Gangnam Style: A qualitative case study on Swedish fashion brands entering and becoming resilient on the South Korean market.

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Gangnam Style

A qualitative multiple case study on Swedish fashion brands entering and becoming resilient on the South Korean market.

Bachelor Thesis

Authors: Malin Forsvall & Julia Jonsson Supervisor: Selcen Ozturkcan

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Abstract

This study will examine the internationalisation process of Swedish fashion brands entering the South Korean market to be able to get an understanding of how the decision of entry strategy is influenced and how it affects the resilience in the market, as well as identify the drivers and barriers influencing the choice of entry mode. The study was conducted through a qualitative multiple case study with an inductive methodology approach. The literature review was established based on the known theories of internationalisation, entry modes and resilience. Here, the concepts discussed throughout the thesis are presented. Interviews were conducted with five different Swedish fashion brands who were all, to different extents, established on the South Korean market to collect empirical findings. These findings were then discussed in correlation to the presented theories to identify patterns within the internationalisation process to the South Korean market. The conclusion of the thesis is that relationships and networks are important drivers to enter and obtain resilience on the South Korean market. This allows the companies to engage in renewal of activities and flexibility in the constantly changing business environment. Language, lack of knowledge and lack of resources are identified as barriers limiting the level of commitment in the South Korean market.

Key words

Resilience, Entry mode, Drivers, Barriers, Internationalisation, Swedish Fashion Brands, South Korea.

Acknowledgments

We would like to take this opportunity to show our gratitude towards the people making this thesis possible. First, we would like to thank our interviewees, Peter Bergkrantz, Karin Johansson, Alexander Hjertström, Lars Wennerström and Rikard Fransson. Without their expertise and willingness to devote time, this study would not have been feasible. Secondly, we thank our supervisor, Selcen Ozturkcan for valuable feedback and positive encouragement. Additionally we owe a great thank you to our examiner Susanne Sandberg and to our opponents for constantly delivering constructive criticism and supporting our work.

Malin Forsvall Julia Jonsson

Kalmar, 29^th May, 2019 Kalmar, 29^th May, 2019

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1 Introduction

The initiating chapter introduces the field of the study starting with a declaration of the background. Here the South Korean market followed by a description of the Swedish fashion industry is conducted. Thereafter, the topic of Globalisation is presented. In the following section the problem discussion, consisting of previous research and research gap, is given in addition to implications about the current business environment. This results in a problem definition leading to the research questions. Further, the purpose of the study is presented together with the delimitations applied to carry through the study.

1.1 Background

Gangnam is a district in Seoul, South Korea, representing the wealthiest area of the capital city. The Gangnam district gained attention when the South Korean singer PSY released a song called Gangnam Style, as a tribute to the ladies of the wealthy district.

The song, and the district is characterized by its luxurious and noble residents and style, which is why the term Gangnam style is referred to as an extravagant lifestyle (Acuna 2012). Swedish fashion design is referred to as minimalistic, luxurious and high quality, fitting perfectly into the Gangnam district and the style characterised by its residents (Askergaard & Ger 1997).

1.2 South Korean market

After the event of the Asian financial crisis in 1997, South Korea was one of the nations that caved in last and recovered quickly (Kim & Jaffe 2010). After managing the interest rates the signs of the crisis were almost vanished and a period of prosperity was awaiting. The country has managed to transform itself from a third world country into a developed industrial nation (Kim & Jaffe 2010). The years following, multiple policies and reforms were introduced to intensify the relations between domestic and foreign (Saxer 2013). The lowering of the trade barriers, introduced in the EU-South Korea free trade agreement has strengthened the close economic relationship between the EU-nations and South Korea together with development of trade and investments.

As a result, business activities between the nations have increased leading to a beneficial situation for Korean consumers, introducing them to a broader range of high quality products from Europe (Eeas.europa.eu 2017). According to Kim and Jaffe (2010) Koreans are concerned with quality which is influencing the consumers buying behaviour. The reason behind this is based on their economic history which has resulted in a mind-set characterised by sustainability.

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The market of South Korea is noticeably large for its geographical size, with a population of 50 million. This together with the favourable location in relation to the East Asian region constitutes an advantage in the international business environment.

With a growing economy as a base, the consumption rates of South Korea are high creating a consumer spending that boosts the retail industry (Business-sweden 2015).

The combination of a rapid globalisation, the favourable location bordering both Japan and China, and the increased purchasing power parity has led to increased international activities for South Korea (Worldbank 2017). According to a study conducted by Hyang, Wonsik and Sang (2012) the level of foreign ownership in the Korean market is ranked ninth among the top 33 countries in the world, indicating that there is a large interest for investing in the South Korean market (Choi, Sul & Min 2012). According to a report conducted by Sweden Abroad (2017), 82 Swedish companies have established subsidiaries in South Korea. However, it should be noted that multiple entry modes exist, nevertheless in the report only subsidiaries are presented.

Furthermore, Swedish export to South Korea has increased by 17% in 2018 indicating that there is a growing interest for Swedish firms to invest in the South Korean market (Statistikblad.kommers 2019). Business Sweden (2015) also highlights that South Korea is one of the top 20 most important growth markets for Sweden, which implies an increasing potential for Swedish firms. The import of Korean products to the Swedish market has also increased by 7,1% in 2018, meaning that there is a growing trade-relationship between the two countries (Statistikblad.kommers 2019).

1.3 Swedish fashion industry

Swedish fashion has a long and impressive history of success (Stenström &

Strannegård 2013). There are many successful Swedish fashion companies on a global scale, such as H&M and Acne studios, both represented on the South Korean market (Acnestudios 2019; HM 2019). The concept of Swedish fashion has gained attention from many consumers and business professionals across the world due to its contribution to creative and cultural industries significantly influencing the economy.

