STRATEGIES FOR COMPETING IN INTERNATIONAL MARKETS

NUR FILZAH BINTI SULAIMAN

TMA 2

110820

Why companies decide to enter foreign markets ?

- To gain access to new customers.

- To achieve lower costs through economies of scale, experience, and increased purchasing power.

- To further exploit core competencies.

- To spread business risk across a wider market base.

- To gain access to resources and capabilities located in foreign markets.

Why competing across national borders makes strategy making more complex.

• Different countries have different home-country advantages in different industries.
• Location-based value chain advantages for certain countries.
• Differences in government policies, tax rates, and economic conditions.
• Currency exchange rate risks.
• Differences in buyer tastes and preferences for products and services.

The Diamond of National Advantage:

Home Country Advantages: 

Demand conditions - Home market size and growth rate, buyers' tastes.

Related supporting industries - Proximity of suppliers, end users, and complementary industries.

Factor conditions - Availability and relative prices of inputs.

Firm strategy, structure, and rivalry - Different styles of management and organization, degree of local rivalry.

The core concept,

-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.

-Greenfield venture is a subsidiary business that is established by setting up the entire operation from the ground up.

Collaborative strategies involving alliances or joint ventures with foreign partners are a popular way for companies to edge their way into the markets of foreign countries.

Cross-border alliances enable a growth-minded company to widen its geographic coverage and strengthen its competitiveness in foreign markets, at the same time, they offer flexibility and allow a company to retain some degree of autonomy and operating control.

COMPETING INTERNATIONALLY: THREE STRATEGIC APPROACHES

1. Multidomestic strategy
2. Global strategy
3. Transnational strategy

Build competitive advantage in international markets

• Use international location to lower cost or differentiate product.
• Share resources and capabilities.
• Gain cross-border coordination benefits.

Core concepts for profit sanctuaries are country markets that provide a firm with substantial profits because of a strong or protected market position.

Core concept for cross-market subsidization is supporting competitive offensive in one market with resources and profits diverted from operations in another market.

DUMPING AS A STRATEGY:

Dumping - selling goods in foreign markets at prices that are either below normal home market prices or below the full costs per unit.

Dumping is not a fair-trade practice:

Governments can be expected to retaliate against such practices by foreign competitors.

The World Trade Organization (WTO) actively polices dumping to discourage such practices.