Strategies for competing in international markets 1 LEARNING OBJECTIVES 1. primary reasons companies choose to compete in international markets 2. how and why differing market conditions across countries influence a company’s strategy choices in international markets 3. the five major strategic options for entering foreign markets 4. the three main strategic approaches for competing internationally 5. how multinational companies are able to use international operations to improve overall competitiveness 6. the unique characteristics of competing in developing-country markets.
13
Embed
Strategies for competing in international markets · 2020. 5. 7. · COMPETING IN INTERNATIONAL MARKETS 1.Maintain a national (one-country) production base and export goods toforeign
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Strategies for competing in international markets
1
LEARNING OBJECTIVES
1. primary reasons companies choose to compete in international markets
2. how and why differing market conditions across countries influence a company’s strategy choices in international markets
3. the five major strategic options for entering foreign markets
4. the three main strategic approaches for competing internationally
5. how multinational companies are able to use international operations to improve overall competitiveness
6. the unique characteristics of competing in developing-country markets.
u Different countries have different home-country advantages in different industries
u Location-based value chain advantages for certain countries
u Differences in government policies, tax rates, and economic conditionsu Currency exchange rate risksu Differences in buyer tastes and preferences for products and services
THE RISKS OF ADVERSE EXCHANGE RATE SHIFTSu Fluctuating exchange rates pose significant economic risks to a firm’s
competitiveness in foreign markets. Exporters are disadvantaged when the currency of the country where goods are being manufactured grows stronger relative to the currency of the importing country.
u Domestic companies facing competitive pressure from lower-cost importsbenefit when their government’s currency grows weaker in relation to the currencies of the countries where the lower-cost imports are being made.
u What effects has the adoption of the euro had on the ability of European Union (EU) countries (and firms) to respond changes in intra-national economicconditions in other EU countries given that they now share a common currency?
u What should a EU firm do to respond to a adverse currency exchange rate shiftin a non-EU country?
u Conditions are favorable for using an internal startup strategy when:ü Creating an internal startup is cheaper than making an acquisition.ü Adding production capacity will not adversely impact the supply–
demand balance in the local market.ü A startup subsidiary has the ability to gain good distribution access.ü A startup subsidiary will have the size, cost structure, and resource
strengths to compete head-to-head against local rivals.
BENEFITS OF ALLIANCE AND JOINT VENTURE STRATEGIESu Gaining partner’s knowledge of local market conditionsu Achieving economies of scale through joint operationsu Gaining technical expertise and local market knowledgeu Sharing distribution facilities and dealer networks, and mutually
strengthening each partner’s access to buyers.u Directing competitive energies more toward mutual rivals and less
toward one anotheru Establishing working relationships with key officials in the host-country
THE RISKS OF STRATEGIC ALLIANCES WITH FOREIGN PARTNERSu Outdated knowledge and expertise of local partnersu Cultural and language barriersu Costs of establishing the working arrangementu Conflicting objectives and strategies and/or deep differences of opinion
about joint controlu Differences in corporate values and ethical standards.u Loss of legal protection of proprietary technology or competitive
advantageu Over dependence on foreign partners for essential expertise and
COMPETING INTERNATIONALLY: THREE STRATEGIC APPROACHESAn international strategy is a strategy for competing in two or more countries simultaneously.1. A multidomestic strategy is one in which a firm
varies its product offering and competitive approach from country to country in an effort to be responsive to differing buyer preferences and market conditions. It is a think-local, act-local type of international strategy, facilitated by decision making decentralized to the local level.
COMPETING INTERNATIONALLY: THREE STRATEGIC APPROACHES2. A global strategy is one in which a company employs the
same basic competitive approach in all countries where it operates, sells much the same products everywhere, strives to build global brands, and coordinates its actions worldwide with strong headquarters control. It represents a think-global, act-global approach.
3. A transnational strategy is a think-global, act-local approach that incorporates elements of both multidomestic and global strategies.
WHEN TO DISPERSE ACTIVITIES ACROSS MANY LOCATIONS?u Buyer-related activities can be conducted at a distance.u There are high transportation costs.u There are diseconomies of large size.u Trade barriers make a central location too expensive.u Dispersing activities reduces exchange rate risks.u Dispersion helps prevent supply interruptions.u Dispersion helps avoid adverse political developments.u Dispersion allows for location-based technology and production cost
STRATEGY OPTIONS FOR COMPETING IN THE MARKETS OF DEVELOPING COUNTRIESuPrepare to compete on the basis of low price.uPrepare to modify the firm’s business model or strategy
to accommodate local circumstances.u Try to change the local market to better match the
way the firm does business elsewhere.uAvoid developing markets where it is too difficult or