1 © 2001 by the mcgraw-hill companies, inc. all rights reserved. mcgraw-hill/irwin copyright...
TRANSCRIPT
1© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Chapter Outline Why Companies Expand into Foreign Markets Cross-Country Differences The Competitive Environment: Multi-country or Global
Competition? Strategy Options for Entering and Competing in
Foreign Markets Pursuing Competitive Advantage by
Competing Multinationally Profit Sanctuaries, Cross-Market
Subsidization, and Global Offensives Strategic Alliances and Joint Ventures
with Foreign Partners Competing in Emerging Foreign Markets Strategies for Local Companies in Emerging
Markets
2© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
What Is the Motivationfor Competing Internationally?
Gain access tonew customers
Capitalizeon resource
strengths andcompetencies
Helpachieve
lower costsSpread
business risk across wider market base
Obtain access to valuable natural
resources
3© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
International vs. Global Competition
International or Multinational
Competitor
Company operates in a select few foreign countries,
with modest ambitions to expand further
GlobalCompetitor
Company markets products in 50 to 100 countries and is expanding operations into additional country markets
annually
4© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Cross-Country Differences in Cultural, Demographic, and Market Conditions
Cultures and lifestyles differ among countries
Differences in market demographics
Variations in manufacturing and distribution costs
Fluctuating exchange rates
Differences in host government trade policies
=
5© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
How Markets Differ from Country to Country
Consumer tastes and preferences Consumer buying habits Market size and growth potential Distribution channels Driving forces Competitive pressures
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.
6© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Potential Locational Advantages Stemming from Cost Variations Among Countries
Manufacturing costs vary based on Wage rates Worker productivity Natural resource availability Inflation rates Energy costs Tax rates
Quality of a country’s business environment Clustering of suppliers, trade associations, and
makers of complementary products
7© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Differences in HostGovernment Trade Policies
Local content requirements Import tariffs or quotas Restrictions on exports Regulations regarding prices of imports Other regulations
Technical standards Product certification Prior approval of capital spending projects Withdrawal of funds from country Minority ownership by local citizens
8© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Multi-country
Competition
Global
Competition
Two Primary Patternsof International Competition
9© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Each country market is self-contained Competition in one country market is
independent of competition in other country markets
Rivals competing in one country market differ from set of rivals competing in another country market
Rivals vie for national market leadership No “international” market, just a collection of
country markets
Characteristics ofMulti-Country Competition
10© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Characteristics of Global Competition
Competitive conditions across country markets are strongly linked together Many of same rivals compete in many of the
same country markets Rivals vie for worldwide leadership A true international market exists
A firm’s competitive position in one country is affected by its position in other countries
Competitive advantage (or disadvantage) is based on a firm’s world-wide operations and overall global standing
11© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Strategy Options for International Markets
Exporting Licensing Franchising strategy Multi-country strategy Global strategy based on
Low cost Differentiation Best-cost Focusing
Strategic alliances or joint ventures
12© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Pursuing Competitive Advantageby Competing Multinationally
Three ways to gain competitive advantage
1. Locating activities among nations to lower costs or achieve greater product differentiation
2. Efficient/effective transfer of competitively valuable competencies and capabilities from domestic to foreign markets
3. Coordinating dispersed activities in ways a domestic-only competitor cannot
13© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
What Are Profit Sanctuaries?
Profit sanctuaries are country markets where a firm
Has a strong or protected market position and
Derives substantial profits
Generally, a firm’s most strategically crucial profit sanctuary is its home market
Profit sanctuaries are a valuable competitive asset in global industries!
14© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
What Is Cross-Market Subsidization?
Involves supporting competitive offensives in one market with resources/profits diverted from operations in other markets
Competitive power of cross-market subsidization results from a multinational firm’s ability to Draw upon its organizational resources and profits in
other country markets to help mount an attack on single-market or one-country rivals and try to lure away their customers with lower prices, discount promotions, heavy advertising, or other offensive tactics
15© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Cooperative agreements / strategic alliances with foreign companies are a means to Enter a foreign market or Strengthen a firm’s competitiveness in world
markets Purpose of alliances
Joint research efforts Technology-sharing Joint use of production or distribution facilities Marketing / promoting one another’s products
Achieving Global Competitivenessvia Cooperation
16© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Characteristics of Competing inEmerging Foreign Markets
Tailoring products for the big, emerging markets often involves Making more than minor product changes and Becoming more familiar with the 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
17© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Strategies for Local Companiesin Emerging Markets
Optimal strategic approach hingeson
Whether a firm’s competitive assets are suitable only for the home market or can be transferred abroad
Whether industry pressures to move toward global competition are strong or weak
18© 2001 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/IrwinCopyrigh
t
Ind
ust
ry P
ress
ure
s to
G
lob
aliz
e
Resources and Competitive Capabilities
Dodge Rivals by Shifting to a New
Business Model or Market Niche
Initiate Actions to Contend on a Global Level
Defend byUsing
“Home-field”Advantages
TransferCompany
Expertise toCross-Border
Markets
Tailored for Home Market
Transferable to Other Countries
Low
High
Source: Adapted from Niroj Dawar & Tony Frost, “Competing with Giants:
Survival Strategies for Local Companies in Emerging Markets,” Harvard Business Review, 77 No. 1 (Jan.-Feb. 1999), p. 122
Figure 6.1: Strategy Options for Local Companies in Competing Against Global Challengers