The Swedish fashion industry is recognised by rich diversity which is one of the factors to its success world-wide (Stenström & Strannegård 2013). Swedish fashion is often described as a fragment of the phenomenon “western design” which is characterised as simple and minimalistic (Askergaard & Ger 1997). They are also well known for promoting innovative design, brand value, efficient marketing channels, logistics and distribution which has led to high profitability and the creation of a broad audience (Hauge et al. 2009).

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1.4 Resilience

Globalisation is not new however, the earth has never before been connected by so little, this was stated already in the 18th century by the philosopher Johann Gottfried Von Herder (Naim 2004). Globalisation is not a trend, something promised but not delivered, it is the unstoppable evolution of the society we live today (Naim 2004).

Caused by the urge to explore across borders, globalisation allows companies to operate and transfer capital across the globe. Trade and the increase in availability, thanks to the rise of internet, has made it a central part in marketing strategies (Hollensen 2016).

Naim (2004) presents the traditional view of globalisation as a phenomenon only large enterprises could engage in. Having substantial capital and revenue was essential to enable firms to seek outside of the national borders and internationalise their business.

Sandberg (2012) continues to describe globalisation as an accelerating phenomenon that has contributed to the creation of a new business environment. Now, not only large enterprises constitute the business environment, small and medium sized enterprises are also included with the possibility to engage in value creating operations and become resilient. As urban societies grow alongside the accelerating globalisation, retailers are challenged as they strive to stay resilient on the market. The demand for sustainability is increasing and therefore the resilience of urban retailers is important to understand the dynamics of urban systems (Fernandes & Chamusca 2014). Within the field of international business, resilience is referred to as the capability to survive and adapt on a market that is constantly changing (Ates & Bititchi 2011). Resilience concerns the way a company can renew their business operations in order to match the changing business environment (Demmer, Vickery & Calantone 2011). To become resilient on the market firms conduct effective strategies to deal with uncertainties and changes. This is important in terms of survival but also creates an opportunity for firms to prosper in a changing market. The concept of resilience is therefore developed over a long period of time. Resources and capabilities are also key to be able to develop innovative and sustainable ways of surviving the market (Oliver, Senturk, Calvard, Potocnik, Tomasella 2017).

By advertising globally, cultures and experiences are shared amongst consumers.

Utilising the exchange of communication between creators and consumers, the fashion industry has managed to influence markets on a global level (Fowler, Reisenwitz &

Fowler 2014). There is a large quantity of earlier research supporting the correlation between cultural distance and choice of entry mode (Gollnhofer & Turkina 2015).

The findings above, together with young, fashion interested consumers in Korea, has led to a wide range of global brands expanding to the nation (Ko, Kim, Taylor, Kim &

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This together with the interest for Swedish design and demand for quality has created an opportunity to investigate the expansion of Swedish fashion brands into the South Korean market.

1.5 Problem discussion

Examining the research made in the last couple of decades, two evident trends seem to appear concerning research within the field of entry modes in international business.

Firstly, the choice of market in the process of internationalisation and secondly, how the choice of entry mode into the selected market is determined (Albertoni, Elia &

Piscitello 2018). The first trend surrounds the discussion concerning the question on which market to choose in the process of internationalisation. The hunt for opportunities ready to be exploited is undertaken and companies analyse different factors to gather information about foreign markets (Friedman 2007). This topic is widely discussed both in theoretical literature along with multiple academic studies.

The second trend within the field of entry modes focuses around key determines behind the choice of entry mode. Seen as a successor of the first trend as it accompanies the choice of market within the marketing strategy (Zhang, Zhang & Liu 2007).

Business strategies are influenced by internationalisation and the decision making, determining the mode of entry for a firm, sits in the core of that. Globalisation is evident and companies from all around the world are engaged in the fight for market shares (Friedman 2007). Thereby, the global marketing strategy and the determining factors behind the execution of entering a market is a phenomenon widely studied.

Within the research field of entry modes and internationalisation, concentrating the research on emerging markets has been of high interest to previous researchers.

However, the interest for researching what is referred to as newly industrialised markets or newly industrialised countries (NICs) seems to constitute an increasingly larger scope lately (Moran 1998; Chang & Kim 1995; Cheng, Blankson, Wu & Chen 2005). Markets titled as NICs were once developing markets who are now industrialised, or still industrialising. These markets are characterised as having fast growth of employment, an increasing share of world exports of goods as well as fast growth of GNP per capita (Boughey, n.d). South Korea is a recurrent target in case studies made on NICs since the market serves the characteristics defined above (Cheng et al. 2005). As a by-product of the research within the two identified trends, studies concerning the outcome of the various entry modes and the result of internationalisation arise additionally (Zhang et al. 2007).

Research made on the fashion industry in the past has been highly focused on the production of garments and aspects included in the production of apparel.

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Hauge, Malmberg and Power (2009) highlight the different light into which the Swedish fashion industry drives the research. This is explained as a shift from focusing on the material production locally to becoming strongly competitive by outsourcing production to low-cost areas instead. Thus, the study made by Hauge, Malmberg and Power emphasise the representation of economic aspects of the Swedish fashion industry (Hauge, Malmberg & Power 2009). The focus on production related topics is further presented in the study by Dahlén (2012) exposing the problematic subject of copyright within fashion.

As of today, a wide range of research within internationalisation is published together with studies on the fashion industry focusing on economy and production. To separate from the production aspect of outsourcing and focusing on brand and design; what do we actually know about entering a newly industrialised market? Furthermore, what do we know about entering a newly industrialised market as a Swedish fashion brand?

