What are the primary reasons companies choose to compete in international markets?

  

you will writing a 250-350 word reflective statement on the learning, and how it has affected your thought process, development, and professional disposition. This statement should be an opportunity for you to reflect on your personal learning processchallenges, moments of discovery, life experiences, readings, and interactions.The reflection will be based on the readings the text books. Your reflection will be based on the assigned readings of the weeks. Reflections must meet the following criteria: – 250-350 word count – Describe your take-away from the assigned reading. This may relate to personal insights gained, parallels to past management experiences, or parallels to observations of past management you have experienced in other organizations.
LO1 Develop an understanding of the primary reasons companies
choose to compete in international markets.
LO2 Learn why and how differing market conditions across countries
influence a companys strategy choices in international markets.
LO3 Gain familiarity with the five general modes of entry into foreign
markets.
LO4 Learn the three main options for tailoring a companys
international strategy to cross-country differences in market
conditions and buyer preferences.
LO5 Understand how multinational companies are able to use
international operations to improve overall competitiveness.
LO6 Gain an understanding of the unique characteristics of competing
in developing-country markets.
7-2
Why Companies Expand Into
International Markets
1. To gain access to new customers.
2. To achieve lower costs and enhance the
firms competitiveness.
3. To further exploit its core competencies.
4. To gain access to resources and
capabilities located in foreign markets.
5. To spread its business risk across a wider
market base.
7-3
Factors That Shape Strategy Choices
in International markets
1. The degree to which there are important crosscountry differences in demographic, cultural,
market conditions.
2. Whether opportunities exist to gain a locationbased advantage based on wage rates, worker
productivity, inflation rates, energy costs, tax
rates, and other factors that impact cost structure.
3. The risks of adverse shifts in currency exchange
rates.
4. The extent to which governmental policies affect
the local business climate.
7-4
Cross-Country Differences in Demographic,
Cultural, and Market Conditions
Adjustments to local buyer tastes
Raise manufacturing and distribution costs.
Reduce scale economies and increase learning curve
effects.
Differences in market growth potential
Reflect wide variances in the demographics, income
levels, and cultural attitudes in emerging markets.
Can result from a lack of infrastructure, reliable
distribution systems, and closed retail networks.
Differences in the intensity of local competition
7-5
How Markets Demographics Differ
from Country to Country
Distribution channel
emphasis
Consumer tastes
and preferences
Consumer
purchasing power
Consumer
buying habits
Demographic
Differences
Demands for
localized products
Strength of local
competitive rivalry
7-6
How Markets Demographics Differ
from Country to Country
Consumer tastes and preferences
Consumer purchasing power
Consumer buying habits
Distribution channel emphasis
Demands for localized products
The strength of local competitive rivalry
7-7
Opportunities for Location-Based
Cost Advantages
Wage
rates
Worker
productivity
Environmental
regulations
Location-Based
Cost Advantages
Energy
costs
Tax
rates
Inflation
rates
Access to
resources
7-8
Opportunities for Location-Based
Cost Advantages
A firms costs and profitability are impacted
by the location of its activities due to:
Wage rates
Worker productivity
Energy costs
Environmental regulations
Tax rates
Inflation rates
Access to resources
7-9
The Risks of Adverse
Exchange Rate Shifts
An exporter gains in competitiveness when
the currency of the country in which the
exported goods are manufactured is weak
relative to the currency of the country to
which the exporter will export the goods.
An exporter is at a disadvantage when the
currency of the country where exported
goods are manufactured grows stronger
relative to the country to which the exporter
will export the goods.
7-10
The Impact of Government Policies on
the Business Climate in Host Countries
