Competing in a Foreign Market

Competing in a Foreign Market - Crafting and Executing...

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Crafting and Executing Strategy Mcgraw Hill 15 th Edition Thompson, Strickland and Gamble Chapter 7 Competing in a Foreign Market Any company that aspires to industry leadership in the 21 st Century must think in terms of global, not domestic, market leadership. Companies in industries that are already globally competitive or in the process of becoming so are under the gun to come up with a strategy for competing successfully in foreign markets. Why Companies expand into Foreign Markets? A company may opt to expand outside its domestic market for any of the four major reasons: To gain access to new customers Expanding foreign markets offers potential for increased revenues, profits, and long term growth and becomes especially attractive option when a company’s home markets are mature. To achieve lower costs and enhance the firms competitiveness Many countries are driven to sell in more countries than one because domestic sales volumes is not large enough to fully capture manufacturing economies of scale or learning/experience curve effects and thereby substantially improve the firms cost competitiveness. To capitalize on its core competencies A company may be able to leverage its competencies and capabilities into a position of competitive advantage in foreign markets as well as just domestic markets. Example Nokia, Walmart in their discount expertise. To spread its business risk across a wider market base A company spreads business risks by operating in a number of different foreign markets rather than depending entirely on operations in domestic market. The difference between competing internationally and competing globally Typically a company will choose a few countries to enter into and than a global scales comes later after the company has established operations on several continents and racing against rivals for global market leadership. There is a meaning distinction between the competitive scope of a company that operates in few countries and a company that markets its products globally. The former is more accurately termed international competitor whereas the latter qualifies as a global competitor.
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Cross Country Difference in cultural demographic and market conditions Regardless of a company’s motivation for expanding outside its domestic market the strategies used to compete in foreign markets must be situation driven. Cultural, demographic and market conditions vary significantly among countries of the world. Cultures and lifestyles are the most obvious areas in which countries differ: income levels and market demographics are close behind. Sometimes product designs suitable in one country are inappropriate in another for example USA use 110 volt systems and the UK use standard 240 volt systems. Or in china parents are reluctant to purchase pc’s for their children because of fear of distraction.
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