MGMT 449 - MIDTERM - CH 7
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Why do companies enter foreign markets
To gain access to new customers
- To achieve lower costs and
- economies of scale
To exploit core competencies
- To spread business risk across a
- wider market base
To access resources and capabilities in foreign mark
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
- ●Exists when competition in each country market is localized and not closely connected
- to competition in other country markets.
- Exists when competitive conditions and prices are strongly linked across many
- different national markets
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 firm’s products abroad.
- ♦Employ an overseas franchising
- ♦Establish a wholly-owned
- subsidiary by either acquiring a foreign company or through a “greenfield”
- ♦Form strategic alliances or joint
- ventures with foreign companies.
THE THREE MAIN STRATEGIC APPROACHES
- Are country markets (or geographic regions) in which a firm derives substantial
- profits because of its protected market position or its competitive advantage.
- Is the diversion of resources and profits from one market to support competitive
- offensives in another different market
- 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
companies opt to expand into foreign markets for such reasons as to
gain access to new customers, achieve lower costs and enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base.
One of the biggest strategy issues confronting a company competing in the international arena is
whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market to match the preferences and requirements of local buyers.
The essential difference between multidomestic competition and global competition is that
n multidomestic competition the markets of different countries are not closely linked and rivals battle for "national market championships" whereas in global competition the markets of different countries are closely linked and form a world market, thus pitting rivals in a battle for the "world market championship."
are country markets in which a company derives substantial profits because of its protected market position or unassailable competitive advantage.
Which of the following is not a typical option that companies have to consider to tailor their strategy to fit the circumstances of emerging country markets?
Develop new sets of core competencies that allow a company to offer value to consumers of emerging markets in ways unmatched by rivals
the strategy options for local companies in competing against global challengers include
develop business models that exploit the shortcomings of local distribution networks and infrastructure, utilize keen understanding of local customer needs and preferences, and transferring company expertise to cross-border markets.
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