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8/13/2019 Strategy for Competing in Global Markets
1/23
Strategy for Competing in
Global Markets
8/13/2019 Strategy for Competing in Global Markets
2/23
The overriding reason for
incorporating an
international strategy into
the companys strategicplan
The reason for being a global
company is to leverage capabilitiesworldwide so that a long term
competitive advantage is achieved
that cannot be achieved otherwise
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Companies expand
internationally in order to: Gain new customers
Lower costs
Leverage core competencies Spread risk
Move to an earlier point on the life cycle
curve
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Profit Sanctuaries
Areas of low competition with assured
profit margins
Companies with large, protected profit
sanctuaries have a competitive advantage
over companies that dont have a
protected sanctuary.(global competitor vs.
local or national competitor)
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Cross-Market Subsidization
Supporting competitive offensives in one
market with resources and profits diverted
from operations in other markets.
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Strategy Options for International
Markets
License
Strategic
Alliances
Domestic Export
Global
Multi-Country
Franchise
International
Strategy
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Collaborative Efforts
Export
Licensing
Franchising Strategic Alliances
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Competing Internationally or
globally
A company is an international(or multinational
competitor when it competes in a select few
foreign markets. It is a global competitor when it has or is
pursuing a market presence on most continents
and in virtually all of the worlds major countries
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Advantages and Disadvantages
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Characteristics of Export
Strategies
Involves using domestic plants as a productionbase for exporting to foreign markets- eachteam started here.
Excellent initial strategy
to pursueinternational sales
Advantages Minimizes both risk and capital requirements
Conservative way to test international waters
Minimizes direct investments in foreign
countries An export strategy is vulnerable when
Manufacturing costs in home country are higherthan in foreign countries where rivals haveplants
High shipping costs are involved
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Licensing makes sense when a firm Has valuable technical know-how or a patented
product but does not have international
capabilities or resources to enter foreign markets Desires to avoid risks of committing resources to
markets which
Are unfamiliar
Present economic uncertainty
Are politically volatile Disadvantage
Risk of providing valuable technical know-how toforeign firms and losing some control over its use
Characteristics of Licensing
Strategies
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Often is better suited to global expansionefforts of service and retailingenterprises
Advantages
Franchisee bears most of costs and risks ofestablishing foreign locations
Franchisor has to expend only the resourcesto recruit, train, and support franchisees
Disadvantage Maintaining cross-country quality
control
Characteristics of Franchising
Strategies
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Strategic Alliances and
Collaborative Partnerships
Companies sometimes use
strategic al l iancesor
col laborat ive partnershipsto
complement their own strategic
initiatives and strengthen their
competitiveness. Such cooperative
strategies go beyond normal
company-to-company dealings but
fall short of merger or full joint
venture partnership.
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Alliances Can Enhance a
Firms Competitiveness
Alliances and partnerships can help
companies cope with two demanding
compet it ive challenges
Racing against rivals to build a
market presence in many
different national markets
Racing against rivals to seize
opportunities on the frontiers
of advancing technology
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Why Are Strategic
Alliances Formed?
To collaborate on technology development or new
product development
To fill gaps in technical or manufacturing expertise
To acquire new competencies
To improve supply chain efficiency
To gain economies of scale in
production and/or marketing To acquire or improve market access via joint marketing
agreements
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Why Alliances Fail
Ability of an alliance to endure depends on How well partners work together
Success of partners in responding
and adapting to changing conditions
Willingness of partners torenegotiate the bargain
Reasons for alliance failure Diverging objectives and priorities of partners
Inability of partners to work well together
Changing conditions rendering purpose of alliance
obsolete
Emergence of more attractive technological paths
Marketplace rivalry between one or more allies
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Ways of competing
Internationally Multi Country
Each country is a stand alone market
Buyers attracted to different attributes
Sellers vary from country to country
Industry conditions and competitive forces are
different
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Global Competition
Global
Standardized approach regardless of countries
Competition based on true world market
Rivals compete for worldwide leadership Competitive conditions across national markets are
linked into a tru international market
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Each country marketis self-contained
Compet i t ionin one country market isindependentof competition in other
country markets Rivals com pet ing in one coun try
market dif fer from set ofr ivalscompeting in another count ry
market Rivals v iefor nat ionalmarket
leadership
No international market, just a
collection of country markets
Characteristics of
Multi-Country Competition
Ch t i ti f Gl b l
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Characteristics of GlobalCompetition
Compet it ive condi t ions across countrymarkets are strongly l inkedtogether Many of same rivals compete in many of the
same country markets
Rivals v iefor wo rldw ide leadership
A t rue internat ional market exists
A firms com pet it ive pos i t ion in onecountry is affectedby its position in othercountries
Competi t ive advantage (or
disadvantage) is based on a firms world-wide operations and overall globalstanding
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PitfallsCultural
In order to compete, differences in culture,
market conditions and demographics mustbe considered.
Nestles in Africa
Disney in France
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Pitfalls -- Economic
Cost issues
currency exchange rates
labor cost
material costs taxes
Business Issues
Business Friendly
Political Stability
Access to customers
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A final word of warning
Profitability in emerging country markets
rarely comes quickly or easily
New entrants have to be very sensitive to
local conditions, be willing to invest in
developing the market for their products
over the long term and be patient in
earning a profit