Sie sind auf Seite 1von 12

Chapter 7 Strategies for Competing in International Markets

CHAPTER 7

STRATEGIES FOR COMPETING


IN INTERNATIONAL MARKETS
CHAPTER SUMMARY
Chapter 7 focuses on strategy options for expanding beyond domestic boundaries and competing in the markets of
either a few or a great many countries. The spotlight will be on strategic issues unique to competing successfully
in an economy that is globalizing. It will introduce a number of core concepts including multi-domestic, global,
and transnational strategies as well as the Porter diamond of national advantage and cross-country differences in
cultural, demographic, and market conditions. Chapter Seven includes sections on strategy options for entering
and competing in foreign markets, the importance of locating operations in the most advantageous countries,
and the special circumstances of competing in such emerging markets as China, India, and Brazil, Russia and
Eastern Europe.

LECTURE OUTLINE
I. Why Companies Expand Into Foreign Markets
1. A company may opt to expand outside its domestic market for any of four major reasons:
a. To gain access to new customers Expanding into foreign markets offers potential for increased
revenues, profits, and long-term growth and becomes an especially attractive option when a
companys home markets are mature.
b. To achieve lower costs and enhance the firms competitiveness Many companies are driven
to sell in more than one country because domestic sales volume is not large enough to fully
capture manufacturing economies of scale or learning curve effects and thereby substantially
improve the firms cost-competitiveness.
c. To further exploit 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.
d. To gain access to resources and capabilities located in foreign markets A company may be
able to access resources and capabilities through cross-border alliances, joint ventures, or even
cross-border acquisitions.
e. 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.

619
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

619

Chapter 7 Strategies for Competing in International Markets

II. Why Competing Across National Borders makes Strategy Making More Complex
A. Porters Diamond of National Competitive Advantage
1. Where industries are more likely to develop competitive strength depends on a set of factors that
describe the nature of each countrys business environment and vary from country to country.
2. Demand Conditions
a. The demand conditions in an industrys home market include the relative size of the market, its
growth potential, and the nature of domestic buyers needs and wants.
b. Demanding domestic buyers for an industrys products spur greater innovativeness and
improvements in quality. Such conditions foster the development of stronger industries, with
firms that are capable of translating a home-market advantage into a competitive advantage in
the international arena.
3. Factor Conditions
a. Factor conditions describe the availability, quality, and cost of raw materials and other inputs
(called factors ) that firms in an industry require to produce their products and services.
b. Competitively strong industries and firms develop where relevant factor conditions are
favorable.
4. Figure 7.1, The Diamond of National Competitive Advantage, provides an illustration of Porters
Diamond and how the factors relate to the firm and each other.
5. Related and Supporting Industries
a. Robust industries often develop as part of a cluster of related industries, including suppliers
of components and capital equipment, end users, and the makers of complementary products,
including those that are technologically related.
b. The advantage to firms that develop as part of a related-industry cluster comes from the close
collaboration with key suppliers and the greater knowledge sharing throughout the cluster,
resulting in greater efficiency and innovativeness.
6. Firm Strategy, Structure, and Rivalry
a. Different country environments foster the development of different styles of management,
organization, and strategy.
b. Fierce rivalry in home markets tends to hone domestic firms competitive capabilities and ready
them for competing internationally.
7. For an industry in a particular country to become competitively strong, all four factors must be
favorable for that industry.
B. Locating Value Chain Activities for Competitive Advantage
1. Differences in wage rates, worker productivity, inflation rates, energy costs, tax rates, government
regulations, and the like create sizable variations in manufacturing costs from country to country.
2. The quality of a countrys business environment also offers locational advantages the governments
of some countries are anxious to attract foreign investments and go all-out to create a business
climate that outsiders will view as favorable.

2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

620

Chapter 7 Strategies for Competing in International Markets

C. The Impact of Government Policies and Economic Conditions in Host Countries


1. National governments exact all kinds of measures affecting business conditions and the operations
of foreign companies in their markets.
2. Host governments may set local content requirements on goods made inside their borders by
foreign-based companies, put restrictions on exports to ensure adequate local supplies, regulate
the prices of imported and locally produced goods, and impose tariffs or quotas on the imports of
certain goods.
3. Host governments provide specific risks in two intertwined categories; political risks based upon
hostility towards a certain industry and economic risks based upon inflation, monetary policy, and
protection of intellectual property.

