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8/3/2019 Group 5_Competitive Strategies in Foreing Markets
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Competitive strategiesfor
Firms in Foreign Markets
By :
Mittal Thakkar (102125)
Nehal Roy (102127)Nimesh Barot (102128)
21stOct11Sub : STM - II
8/3/2019 Group 5_Competitive Strategies in Foreing Markets
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What is Globalization?
2
The strategy ofapproaching worldwidemarkets with
standardized products
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Development of a GlobalCorporation
3
Evolution ofa global firm
entailsprogressivel
yinvolvedstrategylevels
1. Export-import activity
2. Foreign licensing andtechnology transfer
3. Direct investment in overseasoperations
4. Substantial increase in foreigninvestment
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Reasons for Going Global Proactive Approach
4
Additional resources
Lowered costs
Incentives
New, expanded markets
Exploitation of firm-
specific advantages
Taxes
Economies of scale
Synergy
Power and prestige
Protect home market via
offense in competitors
home
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Reasons for Going Global
Reactive Approach
5
Trade barriers
International customers
International competition
Regulation
Chance
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Beginning to Globalize:
Key Steps
6
External assessment Careful examination of critical features of the
global environment, particularly to host nations
status in Economic progress
Political control
Nationalism
Internal assessment
Identification of resources in Technical and managerial skills, capital, labor, raw
materials
Identification of capabilities in
Product delivery, financial management systems
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Factors Contributing to Complexityof Global Strategic Planning
7
1. Globals face multiple political, economic, legal, social, andcultural environment as well as various rates of changes
within each of them
2. Interactions between national and foreign environments are
complex because of national sovereignty issues and widelydiffering economic and social conditions
3. Geographic separation, cultural and national differences, andvariations in business practices tend to complicatecommunication and control efforts between headquarters andoverseas affiliates
4. Globals face extreme competition due to differences inindustry structure
5. Globals are restricted in selecting competitive strategies byvarious regional blocs and economic integrations
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Control Problems of theGlobal Firm
8
Financial policies typically are designed to further the goals of the
parent company and pay minimal attention to the goals of the
host countries
Different financial environments make normal standards ofcompany behavior concerning concerning the disposition of
earnings, sources of finance, and structure of capital more
problematic
Important differences in measurement and control systems exist
Differences exist in national attitudes toward work measurementand in government requirements about disclosure of information
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InternationalStrategy Options
9
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InternationalStrategy Options
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Mode Description Advantages Disadvantages
Exporting Transfer ofgoods orservices
acrossnationalboundaries
- Ability to realizelocationand experience
- curveeconomies- Avoids the costof establishingmanufacturingoperations inthe host country- Low risk
-High transportcosts
-Unpredictabilityof trade barriers
- Problems withlocal marketingagents
Exporting as a mode of entry are Sony in the global television market, Matsushitain the video cassetterecorder market, and several Japanese companies in theUnited States auto market.
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InternationalStrategy Options
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Mode Description Advantages Disadvantages
Licensing Foreignlicenseebuys the rights
toproduce acompanysproduct inthe licenseescountry for a
negotiated fee
- Low costs ofdevelopmentof foreign markets
and risk- Quick growthpossible
- Difficult torealizelocation and
experiencecurveeconomies & toengage inglobalstrategic
coordination- Difficult tohave controlovertechnology
For example, RCA once licensed its color television technology to a numberof Japanese companies.
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InternationalStrategy Options
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Mode Description Advantages Disadvantages
Franchising Selling tofranchiseelimited rights touse its brand nameand businessmodel in return fora lumpsumpayment and ashare of thefranchisees
profits, often in theservices and tradesectors
- Low costs ofdevelopmentof foreign marketsand risk- Quick growthpossible
- Difficult toengage inglobalstrategiccoordination- Difficult tocontrolquality
Examples of companies that use franchising as a mode of entry are McDonalds,
Kentucky Fried Chicken, Hilton hotels
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InternationalStrategy Options
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Mode Description Advantages Disadvantages
Strategicalliance/JointVenture
Sharing ofownershipstake andoperatingcontrol byboth parentcompanies
- Access to localpartnersknowledge- Shareddevelopmentcost and risk- Easier politicalacceptability- Facilitate the
transfer ofcomplementaryskills
- Difficult to engage inglobal strategiccoordination and torealize location andexperience-curveeconomies- Risk of giving awaytechnological know-how and market
access to alliancepartner for asmall return
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InternationalStrategy Options
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Mode Description Advantages Disadvantages
Whollyowned
subsidiary
Parentcompany
owns 100percent ofthesubsidiarysstock
- Protection oftechnology
- Ability toengage inglobal strategiccoordinationand to realizelocation and
experiencecurveeconomies
- High costsand risks
- Divergentcorporatecultures andpriorities