Clothing is considered as one of the best ways to display status, which is highly regarded in the South Korean society (Park & Burns 2005). The high quality of Swedish fashion together with the simple, minimalistic and innovative style is matching the Korean mind-set regarding fashion. Goldsmith, Flynn, Goldsmith and Kim (2013) further strengthens the perception by implicating that the urban society in South Korea is rapidly growing and the consumption behaviour is evolving simultaneously. Goldsmith et al (2013) claim that the growth leads to a materialistic influence on the consumer behaviour with a growing demand on innovative design within the fashion industry. In addition, the demand for sustainability is current in the urban society, especially towards the fashion industry. To become resilient on the market, the fashion industry need to prioritise these demands (Fernandes & Chamusca 2014). Furthermore, Fernandes and Chamusca (2014) discuss that the change in attitudes within the urban society has affected the dynamics of the market and thereby also the choice of entry mode. A report published by Business Sweden (2015) implies that South Korea is one of the most important growth markets from Swedish business activities indicating that there is a large interest of engaging in trade with Sweden.

However, there is a research gap within the entry, establishment and resilience of fashion related businesses in the South Korean market which is why this is a subject of interest.

According to Rodríguez, Barcos & Álvarez (2010) the process of internationalisation is long and associated with risks for all types of firms. The choice of how to internationalise is diverse and can be conducted in different ways. The choice of entry mode is determining the resilience, meaning how a company sustain their position in the market. Depending on factors such as what industry, cultural differences between markets and size of the firm, different types of entry modes are used (Hollensen 2016).

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Therefore, this study will examine the internationalisation process of Swedish fashion brands entering the South Korean market to be able to get an understanding of how the decision of entry strategy is influenced and how it affects the resilience in the market.

Combining the current topic of internationalisation with the match between demand in the South Korean market and the innovativeness and willingness to expand amongst Swedish fashion brands, lays the foundation for this study. The interest in fashion, innovation and globalisation adds to the approach of this thesis. In order to investigate this topic two research questions will be used in order to support the implementation of the study.

1.6 Research Questions

• How does the choice of entry mode affect the resilience of Swedish fashion brands in the South Korean market?

• How do drivers and barriers influence the choice of entry mode for Swedish fashion brands entering the South Korean market?

1.7 Purpose

This study will examine the internationalisation process of Swedish fashion brands entering the South Korean market to be able to get an understanding of how the decision of entry strategy is influenced and how it affects the resilience in the market.

The aim is to perform case studies on the participating companies with purpose of creating an understanding on how Swedish brands can advance into the South Korean market with the aim to become resilient. Our result should provide a comprehension about the process a brand encounters when entering the South Korean market.

Moreover, the thesis aims to cultivate recommendations for further internationalisation and entry modes for Swedish fashion brands concerning resilience on the South Korean market.

1.8 Delimitations

The study will focus on which entry modes have been used by Swedish fashion brands when entering the South Korean market. Research will be performed on which entry strategies have been more effective in contrast to less effective. This to create an overview for how Swedish fashion brands could implement a resilient internationalisation strategy.

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Since the research is conducted through multiple case studies, the findings will be based solely on the experience of the companies participating in the study. Thereby, we will not be able to include data from other Swedish fashion brands who do not participate.

1.9 Outline

Introduction

The initial chapter introduces the topic of research followed by a problem discussion. This highlights the discovered research gap which leads to the research questions together with the purpose and delimitations.

Literature Review

The second chapter presents the chosen literature which constitutes the theoretical framework. The presented theories result in a conceptual framework.

Methodology

The third chapter consist of the methodology chosen, beginning with a presentation of the research approach, method and design. Followed by data collection and the method used for conducting case studies.

Empirical Findings

This chapter will present an introduction of the participating companies together with the empirical findings collected through interviews.

Analysis

In this section the empirical findings is discussed together with the theories and the voice of the authors. The aim of the chapter is to create an analysis that emphasise with the conceptual framework

Conclusion

The final chapter concludes the thesis by presenting the main arguments based on the discussion made in the analysis. Furthermore, the conclusion will answer the research questions and fill the identified research gap.

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2 Literature review

The second chapter presents the chosen theories which conduct the theoretical framework for this thesis. It consists of theories within internationalisation, entry modes, drivers, barriers and resilience. These together result in the conceptual framework that the study stems form.

2.1 Uppsala model

The Uppsala model was developed by Johanson and Vahlne (1977) and describes the internationalisation process of firms as gradual. It is based on observations of Swedish firms developing their international operations gradually, rather than immediately making large investments abroad. The model suggest that firms begin their internationalisation process by exporting to a country through a sales agent. Thereafter establish a sales subsidiary and lastly establish a production facility in the host market (Johanson & Vahlne 1977). A main characteristic of the model include that firms tend to expand their operations to markets which are geographically and culturally close, referred to as psychic distance (Johanson & Vahlne 1977). The reason for implementing business activities in foreign markets with low psychic distance is to reduce uncertainties and risks as well as increase the firm’s perceived opportunities.

By gaining knowledge about the foreign market, firms can decide the level of commitment which influences the activities in the host market. Components that could feed the perception of a market being of high psychic distance are cultural differences, language or political systems for example (Johanson & Vahlne 2015).

The Uppsala model is commonly used in business related contexts, however, it is one of the first models describing the internationalisation process of firms. Therefore changes in the business environment has made the model insufficient in some cases (Andersen 1993). Stated by (Madsen & Servais 1997), the model is not applicable for all industries, especially firms with niche products and specialised markets.

The model has been updated in correlation with the development of the global business environment. Further, it highlights the connection between networks and relationships and its effect on the internationalisation process. The ability to coordinate and control the development of networks is crucial for the performance of firms (Vahlne &

Johanson 2013). This implies that firms learn from each other and create knowledge through interaction, which stimulate new business opportunities. Johanson and Vahlne (2006) suggest that if the host market firm is committed to other relationships, it will provide a wide network leading to new relationships and further business activities.

