CHAPTER 7

STRATEGIES FOR COMPETING IN

INTERNATIONAL MARKETS

Student Version
Copyright 2012 The McGraw-Hill Companies, Inc.

McGraw-Hill/Irwin

Learning Outcomes
Develop an understanding of the primary reasons
companies choose to compete in international markets.
Learn how and why differing market conditions across
countries and industries make crafting international
strategy a complex undertaking.
Learn about the major strategic options for entering and
competing in foreign markets.
Gain familiarity with the three main strategic approaches
for competing internationally.
Understand how international companies go about
building competitive advantage in foreign markets.

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WHY COMPANIES DECIDE TO

ENTER FOREIGN MARKETS

To gain access to
new customers

To exploit core
competencies

To achieve lower
costs and economies
of scale

To spread business
risk across a wider
market base
To access resources
and capabilities in
foreign markets

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WHY COMPETING ACROSS NATIONAL

BORDERS MAKES STRATEGY
MAKING MORE COMPLEX
1.

Industry competitiveness factors that

vary from country to country

2.

Location-based advantages for

certain countries

3.

Differences in government policies

and economic conditions

4.

Currency exchange rate risks

5.

Differences in cultural, demographic,

and market conditions
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Political and Economic Risks

Political Risks

Stem from instability or weaknesses in

national governments and hostility to foreign
business.

Economic Risks

Stem from the stability of a countrys

monetary system, economic and regulatory
policies, lack of property rights protections,
and risks due to exchange rate fluctuation.

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The Risks of Adverse Exchange Rate Shifts

Effects of Exchange Rate Shifts:

Exporters experience a rising demand for

their goods whenever their currency grows
weaker relative to the importing countrys
currency.
Exporters experience a falling demand for
their goods whenever their currency grows
stronger relative to the importing countrys
currency.

76

The CAGE framework

Cultural

Administrative and

distance

political distance

Geographic

Economic/ wealth

distance

distance

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Cross-Country Differences in Demographic,

Cultural, and Market Conditions

To customize offerings in each

country market to match the tastes
and preferences of local buyers
Key Strategic
Considerations
To pursue a strategy of offering a
mostly standardized product
worldwide.

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THE CONCEPTS OF MULTIDOMESTIC

COMPETITION AND GLOBAL
COMPETITION
Multidomestic Competition

Exists when competition in each country

market is localized and not closely connected
to competition in other country markets.

Global Competition

Exists when competitive conditions and

prices are strongly linked across many
different national markets.
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How a Multicountry Strategy Differs from a Global Strategy

710

COMPETING INTERNATIONALLY:
THE THREE MAIN STRATEGIC
APPROACHES
Competing
Internationally

Multidomestic
Strategy

Global
Strategy

Transnational
Strategy

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712

STRATEGIC OPTIONS FOR ENTERING

AND COMPETING IN INTERNATIONAL
MARKETS
Maintain a national (one-country) production base and
export goods to foreign markets.
License foreign firms to produce and distribute the firms
products abroad.
Employ an overseas franchising strategy.
Establish a wholly-owned subsidiary by either acquiring
a foreign company or through a greenfield venture.
Form strategic alliances or joint ventures with foreign
companies.
713

 What are the advantages and

disadvantages of each of the entry
strategies?

714

THE QUEST FOR COMPETITIVE

ADVANTAGE IN THE INTERNATIONAL
ARENA
Build Competitive Advantage
in International Markets

Use international
location to lower
cost or differentiate
product

Share resources,
competencies,
and capabilities

Gain cross-border
coordination
benefits

715

 http://www.youtube.com/watch?v=v6coD
UDCJ10

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