FINNISH SMES’ PERCEPTION OF UK MARKET ATTRACTIVENESS IN THE

AFTERMATH OF ECONOMIC DISINTEGRATION

Possible subheading

Lappeenranta–Lahti University of Technology LUT

Master’s Programme in International Business and Entrepreneurship, Master’s Thesis

2024

Vilma Viitikko

Examiners: Professor Juha Väätänen

Researcher Gregory O’Shea

ABSTRACT

Lappeenranta–Lahti University of Technology LUT

LUT School of Business and Management
Business Administration

Vilma Viitikko

Finnish SMEs’ perception of UK market attractiveness in the aftermath of economic

disintegration

Master’s thesis
2024
xx pages, xx figures, xx tables and xx appendices
Examiners: Professor Juha Väätänen and Researcher Gregory O’Shea

Keywords: List keywords that define the content of the thesis and help find it.
TIIVISTELMÄ

Lappeenrannan–Lahden teknillinen yliopisto LUT

LUT-kauppakorkeakoulu
Kauppatieteet

Vilma Viitikko

Työn suomenkielinen nimi lihavoituna (myös mahdollinen alaotsikko)

Kauppatieteiden pro gradu -tutkielma

2024
xx sivua, xx kuvaa, xx taulukkoa ja xx liitettä
Tarkastajat: Professori Juha Väätänen ja Tutkija Gregory O’Shea

Avainsanat: Listaa tähän avainsanat, joiden perusteella tutkielma voi haettaessa löytyä
ACKNOWLEDGEMENTS

(Optional)
ABBREVIATIONS

Abbreviations

SME Small and Medium-sized Enterprises

UK United Kingdom

EU European Union

IMS International Market Selection

 6

Table of contents

Abstract

(Acknowledgements)

(Symbols and abbreviations)

1 Introduction .................................................................................................................... 9
1.1 Background of the study ........................................................................................ 9
1.2 Statement of the problem ..................................................................................... 10
1.3 Aim of the research and research questions ......................................................... 10
1.4 Research methodology ......................................................................................... 11
1.5 Theoretical framework ......................................................................................... 11
1.6 Delimitations ........................................................................................................ 12
1.7 Structure of the thesis .......................................................................................... 13
2 Economic Disintegration .............................................................................................. 15
2.1 Forms of economic integration ............................................................................ 15
2.2 Benefits and disadvantages of economic integration ........................................... 16
2.2.1 Benefits of economic integration ..................................................................... 16
2.2.2 Disadvantages of economic integration ........................................................... 18
2.3 Economic disintegration ...................................................................................... 18
2.4 Brexit ................................................................................................................... 19
2.4.1 Consequences of Brexit ................................................................................... 20
3 Market Attractiveness ................................................................................................... 22
3.1 Introduction to market attractiveness ................................................................... 22
3.2 Development of market attractiveness research .................................................. 23
3.3 Market attractiveness models and factors ............................................................ 24
3.4 Other factors affecting market attractiveness ...................................................... 30
3.5 A framework for market attractiveness in the case of economic disintegration .. 32
3.6 UK market attractiveness ..................................................................................... 33
4 Research Design and Methods ..................................................................................... 36
4.1 Research philosophy ............................................................................................ 36
 7

4.2 Research methodology ......................................................................................... 37

4.3 Data collection ..................................................................................................... 38
4.4 Sampling .............................................................................................................. 40
4.5 Data analysis ........................................................................................................ 41
4.6 Reliability and validity......................................................................................... 42
5 Findings ........................................................................................................................ 44
5.1 International activities.......................................................................................... 46
5.2 Market attractiveness ........................................................................................... 47
5.3 UK market attractiveness ..................................................................................... 49
5.4 Effects of Brexit ................................................................................................... 53
5.5 Future aspects ...................................................................................................... 57
6 Discussion..................................................................................................................... 59
6.1 SQ 1 Which factors affect market attractiveness (for Finnish SMEs)? ............... 59
6.2 SQ 2 How has Brexit changed the business landscape (for Finnish SMEs)? ...... 60
6.3 How do Finnish SMEs view the UK’s market attractiveness in the aftermath of
economic disintegration? ................................................................................................. 61
7 Conclusions .................................................................................................................. 62
7.1 Answer to the main research question ................................................................. 62
7.2 Theoretical and practical implications ................................................................. 62
7.3 Limitations ........................................................................................................... 62
7.4 Further research ................................................................................................... 62
References ............................................................................................................................ 63

Appendices

Appendix 1. The Questionnaire

 8

Figures

Figure 1: Caption

Figure 2: Caption

Tables

Table 1: Caption
 9

1 Introduction

An unforeseen event occurred when the United Kingdom (UK) withdrew from the European
Union (EU) - this event being known as Brexit. In 2016, a referendum took place in the UK
where the citizens voted for the exit of the UK from the EU and after a four-year transition
period, the UK officially left the EU in 2020. Brexit has had vast and substantial effects on
many different aspects of the world economy. It has also affected the operation,
internationalisation and future plans of Finnish SMEs.

Adding on existing research, this thesis studies the effect of Brexit, a complex and unique
event, on how attractive the UK market is viewed from the perspective of Finnish SMEs.TO
BE EXTENDED

This introduction chapter goes through the background of the study, presents the research
problem and the aims of the research and research questions. The methodology for this
research is briefly presented after which the theoretical framework and limitations follow.
This chapter will end with going through the structure of this thesis.

1.1 Background of the study

Market attractiveness links to the firm internationalisation process and more specifically the
International Market Selection (IMS) process. Market attractiveness refers to how appealing
a market is viewed as for expansion or investment purposes. Market attractiveness is formed
of many different factors. Individual companies use different factors and weightings to
evaluate a market’s attractiveness. Most of the factors are also out of the influence of
individual companies.

Brexit is a form of economic disintegration where the UK withdrew from an economic

integration that unified national economic policies, abolished barriers to trade and liberalised
factor movements between the member countries. Brexit is linked to market attractiveness
in a way that the consequences of Brexit influence the factors used for market attractiveness
evaluation.
 10

While the uniqueness and complexity of Brexit as an event has gathered a lot of attention
and need for research, most research on the phenomenon has been done before UK’s actual
exit in 2020. As the new period of the UK not belonging to the EU has now been ongoing
for several years, it is possible to obtain more specific and actual results on the effects of
Brexit. Results gained before the actual EU exit have been more or less speculative.
Additionally, no research could be found on SMEs’ perception of UK market attractiveness.
Market attractiveness research tends to have very specific topics which don’t assist in
answering this research’s research question. For these reasons, and many more, there is a
need for more research on the effects of Brexit.

1.2 Statement of the problem

The need for more research on the effects of Brexit and the need for research on this specific
topic has been identified. The internationalisation of Finnish SMEs is important. ADD WHY
For this reason it is important to study and find out whether there are factors hindering the
internationalisation of Finnish SMEs. Based on the results of a research, any needed actions
can then be designed and taken in order to address any existing issues. Brexit could be
affecting the operation, internationalisation and future plans of Finnish SMEs in a harmful
way.

TO BE EXTENDED

1.3 Aim of the research and research questions

The aim of this research is to find out how Brexit, an event of economic disintegration and
the beginning of a new era, has affected how attractive Finnish SMEs view the UK market.
This results in the primary research question being formulated as:

How do Finnish SMEs view the UK’s market attractiveness in the aftermath of
economic disintegration?

To assist with addressing the primary research question and guide the scope of this research,
the following two sub-questions have been formulated:
 11

SQ 1: Which factors affect market attractiveness (for Finnish SMEs)?

SQ 2: How has Brexit changed the business landscape (for Finnish SMEs)?

TO BE EXTENDED

1.4 Research methodology

The research methodology for this research is mixed methods. The mixed methods
methodology was chosen for the benefits to be obtained from both quantitative and
qualitative approaches to assist in addressing and achieving the research objectives. The
quantitative approach enables the results to be generalized to a wider population and the
qualitative approach enables to achieve a deeper understanding. The data collection method
for collecting primary data is an online questionnaire. The target population for the research
are Finnish SMEs of different age and size and from different industries.

TO BE EXTENDED

1.5 Theoretical framework

The theoretical framework of this research builds on two concepts which are market
attractiveness and economic disintegration. The theoretical framework is depicted in Figure
X.

Figure X. The theoretical framework of this research

This research examines the relation between market attractiveness and economic
disintegration through a real-life event.
 12

1.6 Delimitations

The scope of this research is limited to Finnish SMEs. SMEs were chosen to be the focus of
this study for two major reasons. Firstly, 99.8% of the companies in Finland are SMEs
(Suomen Yrittäjät, 2024) which depictures the nature of the companies in Finland. Secondly,
when it comes to firm internationalisation and evaluating attractive markets the processes
between SMEs and large companies can vastly differ. Large companies, which can be
defined as organizations with over 250 employees and a yearly revenue of more than 50
million (European Commission, 2024c), have quite different resources compared to SMEs
or even micro-sized and small-sized companies which affects the nature of
internationalisation and evaluating market attractiveness. There are no delimitations on the
industry in which a company operates in or on the specific geographical location where the
company is located in Finland. This research also only examines the evaluation of market
attractiveness which is only one step of the IMS process. This research doesn’t for example
study the methods used for market attractiveness analysis.
 13

1.7 Structure of the thesis

The structure of this thesis is presented below in Figure X.

Figure X. The structure of this thesis

The introduction included the background of the thesis, the problem statement, presentation
of the research objectives and questions, a brief description of the research methodology and
theoretical framework and the delimitations of this research.
 14

After the introduction to this thesis, the thesis starts of with presenting existing research and
literature related to the topic. Chapters 2 and 3 dive into the theoretical framework starting
off with economic integration and then followed by market attractiveness.

Chapter 4 presents the research design and methods used for this study. The chapter goes
through the research philosophy, methodology, data collection methods, sampling, data
analysis methods and the reliability and validity of the research.

