Management

*

*

*

*

*

*

*

*

*

*

*

Answer: C

*

*

7-*

Franchising Strategies

• Often is better suited to global expansion efforts of service and retailing enterprises
• Advantages
• Franchisee bears most of costs and
  risks of establishing foreign locations
• Franchisor has to expend only the
  resources to recruit, train, and support franchisees
• Disadvantage
• Maintaining cross-country quality control

7-*

Achieving Global Competitiveness
via Cooperative Agreements

• Cooperative agreements with
  foreign companies are a means to
• Enter a foreign market or
• Strengthen a firm’s
  competitiveness in world markets
• Purpose of alliances / joint ventures
• Joint research efforts
• Technology-sharing
• Joint use of production or distribution facilities
• Marketing / promoting one another’s products

7-*

Strategic Appeal of Strategic Alliances

• Gain better access to attractive country markets
• Capture economies of scale in production and/or marketing
• Fill gaps in technical expertise or knowledge of local markets
• Share distribution facilities and dealer networks
• Direct combined competitive energies toward defeating mutual rivals
• Take advantage of partner’s local market
  knowledge and working relationships with
  key government officials in host country
• Useful way to gain agreement on
  important technical standards

7-*

Pitfalls of Strategic Alliances

• Overcoming language and cultural barriers
• Dealing with diverse or conflicting operating practices
• Time consuming for managers in
  terms of communication,
  trust-building, and coordination costs
• Mistrust when collaborating in
  competitively sensitive areas
• Clash of egos and company cultures
• Dealing with conflicting objectives, strategies, corporate values, and ethical standards
• Becoming too dependent on another firm for essential expertise over the long-term

7-*

Localized Multicountry Strategy
or a Global Strategy?

• Whether to vary a company’s competitive approach to fit specific market conditions and buyer preferences in each host county

or

• Whether to employ essentially the same strategy in all countries

Strategic Issue

7-*

Figure 7.1: A Company’s Strategic Options for Dealing with
Cross-Country Variations in Buyer Preferences and Market Conditions

7-*

7-*

A company varies its product offerings and basic competitive strategy from country to country
in an effort to be responsive to
differing buyer preferences
and market conditions.

What Is a “Think-Local, Act-Local” Approach to Strategy Making?

7-*

7-*

Characteristics of a “Think-Local,
Act-Local” Approach to Strategy Making

• Business approaches are deliberately crafted to
• Accommodate differing tastes and expectations of buyers in each country
• Stake out the most attractive market positions vis-à-vis local competitors
• Local managers are given considerable strategy-making latitude
• Plants produce different products
  for different local markets
• Marketing and distribution are adapted
  to fit local customs and cultures

7-*

When Is a “Think-Local, Act-Local”
Approach to Strategy Making Necessary?

• Significant country-to-country
  differences in customer preferences
  and buying habits exist
• Host governments enact regulations requiring products sold locally meet strict manufacturing specifications or performance standards
• Trade restrictions of host governments are
  so diverse and complicated they preclude a
  uniform, coordinated worldwide market approach

7-*

Drawbacks of a “Think-Local,
Act-Local” Approach to Strategy Making

Poses problems of transferring competencies across borders

Works against building a
unified competitive advantage

7-*

7-*

A company employs the same basic competitive approach in all countries where it operates.

What Is a “Think-Global, Act-Global” Approach to Strategy Making?

7-*

7-*

Characteristics of a “Think-Global,
Act-Global” Approach to Strategy Making

• Same products under the same brand names are sold everywhere
• Same distribution channels are used in all countries
• Competition is based on the same capabilities
  and marketing approaches worldwide
• Strategic moves are integrated and coordinated worldwide
• Expansion occurs in most nations where
  significant buyer demand exists
• Strategic emphasis is placed on
  building a global brand name
• Opportunities to transfer ideas, new
  products, and capabilities from one
  country to another are aggressively pursued

7-*

Figure 7.2: How a Localized or Multicountry
Strategy Differs from a Global Strategy

7-*

7-*

A company uses the same basic
competitive theme in each country but gives local managers the latitude to

• Incorporate whatever country-specific variations in product attributes are needed to best satisfy local buyers and
• Make whatever adjustments in production, distribution, and marketing are needed to compete under local market conditions.

What Is a “Think-Global, Act-Local” Approach to Strategy Making?

