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Sebastian Corredor
MIE 480
October 30th, 2010
International Awareness in Strategic Management
The world economy is globalizing at an accelerating pace as countries that previously closed to
foreign companies are now opening up their markets, as the Internet shrinks the importance of
geographic distance, and as ambitious growth-minded companies race to build stronger competitive
positions in international markets. Companies in industries that are globally competitive, or in the
process of becoming so, are under the gun to come up with a strategy for competing successfully in
foreign markets.
I think it is extremely important that companies pick the right strategy that will help them
obtain sustainable competitive advantage over their competitors. In order to do so, companies need to
learn as much as they can about the countries where they are trying to introduce their businesses. This
becomes an issue to many companies as they are constantly trying to figure out what kind of strategy
they should implement. On one hand you have the multi-country approach, in which they try to fit to
the specific market conditions and buyer preferences in each host country. On the other hand you have
the global approach and you employ essentially the same strategy in all countries. So which one should
managers pick? It depends; I think strategies used to gain a competitive advantage have to be situation
driven.
Cultural, demographics and market conditions vary significantly among countries. Consumers in
Brazil do not have the same tastes, preferences and buying habits as consumers in Sweden or China.
Income conditions are also very different; middle-class consumers represent a much smaller portion of
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the population in developing countries than in North America, Japan and Western Europe. For these
reasons some companies will develop a multi-country strategy, in which a company tailors its product
offerings and perhaps its basic competitive strategy to fit buyers’ tastes and market conditions in each
country where it opts to compete. Companies involved in multicounty strategies will decentralize
decision making authority to allow local managers to be autonomous and respond to the needs of each
country market. Companies will also need to have plants produce different product versions for
different local markets, and adapt marketing and distribution to fit local customs and cultures. Multi
country strategy is essential when there are significant country –to-country differences in customer
preferences and buying habits, when there are significant cross country differences in distribution
channels and marketing methods, and when host governments enact regulations requiring that
products sold locally meet strict manufacturing specifications or performance standards. A great
example of a multi-country approach is Coca-Cola. They strive to meet the demands of local tastes and
cultures, offering 300 brands in over 200 countries. Its network of bottlers and distributors is distinctly
in each country, and the company’s products and brands are formulated to cater to local tastes1.
While making products that are closely matched to local preferences makes them more
appealing to local buyers, customizing a company’s products country by country may have the effect of
raising production and distribution costs due to the greater variety of designs and components, shorter
production runs, and possible complications of added inventory handling and distribution logistics. Some
managers might feel that global strategy- in which it sells the same products under the same brand
names everywhere, uses much of the same distribution channels in all countries, and competes on the
basis of the same capabilities and marketing approaches worldwide- will be a better fit. In a global
strategy a company’s fundamental competitive approach, whether is low-cost leadership,
differentiation, and best-cost provider, remains very much the same worldwide and it requires local
1
www.cocacola.com
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managers stick close to corporate decisions. It also requires great coordination throughout the
corporation to integrate the company’s strategic moves worldwide. Companies that are trying to build a
global brand name by offering same features and quality in all regions should pursue a global strategy.
Whenever country-to-country differences are small enough, a global strategy is preferable to multicountry strategies because a company can more readily unify its operations and focus on establishing a
brand image and reputation that is uniform from country to country. Moreover, with a global strategy a
company is better able to focus its full resources on building the resource strengths and capabilities to
secure a sustainable low cost competitive advantage over both domestic rivals and global rivals. IKEA is a
great example of a global strategy, it provides the same high quality products around the world and they
centralized decision-making. Their company mission statement is follow closely by managers around the
world and they try to reduce costs by achieving economies of scale.
The tension between the market pressures to localize a company’s product offerings country by
country and the competitive pressures to lower costs is one of the big strategic issues that participants
in foreign markets have to resolve. As a co-manager for company B industry 42 I have found how
difficult is to create a strategy that gives you a competitive advantage over your competitors. Our main
goal was to provide customers with a high quality product while achieving low production costs. During
year 16 our costs of pairs sold was 47% of net revenues, marketing expenses were 8.2%, administrative
expenses 2.2 %, and warehouse expenses 6.5%. Costs of pairs sold and marketing expenses were the
lowest in industry 42, while marketing expenses and warehouse expenses were the second lowest in the
industry. We also use a multi region approach by selling different models and futures in each of our
geographic regions. In North America we currently offer 6-stars quality and 350 models at a very
competitive price. In our Europe-Africa and Asia regions we offer 5-str quality and 250 models =,
however our prices we offer different prices ($52.00 in Europe-Africa and $44.00 in Asia). Finally we
offer 5-stars and 261 models in Latin America at a price of $47.00. Moreover, we have signed different
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celebrities to satisfy the different preferences in the regions. Currently we have contracts with Payton
Manyon, Oprah Letterman, Jose Montana, Kobioshi Jones, Ace Federar, Danica Andretti, Labron Game,
Lorena Lopez, and Yao KungPao. As a result we have achieved the following celebrity appeal: 285 in
North America, 290 in Europe, 270 in Asia, and 305 in Latin America2.
In conclusion, I think that any company that aspires to industry leadership in the 21st century
must think in terms of global, not domestic, market leadership. Many companies are expanding outside
its domestic market in order to gain access to new customers, achieve lower costs, enhance the firm’s
competitiveness, capitalize on its core competencies, and spread its business risk across a wider market
base. But regardless of a company’s motivation to expand into foreign markets, the strategies it uses to
compete must be situation-driven.
2
Competitive Intelligence Reports BSG, http://www.bsg-online.com/users/flash/index.html