The fifth chapter presents the findings from the empirical research. Chapter 6 then combines
the findings presented in Chapter 5 with the theoretical framework presented earlier in
Chapters 2 and 3. The final chapter of this thesis, Chapter 7, provides a conclusion for this
research along with theoretical and practical implications, limitations for this research and
considerations on future research. Each chapter builds on the previous chapters forming a
coherent and solid path to reach the aims of this research and provide an answer to the
research question.
 15

2 Economic Disintegration

Brief introduction to chapter to be added

2.1 Forms of economic integration

Economic integration defined by Balassa (1976, p. 17) is “from its lowest to its highest
forms, integration progresses through the freeing of barriers to trade (‘trade integration’), the
liberalisation of factor movements (‘factor integration’), the harmonisation of national
economic policies (‘policy integration’) and the complete unification of these policies (‘total
integration’)”.

As defined in the definition, there are different forms of economic integration which are, in
order of level of integration, a free-trade area, customs union, single or common market,
economic union and a complete economic integration (Balassa, 2011, p?). Outside of
Balassa’s categorization there are also a preferential trading area and an economic and
monetary union (Krishna, 2005) (Feldstein, 1997).

The first stage of economic integration is a preferential trading area. In this area, tariffs are
removed partially allowing access to certain goods (Baccini, 2019, p?). The free trade area
extends the economic integration to tariffs and quantitative restrictions being removed
between the members of the free trade area, while each member still decides on tariffs against
non-member countries. The free trade usually comprises the trade of goods or sometimes
also services but not free movement of people or capital. (Balassa, 2011, p?) Existing free
trade areas or agreements are for example the European Free Trade Association (EFTA), the
agreement between the United States of America, Mexico and Canada (USMCA), and the
ASEAN Free Trade Area (AFTA).

A customs union has a deeper level of integration compared to a free trade area as the tariffs
against non-member countries have been equalized within the economic integration
(Balassa, 2011, p?). Current customs unions are for example the European Union Customs
Union (EUCU), the United Kingdom-Crown Dependencies Customs Union (UK-CD
Customs Union), and the Southern Common Market (Mercosur).
 16

A single or common market includes having other common regulations and requirements
regarding trade which is about removing other barriers to trade. These regulations and
requirements may concern harmonizing product standards or creating a competition policy.
(Balassa, 2011, p?) Single markets are for example the European Single Market and the
Eurasian Economic Space.

An economic union includes free movement of goods, services, and factor (people and
capital) movements, common regulations and requirements regarding trade and a mutual
trade policy for non-member countries (Balassa, 2011, p?). Existing economic unions are
the CARICOM Single Market and Economy, the Eurasian Economic Union (EAEU) and
European Economic Area (EEA).

An economic and monetary union adds integration to an economic union with unifying the
currency between the member countries. The Economic and Monetary Union of the
European Union (EMU) is an economic and monetary union. (Feldstein, 1997)

A complete economic integration is the highest form of integration which unifies the
monetary, fiscal, social and countercyclical policies of the member countries and requires a
supra national authority for making decisions concerning the member countries (Balassa,
2011, p?). Complete economic integration can be found in the European Union.

2.2 Benefits and disadvantages of economic integration

Text needed here

2.2.1 Benefits of economic integration

The benefits and disadvantages of economic integration differ according to the form of
integration. The deeper an economic integration is the more elements it has and thus
increased benefits or mutually disadvantages. The main target and benefit of economic
integration is to increase trade. Trade is enhanced through the decrease or removal of barriers
to trade. These barriers can be tariffs, quotas, exchange controls and non-tariff barriers such
as rules, regulations and other bureaucratic requirements (Collinson et al., 2020).
 17

International trade expands the market resulting in a wider consumer base and access to
additional revenue streams (source). As trade increases, it operates as a driver for economic
growth (Montanaro and Violi, 2020, p?).

The decrease or removal of barriers to trade also lowers cost of trade (Montanaro and Violi,
2020, p?). Cost of trade relates to costs from tariffs and non-tariff barriers. Costs arising
from non-tariff barriers are for example costs of shipment, having to adapt to differences in
product regulations, legal barriers and other transaction costs. (Dhingra et al., 2017, p?) It
has been pointed out that costs from non-tariff barriers can exceed costs arriving from tariffs
(Dhingra et al., 2017, p?) and thus non-tariff trade costs create a larger barrier to trade
compared to tariffs (Knobel et al., 2019, p?).

If the economic integration is deep enough, it allows for free movement of not only goods
and services but also people and capital. The free movement of goods and services provides
consumers a wider product offering. The free movement of people creates for example
employment opportunities that benefits both job seekers and organisations. Job seekers have
more opportunities and a possibility for developing skills and having a higher wage while as
organisations have a wider access for specific talent (source). Higher wages result in an
increase in purchasing power of consumers which yet again improve living standards and
contribute to economic growth.

Having a look at capital markets, free capital movement aids financing and investing
activities. Economic integration enables countries to borrow cross-border capital. (European
Commission, 2024a, p?) Free capital movement increases foreign direct investment (FDI).
Investments are able to seek higher rates of return and to reduce investment risk by being
able to diversify investments (Agénor, 2003, p?). Economic integration also expands R&D
activities (Gao, 2005, p?).

A result from decrease or removal of barriers to trade and free movement of goods, services,
people and capital are the increased possibilities for economies of scale, focus on
comparative advantage, increased competition and a more efficient allocation of resources
which increases productivity (Montanaro and Violi, 2020, p?). These result in lower prices
for consumers and business growth for companies (source?).

Economic integration also improves political relationships between the members (source).
The purpose of economic integration after the Second World War was to promote peace.
 18

Improved political relations foster political stability and enable development and work
towards mutual goals (Montanaro and Violi, 2020, p?).

2.2.2 Disadvantages of economic integration

The disadvantages of economic integration is a subject that hasn’t gathered much research
or literature (source?). This maybe also emphasises the number of advantages that are related
to economic integration. Perhaps the most noted disadvantage of economic integration is the
loss of national sovereignty (source?). Economic integration can also cause diversion of
trade where trade is diverted between different markets (Richardson, 1993, p?). The relative
prices in the domestic markets of an economic integration change due to the change in tariffs.
This also has an effect on location of production and consumption patterns. Economic
integration intensifies competition also in areas of employment and causes shifts and
reductions in employment. Companies may shift jobs countries with cheaper labour
decreasing the job positions in the domestic market. On the other hand, employees may also
shift to other countries which have better job opportunities.

2.3 Economic disintegration

Countries or member states can withdraw from an economic integration. This is the reversal
of economic integration being economic disintegration. Perhaps the most significant
resignation is the UK’s withdrawal from the EU as the EU is the highest form of economic
integration thus making the resignation complex. The UK is not the first member to withdraw
from the EU as Greenland, an autonomous province of Denmark, has resigned from the EU
in 1985. However, the UK is a sovereign state and is the only sovereign state to have left the
EU. Additionally, in 1985 the EU was the European Economic Community (EEC) which
was an economic union – a lower form of economic integration. (Add source)

There have been other economic disintegrations within other forms of economic integration
most of those being resignations from free trade agreements. The United States withdrew
from the North American Free Trade Agreement (NAFTA) in 2020 after being a member of
the trading bloc since 1994. NAFTA was one of the largest trading blocs measured by the
 19

gross domestic product. NAFTA was a free trade area with the purpose of reducing and
removing barriers to trade and investment between the U.S., Mexico and Canada. U.S.
President Donald Trump initiated the withdrawal from NAFTA and replaced the free trade
agreement with the United States-Mexico-Canada Agreement (USMCA). It is also stated
that the new trade deal wasn’t a withdrawal from NAFTA but rather a renegotiation. The
reasons for the withdrawal were to increase domestic manufacturing jobs Continue

The U.S. also withdrew from the Trans-Pacific Partnership in 2017 causing the trade
agreement to not come into effect. The trade agreement was supposed to reduce barriers to
trade including both tariffs and non-tariff barriers. The other member countries continued to
form a new trade agreement, after the U.S.’s withdrawal, called the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership.

2.4 Brexit

On the 23rd of June 2016, a referendum took place in the United Kingdom (UK) where the
citizens voted for the exit of the UK from the European Union (EU) (European Council,
2023). This decision is of historical importance as the UK is the first sovereign country to
leave the EU which is one of the most advanced economically integrated blocks. Economic
integration has substantially increased after the Second World War (Balassa, 2011, p?) but
adversely Brexit is a reversal of this development. This event is a completely unforeseen
event which has had and will still remain to have vast and substantial effects on many
different aspects of the economy.

The European Union is a complete economic integration. This means that the monetary,
fiscal, social and countercyclical policies of the member countries have been unified. The
European Union has a customs union (EUCU) which creates a single market for the member
countries called the European Single Market (source). The customs union and single market
remove all tariff and non-tariff barriers between the member countries and equalizes tariffs
against non-member countries, allow free movement of goods, services, capital and people
between member countries and result in having a common legal framework and legislation
(source). The unification of monetary policies means that within the EU there exists the
 20

European Central Bank (ECB) that sets the monetary policy for the eurozone (EZ) which
also contains a common currency for most of the member countries (source).

The European Union started to form in the 1950s. First, the European Coal and Steel
Community was established in 1952. Then cooperation between the six founding countries
continued to expand and as a result the European Economic Community (EEC) and
European Atomic Energy Community (Euratom) were formed in 1958. (European Union,
2023a).The EU started to form in the aftermath of the Second World War to prevent future
wars and to promote peace. The UK joined EEC in 1973 and Finland joined the EU in 1995
(European Union, 2023c). Thus, the UK has had a long history of trade with the EU and also
Finland as a member of the European Union.

After the referendum, the UK started to negotiate with the EU to form the Withdrawal
Agreement. The period while the negotiations took place was called a transition period. The
UK officially left the EU on the 31st of January 2020. (Foltea, 2020). During the transition
period, the economic integration between the UK and the EU didn’t yet change.

The events leading up to Brexit have said to originate already from the 1990s (Dhingra, S.
and Sampson, T., 2022, p?). Some reasons for the outcome of this referendum where for
example the threat of losing British sovereignty, lack of European identity and immigration.
These factors among others lead the UK to being Eurosceptic. (Carl et al., 2019).

