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u Why Companies Expand into Foreign Markets
u The Concepts of Multi country Competition and
Global Competition
u Strategy Options for Entering and Competing in
Foreign Markets
u The Quest for Competitive Advantage in Foreign
Markets
u Profit Sanctuaries, Cross Market Subsidization, and
Global Strategic Offensives
u Strategies That Fit the Markets of Emerging
Countries
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u Whether to `  a company¶s offerings in each
different country market to match preferences of local
buyers or offer a mostly 


product worldwide

u Whether to employ essentially the same


basic `    in all countries
or modify the strategy country by country

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u Where to Ä` a company¶s production facilities,
distribution centers, and customer service operations
to realize the greatest locational advantages

u üow to efficiently transfer a company¶s  `  


and ` Ä from one country to another to secure
competitive advantage

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u Market contest among rivals in one country not
closely connected to market contests in other
countries
u Buyers in different countries are
attracted to different product attributes
u Sellers vary from country to country
u Industry conditions and competitive forces in
each national market differ in important respects
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u Competitive conditions across


country markets are strongly linked
Many of same rivals compete in
many of the same country markets
A true international market exists
uA firm¶s competitive position in one country is
affected by its position in other countries
u Competitive advantage is based on a firm¶s world
wide operations and overall global standing
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u Exporting

u Licensing

u Franchising strategy

u Multi country strategy

u Global strategy

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u Involve  
` Ä  as a 
` 
 for     to foreign markets
u £`ÄÄ  Ä  to pursue international
sales
u ¢
 
Conservative way to test international waters
Minimizes both risk and capital requirements
Minimizes direct investments in foreign countries
u An     is Ä  Ä when
Manufacturing costs in home country are higher
than in foreign countries where rivals have plants
üigh shipping costs are involved
Adverse fluctuations in currency exchange rates
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u O`   makes sense when a firm


üas valuable technical know how or a patented product
but does not have international capabilities to enter
foreign markets
Desires to avoid risks of committing resources to
markets which are
 Unfamiliar
 Politically volatile
 Economically unstable

u h
 
_isk of providing valuable technical know how to foreign
firms and losing some control over its use
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u Oftenis   


to ÄÄ    
of  `
 Ä   

u ¢
 

Franchisee bears most of costs and


risks of establishing foreign locations

Franchisor has to expend only the


resources to recruit, train, and support franchisees

u h
 

Maintaining cross country quality control


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u Whether to   a company¶s `  


 ` to fit specific market conditions and
buyer preferences in each host county
O_
u Whether to  Ä essentially the  
in all countries

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 -Ñ 'O#.'O/
. 

A company   its 


`
   and ``  
  `  `  
in an effort to be responsive to
differing buyer preferences and
market conditions.
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.'O/. 
u Business approaches are deliberately crafted to
Accommodate differing tastes and expectations of
buyers in each country
Stake out the most attractive market positions vis
vis
local competitors
u Local managers are given considerable
strategy making latitude
u Plants produce different products
for different local markets
u Marketing and distribution are adapted
to fit local customs and cultures
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u Significant
country to country differences in
customer preferences and buying habits exist

u üost governments enact regulations requiring


products sold locally meet strict manufacturing
specifications or performance standards

u Trade restrictions of host governments are


so diverse and complicated they preclude a
uniform, coordinated worldwide market approach
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Poses problems of transferring


competencies across borders

Works against building a


unified competitive advantage
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 -Ñ ' #.' /
. 

A company  Ä the 

``   ` in all

countries where it operates.

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u Same products under the same brand names are sold
everywhere
u Same distribution channels are used in all countries
u Competition is based on the same capabilities
and marketing approaches worldwide
u Strategic moves are integrated and coordinated worldwide
u Expansion occurs in most nations where significant buyer
demand exists
u Strategic emphasis is placed on building
a global brand name
u Opportunities to transfer ideas, new
products, and capabilities from one
country to another are aggressively pursued
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 -Ñ ' #.'O/
. 

