Bài giảng Crafting and Executing Strategy - Chapter 7: Strategies for Competing in Foreign Markets

Chapter 7: Strategies for Competing in Foreign MarketsScreen graphics created by:Jana F. Kuzmicki, Ph.D.Troy UniversityChapter Learning ObjectivesDevelop an understanding of why companies that have achieved competitive advantage in their domestic market may opt to enter foreign markets.Learn how and why differing market conditions in different countries influence a company’s strategy for competing in foreign markets.Gain familiarity with the major strategic options for entering and competing in foreign markets.Understand the principal approaches used by multinational companies in building competitive advantage in foreign markets.Gain an understanding of the unique characteristics of competing in emerging markets.Chapter RoadmapWhy Companies Expand into Foreign MarketsFactors that Shape Strategy Choices in Foreign MarketsThe Concepts of Multicountry Competition and Global CompetitionStrategy Options for Entering and Competing in Foreign MarketsThe Quest for Competitive Advantage in Foreign MarketsStrategies to Compete in the Markets of Emerging CountriesThe Four Big Strategic Issuesin Competing MultinationallyWhether to customize a company’s offerings in each different country market to match preferences of local buyers or offer a mostly standardized product worldwideWhether to employ essentially the samebasic competitive strategy in all countriesor modify the strategy country by countryWhere to locate a company’s production facilities,distribution centers, and customer service operations to realize the greatest locational advantagesHow to efficiently transfer a company’s resource strengths and capabilities from one country to another to secure competitive advantageWhy Do Companies Expandinto Foreign Markets?Gain access tonew customersCapitalizeon corecompetenciesAchieve lowercosts and enhance competitivenessSpreadbusiness risk across widermarket baseObtain access to valuable naturalresources7-5International vs. Global CompetitionInternational CompetitorGlobalCompetitorCompany operates in a select few foreign countries, with modest ambitions to expand furtherCompany markets products in 50 to 100 countries andis expanding operations into additional country markets annually7-6Factors Shaping Strategy Choices in Foreign MarketsCross-country differences in cultural, demographic, and market conditionsGaining competitive advantage basedon where activities are locatedRisks of adverse shifts incurrency exchange ratesImpact of host government policieson the local business climate7-7Cultures and lifestyles differ among countriesDifferences in market demographicsand income levelsVariations in manufacturingand distribution costsFluctuating exchange ratesDifferences in host governmenteconomic and political demandsCross-Country Differences in Cultural, Demographic, and Market ConditionsConsumer tastes and preferencesConsumer buying habitsMarket size and growth potentialDistribution channelsDriving forcesCompetitive pressuresHow Markets Differ from Country to CountryOne 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 tooffer a mostly standardized product worldwide.Manufacturing costs vary from country to country based onWage ratesWorker productivityInflation ratesEnergy costsTax ratesGovernment regulationsQuality of business environment varies from country to countrySuppliers, trade associations, and makers of complementary products often find it advantageous to cluster their operations in the same general locationDifferent Countries HaveDifferent Locational AppealFluctuating Exchange Rates Affect a Company’s CompetitivenessCurrency exchange rates are unpredictableCompetitiveness of a company’s operationspartly depends on whether exchange ratechanges affect costs favorably or unfavorablyCompetitive impact of fluctuating exchange ratesExporters always gain in competitivenesswhen the currency of the country wheregoods are manufactured grows weakerExporters are disadvantaged whenthe currency of the country wheregoods are manufactured grows strongerDifferences in HostGovernment Trade PoliciesLocal content requirementsRestrictions on exportsRegulations on prices of importsImport tariffs or quotasOther regulationsTechnical standardsProduct certificationPrior approval of capital spending projectsWithdrawal of funds from countryOwnership (minority or majority) by local citizensMulti-country CompetitionGlobal CompetitionTwo Primary Patternsof International CompetitionCharacteristics ofMulti-Country CompetitionMarket contest among rivals in onecountry not closely connected tomarket contests in other countriesBuyers in different countries areattracted to different product attributesSellers vary from country to countryIndustry conditions and competitive forces ineach national market differ in important respectsRival firms battle for national championships –winning in one country does not necessarily signal the ability to fare well in other countries!Competitive conditions across country markets are strongly linkedMany of same rivals compete inmany of the same country marketsA true international market existsA firm’s competitive position in one country is affected by its position in other countriesCompetitive advantage is based on a firm’s world-wide operations and overall global standingCharacteristics of Global CompetitionRival firms in globally competitiveindustries vie for worldwide leadership! Strategy Options for Competing in Foreign MarketsExportingLicensingFranchising strategyStrategic alliances orjoint venturesMulti-country strategyGlobal strategyInvolve using domestic plants as a production base for exporting to foreign marketsExcellent initial strategy topursue international salesAdvantagesConservative way to test international watersMinimizes both risk and capital requirementsMinimizes direct investments in foreign countriesAn export strategy is vulnerable whenManufacturing costs in home country are higherthan in foreign countries where rivals have plantsHigh shipping costs are involvedAdverse fluctuations in currency exchange rates occurExport StrategiesLicensing StrategiesLicensing makes sense when a firmHas valuable technical know-how or a patented product but does not have international capabilities to enter foreign marketsDesires to avoid risks of committing resources to markets which areUnfamiliarPolitically volatileEconomically unstableDisadvantageRisk of providing valuable technical know-how to foreign firms and losing some control over its useFranchising StrategiesOften is better suited to global expansion efforts of service and retailing enterprisesAdvantagesFranchisee bears most of costs andrisks of establishing foreign locationsFranchisor has to expend only theresources to recruit, train, and support franchiseesDisadvantageMaintaining cross-country quality controlAchieving Global Competitivenessvia Cooperative AgreementsCooperative agreements