2.4.1 Consequences of Brexit

Brexit has consequences for nearly all parts of the UK’s economy (Dhingra, S. and Sampson,
T., 2022, p?). Brexit started having an effect already before the referendum due to increased
uncertainty of the future and the possible implications of a leave vote. The UK faced
consequences of Brexit during the transition period even though nothing in practice changed
during that time and the economic integration with the EU remained. During 2016-2019, the
UK faced higher import and consumer prices, lower investment and slower real wage and
GDP growth (Dhingra, S. and Sampson, T., 2022, p?).

As the UK isn’t now a part of the European Union, the UK isn’t part of the complete
economic integration. The UK doesn’t belong to the European Union Customs Union
 21

(EUCU) or to the European single market. The UK cannot any longer benefit from, or from
a different perspective be restricted to, the free trade policy containing removed tariff and
non-tariff barriers to trade, the free movement of goods, services, capital and people and a
common legislation. Even while being a member of the EU, the UK hadn’t adopted the Euro
as a local currency so Brexit hasn’t resulted in a change of currency.

The UK and EU agreed on a Trade and Cooperation Agreement (TCA). The TCA includes
a free trade agreement. In the TCA, the two parties have agreed on matters such as trade of
goods and services, digital trade, intellectual property, investment, competition, taxes, public
procurement, aviation and road transport, energy, fisheries, social security coordination, law
enforcement and judicial cooperation in criminal matters, sustainability, thematic
cooperation and participation in Union programmes. The TCA excludes matters such as
foreign policy, external security and defence cooperation.

The TCA ensures zero tariffs and quotas on goods that comply with certain rules of origin.
(European Commission, 2023). Brexit and the TCA have increased the barriers to trade and
resulted in new nontariff barriers between the UK and the EU. The barriers consist of
customs checks, rules of origin requirements, sanitary and phytosanitary restrictions on trade
in animal and plant products, proving regulatory compliance, reduced market access for
service providers, non-existence of passporting rights for financial services and restrictions
on short-term business visits.

Customs declarations are needed to file when goods are exported or imported from/to the
UK or being moved through the UK. Additionally, security and safety data may need to be
provided. Special licences are required for the exporting or importing of certain goods such
as waste and hazardous chemicals. The has also been changes to the VAT rules that apply in
the UK compared to those in the EU. (European Commission, 2024b)
 22

3 Market Attractiveness

Brief introduction of chapter to be added

3.1 Introduction to market attractiveness

Identifying attractive foreign markets is a fundamental task in international business,

marketing and strategy research (Gaston-Breton, C. and Martín Martín, O. 2011, p?). The
complexity of IMS as a strategic decision has been highlighted in literature (Papadopoulos,
N. and Martín Martín, O., 2011, p?). IMS can be seen to be linked with a company’s
internationalisation strategy. Different internationalisation strategies such as the
internationalisation theory by Buckley and Casson, the Uppsala model by Johanson and
Wiedersheim-Paul and Born-Globals by Knight and Cavusgil (Iazzi et al., 2015, p?)
influence how attractive a market is viewed due to emphasising different factors when
evaluating the attractiveness of a market. IMS is included in a market entry strategy where
decisions on a target market are made (Koch, A. J., 2001, p?). The market selection decision
affects many other upcoming strategic decisions to be made such as choice of market entry
mode and implementing foreign marketing programmes which directly have an effect on the
performance and success of foreign market entry and business operation.

IMS and specifically evaluating market attractiveness is a complex process due to the
information and knowledge and analysis required to make rational and systematic decisions
while the characteristics of the decision maker affect the IMS process (Papadopoulos, N. and
Martín Martín, O., 2011, p?). Additionally, the requirement for comparative information on
countries, industries, products and consumers and considering the availability of the
information in question furthermore complicates the IMS process. Developed countries
produce and provide vast amounts of information on their markets. However, in emerging
and developing countries the amount of information available is lower and even basic data
might be unavailable. (Papadopoulos, N. and Martín Martín, O., 2011, p?) Emerging and
developing countries shouldn’t be straightforwardly considered unattractive based on the
 23

information that is unavailable. Later on in this paper, the component of future potential
when assessing market attractiveness will be examined.

3.2 Development of market attractiveness research

Research on market attractiveness is mostly tied to international market selection (IMS)

research. Market attractiveness is rarely an isolated evaluation but rather part of an
international market selection (IMS) process. International market selection is a process that
is part of companies’ international expansion where potential markets are screened for before
foreign market entry. Most of IMS research has been conducted during the beginning of the
2000s. IMS publications formulating IMS models have later on decreased due to the
difficulties related to constructing models that are applicable for different kinds of
companies (Deaza et al., 2020, p?). Most of the IMS literature examines the international
market selection process of SME’s and not MNE’s. There is said to be a need for more
research around IMS. More empirical studies are needed and especially studies using
primary data. (Papadopoulos, N. and Martín Martín, O., 2011, p?)

Besides international market selection, there is another approach for screening of attractive
markets. While international market selection, also called country ranking in some research
(Cavusgil et al., 2004, p?), views countries as markets and ranks countries based on selected
factors, international market segmentation, also known as clustering (Cavusgil et al., 2004,
p?), divides the foreign market into segments or groups where each group shares similar
characteristics disregarding country boarders.

The international market selection stream was the first to evolve (Papadopoulos, N. and
Martín Martín, O., 2011, p?). While there is more research around international market
selection and it seems to be a more used approach, Cavusgil et al. (2004) recommends for
the two approaches to be combined when screening for foreign markets to enter. On the other
hand, Papadopoulos and Martín Martín (2011) state that the choice between selection or
segmentation isn’t of relevance but rather the factors used for screening markets and the
strategy developed are of importance.

Both approaches, international market selection and segmentation, where developed in the
late 1960s. Segmentation received criticism on the approach being complicated and having
 24

methodological weaknesses. In the early models of segmentation, geographic distance was

used as the screening factor. Later on, cultural, political, socioeconomic and religious factors
were added as screening factors. (Cavusgil et al., 2004, p?) The factors for segmentation
have involved around economic and demographic factors. For international market selection,
economic development and internal stability and cohesion where the first factors to be used
when screening countries. In 1981, Harell and Kiefer presented a country attractiveness scale
which examined market size, market growth, price controls and regulations, homologation
requirements, local content and compensatory export requirements, inflation, trade balance
and political stability of different countries. In their scale, a weight was assigned to each of
the factors above and countries where then ranked in order. Thus, the country ranking
method that is vastly used nowadays was developed over 40 years ago. Harrell and Kiefer’s
model is still applicable to this day. During the years, different factors have been added and
removed between the different models for foreign country screening.

3.3 Market attractiveness models and factors

Most IMS models view the market selection process as a three-stage process. These three
stages are often called the screening stage, identification stage and selection stage. The first
stage examines macro-level data. The macro-level data assists in the initial elimination of
countries or markets that don’t meet the IMS objectives of a company. The second stage
then analyses industry level information and the third stage views firm-specific information.
(Koch, A. J., 2001, p?)

International market selection models analyse market attractiveness through three different
groups of data. These three groups are macroeconomic, mesoeconomic and microeconomic
(Deaza et al., 2020, p?). Macroeconomic data consists of data on the economy,
mesoeconomic data has a look at industry or sector level data and microeconomic data
consists of company specific data. Deaza et al. (2020) argue that the models that incorporate
all these three levels of data are the most complete models. Thus, not all models that analyse
market attractiveness necessarily view data combined from the economy, industry and the
company itself.
 25

In the IMS model by (Cavusgil, 1985, p?), the preliminary country or market screening stage
views economic, political, demographic and cultural factors. The specific factors that are
viewed in the first stage of Cavusgil’s (1985) market screening model can be seen in Figure
X. Cavusgil’s model is the most comprehensive model in literature as other models examine
notably fewer factors. Cavusgil’s model will serve as an instructive base for comparison with
other models.

Figure X. XX

The reason macro-level data is used for the initial screening is that the indicators used for
examining markets should be equal and comparable (Miečinskienė et al., 2014) and macro-
level data can be obtained for a low cost from widely available secondary sources
(Papadopoulos, N. and Martín Martín, O., 2011, p?) for most of the markets in the world.
The main reasons for the market selection process being sequential is due to effectively using
resources and not being able to excessively examine every market. Through this process,
unattractive markets are able to be excluded as soon as possible in the process. (Cavusgil,
1985, p?)

A known model for analysing the macroenvironment is the PESTLE model. The PESTLE
model views political, economic, social, technological, legal and environmental aspects that
 26

exist in the specific market that is under analysis (Johnson et al, 2017). Cavusgil’s (1985)
model views the political, economic and social/demographic aspects already during the
preliminary market screening and later in during the second stage has a look at legal aspects.
The PESTLE model extends the macroenvironment analysis also to the technological and
environmental aspects. In the paper by Miečinskienė et al. (2014), technological aspects are
brought up in the process of export market selection along with economic, political and
social.

Economic factors are convenient to be used for comparing different markets as they are
objective quantitative factors. However, while political factors can have a more subjective
nature they are assigned as important as economic factors (Rahman, 2006, p?). The
importance of political factors arises from the significance of influence they can have on a
business’s operation. As well as presented in Cavusgil’s (1985) model, Rahman (2006) also
specifically emphasises thoroughly examining government involvement in business by
stating that host governments can affect the operation of foreign businesses by placing
special rules and/or restrictions for foreign businesses regarding pricing, advertising, selling
and distributing.

Culture is a factor that should be considered while examining market attractiveness

(Cavusgil et al., 2004, p?). There are however challenges with cultural factors as the data
related to cultural factors is hard to gather and evaluate. The concept of psychic distance
reoccurs when cultural factors are discussed in IMS. (Alexander et al., 2007) Companies
tend to enter markets that have a low psychic distance compared to the home market.

A framework that assists in examining cultural factors is the CAGE framework (Johnson et
al., 2017). The CAGE framework takes into consideration the four dimensions of distance
which are cultural, administrative, geographical and economic distance. The framework
analyses the match between the foreign market and the company. Rahman (2006)
recommends to assess the compatibility of the company’s business culture to the markets
under analysis. Another model for analysing cultural aspects is the Hofstede’s model of six
dimensions of national cultures (Source).

