in a network. Further, McKiernan (1992) identifies that a firm can either be in a network, or not. The reason for a firm that already is, at this point, in a network is to defend their position. While a firm, out-side a network, investigates whether to invest in entering the network. Further if a firm is in a network, the firm-specific advantages are now dependent of the collaborative- and func-tioning linkage between the different sections within the network.

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“Hence, from an internationalization perspective, foreign entry modes depend upon the organization’s current position in the chain of exports, licensing, branches, wholly-owned subsidiary and acquisition.” (McKiernan, 1992, p. 108)

In order to manage the firm’s dependence within the network, McKiernan (1992) suggests that acquisitions are going to be executed as a way to success. Further, the network theory emphasizes that there is a difference between the firms that are already in the network and the ones that are not. The reason for this, according to McKiernan (1992), is that the em-pirical findings show that the chosen mode differs whether the firm is a part of an interna-tional network or not.

If the firm already is in a network it is more likely to conduct a Foreign Direct Investment (FDI), described in more detail in section 3.2.5. While a firm that is not a part of the inter-national network will probably enter a foreign market by an agent, distributor or open up a subsidiary in that market.

Another solution for a company within an existing network, according to McKiernan (1992), is for the firm to try to evolve their linkage and connections within the present network, resulting in stronger relationships and more smoothly run operations.

3.5 Summary of the theoretical framework

The authors of this thesis have, in order to fulfill the purpose of this thesis, collected in-formation from various sources. The collected framework for this theory and its concept have at first been derived from Ford (2002). As defined by Ford there are three different views of the internationalization literature, which the authors have integrated in this thesis in order to explain the evolution of the network theory. The three different views defined by Ford (2002) are, the distribution channel literature, the internationalization literature, and the network literature.

The distribution channel literature, which describes the oldest view of a firm’s internation-alization process, emphasizes on the different actions that a firm performs in order to reach foreign markets, such as logistical solutions, product assembly, and other basic finan-cial operations. This view concentrates on the relationship between two different firms in relation to the internationalization literature that describes the internationalization process as a phenomenon that emerges from a single firm.

The internationalization literature is a view that is still highly current and concerns many matters, such as the Uppsala model by Wiedersheim-Paul (1975). The authors of this litera-ture describes the Uppsala model, also called the establishment chain, as a model that ex-plains the different stages of evolution a firm goes through when venturing abroad. Fur-thermore, this model also explains the growth process of a firm.

Not only to explain the growing process and the establishment of a firm, the purpose of this thesis is to identify the different modes of entry that Frank Dandy can choose from, when entering a new market. Ball et. al. (2006) have defined three different ways that firms can enter a market: direct export, indirect export or foreign direct investment (FDI). These ways of entry imply different levels of risk. The choice between these three ways of entry is defined by Lou (1999) as three evaluation criteria:

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1. Control.

2. Human and financial resource demanding. 3. Return on investment.

Examples of these three criteria working in conjunction with each other are, for a low-risk venture, when you have a distributor that is connected to low control and low return on investment but offers a low risk. For high-risk ventures a subsidiary to your main company means high control, high risk but yields high return on investment.

This has lead to the latest of the literatures, the network literature. Here the firm is no longer defined as a single firm that operates solely or the firm’s interaction between one another. This literature defines the firm as something that is a part of something bigger, namely the business network. In the network literature, the internationalization process is a connection between cooperation and collaboration between the actors within the network. Concerning this literature, Swedish researchers have pioneered the development of the network phenomenon (Håkansson and Snehota, 1995). Håkansson (1992) has defined the network as independent relationships between resources, actors and activities (chapter 3.5). Further, one important aspect is brought to light by McKiernan (1992), regarding various networks that a company can be affiliated with. Either a company is in a network, or the company is not. If you are in a network, you strive to strengthen your position and if you are outside a network, you fight in order to enter.

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4 Empirical findings

In this chapter, the authors will present a summary of the interview and present a case of Frank Dandy Superwear AB. Further, on the case will be presented as a story where the results of the empirical findings from the case are showed in an extended text. This chapter has the same structure as previous chapter and linked to the interview guide, which can be found in the appendix.

4.1

A Case Study of Frank Dandy Superwear AB

This case study is based on three semi-structured interviews conducted with the sales and export manager of Frank Dandy AB, Mattias Edenholm (M.E.1: 2008– 05– 01 and M.E.2: 2008–05– 16) and Patrik Zenno (P.Z: 2008–05– 09), marketing manager of Frank Dandy. Other sources such as Frank Dandy web page, Frank Dandy´s annual report 2007, Peak Performance annual report 2007 and articles about Frank Dandy success story have been used to strengthen the validity and trustworthiness of the case.

4.1.1 Background

According to M.E.1, it all started in the year 2000 when Tobias Lindberg created the com-pany Stargate Brand Group AB in Jönköping, Sweden, with an ambition to sell his new product SmartCaze (See exhibit 1), a wallet/credit cardholder, in gas stations nationwide. He found it easier said than done and after a year of struggling with pour sales figures, he decided to reposition his brand and target a new target group. He chose males within 18 to 35 years of age, since they were willing to consume and, he had discovered that, they could easily be reached by putting up small display cases in fashion stores. It was an instant hit and after two years, he felt that it was time to move on to something new and bigger. P.Z continues, at this point in time, the male underwear scene was dominated by plane and simple underwear. It was not a piece of clothing one would buy to make a fashion state-ment. Tobias had found a niche market with unsatisfied wants since he felt males urged for underwear that was more fashionable. In order to fulfill this want, he created a brand called Frank Dandy Superwear (See exhibit 2) with the objective“…to break the rules of tradi-tional underwear and create new ways of fashion and style” (M.E, personal communica-tion, 2008 – 05 – 01).

