group 5_competitive strategies in foreing markets

8/3/2019 Group 5_Competitive Strategies in Foreing Markets

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Competitive strategiesfor

Firms in Foreign Markets

By :

Mittal Thakkar (102125)

Nehal Roy (102127)Nimesh Barot (102128)

21stOct11Sub : STM - II


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What is Globalization?

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The strategy ofapproaching worldwidemarkets with

standardized products


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Development of a GlobalCorporation

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Evolution ofa global firm

entailsprogressivel

yinvolvedstrategylevels

1. Export-import activity

2. Foreign licensing andtechnology transfer

3. Direct investment in overseasoperations

4. Substantial increase in foreigninvestment


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Reasons for Going Global Proactive Approach

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Additional resources

Lowered costs

Incentives

New, expanded markets

Exploitation of firm-

specific advantages

Taxes

Economies of scale

Synergy

Power and prestige

Protect home market via

offense in competitors

home


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Reasons for Going Global

Reactive Approach

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Trade barriers

International customers

International competition

Regulation

Chance


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Beginning to Globalize:

Key Steps

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External assessment Careful examination of critical features of the

global environment, particularly to host nations

status in Economic progress

Political control

Nationalism

Internal assessment

Identification of resources in Technical and managerial skills, capital, labor, raw

materials

Identification of capabilities in

Product delivery, financial management systems


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Factors Contributing to Complexityof Global Strategic Planning

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1. Globals face multiple political, economic, legal, social, andcultural environment as well as various rates of changes

within each of them

2. Interactions between national and foreign environments are

complex because of national sovereignty issues and widelydiffering economic and social conditions

3. Geographic separation, cultural and national differences, andvariations in business practices tend to complicatecommunication and control efforts between headquarters andoverseas affiliates

4. Globals face extreme competition due to differences inindustry structure

5. Globals are restricted in selecting competitive strategies byvarious regional blocs and economic integrations


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Control Problems of theGlobal Firm

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Financial policies typically are designed to further the goals of the

parent company and pay minimal attention to the goals of the

host countries

Different financial environments make normal standards ofcompany behavior concerning concerning the disposition of

earnings, sources of finance, and structure of capital more

problematic

Important differences in measurement and control systems exist

Differences exist in national attitudes toward work measurementand in government requirements about disclosure of information


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InternationalStrategy Options

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Mode Description Advantages Disadvantages

Exporting Transfer ofgoods orservices

acrossnationalboundaries

- Ability to realizelocationand experience

- curveeconomies- Avoids the costof establishingmanufacturingoperations inthe host country- Low risk

-High transportcosts

-Unpredictabilityof trade barriers

- Problems withlocal marketingagents

Exporting as a mode of entry are Sony in the global television market, Matsushitain the video cassetterecorder market, and several Japanese companies in theUnited States auto market.


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Licensing Foreignlicenseebuys the rights

toproduce acompanysproduct inthe licenseescountry for a

negotiated fee

- Low costs ofdevelopmentof foreign markets

and risk- Quick growthpossible

- Difficult torealizelocation and

experiencecurveeconomies & toengage inglobalstrategic

coordination- Difficult tohave controlovertechnology

For example, RCA once licensed its color television technology to a numberof Japanese companies.


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Franchising Selling tofranchiseelimited rights touse its brand nameand businessmodel in return fora lumpsumpayment and ashare of thefranchisees

profits, often in theservices and tradesectors

- Low costs ofdevelopmentof foreign marketsand risk- Quick growthpossible

- Difficult toengage inglobalstrategiccoordination- Difficult tocontrolquality

Examples of companies that use franchising as a mode of entry are McDonalds,

Kentucky Fried Chicken, Hilton hotels


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Strategicalliance/JointVenture

Sharing ofownershipstake andoperatingcontrol byboth parentcompanies

- Access to localpartnersknowledge- Shareddevelopmentcost and risk- Easier politicalacceptability- Facilitate the

transfer ofcomplementaryskills

- Difficult to engage inglobal strategiccoordination and torealize location andexperience-curveeconomies- Risk of giving awaytechnological know-how and market

access to alliancepartner for asmall return


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Whollyowned

subsidiary

Parentcompany

owns 100percent ofthesubsidiarysstock

- Protection oftechnology

- Ability toengage inglobal strategiccoordinationand to realizelocation and

experiencecurveeconomies

- High costsand risks

- Divergentcorporatecultures andpriorities

group 5_competitive strategies in foreing markets

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