Global Strategies Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be a minimum of 300 words in length and you should respon

14 Oct Global Strategies Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be a minimum of 300 words in length and you should respon

Posted at 06:58h in Business & Finance /Management by

Global Strategies

Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be a minimum of 300 words in length and you should respond to two additional posts from your peers. If you have not done so lately, please review the Rules of Discussion.

Understanding global strategies are critical to survival in a global market. Consider what are some global environmental trends affecting the choice of international strategies, particularly international corporate-level strategies.

chapter 7 Strategies for Competing Internationally or Globally

Arthur A. Thompson The University of Alabama

An e-book published and distributed by McGraw Hill Education

Sixth Edition of Strategy: Core Concepts and Analytical Approaches (2020-2021). Arthur A. Thompson, The University of Alabama. Published and distributed by McGraw Hill Education. Image of globe comprised of puzzle pieces with several pieces dislodged and scattered below the globe. Chapter 5 The Five Generic Competitive Strategy Options: Which One to Employ

“You have no choice but to operate in a world shaped by globalization and the information revolution. There are two options: Adapt or die.”

7–2

Andrew S. Grove former Chairman and CEO, Intel Corporation

“You do not choose to become global. The market chooses for you; it forces your hand.”

7–3

Alain Gomez former CEO, Thomson, S.A.

“[I]ndustries actually vary a great deal in the pressures they put on a company to sell internationally.”

7–4

Niraj Dawar and Tony Frost Professors, Richard Ivey School of Business

Learning Objectives

Learn why companies decide to enter foreign markets.

Understand why competing across national borders makes strategy-making more complex.

Learn the difference between multi-country competition and global competition.

Gain command of the strategic options for establishing a competitive presence in foreign markets.

Become familiar with the three main strategic approaches to competing internationally.

Learn how multinational competitors can use their international operations to improve their competitiveness.

Learn about profit sanctuaries and global strategic offensives.

7–5

Chapter 7 Roadmap

Why Companies Decide to Enter Foreign Markets

Why Competing across National Borders Makes Strategy-Making More Complex

The Concepts of Multicountry Competition and Global Competition

Strategy Options for Entering and Competing in International and Global Markets

The Quest for Competitive Advantage in Global Markets

Profit Sanctuaries and Global Strategic Offensives

7–6

Whether to customize the firm’s offerings in different country markets to match local buyer preferences or offer mostly standardized products worldwide

Whether to employ the same basic competitive strategy in all countries or to modify the strategy country by country to better match local market and competitive conditions

Where to locate facilities, distribution centers, and service operations to realize the greatest locational advantages

When and how to efficiently transfer some of a firm’s competitively powerful resources and capabilities from its operations in some countries to its operations in one or more other countries in order to better spearhead the company’s strategic offensives to enter new country markets and to more effectively battle local rivals for sales and market share

Strategic Issues Unique to Competing across National Borders

7–7

Competing Across National Borders

7–8

Strategic Issues Unique To Competing Across National Borders

Whether to customize the firm’s offerings in each country market or to offer a mostly standardized product worldwide

Whether to employ the same basic competitive strategy in all countries or modify the strategy

country by country

Where to locate the firm’s operations

to realize the greatest location-related advantages.

When and how to transfer some of a firm’s competitively powerful resources and capabilities from its operations in some countries to its operations in one or more other countries in order to compete more effectively against local rivals

A firm that competes in relatively few foreign countries is an international or multinational competitor

A global competitor has operations on several continents, is actively marketing its products or services in many different parts of the world, and is pursuing a strategy of expanding into additional countries

Typically, a firm will start to compete internationally by entering one or two foreign markets and then expand gradually or perhaps rapidly into the markets of other countries over time.

7–9

International Competitors versus Global Competitors—What’s the Difference?

Why Companies Decide to Enter Foreign Markets

7–10

To gain access to new customers

To achieve lower costs and thereby become more cost competitiveness

To further exploit competitively valuable resources and capabilities

To spread business risk across a wider market base

To meet their customers’ needs abroad and retain their position as a key supply chain partner.