Host government policies that create a
business climate favorable to foreign firms
agreeing to construct or expand production
and distribution facilities in the host country
include:
Reduced taxes
Low-cost loans
Site-development assistance
7-11
The Impact of Host Government Policies
on the Business Climate (contd)
Limits on repatriation
of local funds
Environmental
regulations
Customs requirements,
tariffs and quotas
Negative
impact of host
government
policies
Locally produced
content requirements
Local ownership or
partner requirements
Subsidies for
domestic companies
Require prior approval of
capital spending projects
7-12
The Impact of Host Government Policies
on the Business Climate (contd)
Host government policies negatively
affecting foreign-based firms include:
Environmental regulations
Customs requirements, tariffs and quotas
Local content requirements
Requiring prior approval of capital spending projects
Limits on repatriation of local funds
Local ownership or partner requirements
Subsidies for domestic companies
7-13
CORE CONCEPT
Political risks stem from instability or weak-ness
in national governments and hostility to foreign
business; economic risks stem from the
instability of a countrys monetary system,
changes in economic and regulatory policies, and
the lack of property rights protections.
7-14
Strategy Options for Entering
Foreign Markets
1. Maintain a national (one-country) production base
and export goods to foreign markets.
2. License foreign firms to produce and distribute the
companys products abroad.
3. Employ a franchising strategy.
4. Establish a subsidiary in a foreign market via
acquisition or internal development.
5. Rely on strategic alliances or joint ventures with
foreign partners to enter new country markets.
7-15
Export Strategies
Exporting involves using domestic plants as a
production base for exporting to foreign markets.
Advantages:
Conservative way to test international waters.
Minimizes both risk and capital investment requirements.
An export strategy is vulnerable when:
1. Home country manufacturing costs are higher than in foreign
countries where rivals have plants.
2. Product transportation costs to distant markets are relatively
high.
3. Rapid adverse shifts can occur in currency exchange rates.
7-16
Licensing Strategies
Licensing makes sense when a firm:
Has valuable technical know-how or a patented
product but has neither the internal capabilities nor
resources to enter foreign markets.
Wants to avoid the risks of committing resources to
country markets that are unfamiliar, politically volatile,
economically unstable, or otherwise risky.
Seeks to generate income from potential royalties.
Disadvantage of licensing:
Difficulty in maintaining control over the use of
technical know-how provided to foreign firms.
7-17
Franchising Strategies
Is often better suited to the global expansion
efforts of service and retailing enterprises
Advantages:
Franchisee bears many of the costs and risks of
establishing foreign locations.
Franchisor has to expend only the resources to
recruit, train, and support franchisees.
Disadvantages:
Maintaining quality control in franchisee operations.
Allowing franchisees discretion in adapting product
offerings to local tastes and expectations.
7-18
Foreign Subsidiary Strategies
Allows for direct control over all aspects
of operating in a foreign market.
Options for developing a subsidiary:
Acquiring either a struggling or successful foreign
local firm is the quickest, least risky, and most cost
efficient path to hurdling local market entry barriers.
Establishing a foreign subsidiary from the ground up
via internal development relies heavily on the firms
prior experience with foreign market operations.
7-19
Internal Development and Start-up
of a Foreign Subsidiary
An internal start-up strategy is appealing when:
The parent firm has the experience, competencies, and
resources required to develop and operate foreign subsidiaries.
Creating an internal start-up is less costly than making
an acquisition in a foreign market.
Adding new production capacity will not adversely impact
the supplydemand balance in the local market.
The start-up subsidiary can gain access to local distribution
networks (perhaps due to the firms recognized brand name).
A start-up subsidiary will have the size, cost structure, and
