Strategies for Competing in Globalizing Markets
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Transcript of Strategies for Competing in Globalizing Markets
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Welcome To The Presentation
STRATEGIES FOR
COMPETING INGLOBALIZING MARKETS
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Previously closed national economies are openingup their markets to foreign companies
Importance of geographic distance is shrinkingdue to the Internet
Growth-minded companies are racing to stake outpositions in the markets of more and more
countries
Why is the World Economy Globalizing?
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What is the Motivation
for Competing Internationally?
Gain access tonew customers
Capitalizeon resource
strengths and
competencies
Helpachieve
lower costs
Spreadbusiness riskacross widermarket base
Obtain access tovaluable natural
resources
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Cross-Country Differences in Cultural,
Demographic, and Market Conditions
Cultures and lifestyles differ among countries
Differences in market demographics
Variations in manufacturing and distributioncosts
Fluctuating exchange rates
Differences in host government trade policies
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Two Primary Patterns
of International Competition
Multi-country
Competition
GlobalCompetition
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Characteristics of
Multi-Country Competition
Each country market is self-contained
Competition in one country market isindependent of competition in other country
marketsRivals competing in one country market differ
from set of rivals competing in anothercountry market
Rivals strive for national market leadership
No “international” market, just a collection ofcountry markets
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Characteristics of Global Competition
Competitive conditions across country markets arestrongly linked together
Many of same rivals compete in many of the samecountry markets
Rivals strive for worldwide leadership
A true international market exists
A firm’s competitive position in one country is affected by its position in other countries
Competitive advantage (or disadvantage) is based ona firm’s world-wide operations and overall globalstanding
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Strategy Options for International Markets
Exporting
Licensing
Franchising
Global strategy based onLow cost
Differentiation
Best-costFocusing
Strategic alliances or joint ventures
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Export Strategies
Involves using domestic plants as a production base forexporting to foreign markets
Advantages
Minimizes both risk and capital requirements
Conservative way to test international waters
Minimizes direct investments in foreign countries
An export strategy is vulnerable when
Manufacturing costs in home country are higher thanin foreign countries where rivals have plants
High shipping costs are involved
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Licensing Strategies
Licensing makes sense when a firm
Has valuable technical know-how or a patentedproduct but does not have international capabilities orresources to enter foreign markets
Desires to avoid risks of competing in the marketswhich
Are unfamiliar
Present economic uncertainty
Are politically volatile Disadvantage
Risk of providing valuable technical know-how toforeign firms and losing some control over its use
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Franchising Strategies
Often is better suited to global expansion effortsof service and retailing enterprises
Advantages
Franchisee bears most of costs and risks ofestablishing foreign locations
Franchisor has to expend only the resourcesto recruit, train, and support franchisees
Disadvantage
Maintaining cross-country quality control
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Global Strategy
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Competitive Strategy Principle
A global strategy is one where a
Company employs the same basiccompetitive approach in all countries
where it operates
A multi-country strategy is Onewhere a company varies its
product offering & competitive approachfrom country to country to meet
buyer preference
Think Local,Act Local
Think Global,Act Global
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Pursuing Competitive Advantage
Three ways to gain competitive advantage
1. Locating activities among nations to lower costsor achieve greater product differentiation
2. Efficient/effective transfer of competitivelyvaluable competencies and capabilities fromdomestic to foreign markets
3. Coordinating dispersed activities in ways adomestic-only competitor cannot
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Cooperative agreements / strategic alliances
Cooperative agreements / strategic alliances withforeign companies are a means to
Enter a foreign market or
Strengthen a firm’s competitiveness in world markets
Purpose of alliances
Joint research efforts
Technology-sharing
Joint use of production or distribution facilitiesMarketing / promoting one another’s products
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Benefits of Strategic Alliances
Gain scale economies in production and/ormarketing
Fill gaps in technical expertise or knowledge of
local marketsShare distribution facilities and dealer networks
Direct combined competitive energies toward
defeating mutual rivals
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Pitfalls of Strategic Alliances
Becoming too dependent on another firm for essentialexpertise over the long-term
Different motives and conflicting objectives
Time consuming; slows decision-making
Language and cultural barriers
Mistrust when collaborating in competitively sensitive
areas
Clash of egos and company cultures
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THANK YOU…………….!!!!!!
ANY QUESTION………????