A company uses the `


`   in each country but
allows local managers latitude to . . .
. Incorporate whatever country specific
variations in product attributes are needed to
best satisfy local buyers and
. Make whatever adjustments in production,
distribution, and marketing are needed to
compete under local market conditions
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u Ñ Î to  `  


 

& O` `  among nations in ways that lower


costs or achieve greater product differentiation

2 £` `    of competitively


valuable `  `
` Ä from
company operations in one country to
company operations in another country

‰ ˜
  
  
`  in
ways a domestic only competitor cannot
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O.  
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. 

u ÑÎ 
Whether to

 Concentrate each activity in a


few countries 

 Disperse activities to many


different nations

Where to locate activities

 Which country is best


location for which activity?
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u ¢`  should be ` `  
Î
Costs of manufacturing or other value chain activities are
meaningfully lower in certain locations than in others
There are sizable scale economies
in performing the activity
There is a steep learning curve associated
with performing an activity in a single location
Certain locations have
 Superior resources
 Allow better coordination of related activities 
 Offer other valuable advantages
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 ˜
. 

u ¢`  should be


  
Î

They need to be performed close to buyers

Transportation costs, scale diseconomies, or


trade barriers make centralization expensive

Buffers for fluctuating exchange rates, supply


interruptions, and adverse politics are needed

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. 
u Ñ     competencies, capabilities, and
resource strengths across borders `   
Development of broader competencies and capabilities
Achievement of dominating depth in some competitively
valuable area

u Dominating depth in a competitively valuable


capability is a strong basis for   Ä
`  
  over
Other multinational or global competitors 

Small domestic competitors in host countries


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u ¢Ä  ` 
located in different countries
`    to `  
  in several
ways
Choose where and how to challenge rivals
Shift production from one location to
another to take advantage of most favorable
cost or trade conditions or exchange rates
Use online systems to collect ideas for new
or improved products and to determine which
products should be standardized or customized
Enhance brand reputation by incorporating
same differentiating attributes in its
products in all markets where it competes
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u Profit
sanctuaries are country
markets where a firm
üas a strong, protected market
position 

Derives substantial profits

u Generally, a firm¶s most strategically


crucial profit sanctuary is its home market

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u Involves supporting competitive offensives in one


market with resources/profits diverted from operations
in other markets
u Competitive power of cross market subsidization
results from a global firm¶s ability to
Draw upon its resources and profits in other country
markets to mount an attack on single market or one
country rivals 

Try to lure away their customers with


 Lower prices
 Discount promotions
 üeavy advertising
 Other offensive tactics
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Approach places a rival on the defensive, forcing it to
 Spend more on marketing/advertising
 Trim its prices
 Boost product innovation efforts
 Take actions raising its costs and eroding its profits
u 
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Attractive offensive strategy for companies competing in multiple
country markets with multiple products
u 
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Approach involves a company selling goods in foreign markets at
prices
 Well below prices at which it sells in its home market 
 Well below its full costs per unit
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u Tailoring products for big, emerging markets often
involves
Making more than minor product changes 

Becoming more familiar with local cultures


u Companies have to attract buyers with
bargain prices as well as better products
u Specially designed and/or specially
packaged products may be needed to
accommodate local market circumstances
u Management team must usually consist
of a mix of expatriate and local managers
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u Prepare to compete on the basis of low price
u Beprepared to modify aspects of
the company¶s business model to
accommodate local circumstances
u Try
to change the local market to better match the
way the company does business elsewhere
u Stayaway from those emerging markets where it is
impractical or uneconomic to modify the company¶s
business model to accommodate local
circumstances
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u Concentrate on advantages enjoyed in the home
market
u Cater to customers who prefer a local touch
u Accept loss of customers attracted to global brands
u Astutely exploit its local orientation based on
Familiarity with local preferences
Expertise in traditional products
Long standing customer relationships
u Cater to the local market in ways that
pose difficulties for global rivals
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u When a local company trying to defend against a global
challenger has resource strengths and capabilities suitable
for competing in other country markets, then it should
consider
Launching initiatives to transfer its expertise to
cross border markets
Becoming more of an international competitor
u Such a move to enter foreign markets can help
Build a bigger customer base (to offset
any losses in its home market)
Grow sales and profits
Put in a stronger position to contend with
global challengers in its home market
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u When industry pressures to globalize are high, viable


strategic options for a local company trying to defend
against global challengers in its home market include

Shifting the business to a piece of the industry


value chain where the firm¶s expertise/resources
provide a defendable position or maybe even
a competitive advantage

Entering a joint venture with a globally


competitive partner

Selling out to a global entrant into its


home market
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3
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u If a local company has resources and capabilities
that it can transfer to operations in other countries,
it can launch a strategy aimed at :
Entering markets of other countries as rapidly as
possible
Shifting to a more globalized strategy
Building brand recognition and a brand
image that extends to more and more
countries
Gradually establishing the resources and
capabilities to go head to head against
large global rivals
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