Strategies for Entering Global Markets

Preface
Reasons for Companies opting to expand outside domestic market. Difference between Competing Internationally and Competing Globally. Difference in Strategies used at domestic level as compared to the ones needed in other countries. Shall one Customise offerings in all other countries or shall it be a Standardised one.

Cont
A Companys potential for gaining Competitive Advantage based on where it locates its Foreign activities or being at a Disadvantage because rivals have Lower Cost locations is a matter of

Strategic

Concern. Fluctuating Exchange Rates. Host Government Restrictions. Restrictions from Government of Original Country.

Strategy Options for Entering Foreign Markets

Maintain a national manufacturing base and hence Export products. License Foreign firms to use Companys Technology or produce and distribute Companys products. Use Franchising Strategy. Follow a Multi Country Strategy. Follow a Global Strategy (same Competitive Strategy in all countries). Use Strategic Alliances or Joint Ventures with foreign Companies.

Export Strategies
Minimises both Risk and Capital requirements. Control over Distribution Channel depends upon (dis)advantages of the Company. Whether an Export Strategy can be used over long run depends on relative cost competitiveness of home country. Exporter has to keep its Production and Shipping costs competitive with rivals having facilities near the end user markets.

Licensing
Is good when a firm with valuable technical know-how or patented product has neither Internal Organisational capability nor the Resources to enter Foreign market. Avoids risk of putting resources for markets unknown. Cost effective Strategy for the firm as no Set Up costs involved. However Disadvantage is losing some control as you are providing Technology to some one else (over its use, monitoring licenses, safeguarding know how).

Franchising
Difference between Franchising and Licensing. Minimum Risks in terms of Costs involved. Can use expertise of the Franchisee for a market that is unknown. However problem involved is about maintaining Quality, Consistency and Standardization.

Multi Country Strategy or a Global Strategy

Need for Multi Country Strategy on account of differences in Cultural, Economic, Political, Competitive conditions in different countries. More the diversity, stronger the case for Multi Country Strategy. Generally Companies use the same basic Competitive theme (Low Cost, Differentiation etc) in each country. A Multi Country Strategy is suitable for Companies where Multi Country Competition dominates and local responsiveness is essential. A Global Strategy works best in markets that are Globally Competitive or beginning to Globalise.

Cont
Multi Country strategy is essential:
When there are significant country-to-country differences in consumer needs and buying habits. When buyers want highly customised products. When host Govt enacts regulations that local products have to meet strict manufacturing specifications.

However there are drawbacks as well :

Difficult to transfer Companys Competency across border. Does not promote building a single, unified Competitive Strength. Hurdles for achieving Low Cost leadership unless one captures Economies of Scale.

Cont
Global Strategy can concentrate on building Resource Strengths to secure a sustainable Low-Cost or Differentiation based Competitive Advantage. When Country to Country differences are small enough, one can use Global Strategy.