Test 3 Chp - 7
Which of the following is not an advantage of utilizing a licensing strategy to participate in foreign markets? The ability to shift the costs and risks to the licensee The ability to generate income from royalties The ability to enter international markets even though the company lacks international organizational capabilities and the resources to do so The ability to avoid risks of committing resources to country markets that are unfamiliar or otherwise risky The ability to safeguard the company's technical know-how or patents
The ability to safeguard the company's technical know-how or patents
multidomestic strategy
Think Local, act local -Works best when companies must vary products and competitive approaches
Global Strategy
Think global, act global -Works best in markets when you can use the same approach in each market. Lower costs
Using domestic plants as a production base for exporting goods to selected foreign country markets is usually a superior approach to competing in international markets. can be a competitively successful strategy when a company is focusing on vacant market niches in each foreign country. can be an excellent initial strategy to pursue international sales. is usually a weak strategy when competitors are pursuing licensing strategies. can be a powerful strategy because the company is not vulnerable to tariffs or quotas.
can be an excellent initial strategy to pursue international sales.
A "think local, act local" multidomestic type of strategy: focuses on the same basic competitive approach (low-cost, differentiation, best-cost, focused) in all countries where the firm does business. always makes a company vulnerable to rivals employing "think global, act global" strategies. protects a multinational firm against fluctuating exchange rates. is generally an inferior strategy when one or more foreign competitors is pursuing a global low-cost strategy. employs essentially the same basic competitive strategy theme in all country markets.
focuses on the same basic competitive approach (low-cost, differentiation, best-cost, focused) in all countries where the firm does business.
The primary reasons that companies opt to expand into foreign markets are to: boost returns on investment, broaden their product lines, avoid tariffs and trade restrictions, and escape dealing with strong labor unions. 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. grow sales faster than the industry average, reduce the competitive threats from rivals, and open up more opportunities to enter into strategic alliances. avoid having to employ an export strategy, avoid the threat of cross-market subsidization from rivals, and enable the use of a global strategy instead of a multidomestic strategy. raise the entry barriers for industry newcomers, neutralize the bargaining power of important suppliers, grow sales faster, and increase the number of loyal customers.
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.
In order to use location to build competitive advantage when competing on domestic and international level, a company must transfer company expertise to cross-border markets and initiate actions to contend on an international level. pursue blue-ocean opportunities both in the company's home country market and in global markets. use acquisition and rapid-growth strategies to better defend against expansion-minded international rivals. try to change the local market to better match the way the company does business elsewhere. consider whether to concentrate each activity it performs in a few select countries or disperse the performance of the activity to many nations, and determine in which countries it should locate particular activities.
pursue blue-ocean opportunities both in the company's home country market and in global markets.
Franchising
selling to a foreign organization the rights to use a brand name and operating know-how in return for a lump-sum payment and a share of the profits
Companies tend to concentrate their activities in a limited number of locations where the costs of manufacturing or other activities are significantly higher. where there are significant scale diseconomies. when there is a steep learning curve associated with performing an activity. when certain locations have inferior resources or allow for poorer coordination of related activities. where sophisticated production facilities or highly trained local personnel are unavailable.
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. determining how many foreign firms to license to produce and distribute the company's products. whether to pursue a global strategy or an international strategy. whether to offer a product at a priced based on the median income of the population. whether to charge the same price in all country markets.
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.
Global leadership necessities
1.) Compete on the basis of low price 2.) be prepared to modify business model/strategy to accommodate local circumstances without losing advantage 3.) try to change the local market to better match the way the company does business elsewhere. --Profitability will take time and is unlikely to come quickly in emerging markets
Two ways a firm can gain competitive advantage
1.) Locate various value chain activities among nations in a manner that lowers costs or achieves greater product differentiation 2.) draw on multinational or global competition to deepen or broaden resources and capabilities and to coordinate its dispersed activities in ways that a domestic competitor cannot.
A "think global, act global" approach to strategy making is preferable to a "think local, act local" approach when customer preferences vary significantly from country to country. it is necessary to delegate strategy making to local managers with firsthand knowledge of local conditions. plants need to be scattered across many countries to avoid high shipping costs. country-to-country differences are small enough to be accommodated within the framework of a mostly uniform global strategy. host governments enact regulations requiring that products sold locally meet strict manufacturing specifications or performance standards.
country-to-country differences are small enough to be accommodated within the framework of a mostly uniform global strategy.
Multinational competitors tend to concentrate activities in a limited number of locations when prices and competitive conditions are strongly linked across country markets to form a world market. 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 risk of fluctuating exchange rates is very high. host-country governments can be persuaded to erect high tariff barriers to protect the company's operations from foreign competitors and it is not imperative to be responsive to buyer needs and competitive conditions in each country. competitive conditions make it infeasible to employ a profit sanctuary strategy or an export strategy.
