Bài giảng Crafting & Executing Strategy - Ch 7: Strategies for competing in international markets

CHAPTER 7STRATEGIES FOR COMPETING IN INTERNATIONAL MARKETS STUDENT VERSIONTo further exploit core competenciesTo spread business risk across a wider market baseTo gain access to new customersTo achieve lower costs through economies of scale, experience, and increased purchasing powerTo gain access to resources and capabilities located in foreign marketsWHY COMPANIES DECIDE TO ENTER FOREIGN MARKETSWHY COMPETING ACROSS NATIONAL BORDERS MAKES STRATEGY-MAKING MORE COMPLEX1.Different countries have different home-country advantages in different industries2.Location-based value chain advantages for certain countries3.Differences in government policies, tax rates, and economic conditions4.Currency exchange rate risks5.Differences in buyer tastes and preferences for products and servicesTHE DIAMOND FRAMEWORKAnswers important questions about competing on an international basis by:Predicting where new foreign entrants are likely to come from and their strengths.Highlighting foreign market opportunities where rivals are weakest.Identifying the location-based advantages of conducting certain value chain activities of the firm in a particular country.7–4REASONS FOR LOCATING VALUE CHAIN ACTIVITIES ADVANTAGEOUSLYLower wage ratesHigher worker productivityLower energy costsFewer environmental regulationsLower tax ratesLower inflation ratesProximity to suppliers and technologically related industriesProximity to customersLower distribution costsAvailable\unique natural resourcesTHE IMPACT OF GOVERNMENT POLICIES AND ECONOMIC CONDITIONS IN HOST COUNTRIESPositivesTax incentivesLow tax ratesLow-cost loansSite location and developmentWorker trainingNegativesEnvironmental regulationsSubsidies and loans to domestic competitorsImport restrictionsTariffs and quotasLocal-content requirementsRegulatory approvalsProfit repatriation limitsMinority ownership limitsTHE RISKS OF ADVERSE EXCHANGE RATE SHIFTSEffects 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.7–7CROSS-COUNTRY DIFFERENCES IN DEMOGRAPHIC, CULTURAL, AND MARKET CONDITIONSTo pursue a strategy of offering a mostly standardized product worldwide.To customize offerings in each country market to match the tastes and preferences of local buyersKey Strategic ConsiderationsSTRATEGIC OPTIONS FOR ENTERING AND COMPETING IN INTERNATIONAL MARKETSMaintain a national (one-country) production base and export goods to foreign markets.License foreign firms to produce and distribute the firm’s products abroad.Employ an overseas franchising strategy.Establish a wholly-owned subsidiary by either acquiring a foreign company or through a “greenfield” venture.Rely on strategic alliances or joint ventures with foreign companies.7–9FOREIGN SUBSIDIARY STRATEGIESConditions are favorable for using an internal startup strategy when:Creating an internal startup is cheaper than making an acquisition.Adding production capacity will not adversely impact the supply–demand balance in the local market.A startup subsidiary has the ability to gain good distribution access.A startup subsidiary will have the size, cost structure, and resource strengths to compete head-to-head against local rivals.7–10GREENFIELD STRATEGIESAdvantagesHigh level of control over venture“Learning by doing” in the local marketDirect transfer of the firm’s technology, skills, business practices, and cultureDisadvantagesCapital costs of initial developmentRisks of loss due to political instability or lack of legal protection of ownershipSlowest form of entry due to extended time required to construct facilityBENEFITS OF ALLIANCE AND JOINT VENTURE STRATEGIESGaining partner’s knowledge of local market conditionsAchieving economies of scale through joint operationsGaining technical expertise and local market knowledgeSharing distribution facilities and dealer networks, and mutually strengthening each partner’s access to buyers.Directing competitive energies more toward mutual rivals and less toward one anotherEstablishing working relationships with key officials in the host-country government7–12THE RISKS OF STRATEGIC ALLIANCES WITH FOREIGN PARTNERSOutdated knowledge and expertise of local partnersCultural and language barriersCosts of establishing the working arrangementConflicting objectives and strategies and/or deep differences of opinion about joint controlDifferences in corporate values and ethical standards.Loss of legal protection of proprietary technology or competitive advantageOver dependence on foreign partners for essential expertise and competitive capabilities.7–13COMPETING INTERNATIONALLY: THREE STRATEGIC APPROACHESMultidomestic StrategyGlobalStrategyTransnational StrategyCompeting InternationallyTHE QUEST FOR COMPETITIVE ADVANTAGE IN THE INTERNATIONAL ARENAUse international location to lower cost or differentiate productShare resources and capabilitiesGain cross-border coordination benefitsBuild Competitive Advantage in International MarketsUSING LOCATION TO BUILD COMPETITIVE ADVANTAGETo pursue a strategy of offering a mostly standardized product worldwide.To customize offerings in each country market to match tastes and preferences of local buyersKey LocationIssuesSHARING AND TRANSFERRING RESOURCES AND CAPABILITIES TO BUILD COMPETITIVE ADVANTAGEBuild a Resource-Based Competitive Advantage By:Using powerful brand names to extend a differentiation-based competitive advantage beyond the home market.Coordinating activities for sharing and transferring resources and production capabilities across different countries’ domains to develop market dominating depth in key competencies. 7–17STRATEGY OPTIONS FOR COMPETING IN THE MARKETS OF DEVELOPING COUNTRIESPrepare to compete on the basis of low price.Prepare to modify the firm’s business model or strategy to accommodate local circumstances.Try to change the local market to better match the way the firm does business elsewhere.Avoid developing markets where it is too difficult or costly to accommodate local circumstances.7–18DEFENDING AGAINST GLOBAL GIANTS: STRATEGIES FOR LOCAL COMPANIES IN DEVELOPING COUNTRIESDevelop a business model that exploits shortcomings in local distribution networks or infrastructure.Utilize knowledge of local customer needs and preferences to create customized products or services.Take advantage of aspects of the local workforce with which large multinational firms may be unfamiliar.Use local acquisition and rapid-growth strategies to defend against expansion-minded internationals.Transfer the firm’s expertise to cross-border markets.7–19