Strategies for Competing in Foreign Markets

Introduction

This lesson focuses on strategy options for expanding beyond domestic boundaries and competing in the markets of either a few or a great many countries. The spotlight will be on four strategic issues unique to competing multinationally. It will introduce a number of core concepts including multi-country competition, global competition, and cross cultural differences in cultural, demographic, and market conditions. Chapter Seven includes sections on strategy options for entering and competing in foreign markets, the importance of locating operations in the most advantageous countries, and the special circumstances of competing in such emerging markets as China, India, and Brazil, Russia and Eastern Europe.

A company may opt to expand outside its domestic market for any of four major reasons:

1. To gain access to new customers—Expanding into foreign markets offers potential for increased revenues, profits, and long-term growth and becomes an especially attractive option when a company’s home markets are mature.

1. To achieve lower costs and enhance the firm’s competitiveness—Many companies are driven to sell in more than one country because domestic sales volume is not large enough to fully capture manufacturing economies of scale or learning curve effects and thereby substantially improve the firm’s cost-competitiveness.

1. To capitalize on its core competencies—A company may be able to leverage its competencies and capabilities into a position of competitive advantage in foreign markets as well as just domestic markets.

1. To spread its business risk across a wider market base—A company spreads business risk by operating in a number of different foreign countries rather than depending entirely on operations in its domestic market.

The Difference between Competing Internationally and Competing Globally

1. Typically, a company will start to compete internationally by entering just one or maybe a select few foreign markets.

2. There is a meaningful distinction between the competitive scope of a company that operates in a select few foreign countries (accurately termed an international competitor) and a company that markets its products in 50 to 100 countries and is expanding its operations into additional country markets annually (which qualifies as a global competitor).

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(p. 197)

By the conclusion you should be able to:

• Discuss the primary reasons companies choose to compete in international markets.

• Describe how and why differing marketing conditions across countries influence a company’s strategy choices in international markets.

• Define the five major strategic options for entering foreign markets.

• List the three main strategic approaches for competing internationally.

• Discuss how companies are able to use international operations to improve overall competitiveness.

• Describe the unique characteristics of competing in developing country markets.

Reading

Chapter 7 of the text book.

Review the PowerPoint for Chapter 7

Assignments

The following Assignment Questions should be completed and submit your responses to these questions in one WORD document. List the question first, and then your response. Your response must adequately cover the question without being wordy or relying on “yes” or “no” responses. USE STYLE APA FORMAT 7^TH EDITION

1. Explain the differences between a “think local, act local”, “think global, act global” and a “think global, act local” strategy.

2. Discuss why a company desirous of competing in foreign country markets needs to pay close attention to the advantages of cross-border transfer of competencies and capabilities. Is such transfer often a key to competitive advantage? Why or why not?

3. Identify and briefly describe a local company’s strategic options in competing against global challengers.

4. Explain how exchange rate fluctuations pose a risk to manufacturing companies who rely upon an export strategy to compete in foreign markets.

5. Explain why a company desirous of competing in foreign markets needs to pay careful attention to where it locates it value chain activities.

6. Using the internet, identify and discuss three key strategies that Volkswagen is using to compete in China.

7. Illustration Capsule 7.1 – Walgreens Boots Alliance, Inc.: Entering Foreign Markets via Alliance Followed by Merger on page 192 provides the example of an alliance between Walgreens and Alliance Boots. What was this partnership designed to achieve and why did the alliance make sense for a company like Walgreens?

8. How strong are the competitive forces in the movie rental marketplace? Do a five- forces analysis to support your answer.