The second analysis in Cavusgil’s model (1985) focuses on industry market potential. This
analysis is about determining the present and future demand for the industry for the markets
 27

in question. The analysis views market access, product potential and local distribution and
production.

Figure X. XX

An industry and its attractiveness can also be analysed with the Porter’s Five Forces
framework. The Porter’s Five Forces framework has a look at threat of entry, the power of
suppliers, the power of buyers, the threat of substitutes and rivalry among existing
competitors (Porter, M. E., 2008).

Rahman (2006) recommends assigning consideration to the legal environment of markets

under analysis. The structure of the existing legal system, relevant agreements and laws such
as competition regulations should be evaluated. The host countries legal system should be
compatible with the firm’s objectives and strategies. Cavusgil (1985, p?) emphasizes legal
considerations regarding investment, taxation, repatriation, employment and code of laws.
 28

Sakarya et al. (2007) point out that market selection models usually fail to examine the future
potential of markets which is true as the models focus on analysing the current situation of
the market. Sakarya et al. propose that long-term market potential should be a factor to
consider when examining a market’s attractiveness. Sakarya et al.’s (2007) presented model
for examining especially emerging markets is also 3 staged where the first stage likewise
uses macro-level indicators. However, the first stage also already includes examining
competitive rivalry which normally tends to take place in the second stage of different IMS
models. Sakarya et al.’s model also includes an industry analysis during the second stage of
IMS. In addition, as previously brought out, the second stage also includes a forecast of costs
and revenues for each market under analysis.

In the (Cavusgil, 1985, p?) IMS model, barriers to trade are examined twice – first on a
market level and then on an industry level. Rahman (2006) highlights how barriers to trade
affect market attractiveness. Rahman points out that every country controls it’s exports and
imports in some way either causing barriers to trade or support for domestically and foreign-
produced goods and services. Trade barriers can be in the form of tariffs, quotas, exchange
controls and non-tariff barriers such as rules, regulations and other bureaucratic requirements
(Collinson et al., 2020). The trend of international trade liberalisation has resulted in the
reduction of tariff barriers but on the other hand governments have increasingly been
applying non-tariff barriers in order to protect domestic industries (Rahman, 2006). Cavusgil
et al. (2004, p?) mention the importance of examining a country’s participation in regional
trade blocs and free-trade agreements. This is especially beneficial when using the clustering
method for analysing market attractiveness as countries in a same trading bloc tend to be
similar in a way. Rahman (2006) also displays the importance of viewing the costs associated
with international market entry and a factor potentially adding to costs is tariffs. Tariffs have
to be paid already before entering a market. This additionally is related to the firms
competitiveness as extra costs are allocated for the foreign company but not for the locally
operating company. Tariffs might also affect and alter the market entry strategy of a
company in order to diminish or even remove the negative affects of tariffs. A company can
for example choose to assemble locally or alter the product or service in order to avoid the
tariffs.

Iazzi et al. (2015) likewise present that international market selection consists of three stages.
They as well mention that macro-level indicators are firstly used in the initial selection of
 29

countries. However, for the second analysis, factors such as level of competition, entry
barriers and market segments are examined. As for the third stage, firm specific information
is viewed. Iazzi et al. (2015) state that the main factors influencing international market
selection can be divided into firm specific factors, host country factors and entry barriers.
Firm specific factors are related to the firm such as firm size, the firm’s international
experience and its management characteristics. Host country factors include market
attractiveness, country attractiveness, marketing infrastructures and competition. Entry
barriers are not only considered to be tariffs and non-tariff barriers but also country risk,
psychic distance and geographic distance.

The third analysis in the Cavusgil (1985) model, is completed on forecasting sales volume,
landed cost, cost of internal distribution and other determinants of profitability. The specific
factors that Cavusgil examines during this stage can be seen from Figure X. Cavusgil’s
model doesn’t specifically focus on firm specific factors. Firm specific factors have only
been added to IMS models in more recent literature. Even though some models don’t
specifically view firm specific factors such as the firm’s size, international experience and
management characteristics mentioned by Iazzi et al. (2015, p?), these are factors that work
as lens through which attractiveness of markets are viewed.

Figure X. XX
 30

The importance of conducting a competitor analysis is also brought out in research

(Cavusgil, 1985, p?) (Sakarya et al., 2007) (Iazzi et al., 2015, p?).

As previously shortly listed, Iazzi et al. (1985) mention country risk to have an influence on
IMS. Even though risk isn’t specifically mentioned in Cavusgil’s model (1985),
Papadopoulos & Martín Martín (2011, p?) (Hachemi Aliouche, 2014, p?) also bring out the
importance of risk analysis in IMS. Hachemi Aliouche (2014) divide market risks into
economic, political, legal and regulatory. To assess economic and political risk, Hachemi
Aliouche views the Euromoney’s Country Risk Index and to assess legal and regulatory risk,
The World Bank’s Ease of Doing Business Index is used. Iazzi et al. (2015, p?) use political
stability and a country risk indicator to account for country risk. In Hachemi Aliouche’s
(2014) method to rank countries’ attractiveness, a weight is assigned to specific factors with
50% of the weight being placed on market potential, followed by 20% on economic and
political risks, 20% on legal and regulatory risks and the remaining 10% on geographic and
cultural distance. Alexander et al. (2007) discuss uncertainty reduction to drive the IMS
process. Cavusgil (1985) states that systematic foreign market research can be disregarded
if the company has little at stake. Internationalization of the company can then simple be
answering to unsolicited orders that arrive from foreign customers. If more risks are
included, the more systematic and diligent the IMS process has to be before committing
resources to foreign market entry.

3.4 Other factors affecting market attractiveness

Besides factors related to the foreign markets, another aspect that shouldn’t be neglected
which affects the analysis of market attractiveness is the characteristics of the person
conducting the analysis and characteristics related to the firm undergoing IMS. IMS is under
influence of the decision maker’s cognitive models and limitations and personal values (Iazzi
et al., 2015, p?) (Gaston-Breton, C. and Martín Martín, O. 2011, p?). It is assumed that the
IMS process is rational but several authors (Miečinskienė et al., 2014, p?) (Iazzi et al., 2015,
p?) (Alexander et al., 2007, p?) point out that in reality the IMS process is non-systematic
and affected by personal beliefs, experiences and network groups. Research shows that
 31

micro firms and SMEs react to stimuli from agents such as government agencies and trade
relations (Deaza et al., 2020, p?). Also process dynamics, amounts and kinds of information
used, environment perceptions, employee participation levels, limited amount of time for
decision making, the imperfections of available decision-making models, firm stability, and
resistance to change have been listed to affect the market evaluation process (Koch, 2001,
p?) (Papadopoulos, N. and Martín Martín, O., 2011, p?) (Iazzi et al., 2015, p?).

The IMS process can also be very different depending on the characteristics of the firm.
SME’s naturally tend to use less systematic approaches as they usually lack the managerial
and human resources needed for foreign market screening (Iazzi et al., 2015, p?). While
smaller companies rely on cognition and qualitative models, medium sized companies
exploit quantitative models where macroeconomic factors are used (Deaza et al., 2020, p?).
Papadopoulos and Martín Martín (2011) also expect that there are differences in the IMS
process between non-internationalized and internationalized firms, between public and
private sector firms and differences between different industries. Additionally, Cavusgil
(1985) mentions that the extent of international involvement, an opportunistic approach
compared to fully committed exporting, influences the nature of IMS.

Market attractiveness is also affected by an initially chosen mode of entry. Whether the
market entry mode is to export or in some form of foreign direct investment, different factors
affect the market attractiveness. For example, when the entry mode is FDI, specific factors
should be viewed and used for analysis of market attractiveness, factors such as ownership
requirements, political stability, tax incentives, availability and cost of labour, availability
of natural resources, local cotent requirements and restrictions on repatriation (Cavusgil et
al., 2004, p?).

It has to be realized how diverse the context can be while evaluating market attractiveness.
The end result of market evaluation can differ hugely as perceived assessments of
international market attractiveness tend to differ greatly from objective assessments
(Papadopoulos, N. and Martín Martín, O., 2011, p?).
 32

3.5 A framework for market attractiveness in the case of economic disintegration

Economic disintegration affects a market’s attractiveness as economic disintegration affects

many of the factors that are considered when examining and determining market
attractiveness. Having a look at the different forms of economic integration, economic
integration affects factors such as trade barriers, free movement of goods, services, people
and capital, legislation, different regulations and requirements, monetary, fiscal and social
policies.

To view the effects of economic disintegration on market attractiveness, the factors related
to both market attractiveness and economic integration should be viewed. Factors related to
both market attractiveness and economic integration are for example economic, political and
legal. Economic disintegration can affect economic growth, the monetary and fiscal policies,
income levels, purchasing power and currency related aspects and these again affect the
attractiveness of a market. Political aspects than can be affected by economic disintegration
and which also affect the market attractiveness are the political environment, taxation, the
social policy and trade restrictions. Legislation can also be affected by economic
disintegration affecting market attractiveness. Other factors that are affected by economic
disintegration and affect market attractiveness are for example market size, availability of
skilled workforce and distribution possibilities. The list of factors can’t be made exhaustively
as economic disintegration affects different parties in numerous unique ways and
additionally market attractiveness is viewed differently in each case.

The purpose of this framework is to examine the effect of economic disintegration on market
attractiveness and thus compare the change in market attractiveness before and after
economic disintegration for a certain market. The framework assumes that factors that are
not considered in the framework don’t affect the market attractiveness. Thus, factors that
affect a market’s attractiveness should be placed into the framework. The framework is used
for examining a certain market’s change in market attractiveness and not for comparison and
excluding purposes between different markets. The framework is presented below in Figure
X.
 33

Figure X. A framework for analysing the change in market attractiveness after economic
disintegration.

In the framework presented in Figure X, factors that increase the attractiveness of a market
are placed on the right side and factors that decrease the attractiveness of a market are placed
on the left side. The different sizes of the factors indicate the size of the effect on market
attractiveness. Some factors may increase or decrease the market attractiveness more than
others. With this framework, it can be conveniently analysed whether the overall effect of
economic disintegration has increased or decreased the market attractiveness.