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2.2 Born global/International entrepreneurship theory

The theory derives from alterations in the international business environment. The conditions have changed in terms of technology, economy and social aspects which has enabled new resources for firms. A rapid increase in the speed, quality and efficiency of international transportation and communication have resulted in reduced transaction costs and facilitated trade opportunities (Oviatt & McDougall 1994).

According to Oviatt and McDougall (2000) the first definition of international entrepreneurship was seen as a study of innovative, proactive and risk-seeking behaviours across borders. They further developed the definition and specified it as

“the discovery, enactment, evaluation, and exploitation of opportunities – across national borders – to create future goods and services” (Oviatt & McDougall 2005, p 540). Earlier research has mainly focused on the internationalisation of MNEs (multinational enterprises), however, a pattern was discovered indicating that SMEs did not follow the traditional path of incrementally increasing their international activities (Gabrielsson, Manek Kirpalani, Dimitratos, Solberg & Zucchella 2008;

Oviatt & McDougall 1994). The process of gradual internationalisation and learning is not applicable for all industries, many firms tend to internationalise rapidly and in an early stage of its establishment (Madsen & Servais 1997). The concepts of INVs (international new ventures) and born globals are common in the field of international entrepreneurship (Knight & Cavusgil 2004).

Born global firms are described as early adopters of internationalisation. They are characterised as companies that expand rapidly into foreign markets and display high proficiency in international business. The management of born global firms possess a global mind set and the resources committed are specific for international activities (Knight & Cavusgil 2004). More often than not, born globals start with only one or a few employees. The small size of newly established firms seems to be related to flexibility providing benefits for foreign market success (Knight & Cavusgil 2004).

INVs are referred to as firms that from their establishment engage in international business activities. Firms view their organisation as international from an initial stage and seeks competitive advantages by covering a broad market as well as developing various channels of distribution and serving customers in diverse segments. INVs are characterised by high product and market visibility (McDougall 1989). Central for firms studied in the international entrepreneurship theory is that innovation, knowledge and capabilities are of significance for the performance and international opportunities of the firms (Mainela et al. 2014). Knowledge is of high importance due to lack of human, financial and tangible resources which is related to the fact that most born globals and INVs are Small/Medium enterprises (Gabrielsson et al. 2008; Oviatt

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Therefore, a strategy which includes strong internal and organisational capabilities is key for success. The result of this is that firms tend to choose entry modes associated with low risks, such as export modes. Due to the lack of tangible and financial resources, the use of external resources is relatively high in comparison to established firms (Oviatt & McDougall 1994; Cavusgil et al. 2015).

2.3 OLI Framework

The framework is based on multiple theories and is described as a tool in the process of internationalisation and choice of entry mode. When a company decides to internationalise and transfer business activities into a foreign market, there are numerous factors and determinants for the choice of entry mode (Hill, Hwang, Chan Kim 1990). The establishment of cross border activities, where the investors possess a high degree of influence over the enterprise in the foreign country, is referred to as FDI (Soofi & Zhang 2014). The implementing of FDI can stimulate economic growth in the host country and enhance the transferring of skills, technology, and innovation, managerial and organisational practices for the investors (Owusu-Antwi, Antwi &

Poku 2013). Dunning (1988) bases his hypothesis, surrounding international business, on three conditions that need to be satisfied for a firm to engage in value-adding activities. These three conditions are ownership, internalisation and location advantages and are occasionally called the “OLI framework” (Rugman 2010).

Ownership advantages refers mainly to intangible assets that a firm possesses which serves them an advantage in the particular market. These assets can be in the form of human capital, innovations, know-how or organisational systems. Dunning (1990) continues to explain that when this condition is satisfied, internalisation is the next criteria to look into. In order to engage in foreign investment, it must be more beneficial to internalise the assets mentioned above rather than outsource or sell them.

The internalisation advantage is also connected with risk and uncertainties. By internalising the risk management process the firm can gain advantage in the market in contrast to other multinational firms (Williams 1997). The criteria presented by Dunning (1990) are created in sequence, meaning that they are dependent on the prior criteria to be satisfied. When ownership and internalisation advantages are satisfied, location advantages can be included in the analysis. This refers to the advantages connected to a specific location outside of the home origin of the firm. It is the advantages of the host market that is of importance, for example natural resources, market size or infrastructural systems (Rugman 2010). The location advantages of the host markets are the determinants for which form of investment should be implemented. If the location advantages would not be favourable for the firm, the choice to trade or export, and thereby operate on a distance, is most likely to be selected (Williams 1997; Dunning 1990).

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The richness of the approach has been the reason behind the positive feedback it has received and has been presented as a creative tool in creating determines for choice of entry modes (Andersen 1997). To solely look into one factor and isolate the choice of entry mode around that will not give a realistic overview of the different modes on entry. By using the eclectic theory, the factors can be analysed in relation to each other and create new determines for the choice of entry mode (Hill et al. 1990). Hill, Hwang and Kim (1990) explain the concept further, emphasising that looking on only transaction costs for example and letting that be the determinant behind choice of entry mode is too narrow. Instead factors such as transaction costs should be analysed together with global strategy and competition for example. This will create a broader base for the choice of entry mode that could lead to a more efficient internationalisation process (Hill et al. 1990). Conclusively, the OLI framework and eclectic paradigm focuses on the capabilities and opportunities in the host market that can be advantageous for the firm selection of entry (Rugman 2010).

2.4 Transaction cost theory

Transaction costs are characterised as the costs a company have to consider when entering a market. These are costs for managing the system and can take the shape of drafting, negotiation or monitoring agreements. There are three common terms for defining transaction costs, these are; search cost, bargaining cost and policing cost. In short terms it can be described as costs for engaging in a market (He et al. 2016).