resources to compete head-to-head against local rivals.
7-20
Alliance and Joint Venture Strategies
Mutual Benefits of Cross-Border Alliances:
Facilitating first entry into foreign markets
Strengthening of a firms competitiveness in world markets
Capturing of economies of scale in production and marketing
Filling of gaps in technical expertise and local market knowledge
Sharing of distribution facilities, dealer networks, and mutual
access to customers
Attacking of mutual rivals and providing for mutual assistance
Building of working relationships with local political and host-
country governmental entities
Gaining of agreements on technical and process standards
7-21
Alliance and Joint Venture Strategies
(contd)
Individual Partner Benefits of Alliances:
Preservation of each partner firms independence
Avoidance of the firms use of scarce financial
resources to fund acquisitions
Retention of the firms flexibility to readily disengage
once the purpose of the alliance has been served
The option to withdraw from the alliance if its benefits
prove elusive, in difference to the more permanent
arrangement required by an acquisition
7-22
Concepts &
Connections 7.1
SOLAZYMES CROSS-BORDER ALLIANCES WITH UNILEVER,
SEPHORA, QANTAS, AND ROQUETTE
7-23
The Risks of Strategic Alliances
with Foreign Partners
Pitfalls to the Success of Alliances:
Language and cultural barriers
Diversity in ethical standards, partner values and
objectives, corporate strategies, and operating
practices
Development of trust, coordination, and effective
communications between partners
Interpersonal conflict among partners managers
Over-dependence on foreign partners for essential
expertise and competitive capabilities
7-24
International Strategy:
The Three Principal Options
Choosing between localized multicountry
strategies or a global strategy
Deciding upon the degree to vary a firms
competitive approach country by country to
fit the specific market conditions and buyer
preferences in each host country when
operating in two or more foreign markets.
7-25
International Strategy:
The Three Principal Options
Options for tailoring
a companys
international strategy
Multidomestic
strategy
Transnational
strategy
Global
Strategy
(think local, act local)
(think global, act local)
(think global, act global)
More
Localization
Less
7-26
CORE CONCEPT
A companys international strategy is its
strategy for competing in two or more countries
simultaneously.
7-27
FIGURE 7.1
A Companys Three Principal Strategic Options
for Competing Internationally
7-28
Multidomestic StrategyA Think Local,
Act Local Approach to Strategy Making
Think Local, Act Local
A firm varies its product offerings and basic
competitive strategy from country to country.
Useful When:
Significant country-to-country differences exist in
customer preferences, buying habits, distribution
channels, or marketing methods.
Host governments enact local content requirements
or trade restrictions that preclude a uniform,
coordinated worldwide market approach.
7-29
CORE CONCEPT
A multidomestic strategy calls for varying a
companys product offering and 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. Think local, act local
strategy-making approaches are also essential
when host-government regulations or trade
policies preclude a uniform, coordinated
worldwide market approach.
7-30
Think Local, Act Local Strategies:
Two Big Drawbacks
1. They hinder transfer of a companys
competencies and resources across
country boundaries because the strategies
in different host countries can be grounded
in varying competencies and capabilities.
2. They do not promote building a single,
unified competitive advantage, especially
one based on low cost.
7-31
Global StrategyA Think Global, Act
Global Approach to Strategy Making
Think Global, Act Global Strategy
Integrates and coordinates the firms strategic moves
worldwide.
Promotes establishing an identifiably uniform brand
image and reputation from country to country.
Focuses the firms full resources on securing a
sustainable low-cost or differentiation-based
competitive advantage over both domestic rivals and
global rivals.
7-32
CORE CONCEPT
Global strategies employ the same basic
competitive approach in all countries where a
company operates and are best suited to
industries that are globally standardized in terms
of customer preferences, buyer purchasing
