Chapter 7: Strategies For Competing In International Markets Flashcards
5 reasons why companies expand into international markets
1) gain access to new customers
2) achieve lower costs through economies of scale
3) Gain access to low-cost inputs of production
4) further exploit its core competencies
5) gain access to resources and capabilities in foreign markets
5 factors that shape strategy choices in international markets
1) Degree to which there are cross-cultural differences in demographic, culture, and market conditions
2) Opportunities for location-based cost advantages
3) Industry cluster knowledge sharing opportunities
4) Risks of adverse exchange rate shifts
5) Impact of gov’t policies on the business climate in the host country
Political risks
Stem from instability or weakness in national gov’ts and hostility to foreign business
Economic risks
Stem from the stability of a country’s monetary system, economic and regulatory policies, and the lack of property rights procections
5 strategy options for entering foreign markets
1) Export
2) License
3) Franchise
4) Subsidiary
5) Joint ventures
Export strategies
Using a national (one country) production base to send goods to foreign markets (multiple countries)
Risks of Export strategies
1) Manufacturing at home may be more expensive
2) Shipping costs
3) Currency exchange may adversely affect
Benefits of Export strategies
1) Maintain control
2) Limit risk of being in foreign market
Licensing strategies
License foreign firms to produce and distribute a company’s products abroad (gives permission to use a brand, product, or technology at a fee)
Risks of Licensing strategies
1) Lose cl over tech know-how
2) Must monitor and safeguard IP
Benefits of Licensing strategies
1) Avoids committing resources
2) Don’t bare full risk
Franchising strategies
Franchisee operates a business under the franchisers brand and must follow their business model and rules
Risks of Franchising strategies
1) Maintaining quality control
2) Debates on modifying to fit local area
Benefits of Franchising strategies
1) Only need to recruit, train, support, and monitor
Benefits of franchising strategies
1) Only need to recruit, train, support, and monitor
Subsidiary strategies
Establish in a foreign market via acquisition or internal development
Risks of Subsidiary strategies
1) Large investment needed
Benefits of Subsidiary strategies
1) More control over supply chain in foreign market
Joint venture strategies
Rely on strategic alliances or join-ventures with foreign partners to enter new s
Risks of Joint venture strategies
1) Language/cultural barriers
2) over-dependance
3) Conflicting objectives and strategies
Benefits of Joint venture strategies
1) Fills tech-expertise gaps
2) Captures economies of scale
3) Access to their markets
International strategy
Strat for competing in 2+ countries simultaneously
Multidomestic strategy
Think local, act local (BP operates under diff names in diff countries)
Global strategies
Think global, act global (Ex volkswagen electric car)
