Summary 1. Competing in international markets allow a company to a. gain access to new customers b. Achieve lower costs through greater economies of scale, learning, and increased purchasing power c. Gain access to low-cost inputs of production d. Further exploit its core competencies e. Gain access to resources and capabilities located outside the company’s domestic market. 2. Strategy making is more complex for 5 reasons: a. Different countries have “home-country advantages” in different industries b. There are location-based advantages to performing different value chain activities in different parts of the world c. Varying political and economic risks make the business climate of some countries more favorable than others d. Companies face the risk of adverse shifts in exchange rates when opening in foreign countries e. Differences in buyer tastes and preferences present a conundrum (challenge) concerning the trade-off between customizing and standardizing products and services 3. The strategies of firm that expand internationally are usually grounded in home-country advantages concerning demand conditions; factor conditions; related and supporting industries; and firm strategy, structure, and rivalry, as described by the Diamond of National Competitive Advantage Framework. 4. There are 5 strategic options for entering foreign markets. These include maintaining a homecountry production based and exporting goods to foreign markets, licensing foreign firms to produce and distribute the company’s products abroad, employing a franchising strategy, establishing a foreign subsidiary via an acquisition or greenfield venture, and using strategic alliances or other collaborative partnerships. 5. A company must choose among the 3 alternative approaches for competing internationally: a. A multidomestic strategy – a “think-local, act-local” approach to crafting international strategy. Multidomestic strategy is appropriate for companies that must vary their product offering and competitive approaches from country to country in order to accommodate (adapt) different buyer preferences and market conditions. b. A global strategy – a “think-global, act-global” approach. The global strategy works best when there are substantial cost benefits to be gained from taking a standardized, globally integrated approach and there is little need for local responsiveness. c. A transnational strategy – a combination of “think-global, act-local” approach. A transnational strategy is called for when there is a high need for local responsiveness as well as substantial benefits from taking a globally integrated approach. In this approach, a company strives to employ the same basic competitive strategy in all markets but still customizes its product offering and some aspect of its operations to fit local market circumstances. 6. There are 3 general ways in which a firm can gain competitive advantage (or offset domestic disadvantages) in international markets. One way involves locating various value chain activities among nations in a manner that lowers costs or achieves greater product differentiation. A second way draws on an international competitor’s ability to extend its competitive advantage by cost-effectively sharing, replicating, or transferring its most valuable resources and capabilities across borders. A third looks for benefits from crossborder coordination that are unavailable to domestic-only competitors. 7. Two types of strategic moves are particularly suited for companies competing internationally. The 1st involves waging strategic offenses in international markets through cross-subsidization – a practice of supporting competitive offensives in one market with resources and profits diverted from operations in another market. The 2nd is a defensive move used to encourage mutual restrain among competitors when there is international multimarket competition by signaling that each company has the financial capability for mounting (installing/fitting) a strong counterattack if threatened. For company with at least one highly profitable or well defended market, having a presence in a rival’s key markets can be enough to deter the rival from making aggressive attacks. 8. Companies racing for global leadership have to consider competing in developing companies like the BRIC countries – Brazil, Russia, India and China – where the business risks are considerable but the opportunities for growth are huge. TO succeed in these markets, companies often have to (1) compete on the basis of low price, (2) modify aspects of the company’s business model to accommodate local circumstances, and/or (3) try to change the local market to better match the way the company does business elsewhere. Profitability is unlikely to come quickly or easily in developing markets, typically because of the investments needed to alter buying habits and tastes, the increased political and economic risk, and/or the need for infrastructure upgrades. And there may be times when a company should simply stay away from certain developing markets until conditions for entry are better suited to its business model and strategy. 9. Local companies in developing-country markets can seek to compete against large international companies by (1) developing business models that exploit shortcomings in local distribution networks or infrastructure, (2) utilizing a superior understanding of local customer needs and preferences or local relationships, (3) taking advantage of competitively important qualities of the local workforce with which large international companies may be unfamiliar, (4) using acquisition strategies and rapid-growth strategies to better defend against expansion-minded international companies, or (5) transferring company expertise to cross-border markets and initiating actions to compete on an international level.