withforeign companies are a means toEnter a foreign market orStrengthen a firm’scompetitiveness in world marketsPurpose of alliances / joint venturesJoint research effortsTechnology-sharingJoint use of production or distribution facilitiesMarketing / promoting one another’s productsStrategic Appeal of Strategic AlliancesGain better access to attractive country marketsCapture economies of scale in production and/or marketingFill gaps in technical expertise or knowledge of local marketsShare distribution facilities and dealer networksDirect combined competitive energies toward defeating mutual rivalsTake advantage of partner’s local marketknowledge and working relationships withkey government officials in host country Useful way to gain agreement onimportant technical standardsPitfalls of Strategic AlliancesOvercoming language and cultural barriersDealing with diverse or conflicting operating practicesTime consuming for managers interms of communication,trust-building, and coordination costsMistrust when collaborating in competitively sensitive areas Clash of egos and company culturesDealing with conflicting objectives, strategies, corporate values, and ethical standardsBecoming too dependent on another firm for essential expertise over the long-term Localized Multicountry Strategyor a Global Strategy?Whether to vary a company’s competitive approach to fit specific market conditions and buyer preferences in each host countyorWhether to employ essentially the same strategy in all countriesStrategic IssueFigure 7.1: A Company’s Strategic Options for Dealing withCross-Country Variations in Buyer Preferences and Market Conditions7-24When Is a “Think-Local, Act-Local”Approach to Strategy Making Necessary?Significant country-to-countrydifferences in customer preferencesand buying habits existHost governments enact regulations requiring products sold locally meet strict manufacturing specifications or performance standardsTrade restrictions of host governments areso diverse and complicated they preclude auniform, coordinated worldwide market approachDrawbacks of a “Think-Local,Act-Local” Approach to Strategy MakingPoses problems of transferring competencies across bordersWorks against building aunified competitive advantage7-26Characteristics of a “Think-Global,Act-Global” Approach to Strategy MakingSame products under the same brand names are sold everywhereSame distribution channels are used in all countriesCompetition is based on the same capabilitiesand marketing approaches worldwideStrategic moves are integrated and coordinated worldwideExpansion occurs in most nations wheresignificant buyer demand existsStrategic emphasis is placed onbuilding a global brand nameOpportunities to transfer ideas, newproducts, and capabilities from onecountry to another are aggressively pursuedFigure 7.2: How a Localized or MulticountryStrategy Differs from a Global Strategy7-28The Quest for CompetitiveAdvantage in Foreign MarketsThree ways to gain competitive advantage1. Locating activities among nationsin ways that lower costs or achievegreater product differentiation2. Efficient/effective transfer of competitivelyvaluable competencies and capabilities fromcompany operations in one country to company operations in another country3. Coordinating dispersed activities in ways a domestic-only competitor cannotLocating Activities to Build aGlobal Competitive AdvantageTwo issues . . .Whether to Concentrate each activityin a few countries orDisperse activities tomany different nationsWhere to locate activitiesWhich country is best location for which activity?Activities should be concentrated whenCosts of manufacturing or other value chain activities are meaningfully lower in certain locations than in othersThere are sizable scale economiesin performing the activityThere is a steep learning curve associatedwith performing an activity in a single locationCertain locations haveSuperior resourcesAllow better coordination of related activities orOffer other valuable advantages Concentrating Activities to Builda Global Competitive AdvantageDispersing Activities to Build aGlobal Competitive Advantage Activities should be dispersed whenThey need to beperformed close to buyersTransportation costs, scale diseconomies, ortrade barriers make centralization expensiveBuffers for fluctuating exchange rates, supply interruptions, and adverse politics are neededTransferring Valuable Competencies to Build a Global Competitive AdvantageTransferring competencies, capabilities, and resource strengths across borders contributes toDevelopment of broadercompetencies and capabilitiesAchievement of dominating depthin some competitively valuable areaDominating depth in a competitively valuable capability is a strong basis for sustainable competitive advantage overOther multinational or global competitors andSmall domestic competitors in host countriesCoordinating Cross-Border Activities to Build a Global Competitive AdvantageAligning activities located in differentcountries contributes to competitive advantage in several waysChoose where and how to challenge rivalsShift production from one location toanother to take advantage of most favorablecost or trade conditions or exchange ratesUse online systems to collectively come up with next-generation productsAchieve efficiencies by shifting workload to locations where personnel are underutilizedEnhance potential to build a global brand name by incorporating same differentiating attributes in products in all markets where a company competesTailoring products for big, emerging markets often involvesMaking more than minor product changes andBecoming more familiar with local culturesCompanies have to attract buyers withbargain prices as well as better productsSpecially designed and/or speciallypackaged products may be needed toaccommodate local market circumstancesManagement team must usually consistof a mix of expatriate and local managers Characteristics of Competingin Emerging Foreign MarketsStrategic Options: How to Competein Emerging Country Markets Prepare to compete on the basis of low priceBe prepared to modify aspects ofthe company’s business model toaccommodate local circumstancesTry to change the local marketto better match the way thecompany does business elsewhereStay away from those emerging markets where it is impractical or uneconomicto modify the company’s businessmodel to accommodate local circumstancesStrategies for Local Companiesin Emerging MarketsDevelop business models that exploit shortcomingsin local distribution networks or infrastructure.Utilize keen understanding of local customer needs and preferences to create customized products or services.Take advantage of low-cost labor and othercompetitively important local workforce qualities.Use economies of scope and scale to betterdefend against expansion-minded multinationals.Transfer company expertise to cross-border marketsand initiate actions to contend on a global level.7-37