habits, distribution channels, or marketing
methods. This is the think global, act global
strategic theme.
7-33
Transnational StrategyA Think Global,
Act Local Approach to Strategy Making
A middle-ground approach that entails:
Utilizing the same basic competitive theme (low-cost,
differentiation, or focused) in each country but allows
local managers the latitude to:
Incorporate whatever country-specific variations in product
attributes are needed to best satisfy local buyers
Make whatever adjustments in production, distribution, and
marketing are needed to respond to local market conditions
and compete successfully against local rivals.
7-34
CORE CONCEPT
A transnational strategy is a think global, act
local approach to strategy making that involves
employing essentially the same strategic theme
(low-cost, differentiation, focused, best-cost) in all
country markets, while allowing some country-tocountry customization to fit local market
conditions.
7-35
Using International Operations to
Improve Overall Competitiveness
A firm can gain competitive advantage by
expanding outside its domestic market in
two important ways:
1. Using location to lower costs or help achieve greater
product differentiation.
2. Using cross-border coordination in ways that a
domestic-only competitor cannot.
7-36
Using Location to Build
Competitive Advantage
Multinational companies attempting to gain
location-based competitive advantage
should consider:
Whether to concentrate activities in a few countries or
disperse performance of each process to many
countries.
Which countries offer the best locational advantage
for each activity.
7-37
When to Concentrate Internal Processes
in a Few Locations
Circumstances favor concentrating activities
and processes in a few countries when:
The costs of manufacturing or other activities are
significantly lower in some locations than in others.
Significant scale economies can be achieved
by concentrating particular activities.
There is a steep learning curve associated with
performing an activity.
Certain locations offer superior resources, allow
for better coordination of related activities, or offer
other advantages.
7-38
When to Disperse Internal Processes
Across Many Locations
Dispersing activities and processes is
advantageous when:
Buyer-related activities must take place close to
buyers.
High transportation costs, diseconomies of large size,
and trade barriers make it too expensive to operate
from a central location.
Dispersing activities reduces the risks of fluctuating
exchange rates and adverse political developments.
7-39
Using Cross-Border Coordination
to Build Competitive Advantage
Multinational and global competitors
coordinate activities across borders to
achieve competitive advantage by:
Sharing product knowledge, operating skills, and
supply chain efficiencies across their markets.
Shifting production between plants in different
countries to take advantage of changes in exchange
rates, energy costs, or in tariffs and quotas.
Shifting production to locations having excess
capacity or underutilized personnel.
7-40
Concepts &
Connections 7.2
YUM! BRANDSS STRATEGY FOR BECOMING
THE LEADING FOOD SERVICE BRAND IN CHINA
7-41
Strategies for Competing in the Markets
of Developing Countries
Developing-Economy Markets
China, India, Brazil, Indonesia, Thailand, Poland,
Russia, and Mexicocountries where business risks
are considerable but opportunities for growth are
huge as their economies develop and living standards
climb toward those of the industrialized world.
Tailoring products to fit conditions in
emerging markets often involves:
Making more than minor product adaptations.
Becoming more familiar with local cultures and habits.
Rethinking pricing, packaging and product features.
7-42
Strategy Options for Competing in
Developing-Country Markets
Prepare to compete on the basis of low price.
Modify aspects of the firms business model or
strategy to accommodate local circumstances.
Try to change the local market to better match the
way the firm does business elsewhere.
Shun emerging markets where it is impractical or
uneconomical to modify the firms business model
to accommodate local circumstances.
Be patient, work within the system to improve the
infrastructure, and lay the foundation for generating
sizable revenues and profits once conditions are
ripe for market take-off.
7-43

