1. Competing in Foreign Markets
McGraw-Hill/Irwin
Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.

2. “You have no choice but to operate in a world shaped by globalization and the information revolution. There are two options: Adapt or die.”
Andrew S. Grove

3. The Four Big Strategic Issues in Competing Multinationally
Whether to customize a company’s offerings in each different country market to match preferences of local buyers or offer a mostly standardized product worldwide
Whether to employ essentially the same basic competitive strategy in all countries or modify the strategy country by country
Where to locate a company’s production facilities, distribution centers, and customer service operations to realize the greatest locational advantages
How to efficiently transfer a company’s resource strengths and capabilities from one country to another to secure competitive advantage

4. Why Do Companies Expand into Foreign Markets?
Gain access to
new customers
Capitalize
on core
competencies
Achieve lower costs and enhance competitiveness
Spread
business risk across wider market base
Obtain access to valuable natural
resources

5. International vs. Global Competition
Competitor
Global
Company operates in a select few foreign countries, with modest ambitions to expand further
Company markets products in 50 to 100 countries and is expanding operations into additional country markets annually

6. How Markets Differ from Country to Country
Economy
Legal/political
Regulatory
Technology
Socio-cultural
Demographic

7. CIA World Fact Book

8. Two Primary Patterns of International Competition
Multi-country Competition
Global Competition

9. Characteristics of Multi-Country Competition
Market contest among rivals in one country not closely connected to market contests in other countries
Buyers in different countries are attracted to different product attributes
Sellers vary from country to country
Industry conditions and competitive forces in each national market differ in important respects
Rival firms battle for national championships –
winning in one country does not necessarily signal the ability to fare well in other countries!

10. Characteristics of Global Competition
Competitive conditions across country markets are strongly linked
Many of same rivals compete in many of the same country markets
A true international market exists
A firm’s competitive position in one country is affected by its position in other countries
Competitive advantage is based on a firm’s world-wide operations and overall global standing
Rival firms in globally competitive industries vie for worldwide leadership!

11. Strategy Options for Competing in Foreign Markets
Exporting
Licensing
Franchising strategy
Multi-country strategy
Global strategy
Strategic alliances or joint ventures

12. Localized Multicountry Strategies or a Global Strategy?
Whether to vary a company’s competitive approach to fit specific market conditions and buyer preferences in each host county OR
Whether to employ essentially the same strategy in all countries
Strategic Issue

13. Characteristics of a “Think-Local, Act-Local” Approach to Strategy Making
Business approaches are deliberately crafted to
Accommodate differing tastes and expectations of buyers in each country
Stake out the most attractive market positions vis-à-vis local competitors
Local managers are given considerable strategy-making latitude
Plants produce different products for different local markets
Marketing and distribution are adapted to fit local customs and cultures

14. Characteristics of a “Think-Global, Act-Global” Approach to Strategy Making
Same products under the same brand names are sold everywhere
Same distribution channels are used in all countries
Competition is based on the same capabilities and marketing approaches worldwide
Strategic moves are integrated and coordinated worldwide
Expansion occurs in most nations where significant buyer demand exists
Strategic emphasis is placed on building a global brand name
Opportunities to transfer ideas, new products, and capabilities from one country to another are aggressively pursued

15. Your Opinion
Assume you are in charge of developing the strategy for a multinational company selling products in several different countries around the world.
A. If your company’s product is personal computers, do you think it would make better strategic sense to employ a multicountry strategy or a global strategy? Why?
B. If your company’s product is dry soup mixes and canned soups, would a multicountry strategy seem to be more advisable than a global strategy? Why?
C. If your company’s product is washing machines, would it seem to make more sense to pursue a multicountry strategy or a global strategy? Why?
D. If your company’s product is basic work tools (hammers, screwdrivers, pliers, wrenches, saws), would a multicountry strategy or a global strategy seem to have more appeal? Why?
Global strategy.
Multicountry strategy.

16. Building Competitive Advantage in Foreign Markets
Three ways to gain competitive advantage
1. Locating activities among nations in ways that lower costs or achieve greater product differentiation
2. Efficient/effective transfer of competitively valuable competencies and capabilities from company operations in one country to company operations in another country
3. Coordinating dispersed activities in ways a domestic-only competitor cannot

17. Locating Activities to Build a Global Competitive Advantage
Two issues
Whether to
Concentrate each activity in a few countries or
Disperse activities to many different nations
Where to locate activities
Which country is best location for which activity?

18. Transferring Valuable Competencies to Build a Global Competitive Advantage
Transferring competencies, capabilities, and resource strengths across borders contributes to
Development of broader competencies and capabilities
Achievement of dominating depth in some competitively valuable area
Dominating depth in a competitively valuable capability is a strong basis for sustainable competitive advantage over
Other multinational or global competitors and
Small domestic competitors in host countries

19. What Are Profit Sanctuaries?
Profit sanctuaries are country markets where a firm
Has a strong, protected market position and
Derives substantial profits
Generally, a firm’s most strategically crucial profit sanctuary is its home market
Profit sanctuaries are a valuable competitive asset in global industries!

20. What Is Cross-Market Subsidization?
Involves supporting competitive offensives in one market with resources/profits diverted from operations in other markets
Competitive power of cross-market subsidization results from a global firm’s ability to
Draw upon its resources and profits in other country markets to mount an attack on single-market or one-country rivals and
Try to lure away their customers with
Lower prices
Discount promotions
Heavy advertising
Other offensive tactics

21. Global Strategic Offensives
Three Options
Attack a foreign rival’s profit sanctuaries
Approach places a rival on the defensive, forcing it to
Spend more on marketing/advertising
Trim its prices
Boost product innovation efforts
Take actions raising its costs and eroding its profits
Employ cross-market subsidization
Attractive offensive strategy for companies competing in multiple country markets with multiple products
Dump goods at cut-rate prices
Approach involves a company selling goods in foreign markets at prices
Well below prices at which it sells in its home market or
Well below its full costs per unit

22. SIC Codes EU MERCOSUR WTO

23. Strategic Appeal of Strategic Alliances
Gain better access to attractive country markets from host country’s government to import and market products locally
Capture economies of scale in production and/or marketing
Fill gaps in technical expertise or knowledge of local markets
Share distribution facilities and dealer networks
Direct combined competitive energies toward defeating mutual rivals
Take advantage of partner’s local market knowledge and working relationships with key government officials in host country
Useful way to gain agreement on important technical standards

24. Characteristics of Competing in Emerging Foreign Markets
Tailoring products for big, emerging markets often involves
Making more than minor product changes and
Becoming more familiar with local cultures
Companies have to attract buyers with bargain prices as well as better products
Specially designed and/or specially packaged products may be needed to accommodate local market circumstances
Management team must usually consist of a mix of expatriate and local managers

25. Strategic Options: How to Compete in Emerging Country Markets
Prepare to compete on the basis of low price
Be prepared to modify aspects of the company’s business model to accommodate local circumstances
Try to change the local market to better match the way the company does business elsewhere
Stay away from those emerging markets where it is impractical or uneconomic to modify the company’s business model to accommodate local circumstances

26. Strategic Options to Defend Against Global Giants
Use home field advantage
Transfer expertise
Shift business model
Go global

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