Professional Documents
Culture Documents
Chap 007
Chap 007
16/e PPT
McGraw-Hill/Irwin
Screen graphics created by: Jana F. Kuzmicki, Ph.D. Troy University-Florida Region
2008 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
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Chapter Roadmap
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
Whether to customize a companys 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 companys production facilities, distribution centers, and customer service operations to realize the greatest locational advantages How to efficiently transfer a companys resource strengths and capabilities from one country to another to secure competitive advantage
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Why Do Companies Expand into Foreign Markets? Obtain access to valuable natural resources Achieve lower costs and enhance competitiveness Spread Capitalize business risk across on core wider competencies market base
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International Competitor
Global Competitor
Differences
in market demographics and income levels in manufacturing and distribution costs exchange rates
Variations
Fluctuating Differences
Distribution Driving
Competitive
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.
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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
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Competitiveness of a companys operations partly depends on whether exchange rate changes affect costs favorably or unfavorably
Lessons
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
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tariffs or quotas
regulations
Technical standards Product certification Prior approval of capital spending projects Withdrawal of funds from country Ownership (minority or majority) by local citizens
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Multi-country Competition
Global Competition
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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!
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A
firms competitive position in one country is affected by its position in other countries Competitive advantage is based on a firms worldwide operations and overall global standing Rival firms in globally competitive industries vie for worldwide leadership!
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strategy strategy
Multi-country Global
Strategic
Export Strategies
Involve
using domestic plants as a production base for exporting to foreign markets Excellent initial strategy to pursue international sales Advantages
Conservative way to test international waters Minimizes both risk and capital requirements Minimizes direct investments in foreign countries
An
Licensing Strategies
Licensing
Has 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
Disadvantage
Risk of providing valuable technical know-how to foreign firms and losing some control over its use
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Franchising Strategies
Often
Advantages
Franchisee bears most of costs and risks of establishing foreign locations Franchisor has to expend only the resources to recruit, train, and support franchisees
Disadvantage
to vary a companys competitive approach to fit specific market conditions and buyer preferences in each host county OR
Whether
Fig. 7.1: A Companys Strategic Options for Dealing with Cross-Country Variations in Buyer Preferences and Market Conditions
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A company varies its product offerings and basic competitive strategy from country to country in an effort to be responsive to differing buyer preferences and market conditions.
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Accommodate differing tastes and expectations of buyers in each country Stake out the most attractive market positions vis--vis local competitors
Local
managers are given considerable strategy-making latitude produce different products for different local markets and distribution are adapted to fit local customs and cultures
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Plants
Marketing
country-to-country differences in customer preferences and buying habits exist governments enact regulations requiring products sold locally meet strict manufacturing specifications or performance standards restrictions of host governments are so diverse and complicated they preclude a uniform, coordinated worldwide market approach
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Host
Trade
A company employs the same basic competitive approach in all countries where it operates.
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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
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Fig. 7.2: How a Localized or Multicountry Strategy Differs from a Global Strategy
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1. Locating activities among nations in ways that lower costs or achieve greater product differentiation 2. Efficient/effective transfer of competitively valuable competencies and capabilities from company operations in one country to company operations in another country 3. Coordinating dispersed activities in ways a domestic-only competitor cannot
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issues
Whether to
Concentrate each activity in a few countries or Disperse activities to many different nations
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 or Offer other valuable advantages
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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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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
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Generally,
Fig. 7.3: Profit Sanctuary Potential of Domestic-Only, International, and Global Competitors
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Draw upon its resources and profits in other country markets to mount an attack on single-market or onecountry rivals and Try to lure away their customers with
Lower prices Discount promotions Heavy advertising Other offensive tactics
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Spend more on marketing/advertising Trim its prices Boost product innovation efforts Take actions raising its costs and eroding its profits
Well below prices at which it sells in its home market or Well below its full costs per unit
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Purpose
of alliances
Joint research efforts Technology-sharing Joint use of production or distribution facilities Marketing / promoting one anothers products
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Gain better access to attractive country markets from host countrys 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 partners local market knowledge and working relationships with key government officials in host country Useful way to gain agreement on important technical standards
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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
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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
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prepared to modify aspects of the companys business model to accommodate local circumstances to change the local market to better match the way the company does business elsewhere away from those emerging markets where it is impractical or uneconomic to modify the companys business model to accommodate local circumstances
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Try
Stay
Fig. 7.4: Strategy Options for Local Companies in Competing Against Global Challengers
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market
Cater
to customers who prefer a local touch loss of customers attracted to global brands exploit its local orientation based on
Accept
Astutely
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
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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
Strategic Options for Local Companies: Dodging Rivals by Shifting to a New Business Model or Market Niche
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 firms 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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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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