The presence of important cross-country differences in buyer tastes, market sizes, and growth potential

The existence of sizable cross-country differences in wages, worker productivity, inflation rates, energy costs, taxes, and other factors that impact a firm’s costs and profit prospects

Differing cross-country governmental policies and regulations that make the business climate more favorable in some countries than others

The need to consider ways to mitigate the risks of adverse shifts in currency exchange rates

Why Competing Across National Borders Causes Strategy Making to Be More Complex

7–11

Cross-Country Differences in Buyer Tastes, Market Sizes, and Growth Potential

Many cross-country factors affect an international or global competitor’s strategic decisions:

Country-to-country differences in population sizes, income levels, and other demographic factors that help drive market size and rates of growth in market demand

Country-to-country differences in buyer tastes

Country-to-country differences in distribution channels, competitive conditions, and other market-related factors

Perhaps the biggest market-related issue:

Whether and how much to customize offerings to match local buyers’ tastes and preferences in each different country market OR

Whether to pursue a strategy of offering a mostly standardized product worldwide

7–12

Core Concept

The tension between the market pressures to localize a firm’s product offerings country by country and the competitive pressures to lower costs by offering mostly standardized products in all countries where it competes is one of the big strategic issues that firms operating in few or many country markets must address.

The managerial challenge in operating internationally or globally is tailoring a firm’s strategy to take a variety of country-to-country differences into account.

7–13

Cross-Country Differences in Operating Costs and Profitability

Country-to-country differences are often so large that a firm’s operating costs and profitability are significantly impacted by local factors such as:

Wage rates • Worker productivity

Inflation rates • Energy costs

Tax rates • Government regulations

Cost advantages are gained by locating operations in countries with:

Low wage rates • Less costly government regulations

Low taxes • Low energy costs

Cheaper access to natural resources

7–14

The Impact of Host Government Policies on the Local Business Climate

Host government policies and attitudes of toward business create a favorable or unfavorable business climate for local firms and foreign firms.

“Pro-business” governments

Provide incentives for expansion-minded firms (lower tax rates, site location and site development assistance, government-sponsored worker training, seek the advice and counsel of business leaders)

Make the transition to more costly and stringent regulations business-friendly rather than adversarial

“Anti-business” governments

Tend to enact costly regulations and procedures, institute burdensome taxes, impose tariffs and/or quotas on imports, create uneven playing field that favors domestic companies, and pursue various other policies that make the local business climate less attractive to foreign firms

7–15

Political Risks

Instability of weak governments

Civil unrest and revolt

Passage of anti-business legislation or regulations

Systemic corruption in governmental and business operations

Suspicion of foreign firms operating within their borders

Loss of assets to nationalization by socialist politicians

Economic Risks

Instability of the national economy and monetary system—inflation rates, deficit-spending, and economic distress

Threat of piracy

Lack of intellectual property protection

The Impact of Host Government Policies on the Local Business Climate (continued)

7–16

The Risks of Adverse Exchange-Rate Shifts

Sizable shifts in currency exchange rates pose significant risks for two reasons:

They are very hard to predict because of the variety of factors involved and the uncertainties surrounding when and by how much these factors will change

Shifting exchange rates affect which countries—either temporarily or long term—represent the low-cost manufacturing location and which rivals have a temporary or longer-term cost-based competitive advantage because of the countries where their production operations are located

7–17

Core Concept

Firms that export goods to foreign countries always gain in competitiveness when the currency of the producing country grows weaker relative to the currencies of countries to which the goods are exported.

A firm is competitively disadvantaged when the currency of country where its products are produced grows stronger relative to the currencies of countries to which its goods are exported and marketed.

7–18

Consider the case of a firm with manufacturing facilities in Brazil (where the currency is reals—pronounced ray-alls) that exports its Brazilian-made goods to European Union markets (where the currency is euros).

Assume that the current exchange rate is 4 Brazilian reals for 1 euro and that the product made in Brazil has a manufacturing cost of 4 Brazilian reals (or 1 euro).

Now suppose that the exchange rate shifts from 4 reals per euro to 5 reals per euro (meaning that the real has declined in value and that the euro is stronger).

The Brazilian-made product is now more cost-competitive because a Brazilian-made good costing 4 reals has fallen to only 0.8 euros at the new exchange rate (4 reals divided by 5 reals per euro = 0.8 euros). The producer of the Brazilian-made good is better positioned to compete against European makers of the same good.

