Ch.7: Strategies for Competing in International Markets

Among the strategy options for tailoring a company's strategy to fit the sometimes unusual or challenging circumstances presented in developing-country markets are the following

(1) prepare to compete on the basis of low price, (2) modify aspects of the company's business model or strategy to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding), (3) try to change the local market to better match the way the company does business elsewhere, and (4) stay away from those emerging markets where it is impractical or uneconomical to modify the company's business model to accommodate local circumstances.

A company may opt to expand outside its domestic market for any of five major reasons:

(1) to gain access to new customers; (2) to achieve lower costs through economies of scale, experience, and increased purchasing power; 3) to gain access to low-cost inputs of production; (4) to further exploit its core competencies; (5) to gain access to resources and capabilities located in foreign markets. Cross-border strategic alliances create value through resource sharing and risk spreading.

Multinational companies should concentrate internal processes in a few locations in the following situations:

(1) when the costs of manufacturing or other activities are significantly lower in some geographic locations than in others; (2) when there are significant scale economies; (3) when there is a steep learning curve associated with performing an activity; and/or (4) when certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages, such as a sophisticated production facility or highly trained local personnel.

Which of the following statements about entering developing markets such as China, India, Russia, and Brazil is correct?

- Building a market for the company's products can often turn into a long-term process that involves reeducation of consumers. - Observing and following the lead of local competitors is the sole guarantee of success in developing markets. - Entering an emerging market should always involve a best-cost strategy. - Standardized products are typically more successful in emerging country markets.

Which of the following is not a typical option that companies have to consider in order to tailor their strategy to fit the circumstances of developing country markets?

Develop new sets of core competencies that allow a company to offer value to consumers of emerging markets in ways unmatched by rivals.

Which one of the following statements concerning the impact of fluctuating exchange rates on companies competing in foreign markets is not true?

Domestic companies under pressure from lower-cost imports are hurt even more when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.

Véronique is the CEO of a wind power energy company headquartered in Toulouse, France. Identify which company model she would emulate to craft a multidomestic strategy

Headquartered in Liverpool, England, Castrol produces over 3,000 different formulas of oil lubricants to meet the requirements of different climates, vehicle types and uses, and equipment applications that characterize different country markets.

Which of the following is not an advantage of utilizing a licensing strategy to participate in foreign markets?

The ability to safeguard the company's technical know-how or patents

The advantages of manufacturing goods in a particular country and exporting them to foreign markets

are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold.

The multidomestic strategy of "think local, act local"

becomes more appealing when country-to-country differences in buyer tastes, cultural traditions, and market conditions vary significantly.

Multidomestic strategy (think local, act local)

calls for varying a company's product offering & competitive approach from country to country in an effort to be responsive to significant cross-country differences in customer preferences, buyer purchasing habits, distribution channels, or marketing methods strategy-making approaches are also essential when host-gov't regulations or trade policies preclude a uniform, coordinated worldwide market approach

Using domestic plants as a production base for exporting goods to selected foreign country markets

can be an excellent initial strategy to pursue international sales.

In order to use location to build competitive advantage when competing on domestic and international level, a company must

consider (1) whether to concentrate each activity it performs in a few select countries or disperse performance of the activity to many nations, and (2) determine in which countries it should locate particular activities.

A "think global, act global" approach to strategy making is preferable to a "think local, act local" approach when

country-to-country differences are small enough to be accommodated with the framework of a mostly uniform global strategy.

Which of the following is the biggest strategic issue when competing in the markets of foreign countries?

determining whether to standardize or customize the company's offerings.

Global strategy (think global, act global)

employ the same basic competitive approach in all countries where a company operates & are best suited to industries that are globally standardized in terms of customer preferences, buyer purchasing habits, distribution channels, or marketing methods puts strategic emphasis on building a global brand name and aggressively pursuing opportunities to transfer ideas, new products, & capabilities from one country to another

A "think local, act local" multidomestic type of strategy

focuses on varying a company's product offering and competitive approach from country to country in an effort to be responsive to significant cross-country differences.

Social media giant Facebook Inc. decided to expand outside its home U.S. market in order to

gain access to new customers for the company's products/services.

The primary reasons that companies opt to expand into foreign markets are to

gain access to new customers, achieve lower costs, enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base.

The advantages of using a franchising strategy to pursue opportunities in foreign markets include

having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchiser to expend only the resources to recruit, train, and support foreign franchisees.

Transnational strategy (think global, act local)

involves employing essentially the same strategic theme (low-cost, differentiation, focused, best-cost) in all country markets, while allowing some countries customization to fit local market conditions intended to accommodate cross-country variations in buyers tastes, local customs, & market conditions while also striving for the benefits of standardization

The big disadvantage of licensing

is the risk of providing valuable technological know-how to foreign companies and thereby losing some degree of control over its use; monitoring licensees and safeguarding the company's proprietary know-how can prove quite difficult in some

The chief difference between a "think global, act global" and a "think global, act local" approach to crafting a global strategy is that

local managers are given more latitude in adapting the global strategy approach as may be needed to accommodate local buyer preferences and be responsive to local market and competitive conditions.

Political risks

stem from instability or weaknesses in national governments and hostility to foreign business

Economic risks

stem from the stability of a country's monetary system, economic and regulatory policies, the lack of property rights protections

International strategy

strategy for competing in two or more countries simultaneously

Multinational competitors tend to concentrate activities in a limited number of locations when

there are significant scale economies and/or steep learning curve effects associated with performing certain activities in a single location, costs of performing the activity are lower in particular geographic locations, and certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages.

The advantages of a licensing entry strategy to participate in foreign markets accrue when

when a firm with valuable technical know-how or a unique patented product wishes to leverage without committing significant organizational capabilities and resources to enter foreign markets that are unfamiliar, politically full of risk, or economically uncertain.

Dispersing the performance of value chain activities to many different countries rather than concentrating them in a few country locations tends to be advantageous

when high transportation costs make it expensive to operate from central locations whenever buyer-related activities are best performed in locations close to buyers

Companies tend to concentrate their activities in a limited number of locations

when there is a steep learning curve associated with performing an activity.

One of the biggest strategic challenges to competing in the international arena is

whether to offer a mostly standardized product worldwide or whether to customize the company's offerings in each different country market to match the tastes and preferences of local buyers.