Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Competing
Chapter Title in
Foreign
Markets
Screen graphics created by:
16/e PPT Jana F. Kuzmicki, Ph.D.
Troy University-Florida Region
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
“You have no choice but
to operate in a world
shaped by globalization
and the information
revolution. There are two
options: Adapt or die.”
Andrew S. Grove
7-2
Chapter Roadmap
Why Companies Expand into Foreign Markets
Cross-Country Differences in Cultural, Demographic, and
Market Conditions
The Concepts of Multi-country Competition and Global
Competition
Strategy Options for Entering and Competing in Foreign
Markets
The Quest for Competitive Advantage in Foreign Markets
Profit Sanctuaries, Cross-Market Subsidization, and Global
Strategic Offensives
Strategic Alliances and Joint Ventures with Foreign Partners
Strategies That Fit the Markets of Emerging Countries
7-3
The Four Big Strategic Issues
in Competing Multinationally
Whether to customize a company’s offerings in each
different country market to match preferences of local
buyers or offer a mostly standardized product worldwide
Whether to employ essentially the same
basic competitive strategy in all countries
or modify the strategy country by country
Where to locate a company’s production facilities,
distribution centers, and customer service operations
to realize the greatest locational advantages
How to efficiently transfer a company’s resource strengths
and capabilities from one country to another to secure
competitive advantage
7-4
Why Do Companies Expand
into Foreign Markets?
Company operates in a
select few foreign
International
countries, with modest
Competitor ambitions to expand
further
Variations in manufacturing
and distribution costs
Differences
in host government
economic and political demands
7-7
How Markets Differ from
Country to Country
Consumer tastes and preferences
Consumer buying habits
Market size and growth potential
Distribution channels
Driving forces
Competitive pressures
One of the biggest concerns of companies competing in foreign
markets is whether to customize their product offerings in each
different country market to match the tastes and preferences of local
buyers or whether to offer a mostly standardized product worldwide.
7-8
Different Countries Have
Different Locational Appeal
Manufacturing costs vary from country to country based on
Wage rates
Worker productivity
Inflation rates
Energy costs
Tax rates
Government regulations
Quality of business environment varies from country to
country
Suppliers, trade associations, and makers of
complementary products often find it advantageous to
cluster their operations in the same general location
7-9
Fluctuating Exchange Rates Affect
a Company’s Competitiveness
Currency exchange rates are unpredictable
Competitiveness of a company’s operations
partly depends on whether exchange rate
changes affect costs favorably or unfavorably
Lessons of fluctuating exchange rates
Exporters always gain in competitiveness
when the currency of the country where
goods are manufactured grows weaker
Exporters are disadvantaged when
the currency of the country where
goods are manufactured grows stronger
7-10
Test Your Knowledge
Which one of the following statements concerning the effects of
fluctuating exchange rates on companies competing in foreign
markets is true?
A. Japan-based manufacturers exporting goods to the U.S. would be
disadvantaged if the Japanese yen grows weaker in relation to the U.S.
dollar.
B. Fluctuating foreign exchange rates greatly reduce the risks of
competing in foreign markets—the big problem occurs when exchange
rates are fixed at unreasonably low levels.
C. Domestic companies under pressure from lower-cost imports are
benefited when their government’s currency grows weaker in relation
to the currencies of the countries where the imported goods are being
made.
D. Chinese exports to Europe would likely be grow in volume if the
Chinese currency because much stronger relative to the euro.
E. If the exchange rate of U.S. dollars for euros changes from $1.25 per
euro to $1.30 per euro, then it is correct to say that the U.S. dollar has
grown stronger.
7-11
Differences in Host
Government Trade Policies
Local content requirements
Restrictions on exports
Regulations on prices of imports
Import tariffs or quotas
Other regulations
Technical standards
Product certification
Prior approval of capital spending projects
Withdrawal of funds from country
Ownership (minority or majority) by local citizens
7-12
Two Primary Patterns
of International Competition
Multi-country
Competition
Global
Competition
7-13
Characteristics of
Multi-Country Competition
Market contest among rivals in one country not
closely connected to market contests in other
countries
Buyers in different countries are
attracted to different product attributes
Sellers vary from country to country
Industry conditions and competitive forces in
each national market differ in important respects
Rival firms battle for national championships –
winning in one country does not necessarily signal the
ability to fare well in other countries!
7-14
Characteristics of Global Competition
Licensing
Franchising strategy
Multi-country strategy
Global strategy
Disadvantage
Strategic Issue
7-20
Fig. 7.1: A Company’s Strategic Options for Dealing with
Cross-Country Variations in Buyer Preferences and Market Conditions
7-21
What Is a “Think-Local, Act-Local”
Approach to Strategy Making?
Significant
country-to-country differences in
customer preferences and buying habits exist
7-26
Characteristics of a “Think-Global,
Act-Global” Approach to Strategy Making
Same products under the same brand names are sold
everywhere
Same distribution channels are used in all countries
Competition is based on the same capabilities
and marketing approaches worldwide
Strategic moves are integrated and coordinated worldwide
Expansion occurs in most nations where significant buyer
demand exists
Strategic emphasis is placed on building
a global brand name
Opportunities to transfer ideas, new
products, and capabilities from one
country to another are aggressively pursued
7-27
Fig. 7.2: How a Localized or Multicountry Strategy Differs from a Global Strategy
7-28
What Is a “Think-Global, Act-Local”
Approach to Strategy Making?