On the other hand, if the value of the real grows stronger in relation to the euro—resulting in an exchange rate of 3 reals to 1 euro—the same Brazilian-made good formerly costing 4 reals (or 1 euro) now has a cost of 1.33 euros (4 reals divided by 3 reals per euro = 1.33), This puts a producer of the Brazilian-made good in a weaker competitive position versus European producers of the same good.

Clearly, manufacturing in Brazil to sell in Europe is more attractive when the euro is strong (a rate of 1 euro for 5 reals) than when weak and 1 euro exchanges for 3 reals.

Example: Who Gains and Who Loses When Currency Exchange Rates Shift?

7–19

When the exchange rate changes from 4 reals per euro to 5 reals per euro:

The Brazilian-made good that formerly cost 1 euro and now costs only 0.8 euros can be sold to European Union consumers for a lower euro price than before.

In other words, the combination of a stronger euro and a weaker real acts to lower the price of Brazilian-made goods in the European Union. This spurs sales of Brazilian goods and boost exports of Brazilian goods to Europe

Conversely, an exchange rate shift from 4 reals to 3 reals per euro makes a Brazilian manufacturer less cost competitive with European manufacturers of the same item—the Brazilian-made good that formerly cost 1 euro and now costs 1.33 euros will sell for a higher price in euros than before, weakens European consumer demand for Brazilian-made goods and reduces Brazilian exports to Europe.

Brazilian exporters experience (1) rising demand for their goods in Europe whenever the Brazilian real grows weaker relative to the euro and (2) falling demand for their goods in Europe whenever the Brazilian real grows stronger relative to the euro.

Example: Who Gains and Loses When Currency Exchange Rates Shift? (continued)

7–20

The Impact of Exchange Rates on Domestic Competitors Competing with Foreign Rivals

Weaker dollar policies best serve U.S. manufacturers affected by low-cost foreign imports by:

Raising the dollar-costs of foreign goods produced in countries whose currencies have grown stronger relative to the dollar

Making foreign goods more expensive to U.S. consumers—curtailing demand for those goods and stimulating demand for U.S. goods

Allowing U.S. goods to be sold at lower prices to consumers in countries with strong currencies—thereby stimulating exports to meet foreign demand for U.S. goods and creating U.S.-based jobs

Increasing the dollar value of profits a firm earns in foreign markets where local currencies are now stronger relative to the dollar

7–21

Core Concept

Domestic companies facing competitive pressure from lower-cost foreign rivals benefit when their country’s currency grows weaker in relation to currencies of countries where lower-cost foreign rivals have their manufacturing plants.

7–22

Questions for Company Co-Managers

When your simulation company is facing an unfavorable exchange rate change that negatively affects profitability in one or more geographic regions, should you and your co-managers:

Consider raising price or adjusting marketing efforts to reduce/eliminate the negative impact on earnings?

Consider temporarily curtailing sales and marketing efforts in the negatively affected regions and boosting sales efforts in regions where profits are favorably impacted by the exchange rate shifts?

Do nothing, absorb whatever adverse financial impact occurs, and suffer the consequences of lower earnings?

7–23

When your simulation firm experiences a favorable exchange rate change that positively affects profitability in one or more geographic regions, should you and your co-managers:

Consider lowering price or boosting marketing efforts to increase sales and further exploit the positive impact on earnings in those regions where the exchange rate shifts are favorable?

Consider temporarily boosting sales efforts in regions where profits are favorably impacted by the exchange rate shifts and curtailing sales and marketing efforts in regions with unfavorable exchange rate impacts?

Do nothing and enjoy the benefits of whatever temporary boost to earnings occurs?

Questions for Company Co-Managers (continued)

7–24

Global competition

There Are Two Importantly Different Patterns of Competition in World Markets

7–25

Multi-country competition

Core Concepts

Multicountry competition exists when competition in one national market is not closely connected to competition in any other national market. There is no global or world market, only a collection of self-contained country markets.

Global competition exists when competitive conditions across national markets are linked strongly enough to form a true international market and when leading competitors compete head-to-head in many different countries.

7–26

Traits of Multicountry Competition

The country’s market is localized to that country and not closely connected to the market contest in other countries

Buyers in different countries are attracted to different product attributes

The numbers and identities of rival sellers vary from country to country

Industry conditions and competitive forces in each national market differ in important respects

Rival firms battle for national championships and winning in one country does not necessarily signal the ability to fare well in other countries!