P.Z argues, by targeting the same target group as they had done when launching Smart-Caze, and thus utilizing their already establish network of retailers, they managed to reach the target group instantly. Although not presenting their new product in display cases they found a rather unusual way to catch their customers´ attention when entering a store. M.E.1 claims that traditionally, underwear were sold in packs of four and were not an item one would find on display but rather tucked away somewhere in the back of the store. Frank Dandy on the other hand put their underwear on hangers and thus presented them to customers as any other piece of fashion clothing such as shirts or sweaters etc, which made their underwear stick out and catch the customer’s attention.

According to P.Z, once again Stargate Brand Group AB had created a successful brand. In the fall of 2006, Stargate Brand Group underwent a mayor organizational restructuring, which implied that SmartCaze and another less successful brand called Cojak were place under a separate entity within the corporation. M.E.1 continues, after the reorganization of the company, it was decided that Frank Dandy Superwear would focus on its core product with the ambition of becoming the best underwear brand in Europe in terms of quality,

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customer service and design. In 2007, Frank Dandy Superwear had become Stargate Brand Group’s crown jewel, from being represented in 60 stores nationwide to have entered 13 countries around the world generating an annual turnover of 39 million SEK. (see Exhibit 3)

4.1.2 Frank Dandy Superwear goes abroad

P.Z stated that already in 2003, one year after the start, Frank Dandy saw themselves as best in Sweden within the underwear industry. According to M.E.1, the next bold step would be to display their products on the world’s largest fashion trade show in Las Vegas called Magic. The reason they decided to participate in this particular trade show was more to get a feel and to see what reactions they would get rather than an actual attempt to enter the North American market.

According to M.E.1, they should have ended up among other underwear brands in the lin-gerie section. However, due to a small misunderstanding between Frank Dandy and the or-ganizers of Magic they ended up in the wrong part of the trade show, in the so-called edge section, among leather, vinyl and rubber clothing, thus they did not reach their potential customers. Furthermore, this incident was probably the best thing that could happen to the company since the company, at this point in time, was still quite small and did not have the competence and experience needed to expand and start selling the products abroad. How-ever, the trade show was not a total failure since it, especially in such a competitive industry as the fashion industry, is a good place to compare yourself to the competition, keep up with current trends and to network.

After the trade show, they came to the conclusion not to enter large markets far away, such as the North American market, which would imply a lot of risks due to high competition, cultural differences, geographical distance and the sheer size of the market itself. Instead, they targeted bordering markets, Norway and Denmark, whose culture is very similar to the Swedish culture, the geographical distance is small, competition is lower and they were of a manageable size. The two markets were so similar that they were treated as a part of the Swedish market rather than foreign markets, agents were hired to take care of sales while Frank Dandy took care of marketing, and logistics. (See agent X and Y in Figure 6)

M.E.1 continues, Frank Dandy has continuously, ever since first visiting Magic in Las Ve-gas in 2003, visited trade shows around the world and through these found partners, agents and distributors in 13 markets such as Estonia, Russia, the USA, and Japan. Frank Dandy chose to enter these markets through agents and local distributors. P.Z argues that export, although being a cheaper alternative, is not an option within the fashion industry, you have to stand out and get attention to make it, something that is hard to achieve through export. To set up and establish a subsidiary or to use in house sale force was also not an option for Frank Dandy since it was considered too costly and time consuming for such a small com-pany, as Frank Dandy, within the fashion industry.

M.E.2 says that Frank Dandy created an extensive network of distributors and agents, and when entering a new market, it was most common to do so through an agent since they were easy to hire and easy to fire if it turned out that did not perform according to Frank Dandy’s policies (mostly concerning brand dilution).

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Distributor

Y

Marketing

Retailers Customer Service Logistics and shipping Retailers Marketing Retailers Logistics and shipping

Agent Y

Retailers

Agent X

Frank Dandy

Distributor

X

Marketing Retailers Customer Service Logistics and shipping

Figure 6, Frank Dandy’s network of distributors and agents and the activities hey were in control of, as drawn by Mattias Edenholm, personal communication, 2008-05-01

According to M.E.1, agents, exemplified as Agent X and Agent Y in the figure above, were responsible for taking care of sales and managing relationships with local retailers while Frank Dandy´s was supposed to take care of logistics and shipping, and marketing.

Furthermore, entering a market through a distributor was not common practice, however, more common was that the agent became, or was replaced by, a distributor. A distributor, exemplified as Distributor X and Distributor Y in the figure above, was responsible for taking care of the everyday aspect of running Frank Dandy’s operations in overseas mar-kets, taking care of sales and managing relationships with local retailers, logistics and ship-ping, and marketing. Thus, distributors handled more activities compared to agents as can be seen in the figure above.

In 2007, Frank Dandy Superwear had entered 13 countries around the world generating an annual turnover of 39 million SEK. (see Exhibit 3). However, only 30 percent of sales were generated by overseas operation and when excluding Norway and Denmark, that figure fell to 5 percent

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