Exam 2 Study Guide

Exam 2 Study Guide - Chapter 7 Competing in Foreign Markets...

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Chapter 7 – Competing in Foreign Markets Why Companies Expand into Foreign Markets 1. To gain access to new customers – offers potential for increased revenues, profits, and long-term growth 2. To achieve lower costs and enhance the firm’s competitiveness – because domestic sales volume is not large enough to fully capture manufacturing economies of scale or learning/ experience curve effects and thereby substantially improve the firm’s cost-competitiveness. 3. To capitalize on its core competencies – able to leverage its competencies and capabilities into a position of competitive advantage in foreign market as well as just domestic markets 4. To spread its business risk across a wider market base – a company spreads business risk by operating in a number of different foreign countries rather than depending entirely on operations in its domestic market **Main reason companies compete overseas is to GROW THE MARKET International vs. Global Competition Global = presence in every market Cross-Country Differences in Cultural, Demographic, and Market Conditions (on exam!) Cultures and lifestyles differ among countries o Consumer taste and preferences o Consumer buying habits o Market size and growth potential o Distribution channels o Driving forces o Competitive pressures o Biggest concern is whether to customize product offerings in each different country market to match the tastes and preferences of local buyers Differences in market demographics and income levels Variations in manufacturing and distribution costs Fluctuating exchange rates Differences in host government economic and political demands
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Exam 2 Study Guide - Chapter 7 Competing in Foreign Markets...

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