Williamson (1996) describes transaction costs as a result of when a firm asks the question; “What’s going on here?” Thereby, transaction cost is the cost of finding out the opportunities in a market from an economically organisational approach.

Furthermore, Williamson (1996) describes transaction costs as a productive dialogue held when engaging in internationalisation of a firm.

Companies want to minimise their transaction costs to promote value creation. This is not done in one day, rather this is accomplished by long term productive relationships and governance agreements (Wathne, Heide, Mool & Kumar 2018). Further, Williamson (1996) introduces the role of governance structures stating that these directly affect the transaction costs. This because transaction differ between organisations and therefore the governance structure needs to be tailored to each specific transaction to achieve efficiency. Conclusively, the structure of governance and the relationships to other actors in the market affects the transaction costs and thereby also the role for a company in a certain market (Williamson 1996).

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Transaction costs differ depending on the market of interest and the origin of the company looking to enter. The level of knowledge the company possesses about the market of interest varies depending on the cultural and psychic distance between the origin of the company and the market (Andersson, Johanson & Vahlne 1997). Further, Andersson, Johanson and Vahlne (1997) explains that the cost associated with searching for information and understanding the market may become larger if the market of interest has high cultural or psychic distance in relation to the origin of the company. When looking to internationalise and in the process of selecting a suitable market, transaction cost analysis can be a key aspect behind the choice of entry. Hence, it is of importance to consider when wanting to engage in efficient and value creating business transactions (He, Lin & Wei 2016).

2.5 Entry modes

The manner in which a firm decides to enter into a foreign market is known as an entry mode (Gould, n.d). It is explained as a process of increasing a firm’s collection of experiential knowledge about business partners as well as obtain human, technical and administrative resources in order to discover opportunities (Blomstermo, Deo Sharma

& Sallis 2006). According to Makino, Lau and Yeh (2002), companies can attain economies of scale and scope by growing their markets and disseminate their share of consumers to multiple countries. Furthermore, the motivation to invest abroad can be triggered by the availability to target new customers in a market (Makino, Lau & Yeh 2002). Several factors are of significance when selecting an entry mode, such as size of the market, product-market fit, business environment and internationalisation objectives (Cavusgil Ghauri & Akcal 2013).

Foreign market presence is described as either high control entry modes or low control entry modes. The entry modes considered as high control often demand extensive resources and is associated with a high degree of uncertainty (Blomstermo et al. 2006).

Entry modes regarded as low control are associated with high flexibility while the level of control is low in comparison. Control is considered a highly regarded factor when choosing entry mode, without control it would be difficult for a firm to coordinate its actions and strategies as well as committing resources. However, it also exposes the company to increased risks (Anderson & Gatignon 1986).

An outline of the main entry strategies are conducted by Cavusgil, Ghauri and Akcal (2013). The Strategies are classified into three categories; trade-based entry mode, contractual entry mode and investment entry mode. The trade-based entry is described as activities related to exporting of products and international purchasing of resources.

By using this strategy firms can maintain their operations nationally and engage in international activities through global sourcing. Buying products or services from foreign suppliers or producing nationally and exporting to foreign customers are

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referred to as global sourcing activities. Trade-based entry strategies includes indirect and direct exporting which are both associated with high flexibility and requires less interactions with suppliers and customers (Cavusgil et.al. 2013; Blomstermo et al.

2006). Indirect and direct exporting are commonly used within firms in the early stages of internationalising its business activities or in the process of initiating new markets as it requires low levels of commitment and resources. These entry modes are associated with low levels of risk as it is easy to enter a new market as well as withdraw operations from a market. Using a distributor or foreign sales agent is commonly occurring when using this entry mode (Bello & Gilliland 1997). The reason to why the degree of control is regarded as low is based on the fact that the firm is still managing the operations from its home country (Anderson & Gatignon 1986).

Contractual entry modes are referred to as activities where the firm engages in agreements with international partners. The partnership agreement enables the international partner to use the firm’s intellectual property in exchange for fees.

Contractual entry modes include licensing, franchising technology transfer, subcontracting, offset, turnkey projects and contract manufacturing (Cavusgil et.al.

2013). Johanson and Vahlne (2006) further argues that partnership agreements contribute to knowledge sharing and interaction between firms. The development of interaction also contributes to a reduced risk, thus also opportunities for further business activities (Johanson & Vahlne 2006). However, the level of control is moderate since agreements in the shape of licensing or franchising often include incentives to adapt to institutional regulations (Anderson & Gatignon 1986).

Investment entry modes is also known as equity based business activities. It describes the involvement of direct investment abroad including wholly owned subsidiaries and joint ventures (Cavusgil et.al. 2013). Joint ventures are referred to as ownership sharing in which equity is owned by a minimum of two companies. Investments that involves the transfer of an entire enterprise to the targeted market is referred to as wholly owned subsidiaries. According to Baena (2013) there are two options in which a firm can establish a subsidiary, either through the acquisition of a local firm or a Greenfield investment. Where Greenfield investment refers to implementing the business activities from the ground and up, step by step. Investment entry modes are often associated with high risks concerning economic and political factors (Baena 2013). The establishment requires a lot of time and large resources committed which is why it is difficult to exit a market or withdraw operations. The main reason for choosing to enter a market through a hierarchical mode is to maintain high control over operations, preserve know-how and establish a strong presence in the targeted market as well as provide access to networks and relationships with customers and suppliers (Low & Robins 2014).