3.6 UK market attractiveness

According to a recent market attractiveness study by EY, the UK market attractiveness for
foreign direct investment (FDI) in 2023 has slightly declined (Ball and Arnold, 2023). The
 34

market attractiveness for FDI is seen to be a composition of image, investors’ confidence

and perceptions on market’s competitive benefits for FDI. There have been economic and
political challenges that have also caused an economic slowdown not only for the UK but
also for the rest of Europe and partially for the whole globe. However, FDI has increased in
Europe in 2022 compared to 2021 while during the same time period, FDI has declined in
the UK. UK is ranked second after France for FDI attractiveness. Business-friendly reforms
in France contribute to the country’s attractiveness. It can be seen that for the UK,
attractiveness for FDI has increased until and started to decline after 2017. However, it is
the same case for Germany. Opposite to this development is France, where the trend of
attractiveness for FDI has been upwards for the past 10 years. The UK held the first place
until 2018.

The reasons for the decrease in market attractiveness include the political challenges for the
UK in 2022 including still the effect of Brexit in reducing market attractiveness for FDI.
More specific reasons for the decline in market attractiveness are trade restrictions and skill
and labour shortages caused by Brexit and some additional domestic political challenges
faced in 2022. There exists concerns on the productivity and growth rates of the UK. The
withdrawal from the European Single Market is also negatively affecting market
attractiveness. Despite the challenges, FDI and market attractiveness for the UK has changed
less than could have been expected. The UK market is seen to be attractive due to the
openness of the economy while global historical links explain why the UK tends to attract
more global investors. Countries that invest the most to the UK are the USA, India, Germany,
France and the Netherlands. Many of these countries are members of the European Union
even though Brexit has most likely had an effect on the relationship between the UK and
European countries.

The UK is attractive for the size of the domestic market as it is considered to be a large and
vibrant consumer market, its legal system, the quality of education, the quality of life,
diversity, culture and language. Sectorial strengths of the UK are financial services, utilities,
pharmaceuticals, digital services and renewables. It can be seen from FDI flows that the UK
has aimed for broadening trading ties with other multilateral trading blocs after withdrawing
from the European Union. The UK has new trade integration with Australia and New
Zealand and also with Japan.
 35

Future market attractiveness for the UK looks bright. 48.6% of the survey respondents view
that UK market attractiveness will increase in the next three years. There are indications of
strategic investment to the UK which also reflects the view of future market potential. The
UK still attracts the most headquarters and R&D and manufacturing investments compared
to other European countries. Any future decline in market attractiveness arises from the
existing regulatory burden, higher costs and a decrease in market size. Also, corporate
taxation and availability and cost of real estate negatively affect the market attractiveness.
Availability of capital, R&D and climate change related actions affect where companies
decide to expand.

The survey also includes insight on UK market attractiveness from an executive perception.
UK market attractiveness has also declined in the view of executives. The UK was the most
attractive European country for foreign investment in 2021 while during the following years
both France and Germany have bypassed the UK market in attractiveness for foreign
investment leaving the UK in the third place. Factors positively affecting market
attractiveness for the UK are the size of the domestic market, education, regulatory landscape
and the diverse cultural life. Factors negatively affecting the market attractiveness of the UK
for FDI in the view of executives are trade restrictions and labour shortages. Additionally,
interest rates, financial conditions and inflation’s effect on consumer demand decrease
market attractiveness.

However, even though the market attractiveness has declined, 65% of survey respondents
plan to establish or expand operations to the UK during the next year. Additionally, the future
prospects on the market attractiveness of the UK are bright with expectations for the market
attractiveness to increase. On the other hand, nearly a fifth expect the market attractiveness
to decrease. Reasons for this are seen to be increased regularity burden, increased costs, a
reduction in market size, rising costs, political instability and incentives existing elsewhere.
The perception of increased regularity burden appears more in specific industries such as
financial services, chemicals & pharmaceuticals, consumer products, industrials and
business services. In order to improve UK market attractiveness, focus could be placed on
geographic rebalancing, reduction of corporate tax levels and improving the skill levels of
skilled UK workers.
 36

4 Research Design and Methods

A research design depicts the way how the research question will be answered (Saunders,
Lewis & Thornhill, 2016, p.163). The main research question for this study is ‘How do
Finnish SMEs view UK’s market attractiveness in the aftermath of economic
disintegration?’. This chapter will display the research philosophy, research methodology,
data collection methods, sampling, data analysis methods and the reliability and validity of
this research.

4.1 Research philosophy

Research philosophy depicts the way existing beliefs and assumptions guide research and
the development of knowledge. The research philosophy’s importance arises from the way
philosophy influences and drives the formation of the research strategy, selection of methods
for data collection and data analysis, and interpretation of the research findings. (Saunders,
Lewis & Thornhill, 2016, p.125)

A research philosophy is affected by research assumptions. These assumptions can be

divided into three groups which are ontology, epistemology, and axiology. Ontology
examines the assumptions made on the nature of reality. Epistemology examines knowledge
– more specifically what is acceptable, valid and legitimate knowledge and how knowledge
is conveyed between individuals. Axiology examines values and ethics in research.
(Saunders, Lewis & Thornhill, 2016, p.127-128) Each of these ways to categorize
assumptions, can take either an objectivist or subjectivist view. This research takes an
objectivist view where research is made through observable and measurable facts through
which “law-like” generalisations can be made of the reality. (Saunders, Lewis & Thornhill,
2016, p.128)

Research philosophies can also be differentiated based on different research paradigms in

addition to being differentiated by different research assumptions. The paradigms are
divided into four paradigms of radical humanist, radical structuralist, interpretive and
functionalist. The research paradigm of this research is identified to be the functionalist
 37

paradigm as it takes the objectivist stance previously mentioned and a regulation perspective
where research focuses on what the reality is now instead of radically challenging it. The
functionalist paradigm aims in achieving rational explanations and developing
recommendations through research. (Saunders et al., 2016, 132)

There are five philosophies which are positivism, critical realism, interpretivism,
postmodernism and pragmatism. The philosophy of positivism works with an observable
social reality in order to produce law-like generalisations. In positivism pure data is created
and this data is uninfluenced by human interpretation or bias. (Saunders, Lewis & Thornhill,
2016, p.135) In critical realism there exists an external and independent reality which is
however not completely accessible through observation (Saunders, Lewis & Thornhill,
2016, p.136). Interpretivism strives to interpret new deeper understandings of the social
world. Interpretivism takes into consideration different meanings arising from different
people, cultural backgrounds, circumstances and time. (Saunders et al., 2016, 140)
Postmodernism compares to interpretivism but goes even further and takes into
consideration the affect of language and power relations while trying to interpret new views
(Saunders et al., 2016, 141). Pragmatism places less emphasis on concepts but rather on
action in research (Saunders, Lewis & Thornhill, 2016, p.143). This research is constructed
with positivism, critical realism, interpretivist and pragmatism philosophies. This research
also takes a deductive approach as academic literature was first reviewed before data
collection and thus the research builds on theory (Saunders, Lewis & Thornhill, 2016,
p.145).

4.2 Research methodology

Research methodologies can be divided into quantitative and qualitative methodologies. The
distinctive characteristic for each methodology is that quantitative research collects and
analyses numeric data while qualitative research collects and analyses non-numerical data
such as words, images and other visual material. There is also a mixed method methodology
which combines both quantitative and qualitative features. (Saunders, Lewis & Thornhill,
2016, p.165) Quantitative research strives to find patterns, relationships and averages while
being able the generalize the findings to a larger population. (Saunders et al., 2016, 166)
 38

Qualitative research is used to analyse subjective and socially constructed meanings related
to the phenomenon under research (Saunders, Lewis & Thornhill, 2016, p.168).

For this research, the mixed method methodology has been chosen as appropriate.
Quantitative research isn’t sufficient for answering the research question as it doesn’t able
the data to be elaborated and for this reason the qualitative methodology has to be included.
If only the qualitative approach would be adopted, it wouldn’t enable to research the wider
perceptions of the population. Thus, the quantitative part of this research enables it to be
generalised to the larger population while the qualitative part provides more insight to the
phenomenon under research.

The mixed methods research design for this research is more specifically a concurrent
embedded design where quantitative and qualitative methods are used simultaneously side-
by-side. Quantitative and qualitative data is collected and analysed within a single phase.
Other ways to use both quantitative and qualitative methods are sequential exploratory,
sequential explanatory and sequential multi-phase. (Saunders, Lewis & Thornhill, 2016,
p.170) The benefit of using a concurrent mixed methods design is the ability to gain a more
profound and comprehensive answer to the research question. It is also less time consuming
compared to the other mixed methods designs.

4.3 Data collection

Data used in research can be either primary or secondary data. Primary data is data that is
collected by the researcher for the specific research. Secondary data is existing data that has
been collected previously for another purpose. (Saunders, Lewis & Thornhill, 2016, p.316)
This research collects primary data as there isn’t secondary data available that would be able
to answer the research question. The data collection method chosen for this research is a
questionnaire. Questionnaires are often used to collect factual or demographic data, data on
attitudes and opinions and data on behaviours and events (Saunders, Lewis & Thornhill,
2016, p.445). In order to answer the research question of ‘How do Finnish SMEs view UK’s
market attractiveness in the aftermath of economic disintegration?’ the wide perceptions of
Finnish companies are being researched, a questionnaire is an appropriate data collection
method.
 39

The questionnaire created for this research was created with Google Forms which is an
online form creator. The questionnaire is attached in the appendices (Appendix 1). The
questionnaire began with a description of the research and research topic. In the beginning,
it was indicated for who the questionnaire was intended for. The questionnaire also contained
a privacy statement and contact information in case questions arose from the recipients. The
questionnaire was tried to be built in a way which would increase the response rate by
keeping the questionnaire as short and simple as possible and making responding pleasant.
This was done by including a clear and concise piece of information at the beginning of the
questionnaire so that it was clear what the questionnaire was about and whether the recipient
was able to answer the questionnaire. The questionnaire was built to be anonymous which
was also expected to increase the response rate. The questionnaire was in both English and
Finnish so that the questionnaire language wouldn’t inhibit from being able to respond.
Questions were also formed in a specific way to make responding pleasant. The
questionnaire was also pilot tested before sending. Responding to the questionnaire was also
initiated by providing the ability to receive a concise summary of the survey results once the
survey results were available. As the questionnaire was built to be anonymous, respondents
could provide their contact information in order to receive the summary of results. The
responses given in the survey couldn’t be linked to the contact information provided.