Introduction:

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In today’s global market, businesses expand into international markets to stay competitive and increase profitability. This expansion can lead to opportunities for businesses to gain access to new customers, resources, capabilities, and spread business risks across a wider market base. However, businesses must understand and navigate the factors that shape strategy choices in international markets. These factors include cross-country differences in demographic, cultural, and market conditions, opportunities to gain a location-based advantage, and the risks of adverse shifts in currency exchange rates. This discussion will delve into the reasons for businesses to expand into international markets and the factors that shape their strategy choices.

Description:

LO1 Develop an understanding of the primary reasons companies choose to compete in international markets, stating that companies expand to gain access to new customers, achieve lower costs and enhance their competitiveness, exploit their core competencies, and gain access to resources and capabilities located in foreign markets. LO2 emphasizes on how differing market conditions across countries influence a company’s strategy choices in international markets. LO3, on the other hand, covers the five general modes of entry into foreign markets. LO4 addresses the three main options for tailoring a company’s international strategy to cross-country differences in market conditions and buyer preferences. LO5 discusses how multinational companies can use international operations to improve overall competitiveness. Lastly, LO6 talks about the unique characteristics of competing in developing-country markets.

The factors that shape strategy choices in international markets depend on the degree to which there are important cross-country differences in demographic, cultural, and market conditions, location-based cost advantages based on wage rates, worker productivity, energy costs, and tax rates, risks of adverse shifts in currency exchange rates, and the extent to which governmental policies affect the local business climate. Cross-country differences in demographic, cultural, and market conditions can result in adjustments to local buyer tastes, reduce scale economies, increase learning curve effects, and affect market growth potential. The differences in the intensity of local competition can also affect market growth potential. It is, therefore, crucial for businesses to understand these factors before venturing into foreign markets.

In conclusion, businesses must understand the reasons for expanding into international markets and factor the cross-country differences in demographic, cultural, and market conditions and location-based cost advantages to shape their strategy choices. The ensuing reflective statement will discuss my takeaways from the assigned readings in relation to personal insights gained, parallels to past management experiences, or observations of past management experiences in other organizations.

Objectives:
– To understand the primary reasons why companies choose to compete in international markets.
– To comprehend how varying market conditions across countries affect a company’s strategy choices in international markets.
– To gain familiarity with the five general modes of entry into foreign markets.
– To learn the three main options for customizing a company’s international strategy to cross-country differences in market conditions and buyer preferences.
– To appreciate how multinational companies can use international operations to improve overall competitiveness.
– To recognize the unique characteristics of competing in developing-country markets.

Learning Outcomes:
During the course of studying this topic, the learner will be able to:
– Identify the drivers behind the expansion of companies into international markets.
– Recognize how demographic, cultural, and market conditions shape the strategy choices of companies in international markets.
– Identify the five general modes of entry into foreign markets.
– Learn about the three main ways to tailor a company’s international strategy to market conditions and buyer preferences.
– Appreciate how multinational companies can leverage international operations to improve their competitiveness.
– Comprehend the challenges and opportunities associated with competing in developing-country markets.

Reflection statement:

As I delved into the assigned readings, I gained a deeper understanding of the reasons why companies expand into international markets. It was enlightening to learn about the various factors that shape strategy choices in foreign markets. For instance, I appreciated the impact of cross-country differences in demographic, cultural, and market conditions on the localization of products and services. I also learned about the opportunities for location-based cost advantages and how multinational companies can use international operations to improve their overall competitiveness.

Overall, this learning experience has helped me appreciate the complexities involved in competing in international markets. I have also gained insights into the unique challenges that companies face when targeting developing-country markets. This knowledge will be useful to me as I pursue my career as a content writer, as I will need to create content that resonates with global audiences.

Solution 1: Developing an International Market Strategy Based on Market Conditions

When companies decide to compete in international markets, they have to consider the various factors that influence their strategy choices. One possible solution is for companies to tailor their strategies based on the market conditions of different countries. For instance, if a country’s demographic, cultural, and market conditions are significantly different from the company’s home market, it may need to adjust its products, marketing, and distribution strategies to meet local customer preferences. However, this can increase the firm’s costs and reduce its scale economies.

Another issue companies face when expanding into international markets is cross-country differences in wages, productivity, inflation rates, energy costs, tax rates, and other factors that impact cost structure. Therefore, companies can identify opportunities to gain a location-based advantage by selecting cheaper locations to produce, source, and manufacture their products. This can potentially reduce costs and enhance their competitiveness while minimizing risks of adverse shifts in currency exchange rates.

Solution 2: Developing a Competitive Advantage in International Markets

Multinational companies can improve their overall global competitiveness by using their international operations to gain access to new customers, resources, and capabilities located in foreign markets. This involves developing a unique international strategy that suits the different cultures, market conditions, and buyer preferences of customers in different countries.