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2.6 Drivers and barriers

Internationalisation is one of the most common strategies for growth. This is a result of the domestic market being too saturated, mature or highly competitive, creating an opportunity for the firm to expand to foreign markets (Kraus, Mitter, Eggers & Stieg 2017; Chetty & Campbell-Hunt 2003). Johanson and Vahlne (2009) and Makino et al (2002) further argues that firms internationalise to reach a wider target group and to attract new customers. Another argument stated by Liang, Lu and Wang (2012) is that firms expand to gain access to external resources, for example technologies, managerial and marketing skills. Specific resources such as a wide international network is an efficient way of gaining information as well as a driving force for entering a new market early in the life cycle. This is argued for in favour of INVs in the international entrepreneurship theory by Knight and Cavusgil (2004). One of the main drivers for born globals is the entrepreneurial mind-set and the international outlook. Previous international experience of the management is also affecting the process of internationalisation in a positive direction. The knowledge and the entrepreneurial capacities possessed is an advantage in helping the firms choose an early internationalisation strategy as a path to growth and success. The knowledge intensity is therefore a key driver impacting the expansion to new markets (Oviatt &

McDougall 1994).

Relationships with local partners can enhance a firm’s reputation and credibility in a distant market. This also increases the perceived quality of a firm or brand. By engaging in a strategic alliance with foreign suppliers, distributors or customers, the partner can help provide the resources required in the new market (Kraus et al. 2017;

Chetty & Campbell-Hunt 2003). Long term relationships and governmental agreements enhance the internationalisation process for firms (Wathne et al. 2018).

The implementation of free trade agreements facilitate and support firms in the countries involved which influences the decision of internationalising in a positive manner. Furthermore, it helps strengthen a firm’s position in the new market (Siddiqui, Zafarullah, Latif & Shabir 2014). Both internal and external barriers are constraining the firm’s ability to conduct business abroad. Barriers to internationalisation limit the expansion of a firm, leading to decreased revenues and lowering of the survival rate (Baum, Schwens & Kabst 2013). Psychic distance is seen as a main external barrier for the internationalisation of firms according to the Uppsala model. The perceived psychic distance between countries is a determining factor influencing the decision to expand to foreign markets (Johanson & Vahlne 1977). Lack of institutional market knowledge can also act as a barrier for firms in the internationalisation process, meaning that firms have not obtained enough information about language, laws and legislation (Johanson & Vahlne 2009).

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Another internal barrier when internationalising is the allocation of resources, such as human resources, financial resources and information about markets. In terms of SMEs, the resources tend to be restricted or, in some cases, non-existent. If the management does not have enough experience and knowledge of internationalisation it can be difficult to proceed in the process of entering new markets. It is important to attain enough financial resources to be able to implement internationalisation strategies and to produce superior products for highly competitive markets (Kraus et al. 2017). Research conducted by Chetty and Campbell-Hunt (2003) indicated that niching the products to specifically meet the requirements of a new market is sometimes a complex process which can also be financially stressful. Stated by Servais and Moen (2002) insufficient or non-unique competitive products can constitute a barrier for firms (Moen & Servais 2002). Hence, standards of price, quality and customer behaviour in the host market also affect the competitiveness of the products.

Procedural barriers such as currency, different payment methods, misinterpretations when communicating across markets and complex administrative systems are also significant for the international performance of a firm (Roy, Sekhar & Vyas 2016).

2.7 Resilience

Resilience is a concept belonging in the middle of a constantly changing world (Webb 2013). Moreover, Webb (2013) describes the concept philosophically by comparing it to a boomerang. It is not how hard or long you have fallen; resilience is the fact that you return ready to face new challenges (Webb 2013). Originally the concepts stem from the description of a positive, focused and flexible human behaviour (Reinmoeller

& van Baardwijk 2005). In international business, resilience regards the capability for a company to survive and adapt their operations in a changing business environment (Ates & Bititci 2011). Further, resilience is described as the ability for a company to renew their business operations to match the changes in the business environment in which they operate (Demmer et al. 2011).

How to become resilient is a topic vastly discussed within the literature surrounding internationalisation. Some emphasise renewal and innovation of operations over time as a strategy to be resilient (Reinmoeller & van Baardwijk 2005). Here innovation and entrepreneurial activity sits at the core, whilst other claim that the focus should be surrounding risk management (Sheffi & Rice 2005). Further, Sheffi and Rice (2005) agree that innovation and renewal is of importance but that equally as important is the strategy of risk management and risk adversity.

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The business environment is changing more rapid now than ever before (Hamel &

Välikangas 2003). Comparing this to less turbulent times where firms could rely on their business strategies and models. In the reality of the business environment being rapidly changing, companies need to constantly work towards renewal and innovation to obtain favourable output. Hamel and Välikangas (2003) emphasise that it is no longer a concern about how to prepare for change but to operate in constant change and constant renewal. For an enterprise to build resilience, flexibility is a key aspect.

Being flexible in a business environment constantly fluctuating is dependent on the company's resources and capabilities (Sheffi 2015). The need for resources is to be able to reassemble and combine them as a way of being flexible and innovative. By combining the resources in a new way, the enterprise engages in renewal which is mentioned above as a way to create resilience. Both tangible and intangible resources are necessary in challenging situations to enable resilience. These resources are commonly presented in categories of material, financial, social, network or intangible resources (Pal, Torstensson & Mattila 2014). Lack of resources in the form of financial capital, time or control is a recurring situation many companies find themselves in.

Hence, holding on to unique resources and capabilities, a company can be resilient in a market and also competitive within the industry. This can for example be unique knowledge or specific capital that a competitor does not possess (Sheffi 2015). Smaller physical resources such as human capital can be vital in situations where the challenge is immediate. Whereas large financial capital can be a resource serving purpose in long periods of regression (Pal et al. 2014; Sheffi 2015).