The questionnaire contained 21 questions that were both of quantitative and qualitative
nature. The questionnaire began with four introductory questions. These questions also
worked for checking the reliability of the responses. Regarding the collection of quantitative
data, there were 13 close ended questions and 1 multiple choice question. Regarding the
collection of qualitative data, there were 7 open ended questions. Close ended and multiple-
choice questions were used in questions where it was possible to exhaustively list all of the
response options otherwise an open-ended question was used.

The questionnaires were sent through cooperation with the Independent Chambers of
Commerce in Finland. Respondents contact information was also collected through the
website of Suomen Yrittäjät. All of the 19 Independent Chambers of Commerce in Finland
were contacted – most of them via phone call and the rest of them through email. 9 of the
Chambers of Commerce assisted in sending the questionnaire to their member companies.
The questionnaire was either sent collectively through an email sent by an employee of the
Chamber of Commerce, through a newsletter or through a post on social media.
 40

4.4 Sampling

Sampling refers to collecting data only from a subgroup rather than from the whole
population under research (Saunders, Lewis & Thornhill, 2016, p.272). It is difficult and
almost impossible to reach every individual of the whole population and thus it is more
beneficial to target a predefined target population. Data collected from the sample group can
be generalised to the larger population (Saunders, Lewis & Thornhill, 2016, p.272). The
population for this research are Finnish SMEs. There are 443,064 SMEs in Finland which is
99.8% of the companies (Suomen Yrittäjät, 2024).

When defining the target population, it is important the all the different cases of the whole
population are represented (Saunders, Lewis & Thornhill, 2016, p.273). In this research, the
target population and sample group have to contain Finnish SMEs that are of different size
and age, are geographically located around Finland and operate in any industry possible. The
target population was identified to be the companies that worked in cooperation with the
Chambers of Commerce and Suomen Yrittäjät. Many Finnish SMEs had to be able to be
conveniently contacted in order to be able to collect a sufficient amount of data.

There are several sampling techniques that can be divided into probability or non-probability
sampling. Probability sampling includes that there is an equal chance for each member
belonging to the target population to be chosen for the research. (Saunders, Lewis &
Thornhill, 2016, p.275) Non-probability sampling means that the probability for each
member belonging to the target population to be part of the sample is unknown (Saunders,
Lewis & Thornhill, 2016, p.276).

This research utilizes non-probability sampling as not every Finnish SME that are part of the
research population have the chance to be selected for the questionnaire. In order for an SME
to have had a chance to have been selected for the research, the SME would have had to be
a member of a Chamber of Commerce or have their contact information available through
Suomen Yrittäjät.

The companies belonging to the sample group represented Finnish SMEs that are of different
size, age, location and industry. More details on the demographics of the respondents can be
found from the Findings chapter and Figures X-XX.
 41

4.5 Data analysis

As the research is a mixed method research containing both quantitative and qualitative data,
there is a need for two different data analysis methods. Quantitative data can be categorized
into numerical and categorical data (Saunders, Lewis & Thornhill, 2016, p.499). This thesis
uses categorical data which is data with values that can’t be measured numerically but can
rather be categorized into categories. Categorical data can be further divided into descriptive
and ranked data types. Descriptive data examines and counts the occurrence of each
category. Ranked data positions the different data inside the data set and each data has its
own value but the values can’t be measured numerically. (Saunders, Lewis & Thornhill,
2016, p.500) Both data types, descriptive and ranked, are also used in this thesis. The
quantitative data arises from the close ended and multiple-choice questions in the
questionnaire. All of the quantitative data was automatically collected through the Google
Forms to an Excel spreadsheet to a table format. From the spreadsheet, the occurrence of
specific responses were able to be calculated.

The qualitative data analysis is approached from a deductive perspective where exiting
theory is used prior to formulating the research question and objectives (Saunders, Lewis &
Thornhill, 2016, p.569). The deductive approach directs the data collection and analysis
processes. The qualitative data arises from the open-ended questions in the survey. All of
the qualitative data was collected through the Google Forms to an Excel spreadsheet.
Qualitative data in this research was analysed with the thematic analysis method. Thematic
analysis searches for themes, patterns and relationships that emerge in the data set (Saunders,
Lewis & Thornhill, 2016, p.579). The data analysis began with familiarising with the data
by reading all of the responses through several times. There were six open ended questions
excluding the introductory question of the respondents’ role in the company at the beginning
of the questionnaire. The focus was on the responses to these six questions. The qualitative
data was coded. As the research is approached from a deductive approach, the codes can be
initially obtained from the literature review. During the data analysis new codes were created
in situations where the existing codes weren’t sufficient. Thus, the coding was both theory
and data driven (Saunders, Lewis & Thornhill, 2016, p.583). A code grouped responses into
different themes or topics. After the data was coded, it was possible to count the occurrence
of specific codes meaning the occurrence of different topics was able to be counted.
 42

4.6 Reliability and validity

The quality of a research can be examined through concepts of reliability and validity.
Reliability refers to how reproducible or replicable a study is. By replicating a study with
conducting the same research methods, one should receive the same findings meaning that
the research is reliable. (Saunders, Lewis & Thornhill, 2016, p.202)

Several factors can affect and threaten the reliability of a research. These threats can be
categorized into four different categories which are participant error, participant bias,
researcher error and researcher bias. Participant error refers to factors affecting the research
participants’ output and performance. (Saunders, Lewis & Thornhill, 2016, p.203)
Participant error could occur in situations where the participant would be rushed into taking
a questionnaire or where the specific time, circumstances or location would negatively
impact the participant taking a questionnaire and result in inadequate responses. In this
research, participant error was tried to be minimized by allowing the participant to take the
questionnaire at any time or place that is most suitable for them. In this way, there would
most likely be less factors negatively affecting the way a participant responds to the
questionnaire. On the other hand, by allowing the participant to take the questionnaire at any
time doesn’t ensure that the participant is able to eliminate the factors affecting the way a
questionnaire is responded to.

Participant bias refers to any bias behind the participant affecting the research results.
Participant bias was mitigated by enabling complete anonymity for the questionnaire
respondents and allowing to respondents to take the questionnaire independently. The order
of the questions in the questionnaire was also thought in a way to decrease the possibility for
participant bias. There doesn’t appear to occur a sampling error either in the research.

Researcher error refers to the error coming from the researcher caused by the circumstances
when and where the research is being completed (Saunders, Lewis & Thornhill, 2016,
p.203). The researcher could be distracted by disturbances in the surrounding environment
which would negatively affect the quality of the research. Errors could also occur from
insufficient preparation. The research and research processes have been planned before
conducting the research which to begin with minimizes errors during research. Secondly,
studying and careful preparation has been taken place throughout the study which in addition
minimizes errors. During the study, all disturbances have tried to be minimized to ensure the
 43

quality of the research. Researcher bias consists of any bias of the researcher affecting
research (Saunders et al., 2016, 203). The possibility of researcher bias was kept in mind
throughout the research process in order to intentionally avoid any researcher bias affecting
the research process. More?

Research validity examines the measures used in the research and whether they are
purposeful, the accuracy used in the analysis of the results and whether the research is
generalisable. Research validity can also be divided into internal and external validity
(Saunders, Lewis & Thornhill, 2016, p.203). Internal validity checks whether what is
intended to measure in the research is measured (Saunders et al., 2016, 450). Factors that
affect and threaten internal research validity are past or recent events, testing,
instrumentation, mortality, maturation and ambiguity about causal direction. (Saunders,
Lewis & Thornhill, 2016, p.204) External validity checks whether the findings of a research
can be generalized to other settings (Saunders, Lewis & Thornhill, 2016, p.204).
 44

5 Findings

The questions asked in the questionnaire are attached in the Appendices (Appendix 1). The
questions can be grouped into 3 themes which are international activities, market
attractiveness, effects of Brexit and future aspects.

The questionnaire began with four introductory questions. The first question asked the
respondents role in the company. The second question asked for the industry in which the
company operates in. The standard industrial classification TOL 2008 by Statistics Finland
(Statistics Finland, 2024) was used for this question. The respondents represented 19
different industries out of the 22 different options. The distribution of respondents between
the industries can be seen from Figure X.

*add graph on different industries*

Figure X. XX

Respondents were asked the age and size of the company. Slightly over half of the
companies (51.7%) had been operating for more than twenty years. 23.2% of the companies
had been operating for 10-20 years meaning that 75% of the companies were more than ten
years old. 19.2% of the companies had been operating for 5-10 years. There were a few
companies that were recently established (0-2 years old) and a few that were 2-5 years old.
The age distribution of the companies can be seen below in Figure X.
 45

2,0 4,0

19,2
0 2 years
2 5 years
5 10 years
51,7
10 20 years
20 years

23,2

Figure X. XX

72.8% of the companies were micro-sized companies. For the size categorization, the
definition of the European Commission was adopted (European Commission, 2024c). 19.9%
of companies were small-sized, 5.96% were medium-sized and two of the respondents were
from large companies. The size distribution of the companies can be seen below in Figure
X.

6,0 1,3

Micro sized
19,9 company
Small sized company

Medium sized
company
Large company
72,8

Figure X. XX
 46

5.1 International activities

Slightly over half of the companies that responded to the questionnaire, 55.3%, have
international operations. Also, half of the respondents, 50.7%, are planning on
internationalising. Out of the 50.7% that are planning on internationalising, 85.7% already
have international operations and the rest 14.3 don’t have meaning that 7.3 of the
questionnaire respondents are yet to start the internationalisation of their company. Out of
the 49% of the companies that are not planning on internationalising, 24.3% have
international operations and 75.7 don’t have international operations.

