strategy for competing in global markets

8/13/2019 Strategy for Competing in Global Markets

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Strategy for Competing in

Global Markets


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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

strategy for competing in global markets

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