Professional Documents
Culture Documents
Student Version
Copyright 2012 The McGraw-Hill Companies, Inc. McGraw-Hill/Irwin
WHY COMPANIES DECIDE TO
ENTER FOREIGN MARKETS
72
WHY COMPETING ACROSS NATIONAL
BORDERS MAKES STRATEGY
MAKING MORE COMPLEX
Industry competitiveness factors that
1. vary from country to country
73
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.
74
The Risks of Adverse Exchange Rate Shifts
75
Cross-Country Differences in Demographic,
Cultural, and Market Conditions
76
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.
77
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.
78
COMPETING INTERNATIONALLY:
THE THREE MAIN STRATEGIC
APPROACHES
Competing
Internationally
79
THE QUEST FOR COMPETITIVE
ADVANTAGE IN THE INTERNATIONAL
ARENA
Use international
Share resources, Gain cross-border
location to lower
competencies, coordination
cost or differentiate
and capabilities benefits
product
710
Using Location to Build
Competitive Advantage
711
PROFIT SANCTUARIES AND CROSS-
BORDER STRATEGIC MOVES
Profit Sanctuaries
Are country markets (or geographic regions)
in which a firm derives substantial profits
because of its protected market position or its
competitive advantage.
Cross-Market Subsidization
Is the diversion of resources and profits from
one market to support competitive offensives
in another different market.
712
Dumping as a Strategy
Dumping
Selling goods in foreign markets at prices
that are either below normal home market
prices or below the full costs per unit.
Why A Firm Engages in Dumping:
To reduce or avoid the high fixed costs of
idle production capacity.
To use below-cost pricing to gain market
share and drive weak firms from the market.
713
STRATEGIES FOR COMPETING IN THE
MARKETS OF DEVELOPING
COUNTRIES
714
DEFENDING AGAINST GLOBAL GIANTS:
STRATEGIES FOR LOCAL COMPANIES IN
DEVELOPING COUNTRIES
715