The resources of a company develops the competence and growth (Vogus & Sutcliffe 2007). Moreover, uncertainty is surrounding the topic, meaning that the characteristics of the fluctuations in the business environment is often not known in advance.

Therefore, companies should encourage growth of capabilities to be able to answer to the uncertain and sudden changes. Capabilities such as effective decision making and strong inter-organisational relationships are often referred to as strong in terms of resilience (Pal et al. 2014; Vogus & Sutcliffe 2007). Pal et al. (2014) argues that the capability to make decisions and drive long-term strategies further supports the opportunity to stay resilient. Vogue and Sutcliffe (2007) also display that recovering from a challenge, staying resilient, will positively support the capabilities of a company and strengthen them for future challenges.

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2.8 Conceptual framework

Conducting a literature overview of the chosen topic has resulted in an understanding that the effects on how a company enters a market can appear in different shapes and forms. The choice of market and entry mode can be influenced by the urge of wanting to internationalise in the initiating stage of establishment. In contrast, gradual internationalisation to markets with common characteristics can also influence the process. What needs to be sacrificed and what can be gained in the process can also affect the process of choosing and entering a market. This stems from the advantages a company possesses towards a market. The mode of entry the company then chooses will affect the resilience on the market. The resilience on the market refers to how well a company survives throughout the challenges that follows a constantly changing business environment. Flexibility and renewal are two concepts frequently used in literature concerning resilience. To be able to achieve this the need for unique and versatile resources and capabilities is vital. Drivers motivating the internationalisation process highly influences the choice of entry mode. In addition, barriers can act as obstacles when wanting to enter a certain market. These affect the choice of entry mode and also in some matters, the opportunity for a company to become resilient on a market. An illustration of the conceptual framework is presented below.

Figure 1: conceptual framework

Resilience

Drivers &

Barriers Entry

Modes

Resources

&

Capabilities

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3 Methodology

The third chapter consists of the methodology chosen for the implementation of this thesis. It begins with a presentation of the research approach, followed by research method and the research design. Furthermore, the data collection and the case study design is featured. The chapter is finalised with a submission of the research quality applied.

3.1 Research approach

The researchers’ mission is to relate theory and reality to each other, often called empirical findings. In what matter the two should be related is a dilemma often embracing the field of scientific research. There are traditionally two alternative approaches that can be used; deductive and inductive. However, the increased usage of a mixed approach, a combination of the two, has emerged in the academic world called abductive (Patel & Davidson 2011). For this study the inductive research approach is favoured.

Deductive approach is described as the most commonly used research approach (Bryman & Bell 2015). Further, they describe the deductive theory as a linear process where theory and hypothesis is the starting point, driving the process of data collection.

Implementing this theory, the collected data is used to evaluate the hypothesis made based on an existing theory. Studies that have a deductive research approach traditionally aim to explain an occasional relationship between concepts and variables (Saunders, Lewis & Thornhill 2015). The topic this thesis assesses has not been widely explored prior and therefore sources are limited. Implementing a deductive approach is therefore seen as challenging and not suitable for this study.

Bryman and Bell (2015) explain the problematics regarding the linear process characterising the deductive approach and argues that this outlook on a research process is not realistic. The process of collecting data and conducting a study is rarely linear, instead the process is often characterised a non-linear. To tackle the non-logic sequence the research process usually follows, inductive approach is presented as a suitable research approach.

Saunders, Lewis and Thornhill (2015) define the inductive approach as contrary to the deductive approach. It is explained as an approach that may result in the same conclusion as the deductive approach would, yet the carrying through of the study would start in the opposite end of the process mentioned above. Instead of proving a hypothesis on a single case, the inductive approach proceeds from a number of cases.

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The cases are selected through specific criteria and interviews are performed to collect data (Alvesson & Skoldberg 2017). Further, this approach emphasises data collection exploring phenomenon, themes or frameworks which is then used as a base for the generation of theory (Saunders et al. 2015).

As the inductive approach works towards creating a generalised truth based on a limited amount of cases, Alvesson and Skoldberg (2017) assesses it as risky. However, since the study is made on the premises of exploring how Swedish fashion brands could enter the South Korean market and become resilient, an inductive approach with multiple case studies is preferred. The strength of the inductive approach is that it creates an understanding of a problem in the context of the social world. This by interviewing people who are situated in a position reflecting the research topic (Saunders et al. 2015).

There is a third approach existing within the field, called Abductive research approach.

According to Bryman and Bell (2015), this is a process characterised as reflexive and dialogical between theory and empirical phenomenon. By collecting data to explore phenomenons and themes together with testing them through subsequent data, this constitutes a mixed approach between the inductive and deductive (Saunders et al.

2015).

This thesis is based on the empirical findings from Swedish fashion companies collected through semi-structured interviews. The data is then further attested by theoretical material explaining the phenomenon internationalisation including concepts of entry modes drivers, barriers and resilience. This multiple case study is therefore favoured by the inductive approach. Making a multiple case study through the inductive approach will allow the researchers to, through this thesis, gain and present a better understanding about the nature of the problem.

3.2 Research method

Alvesson and Skoldberg (2017) highlight the debate regarding the distinction between qualitative and quantitative research method. They briefly define qualitative data as primarily explorative resulting in a hypothesis, whilst quantitative is described as suitable when testing a certain hypothesis. Since this thesis is not created through the testing of hypotheses and statistical tools, the quantitative research method is not sufficient. Instead the qualitative research method will be implemented.

Quantitative research approach is based on data collection that can be quantified into statistical form so that it can prove the hypothetical claim the researcher has presented (Creswell 2005).

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Further, Creswell (2005) describe the quantitative research to be most appropriate when explaining a relationship among variables in contrast to an exploratory aim.

