CHAPTER 7 Strategies for Competing in International Markets

CHAPTER 7 Strategies for Competing in International Markets.

Learning Objectives. This chapter will help you understand: The primary reasons companies choose to compete in international markets. How and why differing market conditions across countries influence a company’s strategy choices in international markets. The differences among the five primary modes of entry into foreign markets. The three main strategic approaches for competing internationally. How companies can to use international operations to improve overall competitiveness. The unique characteristics of competing in developing-country markets..

Why Companies Decide to Enter Foreign Markets. To gain access to new customers To achieve lower costs through economies of scale, experience, and increased purchasing power To gain access to low-cost inputs of production To further exploit its core competencies To gain access to resources and capabilities located in foreign markets.

Why Competing Across National Borders Makes Strategy Making More Complex.

FIGURE 7.1 The Diamond of National Advantage. A graphic shows the relationships in the diamond of national advantage..

Opportunities for Location-Based Advantages. Lower wage rates Higher worker productivity Lower energy costs Fewer environmental regulations Lower tax rates Lower inflation rates.

The Impact of Government Policies and Economic Conditions in Host Countries.

The Risks of Adverse Exchange Rate Shifts. Effects of exchange rate shifts: Exporters experience a rising demand for their goods whenever their currency grows weaker relative to the importing country’s currency. Exporters experience a falling demand for their goods whenever their currency grows stronger relative to the importing country’s currency..

Cross-Country Differences in Demographic, Cultural, and Market Conditions.

Primary Modes of Entry into Foreign Markets. Maintain a home country production base and export goods to foreign markets. License foreign firms to produce and distribute the firm’s products abroad. Employ a franchising strategy in foreign markets. Establish a subsidiary in a foreign market via acquisition or internal development. Rely on strategic alliances or joint ventures with foreign companies..

Export Strategies. Advantages Low capital requirements Economies of scale in utilizing existing production capacity No distribution risk No direct investment risk.

Licensing and Franchising Strategies. Advantages Low resource requirements Income from royalties and franchising fees Rapid expansion into many markets.

Foreign Subsidiary Strategies. Advantages High level of control Quick large-scale market entry Avoids entry barriers Access to acquired firm’s skills.

International Strategy: The Three Main Approaches (1 of 2).

TABLE 7.1 Advantages and Disadvantages of a Multidomestic Strategy.

TABLE 7.1 Advantages and Disadvantages of a Global Strategy.

TABLE 7.1 Advantages and Disadvantages of Transnational Strategy.

Strategies for Competing in the Markets of Developing Countries.