Chapter 7 - Strategies for competing in international markets. In this chapter, the following content will be discussed: Why companies expand into foreign markets, factors that shape strategy choices in foreign markets, the concepts of multicountry competition and global competition, strategy options for entering and competing in foreign markets, the quest for competitive advantage in foreign markets, strategies to compete in the markets of emerging countries. | Student Version 1 Why Companies Expand Into International Markets To gain access to new customers. To achieve lower costs and enhance the firm’s competitiveness. To further exploit its core competencies. To gain access to resources and capabilities located in foreign markets. To spread its business risk across a wider market base. 2 Factors That Shape Strategy Choices in International markets The degree to which there are important cross-country differences in demographic, cultural, market conditions. Whether opportunities exist to gain a location-based advantage based on wage rates, worker productivity, inflation rates, energy costs, tax rates, and other factors that impact cost structure. The risks of adverse shifts in currency exchange rates. The extent to which governmental policies affect the local business climate. Cross-Country Differences in Demographic, Cultural, and Market Conditions Adjustments to local buyer tastes Raise manufacturing and distribution costs. Reduce scale economies and increase learning curve effects. Differences in market growth potential Reflect wide variances in the demographics, income levels, and cultural attitudes in emerging markets. Can result from a lack of infrastructure, reliable distribution systems, and closed retail networks. Differences in the intensity of local competition How Markets Demographics Differ from Country to Country Distribution channel emphasis Demands for localized products Strength of local competitive rivalry Demographic Differences Consumer tastes and preferences Consumer purchasing power Consumer buying habits Opportunities for Location-Based Cost Advantages Location-Based Cost Advantages Environmental regulations Tax rates Inflation rates Wage rates Worker productivity Energy costs Access to resources The Risks of Adverse Exchange Rate Shifts An exporter gains in competitiveness when the currency of the country in which the exported goods are manufactured is weak relative to the currency . | Student Version 1 Why Companies Expand Into International Markets To gain access to new customers. To achieve lower costs and enhance the firm’s competitiveness. To further exploit its core competencies. To gain access to resources and capabilities located in foreign markets. To spread its business risk across a wider market base. 2 Factors That Shape Strategy Choices in International markets The degree to which there are important cross-country differences in demographic, cultural, market conditions. Whether opportunities exist to gain a location-based advantage based on wage rates, worker productivity, inflation rates, energy costs, tax rates, and other factors that impact cost structure. The risks of adverse shifts in currency exchange rates. The extent to which governmental policies affect the local business climate. Cross-Country Differences in Demographic, Cultural, and Market Conditions Adjustments to local buyer tastes Raise manufacturing and distribution costs. Reduce scale