Saunders, Lewis and Thornhill (2015) exemplify quantitative data as raw and imply that without being processed or analysed, this type of data has little meaning to the reader. Researchers using this method focuses on proving the hypothesis created from discovering a problem in the previous theory (Glaser & Strauss 1967). A series of critics have questioned the quantitative research method. Bryman and Bell (2015) and Glaser and Strauss (1967) highlight specifically the criticism directed towards the phenomenon of surveys as it should only be used as a by-product in the study.

In contrast to the experimental approach, that characterises the quantitative method, researchers may shift their interest towards the explorative approach (Merriam &

Tisdell 2016). The qualitative research method highlights the concepts of understanding people's experiences and meanings of attitudes. Rather than using surveys and statistical instruments, the qualitative research method is based on interviews and observations (Merriam & Tisdell 2016). Since the purpose of this thesis is to explore Swedish Fashion brands entering the South Korean market, using the concept of understanding through the qualitative method is favoured.

In a qualitative study, the aim is not to explain a phenomenon, instead the focus lies on seeking deeper understanding and exploration. The literature plays a less substantial role initially, instead the views of the participants is important in this method. This generates an aim and research question that is characterised as open and allows the researcher to ask general questions in order to best utilise and understand the insights of the participants. Using the qualitative method in this study allows the participating companies own experiences to act as the foundation in understanding the topic.

Analysis and interpretation of data collected through the qualitative method results in several approaches to one problem (Creswell 2005).

Since this thesis explores entry modes of multiple Swedish fashion brands to the South Korean market and how to become resilient, the study will be conducted through the qualitative method. The aim is to explore the topic and reach a deeper understanding, which the qualitative method favours (Saunders et al. 2015). The choice to implement a qualitative method favours the ability for the researchers to alter procedures and questions along the duration of the research. This strengthen the choice of method since the topic has not been comprehensively researched before and the possible outcome is therefore widely unknown.

Patel and Davidson (2011) portray the qualitative research method as time consuming and extensive. They base this statement on the voluminous material that generally constitute a study carried through with this method.

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Glaser and Strauss (1967) counter the argument with the implications that a clear structure and time management facilitates the process. Thereby, the qualitative method can be seen as extensive thus, it provides a wide range of information at disposal which favours the study.

3.3 Research design

A research can be carried through to fulfil different purposes. It can be designed to follow either exploratory, explanatory, descriptive or evaluative (Saunders et al.

2015). In which matter you present your research question will inevitably lead you into a certain design of research purpose. Saunders, Lewis and Thornhill (2015) additionally mention that the different purposes stated above does not necessarily have to be distinguished thus can be combined as well.

An exploratory study aims to gain insight on a topic that interests the researcher. By asking open questions the researcher can gain an understanding in a certain problem or field of study through using an exploratory approach. Descriptive research is widely used to gather information about an event or situation. The purpose is to present a description for when or where the event happened. In contrast, an explanatory study aims to study a relationship between variables. By using an explanatory purpose, the study should result in an explanation about how and why variables relate to each other.

Lastly, evaluative research aims to research the function of something. A research made through an evaluative method shows to what extent or how well a specific phenomenon works (Saunders et al. 2015).

When emphasising on the qualitative research method, the aim is to seek deeper understanding within the field of study the research is positioned within. Combining this method with an exploratory research purpose will fulfil the purpose of exploring a phenomenon (Creswell 2005). Therefore, the choice of research purpose for this thesis is the exploratory. By implementing the exploratory purpose along with a qualitative method will support the aim of providing an understanding for choice of entry mode for Swedish fashion brands. In addition, taking stand from an inductive approach, will allow the researchers to review and complement the concepts during the research process (Alvesson & Sköldberg 2017).

The two authors are equally responsible for the carrying through of the thesis. The division in work labour has also been implemented as equal as possible. To accomplish a unified study, separate paragraphs were written within the same chapter and the authors monitored each other’s work to correct errors. This method was used to support the structure and avoid disconnection in the research. It cannot be stated that one author did more than the other or contributed to one chapter more.

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3.4 Data collection

When carrying through a case study, several sources of data are available such as observations, interviews and archival records (Yin 2012). Independent of the strategy chosen to collect the data with, the key is that the data collection should reflect the research questions. The choice of method for data collection is therefore based on the one that is most suitable to answer and explore the concepts of the research questions (Patel & Davidsson 2011). There are two types of data that can be collected; primary data and secondary data. These two types will be combined in order to present a nuanced picture of the research topic in this thesis, however primary data will be prioritised (Creswell 2005).

3.4.1 Primary data

Primary data is characterised as information collected by the author for a specific research topic. This can be collected by interviewing a participant who is connected to the topic in order to gain information about the problem being researched (Saunders et al. 2015). Primary data presents the literature in its original state and also provides more in-depth detailed information (Creswell 2005). Using interviews as a source to gather primary data results in material based on the participants’ word on certain beliefs or behaviours (Denscombe 2014). Moreover, Denscombe (2014) describes that the interview can be made on a one-to-one basis or in a group depending on what is most suitable for the research. The choice of interview strategy and realisation is dependent on resources and costs (Patel & Davidsson 2011). In this thesis, one-to-one interviews was implemented and the interviews were all conducted through telephone, due to the geographical spreading of the interviewees and the financial resources of the researchers. Thus, this was considered the best and most convenient option to conduct the interviews.

3.4.2 Secondary data

Patel and Davidsson (2011) emphasise the importance of distinguishing primary data from secondary data. In contrast to primary data, secondary data is an interpretation of the primary. Furthermore, secondary data is explained as a summary of primary data and should therefore not be interpreted as a representation of the original publication (Creswell 2005). This type of data will be used throughout this thesis as a complementation to the primary data collected. This will strengthen the analysis of the phenomena explored and further support the understanding for choice of entry modes.