Two issues
Whether to
Concentrate each activity in a
few countries or
7-35
Transferring Valuable Competencies to
Build a Global Competitive Advantage
Transferring competencies, capabilities, and
resource strengths across borders contributes to
Development of broader competencies and capabilities
Achievement of dominating depth in some competitively
valuable area
Dominating depth in a competitively valuable
capability is a strong basis for sustainable
competitive advantage over
Other multinational or global competitors and
Small domestic competitors in host countries
7-36
Coordinating Cross-Border Activities to
Build a Global Competitive Advantage
Aligningactivities located in different countries
contributes to competitive advantage 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
7-37
What Are Profit Sanctuaries?
Profit
sanctuaries are country
markets where a firm
Has a strong, protected market
position and
Derives substantial profits
Generally, a firm’s most strategically
crucial profit sanctuary is its home market
7-39
Test Your Knowledge
Profit sanctuaries are valuable competitive assets because
A. they enable a company pursuing a “think global, act local” type
of strategy to be more successful.
B. a domestic competitor with multiple profit sanctuaries can
wage and generally win a competitive offensive against a global
competitor whose profits are scattered across many different
countries.
C. they provide the financial strength to support strategic
offensives in selected country markets and can help fuel a
company’s race for global market leadership.
D. without having at least two profit sanctuaries a company is
virtually precluded from competing globally.
E. they enable a company pursuing a global strategy to compete
on an equal footing with companies employing a multicountry
strategy.
7-40
What Is Cross-Market Subsidization?
Involves supporting competitive offensives in one
market with resources/profits diverted from operations
in other markets
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 and
Try to lure away their customers with
Lower prices
Discount promotions
Heavy advertising
Other offensive tactics
7-41
For Discussion: Your Opinion
7-42
Global Strategic Offensives
Three Options
Attack a foreign rival’s profit sanctuaries
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
Employ cross-market subsidization
Attractive offensive strategy for companies competing in multiple
country markets with multiple products
Dump goods at cut-rate prices
Approach involves a company selling goods in foreign markets at
prices
Well below prices at which it sells in its home market or
Well below its full costs per unit
7-43
Achieving Global
Competitiveness via Cooperation
Cooperative
agreements with foreign companies
are a means to
Enter a foreign market or
Strengthen a firm’s competitiveness
in world markets
Purpose of alliances
Joint research efforts
Technology-sharing
Joint use of production or distribution facilities
Marketing / promoting one another’s products
7-44
Strategic Appeal of Strategic Alliances
Gain better access to attractive country markets from host
country’s government to import and market products locally
Capture economies of scale in production and/or marketing
Fill gaps in technical expertise or knowledge of local
markets
Share distribution facilities and dealer networks
Direct combined competitive energies
toward defeating mutual rivals
Take advantage of partner’s local market
knowledge and working relationships with
key government officials in host country
Useful way to gain agreement on
important technical standards
7-45
Pitfalls of Strategic Alliances
Overcoming language and cultural barriers
Dealing with diverse or conflicting operating practices
Time consuming for managers in terms of communication,
trust-building, and coordination costs
Mistrust when collaborating in
competitively sensitive areas
Clash of egos and company cultures
Dealing with conflicting objectives, strategies, corporate
values, and ethical standards
Becoming too dependent on another firm for essential
expertise over the long-term
7-46
Characteristics of Competing
in Emerging Foreign Markets
Tailoring products for big, emerging markets often
involves
Making more than minor product changes and
Becoming more familiar with local cultures
Companies have to attract buyers with
bargain prices as well as better products
Specially designed and/or specially
packaged products may be needed to
accommodate local market circumstances
Management team must usually consist
of a mix of expatriate and local managers
7-47
Strategic Options: How to Compete
in Emerging Country Markets
Prepare to compete on the basis of low price
Be prepared to modify aspects of
the company’s business model to
accommodate local circumstances
Tryto change the local market to better match the
way the company does business elsewhere
Stay away from those emerging markets where it is
impractical or uneconomic to modify the company’s
business model to accommodate local
circumstances
7-48
Fig. 7.4: Strategy Options for Local Companies
in Competing Against Global Challengers
7-49
Strategic Options for Local Companies:
Use Home-Field Advantages
Concentrate on advantages enjoyed in the home
market
Cater to customers who prefer a local touch
Accept loss of customers attracted to global brands
Astutely exploit its local orientation based on
Familiarity with local preferences
Expertise in traditional products
Long-standing customer relationships
Cater to the local market in ways that
pose difficulties for global rivals
7-50
Strategic Options for Local Companies:
Transfer Expertise to Cross-Border Markets
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
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
7-51
Strategic Options for Local Companies: Dodging Rivals
by Shifting to a New Business Model or Market Niche