One possible way to gain a competitive advantage in international markets is through product differentiation. Companies can tailor their products to the demands of local customers and provide superior quality, performance, and features that set them apart from competitors. This requires a deep understanding of local customer preferences and market trends in each country.

Another way to gain a competitive advantage is through operational efficiency. Companies can adopt best practices in production, logistics, and distribution to reduce costs, improve quality, and speed up delivery to customers. This can be achieved through cross-functional collaboration, innovation, and continuous improvement initiatives.

Reflective Statement:

After reading the assigned readings on expanding into international markets, I have learned that there are several reasons why companies choose to compete in foreign markets. For instance, companies can gain access to new customers, lower costs, exploit core competencies, access resources, and spread business risk across a wider market base. However, succeeding in international markets requires a deep understanding of the market conditions, cultural differences, and buyer preferences in each country.

I have also learned about the five general modes of entry into foreign markets and the three main options for tailoring a company’s international strategy to cross-country differences in market conditions and buyer preferences. I found the topic of location-based cost advantages particularly interesting because it demonstrates how companies can exploit the advantages of different locations to reduce costs, enhance competitiveness, and minimize risks of adverse shifts in currency exchange rates.

Overall, these readings have broadened my knowledge of international business and how companies can develop effective international strategies to compete in foreign markets. As a professional content writer, this insight will help me to understand how to create content that appeals to customers in different markets and aligns with a company’s global strategy. I believe that having a deeper understanding of international business will be useful for me in future projects and contribute to my professional growth.

Suggested Resources/Books:

1. “Global Marketing Strategy: An Executive Digest” by Bodo B. Schlegelmilch, Christoph Teller, and Charles L.W. Hill. This book provides insights into the primary reasons why companies choose to compete in international markets and addresses the important factors that shape a company’s strategy choices in international markets.

2. “The Multinational Mission: Balancing Local Demands and Global Vision” by John Child. This book offers valuable information on the challenges and opportunities facing multinational companies in developing-country markets and helps readers gain an understanding of the unique characteristics of competing in such markets.

3. “Global Marketing Management” by Warren J. Keegan and Mark C. Green. This book is an excellent resource for understanding the five general modes of entry into foreign markets and the three main options for tailoring a company’s international strategy to cross-country differences in market conditions and buyer preferences.

Similar asked questions:

1. What are the primary reasons why companies choose to compete in international markets, and how do these reasons affect a company’s strategy choices?
2. How do differing market conditions across countries influence a company’s strategy choices in international markets, and what factors should companies consider when making these choices?
3. What are the five general modes of entry into foreign markets, and how can companies tailor their international strategy to cross-country differences in market conditions and buyer preferences?
4. How do multinational companies use international operations to improve overall competitiveness, and what are the unique characteristics of competing in developing-country markets?
5. What are some of the location-based cost advantages that companies can exploit in foreign markets, and how do these advantages affect a company’s competitiveness?

Reflection statement:

In studying the assigned readings for the week, I have gained valuable insights into the primary reasons why companies choose to compete in international markets and the factors that shape their strategy choices in these markets. I have also gained an understanding of the five general modes of entry into foreign markets and the three main options for tailoring a company’s international strategy to cross-country differences in market conditions and buyer preferences.

Furthermore, I have learned how multinational companies are able to use international operations to improve overall competitiveness and the unique characteristics of competing in developing-country markets. Finally, I have gained a better understanding of the location-based cost advantages that companies can exploit in foreign markets and how these advantages affect a company’s competitiveness.

Overall, this week’s readings have helped me to appreciate the importance of a company’s international strategy in achieving its global business objectives. They have also highlighted the importance of considering the cross-country differences in market conditions and buyer preferences when making strategic decisions. I believe that this understanding will help me in my future professional endeavors by enabling me to develop effective international strategies that will help companies achieve their global business objectives.

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