7-*

7-*

Test Your Knowledge

The stand-out characteristic of multicountry competition is

A. varying driving forces from country to country.

B. varying competitive pressures from country to country.

C. varying buyer requirements and expectations from country to country.

D. that there is so much cross-country variation in market conditions and in the companies contending for leadership that the market contest among rivals in one country is not closely connected to the market contests in other countries—as a consequence, there is no global or world market, just a collection of self-contained country markets.

E. varying degrees of product differentiation from country to country.

7-*

For Discussion: Your Opinion

Assume you are in charge of developing the strategy for a multinational company selling products in several different countries around the world.

A. If your company’s product is personal computers, do you think it would make better strategic sense to employ a multicountry strategy or a global strategy? Why?

B. If your company’s product is dry soup mixes and canned soups, would a multicountry strategy seem to be more advisable than a global strategy? Why?

C. If your company’s product is washing machines, would it seem to make more sense to pursue a multicountry strategy or a global strategy? Why?

D. If your company’s product is basic work tools (hammers, screwdrivers, pliers, wrenches, saws), would a multicountry strategy or a global strategy seem to have more appeal? Why?

7-*

The Quest for Competitive
Advantage in Foreign Markets

• Three ways to gain competitive advantage

1. Locating activities among nations
in ways that lower costs or achieve
greater product differentiation

2. Efficient/effective transfer of competitively
valuable competencies and capabilities from
company operations in one country to
company operations in another country

3. Coordinating dispersed activities in
ways a domestic-only competitor cannot

7-*

Locating Activities to Build a
Global Competitive Advantage

• Two issues . . .
• Whether to
• Concentrate each activity
  in a few countries or
• Disperse activities to
  many different nations
• Where to locate activities
• Which country is best
  location for which activity?

7-*

• Activities should be concentrated when
• Costs of manufacturing or other value chain activities are meaningfully lower in certain locations than in others
• There are sizable scale economies
  in performing the activity
• There is a steep learning curve associated
  with performing an activity in a single location
• Certain locations have
• Superior resources
• Allow better coordination of related activities or
• Offer other valuable advantages

Concentrating Activities to Build
a Global Competitive Advantage

7-*

Dispersing Activities to Build a
Global Competitive Advantage

• Activities should be dispersed when
• They need to be
  performed close to buyers
• Transportation costs, scale diseconomies, or
  trade barriers make centralization expensive
• Buffers for fluctuating exchange rates, supply interruptions, and adverse politics are needed

7-*

Transferring Valuable Competencies to Build a Global Competitive Advantage

• Transferring competencies, capabilities, and resource strengths across borders contributes to
• Development of broader
  competencies and capabilities
• Achievement of dominating depth
  in some competitively valuable area
• Dominating depth in a competitively valuable capability is a strong basis for sustainable competitive advantage over
• Other multinational or global competitors and
• Small domestic competitors in host countries

7-*

Coordinating Cross-Border Activities to Build a Global Competitive Advantage

• Aligning activities located in different
  countries contributes to competitive advantage in several ways
• Choose where and how to challenge rivals
• Shift production from one location to
  another to take advantage of most favorable
  cost or trade conditions or exchange rates
• Use online systems to collectively come up with next-generation products
• Achieve efficiencies by shifting workload to locations where personnel are underutilized
• Enhance potential to build a global brand name by incorporating same differentiating attributes in products in all markets where a company competes

7-*

• Tailoring products for big, emerging markets often involves
• Making more than minor product changes and
• Becoming more familiar with local cultures
• Companies have to attract buyers with
  bargain prices as well as better products
• Specially designed and/or specially
  packaged products may be needed to
  accommodate local market circumstances
• Management team must usually consist
  of a mix of expatriate and local managers

Characteristics of Competing
in Emerging Foreign Markets

7-*

Strategic Options: How to Compete
in Emerging Country Markets

• Prepare to compete on the basis of low price
• Be prepared to modify aspects of
  the company’s business model to
  accommodate local circumstances
• Try to change the local market
  to better match the way the
  company does business elsewhere
• Stay away from those emerging markets where it is impractical or uneconomic
  to modify the company’s business
  model to accommodate local circumstances

7-*

Strategies for Local Companies
in Emerging Markets

7-*

Develop business models that exploit shortcomings
in local distribution networks or infrastructure.

Utilize keen understanding of local customer needs and preferences to create customized products or services.

Take advantage of low-cost labor and other
competitively important local workforce qualities.

Use economies of scope and scale to better
defend against expansion-minded multinationals.

Transfer company expertise to cross-border markets
and initiate actions to contend on a global level.