7–27

Traits of Global Competition

Prices and competitive conditions across country markets are strongly linked

Leading competitors compete head-to-head in many of the same country markets

A firm’s competitive position in one country both affects and is affected by its position in other countries

A true global or world market exists

Competitive advantage is based on a firm’s world-wide operations and global standing

Rival firms in globally competitive industries vie for global leadership (world championships)!

7–28

Maintain a national (one-country) production base and export goods to foreign markets

License foreign firms to use the firm’s technology or to produce and distribute the firm’s products in foreign markets

Employ a franchising strategy in foreign markets

Rely upon acquisitions or internal startup ventures to gain entry into foreign markets

Rely on strategic alliances or joint ventures with foreign firms as the primary vehicle for entering foreign country markets

Strategy Options for Establishing a Competitive Presence in Foreign Markets

7–29

Export Strategies

Using domestic plant capacity to produce goods for export to foreign markets is a good initial strategy to pursue international sales

Advantages

Is a conservative way to test the risks of international markets

Increases the utilization of existing capital investment in production facilities

Minimizes direct investments in foreign countries

An export strategy is vulnerable when:

Home country manufacturing costs are higher than the manufacturing costs that rivals incur in the countries where they have plants

Product shipping costs to distant markets are high

Adverse shifts can occur quickly in currency exchange rates

Importing countries impose tariffs or erect other trade barriers to protect local firms against competition from foreign-made goods

7–30

Licensing Strategies

Licensing makes sense when a firm

Has valuable technical know-how or a unique patented product but lacks the organizational capability or resources to enter foreign markets

Desires to avoid risks of committing resources to markets that are unfamiliar, politically volatile, and/or economically unstable.

Can earn considerable royalties from licensees who are trustworthy and reputable

Disadvantage

Licensing firm risks providing valuable technical know-how to foreign firms and losing control over its use—monitoring the actions of foreign licensees and safeguarding the company’s proprietary know-how is not always as easy as it might seem

7–31

Franchising Strategies

Well suited to the global expansion efforts of service and retailing enterprises

Advantages

Franchisee bears in-country costs and risks of establishing foreign locations

Franchisor has to expend only the resources to attract, recruit, train, support, and monitor franchisees

Disadvantage

Maintaining quality control when franchisees in certain locations are not strongly committed to consistency and standardization

Issue: To allow localization or not

Should franchisees be allowed to make modifications in the franchisor’s product offering to better satisfy the tastes and expectations of local buyers?

7–32

Acquisition Strategies

Acquiring a local business to compete internationally or globally:

Is quicker than creating a new subsidiary and having to build a new operating organization from the ground up

Is the least risky and most cost-efficient means of hurdling such entry barriers as gaining access to local distribution channels, building supplier relationships, and establishing relationships with government officials and other constituencies

Allows acquirer to move directly to the tasks of transferring resources and personnel, integrating and redirecting the acquired firm into its own operations, putting its own strategy in place, and building a stronger market position

The big issue an acquisition-minded firm must consider is whether to pay a premium price to buy a successful local firm or to buy a struggling competitor at a bargain price (and then spend monies to boost its competitiveness).

7–33

Internal Startup Strategies

Creating an internal startup (greenfield venture) to build a new business subsidiary from scratch makes sense when a firm:

Has foreign market operating experience in rapidly getting new foreign subsidiaries up and running and overseeing their operations

Can create the subsidiary for less cost than making an acquisition.

Can add the subsidiary’s production capacity to the local market without adversely impacting the supply–demand balance in that market.

Can provide the subsidiary with the resources and capabilities needed to achieve the cost structure and competitive strength to battle local rivals head to head.

Can create a subsidiary with the resources and cap

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteEdu. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.

Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.

Do you need an answer to this or any other questions?

Do you need help with this question?

Get assignment help from WriteEdu.com Paper Writing Website and forget about your problems.

WriteEdu provides custom & cheap essay writing 100% original, plagiarism free essays, assignments & dissertations.

With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.

Chat with us today! We are always waiting to answer all your questions.

Click here to Place your Order Now

14 Oct Global Strategies Each week, you will be asked to respond to the prompt or prompts in the discussion forum. Your initial post should be a minimum of 300 words in length and you should respon

Global Strategies

About Us

Quick Links

Recent Posts