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.
Which one of the following is not a factor that a company must contend with in competing in the markets of foreign countries? Variations in market growth rates from country to country and important country-to-country differences in consumer buying habits and buyer tastes and preferences Country-to-country variations in host-government policies and trade requirements Product designs suitable for one country are sometimes inappropriate in another Vulnerability to adverse shifts in currency exchange rates A need to convince shippers to keep transportation costs low
A need to convince shippers to keep transportation costs low
Which of the following is not a potential motivation for entering into strategic alliances or other cooperative arrangements with foreign companies? Gain wider access to attractive country markets Gain better access to scale economies in production and/or marketing Fill competitively important gaps in their technical expertise and/or knowledge of local markets Better enable the use of a "think global, act global" strategy and facilitate cross-market subsidization Share distribution facilities and dealer networks, thus mutually strengthening the allies' access to buyers
Better enable the use of a "think global, act global" strategy and facilitate cross-market subsidization
Which of the following statements about entering developing markets such as China, India, Russia, and Brazil is correct? Observing and following the lead of local competitors is the sole guarantee of success in developing markets. Building a market for the company's products can often turn into a long-term process that involves reeducation of consumers. Entering an emerging market should always involve a best-cost strategy. Standardized products are typically more successful in emerging country markets. Profitability always comes quickly to entrants into developing markets because of global branding.
Building a market for the company's products can often turn into a long-term process that involves reeducation of consumers.
Which of the following is not a typical option that companies have to consider 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. Prepare to compete on the basis of low price. Be prepared to modify aspects of the company's business model to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding). Try to change the local market to better match the way the company does business elsewhere. Stay away from those emerging markets where it is impractical or uneconomical to modify the company's business model to accommodate local circumstances.
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? Fluctuating exchange rates pose significant risks to a company's competitiveness in foreign markets. Exchange rate shifts can produce sometimes favorable and sometimes unfavorable effects on a company's competitiveness. 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. Exporters win when the currency of the country from which the goods are being exported grows weaker relative to the currencies of the countries to which goods are being exported. If the exchange rate of U.S. dollars for euros changes from $1.15 per euro to $1.25 per euro, then it is correct to say that the U.S. dollar has grown weaker.
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.
Transnational Strategy
Think global, act local -Same strategy in all markets but still customize product
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. if economies of scale are essential to achieving acceptable production costs. Two answers are correct when high transportation costs make it expensive to operate from central locations and whenever buyer-related activities are best performed in locations close to buyers. if trade barriers and transportation costs fall, making it more profitable to operate from a central location in the company's home market.
Two answers are correct when high transportation costs make it expensive to operate from central locations and whenever buyer-related activities are best performed in locations close to buyers.
The advantages of manufacturing goods in a particular country and exporting them to foreign markets are seriously compromised by the potential for local government officials to raise tariffs on the imports of foreign-made goods into their country. are greatest when local consumers prefer products manufactured inside the country's borders. are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold. can be wiped out when that country's currency grows weaker relative to the currencies of the countries where the output is being sold. are largely unaffected by tariffs or quotas.
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" is most appropriate when the need for local responsiveness is low. avoids host country ownership requirements and import quotas. facilitates the transfer of a company's capabilities, knowledge, and other resources across country borders. is the only global market entry strategy conducive to building a single worldwide competitive advantage. becomes more appealing when country-to-country differences in buyer tastes, cultural traditions, and market conditions vary significantly.
becomes more appealing when country-to-country differences in buyer tastes, cultural traditions, and market conditions vary significantly.
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. learning about the regulation processes and political and capital requirements of each country market. selecting among global, transnational, or international entry strategies. deciding which price strategy to follow. avoiding the risks posed by fluctuating exchange rates.
determining whether to standardize or customize the company's offerings.
Licensing
entering foreign markets through developing an agreement with a licensee in the foreign market
The advantages of using a franchising strategy to pursue opportunities in foreign markets include: being particularly well-suited to the international expansion efforts of companies with global strategies. 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. helping build brand awareness in international markets. being well suited to companies that employ cross-market subsidization. gaining support from local governments in the form of subsidies and meeting local content requirements.
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.
The chief difference between a "think global, act global" and a "think global, act local" approach to crafting a global strategy is that a "think global, act local" approach involves charging much different prices in the various country markets where the company competes. a "think global, act local" approach involves much less adherence to using the same basic competitive strategy theme (low-cost, differentiation, best-cost, or focused) in all country markets. a "think global, act local" approach involves considerably less adherence to utilizing the same capabilities, distribution channels, and marketing approaches worldwide. 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. a "think global, act global" approach involves selling under a single brand worldwide, whereas a "think global, act local" approach involves the use of multiple brands (often a local brand for each local market).
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.