*add graph here* pie charts with plans to internationalise and not planning on
internationalising

Figure X. XX

29.1% of the companies that responded to the survey operate or have operated in the UK
market. Most of the companies (63.6%) that operate or have operated in the UK market,
have entered the UK market before 2016. This is before the UK referendum took place in
2016, where the UK citizens voted for the UK to leave from the European Union (EU). 25%
of the companies have entered the UK market during 2016-2020 which is while there was
the knowledge of the upcoming UK withdrawal from the EU and while the transition period
took place. 11.4% of the companies have entered the UK market after 2021 which is during
the time period when the UK hasn’t belonged to the EU.
 47

18,5

Before 2016

During 2016 2020

7,3

After 2021
3,3

The company hasn t

70,9 entered the UK market

Figure X. XX

For 45.7% of the companies that have international operation(s), the international activity is
exporting and/or importing. The second largest group (19.9%) has a foreign supplier as
international activity. E-commerce was the third largest group (7.9%) of international
activity and foreign manufacturing the fourth largest (6.6%). 4% of the respondents with
international operations have a foreign subsidiary. Other international activities that were
mentioned in the responses, were service providing (6.0%), international customers and
subcontracting.

*graph here?*

5.2 Market attractiveness

The first question regarding market attractiveness that was asked in the questionnaire was
‘Which factors make a market attractive for your company?’. Figure X presents the different
factors which make a market attractive for the respondents. The figure also displays the
occurrence of the factors within the responses to the questionnaire.
 48

Figure X. XX

Nearly a fourth of the respondents (23.84%) mentioned that existing customers and the
demand for the company’s products or services make a market attractive. The second most
often mentioned factor (9.27 ) was the market’s product/service offering. Most of these
respondents had international operations of exporting and/or importing. These respondents
also had foreign suppliers. The respondents were especially looking for specific products,
product quality, and a diverse product offering. 8.61% of the respondents held ease of doing
business as a factor for market attractiveness. Respondents specifically mentioned ease of
doing business regarding trade, importing, procurement, transportation, monetary
transactions, paperwork and free movement of goods, people and capital. The respondents
valued reliability, swiftness, and predictability. 7.95% of the respondents asses market
potential when examining the attractiveness of a market. Market potential is viewed through
a market’s sales potential and growth of the market and economy. 6.62% of the respondents
find markets attractive based on the distance from the home market or location of the market.
Respondents find markets attractive that belong to the EU, are northern, have a good
location, are located close and have good access to major transportation routes. 5.30% of the
respondents mention the importance of legislation. They specifically mention the
bookkeeping and tax legislation and value legislation that is clear, understandable, stable
and similar to their own legislation. One of the respondents also requires that business
 49

operations should adhere to the requirements set by standards and the public authority. Price
or cost drives the attractiveness of a market for 5.30% of the respondents. Respondents view
the purchasing price of products to be imported, cost of shipping or other transportation, the
price-quality ratio and look for affordable manufacturing costs. 4.64% of the respondents
examine the size of the market to evaluate its attractiveness and 4.64% also consider the
general price level in the market. 3.97% of the respondents referred to trade restrictions when
considering market attractiveness. The respondents look for simple customs clearance and
imports -processes and the majority wants to avoid tariffs. 3.31% of the respondents are
specifically looking for growth possibilities with wanting to increase revenue, diversify their
business portfolio and acquire companies. Culture and language are factors that affect the
attractiveness of a market for 3.31% of the respondents. English is wanted as a language in
the market and respondents also assess the characteristics of people in the market ad expect
to receive respect. Competition is also a factor that is assessed when evaluating market
attractiveness. 3.31% of the respondents expect little competition or for their products or
services to be competitive, to have competitive edge, in the market. 1.99% of the respondents
view the purchasing power in the market and there is a preference to select markets from
developed countries. 1.99% of the respondents assess technological aspects when evaluating
market attractiveness and they value a modern, developed and digitally friendly market.
Other factors that were mentioned and which affect the attractiveness of a market are
business partners, the economy of the market and having euro as a currency was considered
as an advantage.

5.3 UK market attractiveness

The respondents were asked ‘How attractive did you view the UK market before Brexit?’.
The respondents were given the possibility to reply using a scale from one to four where one
meant not attractive and four meant very attractive. Grade two could be understood to
represent slightly attractive and grade three as attractive.

29.8% of the respondents viewed the UK market as very attractive and assigned the highest
grade, four, to picture UK’s market attractiveness. 31.1 of the respondents viewed the UK
market as attractive and 15.9% viewed it as slightly attractive. In total, 76.8% of the
respondents viewed the UK market to be attractive before Brexit meaning that 23.2%
 50

considered the UK market as not attractive. The distribution of views on UK market

attractiveness before Brexit can be seen from Figure X.

Figure X. XX

The respondents were also asked ‘How attractive do you view the UK market now after
Brexit?’. Compared to the 29.8 who viewed the UK market to be very attractive before
Brexit, only 5.3% considered the UK market to be very attractive after Brexit. Only 17.9%
saw the UK market as attractive and 23.8 saw it as slightly attractive after the UK’s
withdrawal from the EU. While 76.8% viewed the market as attractive before Brexit, only
47% viewed the UK market to be attractive after Brexit. Over half of the respondents (53%)
considered the UK market not attractive. The distribution of views on UK market
attractiveness after Brexit can be seen from Figure X.

Figure X. XX
 51

For 53.6% of the respondents, UK market attractiveness decreased. For 44.37% of the
respondents, the market attractiveness of the UK stayed the same as before Brexit and after
Brexit. 1.99% of the respondents viewed the UK market more attractive after Brexit. Out of
those who considered the market attractiveness to decrease, most of them (43.21%)
considered it to have decreased by one unit while 34.57% considered it to have decreased by
two units. 22.22% viewed that the market attractiveness had decreased by three units –
representing the largest possible decrease in this questionnaire. This 22.22% represents
11.92% of all of the questionnaire respondents. The average score placed on UK market
attractiveness before Brexit was 2.68 and the average score after Brexit was 1.75.

The respondents were asked about possible factors that have affected the market
attractiveness of the UK. The most occurring factors have been gathered together in Figure
X. The most often occurring factor was customs which have decreased the attractiveness of
the market. Customs complicate and slow down business operations and cause additional
costs for companies. As a result of customs, some of the companies have even discontinued
importing and re-sale in the UK.

Figure X. XX

The next most often mentioned factors affecting UK market attractiveness are related to
legislation, regulations and especially taxation. Respondents mention increased uncertainty,
complexity and ambiguity around legislation and regulations. Challenges arise from an
 52

increased amount of UK legislation and from differences between EU legislation and UK

legislation. Legislation, regulations and processes related to taxation are considered to be
difficult and complicated.

The third most mentioned factor was bureaucracy. Respondents have experienced increased
bureaucracy. The increased bureaucracy is related to border procedures and an increased
need for paperwork. An example is requirements for export documentations. The fourth most
occurring response affecting UK market attractiveness was specifically mentioned aspects
of export and import. Exporting and importing is considered more challenging. There are
increased costs, delays and bureaucracy with exporting and importing. The transition period
was specifically mentioned to have included challenges related to exporting. Exporting and
importing to and from the UK was compared to exporting and importing with markets
belonging to the EU.

Respondents mentioned often also the increased costs and changes in prices to be factors
affecting UK market attractiveness. As a result of Brexit, companies have faced a lot of
different additional costs. These costs include taxes, tariffs, costs from logistics, and
increases in product prices. These additional costs show up mostly for the customers to pay
by an increase in end prices of products.

Many respondents also specifically mention Brexit to have changed the market attractiveness
of the UK. Respondents also mentioned the effect of the UK not being part of the EU. They
refer to the UK as a third country with different procedures related to trade.

Other individual factors that the respondents mentioned were aspects related to currencies
and exchange rates. The UK has a different currency than the Euro and has had it as a
member of the EU and continues to have it after Brexit. The changes in the Pound sterling
exchange rates have been seen as positive to some respondents. Factors that are also
mentioned to affect the UK market attractiveness are the development and stability of the
economy – specifically the development of the GDP, the rate of unemployment, changes in
consumers’ purchasing power, reliability in the business environment, problems with
monetary transactions, changes in competition outside of the EU, complexity relating to
traveling and the need for work and residence permits. The political uncertainty and overall
uncertainty have decreased the market attractiveness of the UK. In general, respondents
perceive the UK market as difficult, complicated and troublesome.
 53

It is important to note that 17.22 of the respondents didn’t mention any factors that have
affected UK market attractiveness and state that nothing has changed the attractiveness of
the UK market from their perspective. In the previous questions, 44.37% of the respondents
responded that the market attractiveness of the UK has stayed at the same level. It can be
that even though a higher portion of the respondents don’t see a total change in the market
attractiveness, there can still be factors that affect the market attractiveness differently before
and after Brexit.

Those who view the market attractiveness to have increased mention that the increased
independence which the UK has gained through the withdrawal from the EU is viewed as
positive. The independence is seen through decisions made on UK’s economy, immigration
and legislation.

5.4 Effects of Brexit

The respondents were asked three specific questions related to the changes caused by Brexit.
The three questions included most common challenges that companies face as a result of
Brexit based on the literature review. Firstly, the respondents were asked about the effect of
customs checks and need for customs declarations on UK market attractiveness. Most of the
respondents (45.03%) stated that the new customs checks and need for customs declarations
have affected the UK market attractiveness a lot in a negative way. 32.45% of the
respondents viewed that the customs checks and declarations haven’t affected their
company. 20.53% said that the effect was slightly negative. A few respondents (1.99%)
stated that there has been a positive effect of the customs checks and declarations. This
1.99% is consistent with the previously reported changes in UK market attractiveness before
and after Brexit.
 54

Figure X. How much the customs checks and declarations have affected the market
attractiveness of the UK after Brexit.

Secondly, the respondents were asked about the effect of new rules and requirements on
origin of goods on UK market attractiveness. Slightly over half of the respondents (52.98%)
reported that the new rules and requirements on origin of goods haven’t affected the market
attractiveness for their company. Slightly over a fifth (22.52%) said that the market
attractiveness has been slightly negatively affected and another fifth (20.53%) said that it
has been affected a lot negatively by the rules and requirements on origin of goods. 3.97%
state that the rules and requirements have affected the market attractiveness positively,
mostly slightly but also a lot.
 55

Figure X. How much the new rules and requirements on origin of goods have affected the
market attractiveness of the UK after Brexit.

