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Strategies for Competing in Globalizing Markets

Strategies for Competing in Globalizing Markets. International Strategies: Advantages. Gain access to: New customers Capital Raw materials Skills and expertise Exploit economies of scale Capitalize on core competencies Spread risks across a broader base.

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Strategies for Competing in Globalizing Markets

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  1. Strategies for Competing in Globalizing Markets

  2. International Strategies:Advantages • Gain access to: • New customers • Capital • Raw materials • Skills and expertise • Exploit economies of scale • Capitalize on core competencies • Spread risks across a broader base

  3. International Strategies:Political Environment • Political risk • Domestic instability • Foreign conflict • Political climate • Economic climate

  4. International Strategies:Political Environment • Political mechanisms • Protectionism • Tariff • Quota • Subsidy • Cartel • Under the table • Bribery • Extortion • Grease payments

  5. International Strategies:Cultural Environment • Language • Symbols • Values and beliefs • Individual differences • Social orientation • Power orientation • Uncertainty orientation • Goal orientation • Time orientation

  6. International Strategies:Economic Environment • Economic system • Market • High growth/high potential • Other • Natural resources • Infrastructure • FX exposure

  7. International Strategies:Entering International Markets • Importing and exporting • Licensing • Franchising • Strategic alliances • Direct investment

  8. Advantages Small cash outlay Little risk No adaptation necessary Disadvantages Tariffs and taxes High transportation costs Government restrictions International Strategies:Importing and Exporting

  9. Advantages Increased profitability Extended profitability Disadvantages Inflexibility Helps competitors International Strategies:Licensing

  10. Advantages Quick market entry Access to materials and technology Disadvantages Shared ownership limits control and profits International Strategies:Strategic Alliances

  11. International Strategies:Strategic Alliances • Mutually strengthens partners • Exploit economies of scale • Fills gaps in technology and expertise • Share distribution facilities • Must overcome issues of • Language, cultural barriers and trust • Differences on how to proceed • Effective and efficient decision making • Sharing competitively sensitive information

  12. International Strategies:Strategic Alliances • Pick good partners • Be sensitive to cultural differences • Alliance must benefit both sides • Ensure parties honor their commitments • Initiate structure for fast and effective decision making • Keep the alliance flexible

  13. Advantages Enhances control Existing infrastructure Disadvantages Complexity Greater economic and political risk Greater uncertainty International Strategies:Direct Investment

  14. International Strategies:Direct Investment • Multinational or multi-domestic • Adjusting products, services and practices to individual countries or regions • Each subsidiary is somewhat independent • Global • Stresses world-wide consistency and standardization • More centralized control

  15. International Strategies:The 4 Generic Strategies

  16. International Strategy • Create value by transferring valuable core competencies to foreign markets that indigenous competitors lack • Centralize product development functions at home • Establish manufacturing and marketing functions in local country but head office exercises tight control over it • Limit customization of product offering and market strategy • Strategy effective if firm faces weak pressures for local responsive and cost reductions

  17. Multidomestic Strategy • Main aim is maximum local responsiveness • Customize product offering, market strategy including production, and R&D according to national conditions • Generally unable to realize value from experience curve effects and location economies • Possess high cost structure

  18. Global Strategy • Focus is on achieving a low cost strategy by reaping cost reductions that come from experience curve effects and location economies • Production, marketing, and R&D concentrated in few favorable functions • Market standardized product to keep cost’s low • Effective where strong pressures for cost reductions and low demand for local responsiveness • Semiconductor industry

  19. Transnational Strategy • To meet competition firms aim to reduce costs, transfer core competencies while paying attention to pressures for local responsiveness • Global learning • Valuable skills can develop in any of the firm’s world wide operations • Transfer of knowledge from foreign subsidiary to home country, to other foreign subsidiaries • Transnational strategy difficult task due to contradictory demands placed on the organization • Example : Caterpillar

  20. International Strategies:Direct Investment • Profit sanctuaries • Countries where a firm derives significant profits • Strong market position • Cross-market subsidization • Subsidize price through margins gained in other markets • Many consider unfair

  21. International Strategies:Local Defenses • Use home-field advantages • Transfer expertise to cross-border markets • Shift to a new business model or niche • Contend on a global level

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