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Strategy For Competing in Global Markets

There are several strategies companies can employ to compete globally including export strategies, licensing strategies, franchising strategies, and strategic alliances. A company is considered an international competitor when it competes in a few foreign markets and a global competitor when it has a presence on most continents. Competing globally allows companies to gain new customers, lower costs, leverage core competencies, spread risk, and move to an earlier point on the product life cycle curve. However, cultural and economic differences between countries must be considered to successfully compete internationally.

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229 views23 pages

Strategy For Competing in Global Markets

There are several strategies companies can employ to compete globally including export strategies, licensing strategies, franchising strategies, and strategic alliances. A company is considered an international competitor when it competes in a few foreign markets and a global competitor when it has a presence on most continents. Competing globally allows companies to gain new customers, lower costs, leverage core competencies, spread risk, and move to an earlier point on the product life cycle curve. However, cultural and economic differences between countries must be considered to successfully compete internationally.

Uploaded by

bikshapati
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Strategy for Competing in Global Markets

The overriding reason for incorporating an international strategy into the companys strategic plan
The reason for being a global company is to leverage capabilities worldwide so that a long term competitive advantage is achieved that cannot be achieved otherwise

Companies expand internationally in order to:


Gain new customers Lower costs Leverage core competencies Spread risk Move to an earlier point on the life cycle curve

Profit Sanctuaries
Areas of low competition with assured profit margins Companies with large, protected profit sanctuaries have a competitive advantage over companies that dont have a protected sanctuary.(global competitor vs. local or national competitor)

Cross-Market Subsidization
Supporting competitive offensives in one market with resources and profits diverted from operations in other markets.

Strategy Options for International Markets

Franchise License International Strategy MultiCountry

Strategic Alliances

Global

Domestic

Export

Collaborative Efforts
Export Licensing Franchising Strategic Alliances

Competing Internationally or globally


A company is an international(or multinational competitor when it competes in a select few foreign markets. It is a global competitor when it has or is pursuing a market presence on most continents and in virtually all of the worlds major countries

Advantages and Disadvantages

Characteristics of Export Strategies


Involves using domestic plants as a production base for exporting to foreign markets- each team started here. Excellent initial strategy to pursue international sales Advantages
Minimizes both risk and capital requirements Conservative way to test international waters Minimizes direct investments in foreign countries Manufacturing costs in home country are higher than in foreign countries where rivals have plants High shipping costs are involved

An export strategy is vulnerable when


Characteristics of Licensing Strategies


Licensing makes sense when a firm
Has valuable technical know-how or a patented product but does not have international capabilities or resources to enter foreign markets Desires to avoid risks of committing resources to markets which
Are unfamiliar Present economic uncertainty Are politically volatile

Disadvantage
Risk of providing valuable technical know-how to foreign firms and losing some control over its use

Characteristics of Franchising Strategies


Often is better suited to global expansion efforts of service and retailing enterprises Advantages
Franchisee bears most of costs and risks of establishing foreign locations Franchisor has to expend only the resources to recruit, train, and support franchisees

Disadvantage
Maintaining cross-country quality control

Strategic Alliances and Collaborative Partnerships


Companies sometimes use strategic alliances or collaborative partnerships to complement their own strategic initiatives and strengthen their competitiveness. Such cooperative strategies go beyond normal company-to-company dealings but fall short of merger or full joint venture partnership.

Alliances Can Enhance a Firms Competitiveness


Alliances and partnerships can help companies cope with two demanding competitive challenges
Racing against rivals to build a market presence in many different national markets Racing against rivals to seize opportunities on the frontiers of advancing technology

Why Are Strategic Alliances Formed?


To collaborate on technology development or new product development To fill gaps in technical or manufacturing expertise To acquire new competencies

To improve supply chain efficiency


To gain economies of scale in production and/or marketing To acquire or improve market access via joint marketing agreements

Why Alliances Fail


Ability of an alliance to endure depends on
How well partners work together Success of partners in responding and adapting to changing conditions Willingness of partners to renegotiate the bargain

Reasons for alliance failure


Diverging objectives and priorities of partners Inability of partners to work well together Changing conditions rendering purpose of alliance obsolete Emergence of more attractive technological paths Marketplace rivalry between one or more allies

Ways of competing Internationally


Multi Country
Each country is a stand alone market Buyers attracted to different attributes Sellers vary from country to country Industry conditions and competitive forces are different

Global Competition
Global
Standardized approach regardless of countries Competition based on true world market Rivals compete for worldwide leadership Competitive conditions across national markets are linked into a tru international market

Characteristics of Multi-Country Competition


Each country market is selfcontained Competition in one country market is independent of competition in other country markets Rivals competing in one country market differ from set of rivals competing in another country market Rivals vie for national market leadership No international market, just a collection of country markets

Characteristics of Global Competition


Competitive conditions across country markets are strongly linked together
Many of same rivals compete in many of the same country markets Rivals vie for worldwide leadership A true international market exists

A firms competitive position in one country is affected by its position in other countries Competitive advantage (or disadvantage) is based on a firms worldwide operations and overall global standing

Pitfalls Cultural

In order to compete, differences in culture, market conditions and demographics must be considered.
Nestles in Africa Disney in France

Pitfalls -- Economic
Cost issues
currency exchange rates labor cost material costs taxes

Business Issues
Business Friendly Political Stability Access to customers

A final word of warning


Profitability in emerging country markets rarely comes quickly or easily New entrants have to be very sensitive to local conditions, be willing to invest in developing the market for their products over the long term and be patient in earning a profit

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