Thirdly, the respondents were asked how the removal of free movement of people and capital
has affected the market attractiveness of the UK after Brexit. 39.74% reported that the
removal of free movement of people and capital haven’t affected the market attractiveness
of the UK for their company. Slightly over half of the respondents (56.29%) stated that this
factor has negatively affected the market attractiveness, with 25.17% considering it to have
affected slightly and 31.13% considering it to have affected a lot. 3.97% consider the
removal of free movement of people and capital to have affected the UK market
attractiveness positively, either slightly or a lot.

Figure X. How much the removal of free movement of people and capital have affected the
market attractiveness of the UK after Brexit.

The respondents were asked whether they have faced any other challenges as a result of
Brexit. The responses included many similar challenges that had earlier been mentioned.
New challenges that arose were the availability of products in the UK, difficulties with the
maintenance of equipment that is located in the UK, difficulties with paying invoices and
returned packages. One of the respondents described how the company didn’t see that Brexit
would go through and for that reason didn’t secure their currency position which resulted in
the company making losses once the UK finally withdrew from the EU. Another respondent
elaborated how customers don’t have information and knowledge on exporting from the UK
and it has taken time to increase the knowledge and solve completely new issues that have
 56

occurred as a result of Brexit. A few respondents point out that the same challenges also
affect the competitors in the same way. In a way they refer to the changes occurring from
Brexit as any changes that take place in the business environment and have to be adapted to.

To be able to evaluate the effects of Brexit on UK market attractiveness, the respondents

were also asked if any other factors besides Brexit have affected the market attractiveness of
the UK either by increasing or decreasing it. The clear majority (77.48%) of the respondents
didn’t report any other factors that have either positively or negatively affected the UK
market attractiveness. One interpretation can be that there haven’t currently been other
factors affecting the market attractiveness. Four respondents confirmed that only Brexit has
affected the market attractiveness of the UK. The rest of the respondents listed other factors
that have affected the market attractiveness. Out of the one fifth (19.87%) who listed factors,
20% could be clearly interpreted as to increase the market attractiveness of the UK and
66.67% could be clearly interpreted to have decreased the market attractiveness.

Factors that have increased the market attractiveness of the UK include the UK having a
specific market for a respondent’s specific products and the UK having a growing market
for semiconductors. One respondent views the market attractiveness to have declined in the
EU in general resulting in an increase in the market attractiveness of the UK. One respondent
mentions how the companies and the public authority located in the UK have attempted to
mitigate the effects of Brexit and these actions have in fact increased the market
attractiveness of the UK. One respondent views the UK market as promising with a strong
bank sector and a strong role in European defence. Another respondent compares the UK
market to the USA and in light of the USA market the UK market is more attractive due to
less challenges.

Factors that have decreased the market attractiveness of the UK include the UK’s declining
economy, political environment, inflation, the fluctuation in the exchange rate of the Pound
sterling, quality issues and a lowering level of technology. Regarding the political
environment, political stability and UK government’s politics are factors that affect
companies’ trust and decisions to invest in the UK. Companies are looking for predictability
and stability in the business environment. The UK has a stagnating market with a high level
of competition or a market that contains an oversupply. The distance to the UK,
transportation costs and arbitrary customs pricing negatively affect the attractiveness. The
respondents mention the war in Ukraine, trade between the EU and USA, and unequal
 57

competition between Finnish companies and companies in the UK to also decrease the
market attractiveness of the UK. Considering factors related to the companies themselves,
companies also don’t find the UK market attractive due to a lack information, resources, and
relevant contacts.

Other factors that have affected the market attractiveness include the COVID-19 pandemic,
the future of GDPR related aspects in the UK, and the military partnership between Finland
and the UK along with both countries belonging to NATO, the North Atlantic Treaty
Organization.

5.5 Future aspects

The respondents were asked whether Brexit has affected their plans to expand their
company’s business operations to the UK. The majority of the respondents (59.60 )
responded that Brexit hasn’t affected. 37.75 of the respondents reported that Brexit has
negatively effected their plans to expand business operations to the UK. A few respondents
(2.65 ) even stated that Brexit has positively affected their company’s plan to expand to the
UK.

As a final question, the respondents were asked ‘How can the market attractiveness for the
UK be improved?’. 39 of the responses referred in some way either to the European Union
or an economic integration. Many were longing for the EU membership as it was, but some
were also suggesting other forms of economic integration such as (free) trade agreements
and agreements on customs. The respondents were especially wanting to remove tariffs and
customs, harmonize taxation and legislation, free movement and a change in currency to the
Euro.

Other suggestions to improve the market attractiveness of the UK were first of all related to
the customs processes. Removing the current customs formalities or easing the customs
processes were most often suggested. Respondents wished for lower costs and quicker
customs processes and delivery.

Other respondents were looking for an increase in purchasing power, lower prices, less
bureaucracy, simplified taxation, better bilateral relations and the removal of exchange rate
 58

risk. A respondent wished for actions from government to increase political stability and
predictability to increase faith among companies and investors. The political environment in
the UK should also be clear and coherent. Respondents were also in the need for clear simple
information on the market and how to do business in the UK.
 59

6 Discussion

In order to answer the main research question of ‘How do Finnish SME’s view UK’s market
attractiveness in the aftermath of economic disintegration?’, it is important to also know
which factors affect a market’s attractiveness for Finnish SMEs and how Brexit has changed
the business landscape for Finnish SMEs. The sub-questions of the research are addressed
first.

6.1 SQ 1 Which factors affect market attractiveness (for Finnish SMEs)?

Literature and previous research show that potential markets are typically screened through
a three-stage process with each stage examining different information on the market. The
first stage usually examines the market through macroeconomic information. In the model
provided by Cavusgil (1985), the first stage examines political, economic, demographic and
cultural factors. The first stage of Cavusgil’s model (1985) is presented earlier in Figure X.

In the questionnaire, it was asked ‘Which factors make a market attractive for your
company?’. The respondents showed to also view macroeconomic factors when assessing
the attractiveness of a market. However, only 15% of the responses included macroeconomic
factors. The responses mentioned political factors such as trade restrictions. The responses
mentioned also economic factors such as the economy, currency related aspects and the
purchasing power and price level of the market under analysis. As a third category, the
responses also addressed cultural aspects with most of those responses relating to language.
Other models besides the model by Cavusgil (1985) which examine the attractiveness of
markets also view technological aspects at the initial stage. The PESTLE model and the
model by Miečinskienė et al. (2014) add the technological aspect along with political,
economic and social factors. A few responses to the questionnaire mention technological
aspects to affect a market’s attractiveness.

The second analysis in Cavusgil’s model (1985) focuses on industry market potential.
Cavusgil analyses the present and future demand in the specific industry. The second
analysis on the model is presented earlier in Figure X. The factors used in this second
 60

analysis are divided into market access, product potential and distribution and production
related factors. Most of the responses to the question asked in the questionnaire are factors
that are viewed in the second analysis of Cavusgil’s model (1985). Regarding market access,
the respondents to the questionnaire mentioned trade restrictions, ease of doing business and
legislation. Almost a fifth of the responses state to view factors related to market access
when examining the attractiveness of a market.

The respondents also consider product potential for a market to be attractive. First of all, the
most often reported factor that makes a market attractive was existing customers and the
demand for the company’s products or services make a market attractive. The respondents
also said to view market size, market potential, and competition. Respondents also touched
on aspects related to local distribution and production by mentioning logistics and
transportation.

The final stage in Cavusgil’s model (1985) examines closely forecasted sales volumes,
landed cost, cost of distribution and determinants of profitability. Some of the factors used
in the final stage are similar to ones in the second stage of Cavusgil’s model but the final
stage places even more emphasis on the future outlook. Respondents also examine the future
potential by looking at market potential, market size, growth possibilities, the purchasing
power of consumers, general price level of the market, competition and different costs.

Other models for assessing market attractiveness also examine factors related to the firm
(Iazzi et al. 2015, p?; Koch, A. J., 2001, p?). The respondents didn’t bring out any firm
specific factors regarding factors that make a market attractive for their company. Research
also brought out the aspect of risk when examining market attractiveness, and none of the
responses to the questionnaire addressed risk.

6.2 SQ 2 How has Brexit changed the business landscape (for Finnish SMEs)?

The UK was part of the European Union, a complete economic integration, until a
referendum took place and the UK started to withdraw from the EU. The UK was no longer
a member of the EU after the 31st of January 2020. As the EU is the deepest form of
economic integration, the economic integration extends and affects many aspects for the
 61

member countries. As the UK withdrew from the economic integration, it meant changes in
many aspects.

The area that has most been affected by Brexit and which recurs in the responses is the
appearance of customs. As the UK is now not part of the European Union Customs Union
or the European single market, the barriers to trade have increased.

Another area that has faced changes after Brexit is legislation. The European Union law is
not anymore binding for the UK and thus the legislation in the EU and in the UK are not
harmonized anymore. The UK has now an independent regulatory and legislative power.

TO BE CONTINUED

6.3 How do Finnish SMEs view the UK’s market attractiveness in the aftermath
of economic disintegration?

The questionnaire directly asked to rate the market attractiveness of the UK before and after
Brexit. From the responses it can be clearly seen that from the perspective of Finnish SMEs
the market attractiveness of the UK has decreased as a result of Brexit. While the average
score for the market attractiveness before Brexit, on a scale from one to four, was 2.68, the
average score after Brexit dropped to 1.75. However, Brexit has not affected every company
in the same way as for 44.37% of the respondents the attractiveness of the UK market
remained the same and 1.99% even considered the UK market to more attractive after Brexit.
These responses are consistent with how economic disintegration in this case has affected
market attractiveness factors.

TO BE CONTINUED
 62

7 Conclusions

Introduction to the chapter

7.1 Answer to the main research question

7.2 Theoretical and practical implications

7.3 Limitations

7.4 Further research

 63

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Appendix 1. The Questionnaire.

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