Lecture 8
Competing in Foreign
Markets
7-1
Chapter Roadmap
Why Companies Expand into Foreign Markets
The Concepts of Multi-country Competition and
Global Competition
Strategy Options for Entering and Competing in
Foreign Markets
The Quest for Competitive Advantage in Foreign
Markets
Profit Sanctuaries, Cross-Market Subsidization, and
Global Strategic Offensives
Strategies That Fit the Markets of Emerging
Countries
7-2
The Four Big Strategic Issues
in Competing Multinationally
Whether to customize a company’s offerings in each
different country market to match preferences of local
buyers or offer a mostly standardized product worldwide
7-3
The Four Big Strategic Issues
in Competing Multinationally
Where to locate a company’s production facilities,
distribution centers, and customer service operations
to realize the greatest locational advantages
7-4
Why Do Companies Expand
into Foreign Markets?
Company operates in a
select few foreign
International
countries, with modest
Competitor ambitions to expand
further
Multi-country
Competition
Global
Competition
7-7
Characteristics of
Multi-Country Competition
Market contest among rivals in one country not
closely connected to market contests in other
countries
Buyers in different countries are
attracted to different product attributes
Sellers vary from country to country
Industry conditions and competitive forces in
each national market differ in important respects
Rival firms battle for national championships –
winning in one country does not necessarily signal the
ability to fare well in other countries!
7-8
Characteristics of Global Competition
Exporting
Licensing
Franchising strategy
Multi-country strategy
Global strategy
7-10
Export Strategies
Disadvantage
Strategic Issue
7-14
What Is a “Think-Local, Act-Local”
Approach to Strategy Making?
Significant
country-to-country differences in
customer preferences and buying habits exist
7-19
Characteristics of a “Think-Global,
Act-Global” Approach to Strategy Making
Same products under the same brand names are sold
everywhere
Same distribution channels are used in all countries
Competition is based on the same capabilities
and marketing approaches worldwide
Strategic moves are integrated and coordinated worldwide
Expansion occurs in most nations where significant buyer
demand exists
Strategic emphasis is placed on building
a global brand name
Opportunities to transfer ideas, new
products, and capabilities from one
country to another are aggressively pursued
7-20
Fig. 7.2: How a Localized or Multicountry Strategy Differs from a Global Strategy
7-21
What Is a “Think-Global, Act-Local”
Approach to Strategy Making?
Two issues
Whether to
Concentrate each activity in a
few countries or
7-28
Transferring Valuable Competencies to
Build a Global Competitive Advantage
Transferring competencies, capabilities, and
resource strengths across borders contributes to
Development of broader competencies and capabilities
Achievement of dominating depth in some competitively
valuable area
Dominating depth in a competitively valuable
capability is a strong basis for sustainable
competitive advantage over
Other multinational or global competitors and
Small domestic competitors in host countries
7-29
Coordinating Cross-Border Activities to
Build a Global Competitive Advantage
Aligningactivities located in different countries
contributes to competitive advantage in several
ways
Choose where and how to challenge rivals
Shift production from one location to
another to take advantage of most favorable
cost or trade conditions or exchange rates
Use online systems to collect ideas for new
or improved products and to determine which
products should be standardized or customized
Enhance brand reputation by incorporating
same differentiating attributes in its
products in all markets where it competes
7-30
What Are Profit Sanctuaries?
Profit
sanctuaries are country
markets where a firm
Has a strong, protected market
position and
Derives substantial profits
Generally, a firm’s most strategically
crucial profit sanctuary is its home market
7-32
What Is Cross-Market Subsidization?
7-37
Strategic Options for Local Companies:
Use Home-Field Advantages
Concentrate on advantages enjoyed in the home
market
Cater to customers who prefer a local touch
Accept loss of customers attracted to global brands
Astutely exploit its local orientation based on
Familiarity with local preferences
Expertise in traditional products
Long-standing customer relationships
Caterto the local market in ways that
pose difficulties for global rivals
7-38
Strategic Options for Local Companies:
Transfer Expertise to Cross-Border Markets
When a local company trying to defend against a global
challenger has resource strengths and capabilities suitable
for competing in other country markets, then it should
consider
Launching initiatives to transfer its expertise to
cross-border markets
Becoming more of an international competitor
Such a move to enter foreign markets can help
Build a bigger customer base (to offset
any losses in its home market)
Grow sales and profits
Put in a stronger position to contend with
global challengers in its home market
7-39
Strategic Options for Local Companies: Dodging Rivals
by Shifting to a New Business Model or Market Niche