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31 Cards in this Set
- Front
- Back
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Why companies decide to enter foreign markets
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- to gain access to new customers
- to achieve lower costs and economies of scale - to exploit core competencies - to access resources and capabilities in foreign markets - to spread business risk across a wider market base |
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Why competing across national borders makes strategy making more complex
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-industry competitiveness factos that vary from country to country
- Location-based advantages for certain countries - differences in government policies and economic conditions - currency exchange rate risks - difference in cultural, demographic, and market conditions |
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Diamond of National Advantage
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-Demand Conditions
-Related/Supporting Industries -factor Conditions -Firms strategy, structure, and rivalry |
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Demand Conditions
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-Home market relative size, domestic buyers needs
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Related/Supporting Industries
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Proximity of suppliers, end users, and complementary industries
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Factor Conditions
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Availability, quality, and relative prices of inputs (labor, materials)
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Firm Strategy, Structure, and rivalry
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Different management styles and organization, degree of local rivalry
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Diamond Framework answers
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-predicts where new foreign entrants are likely to come from and their strengths
-highlighting foreign market opportunities where rivals are weakest -identifying the location-based advantages of conducting certain value chain activities of the firm in a particular country |
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Reasons for locating value chain activities for competitive advantage
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-lower wage rates
-higher worker productivity -lower energy costs -fewer environmental regulations -lower tax rates -lower inflation rates -proximity to suppliers and customer |
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Impact of government policies
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-tax incentives
-low tax rates -low cost loans -site location and development -worker training -environmental regulations -subsidies and loans to domestic competitors -import restrictions -tariffs and quotas regulatory approvals |
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Appraoches to International Strategy
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-Multidomestic
-global -transnational |
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Strategic options for entering and competing in int'l markets
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-maintain a national (one country) production base and export goods to foreign markets
-License foreign firms to produce and distribute the firms products abroad -employe an overseas franchising strategy -establish a wholly-owned subsidiary either acquiring a foreign company or through a "greenfield" venture -form strategic alliances or joint ventures with foreign companies |
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Export Strategies Advantages
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-low capital requirements
-economies of scale in utilizing existing production capacity -no distribution risk -no direct investment risk |
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Export strategies Disadvantages
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-maintaining relative cost advantage of home-based production
-transportation and shipping costs -exchange rate risks -tariffs/import duties -loss of channel control |
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Licensing and Franchising strategies Advantages
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-low resource requirements
-income from royalties and franchising fees -rapid expansion into many markets |
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Licensing and Franchising Strategies Disadvantages
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-maintaining control of proprietary know-how
-loss of operational and quality control -adapting to local markets tastes and expectations |
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Acqusition strategies Advantages
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-High level of control
-quick large-scale market entry -avoids entry bariers -access to acquired firm's skills |
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Acquisitions Disadvantages
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-costs of acquisition
-complexity of acquisition process -integration of the firms structures, cultures, operations and personnel |
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Greenfield Strategies Advantages
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-High level of control over venture
-"learning by doing" in the local market -direct transfer of the firms technology, skills, business practices, and culture |
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Greenfield Strategies Disadvantages
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-capital costs of initial development
-risks of loss due to political instability or lack of legal protection of ownership -slowest form of entry due to extended time requires to construct facility |
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Alliance and Joint Venture Strategies Advantages
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-avoid entry barriers
-allow for resource and risk sharing -partners knowledge of local market conditions -joint learning and sharing -preservation of partner independence |
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Alliance and Joint Venture Disadvantages
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-Cultural and language barriers
-costs of establishing the working arrangement -issues of joint control -protection of proprietary technology or competitive advantage |
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Multidomestic strategy
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varies product offering and competitive approaches from country to country
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Global Strategy
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employs the same basic competitive approach in all countries where the firm operates
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Transnational Strategy
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is a think-global, act-local approach but incorporates elements of both multidomestic and global strategies
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Multidomestic Approach Advantages
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-Can meet he specific needs of each market more precisely
-can respond more swiftly to loacalized changes in demand -can target reactions to the moves of local rivals -can respond more quickly to local pportuntiies and threats |
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Multidomestic disadvantages
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-hinders resource and capability sharing or cross-market transfers
-higher production and distribution costs -not conducive to a worldwide competitive advantage |
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Transnational Advantages
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-offers the benefits of both local responsiveness and global integration
-enables the transfer and sharing of resources and capabilities across borders -provides the befits of flexible coordination |
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Transnational Disadvantages
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-more complex and harder to implement
-conflicting goals may be difficult to reconcile and require trade-offs -implementation more costly and time-consuming |
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Global Advantages
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-lower costs due to scale and scope economies
-greater efficiencies due to the ability to transfer best practices across markets -more innovation from knowledge sharing and capability transfer -the benefit of a global brand and reputation |
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Global Disadvantages
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-unable to address local needs precisely
-less responsive to changes in local market conditions -higher transportation costs and tariffs -higher coordination and integration costs |