CORE CONCEPT
Political risks stem from instability or weaknesses in national governments and
hostility of foreign business. Economic risks stem from the stability of a countrys
monetary system, economic and regulatory policies, lack of property rights
protections, and risks due to exchange rate fluctuations.
D. The Risks of Adverse Exchange Rate Shifts
1. The volatility of exchange rates greatly complicates the issue of geographic cost advantages.
Currency exchange rates often fluctuate as much as 20 to 40 percent annually. Changes of this
magnitude can either totally wipe out a countrys low- cost advantage or transform a former highcost location into a competitive-cost location.
2. Declines in the value of the U.S. dollar against foreign currencies have the effect of raising the
U.S. dollarcosts of goods manufactured by foreign rivals at plants located in the countries whose
currencies have grown stronger relative to the U.S. dollar. A weaker dollar acts to reduce or eliminate
whatever cost advantage foreign manufacturers may have had over U.S. manufacturers (and helps
protect the manufacturing jobs of U.S. workers).
3. A weaker dollar makes foreign-made goods more expensive in dollar terms to U.S. consumers
this acts to curtail U.S. buyer demand for foreign-made goods, stimulate greater demand on the part
of U.S. consumers for U.S.-made goods, and reduce U.S. imports of foreign-made goods.
4. A weaker U.S. dollar has the effect of enabling the U.S.-made goods to be sold at lower prices to
consumers in those countries whose currencies have grown stronger relative to the U.S. dollar
such lower prices boost foreign buyer demand for the now relatively cheaper U.S.-made goods,
thereby stimulating exports of U.S.-made goods to foreign countries and perhaps creating more jobs
in U.S.-based manufacturing plants.
5. A weaker dollar has the effect of increasing the dollar value of profits a company earns in those
foreign country markets where the local currency is stronger relative to the dollar.
6. A weaker U.S. dollar is therefore an economically favorable exchange rate shift for manufacturing
plants based in the United States. A decline in the value of the U.S. dollar strengthens the costcompetitiveness of U.S.-based manufacturing plants and boosts buyer demand for U.S.-made
goods.

2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

621

Chapter 7 Strategies for Competing in International Markets

E. Cross-Country Differences in Demographic, Cultural, and Market Conditions


1. Differences in population size, income levels, and other demographic factors create differences in
market size and growth rates from country to country.
2. Buyer demand for particular products and services can differ substantially from country to country.
3. Companies operating internationally must then determine whether to and how much to customize
their products and services to match the tastes of local buyers as opposed to following a standardized
product strategy.
III. Strategy Options for Entering and Competing in Foreign Markets
1. There are several general strategic options for a company that decides to expand outside its domestic
market and compete internationally or globally:
a. Maintain a national (one-country) production base and export goods to foreign markets.
b. License foreign firms to produce and distribute the companys products.
c. Employ a franchising strategy
d. Establish a subsidiary in a foreign market.
e. Rely on strategic alliances or joint ventures with foreign partners to enter new country markets.
A. Export Strategies
1. Using domestic plants as a production base for exporting goods to foreign markets is an excellent
initial strategy for pursuing international sales.
2. With an export strategy, a manufacturer can limit its involvement in foreign markets by contracting
with foreign wholesalers experienced in importing to handle the entire distribution and marketing
function in their countries or regions of the world.
3. Whether an export strategy can be pursued successfully over the long run hinges on the relative
cost-competitiveness of the home-country production base.
4. An export strategy is vulnerable when:
a. Manufacturing costs in the home country are substantially higher than in foreign countries
where rivals have plants
b. The costs of shipping the product to distant foreign markets are relatively high
c. Adverse fluctuations occur in currency exchange rates
d. Importing countries impose tariffs or erect other trade barriers.
B. Licensing Strategies
1. Licensing makes sense when a firm with valuable technical know-how or a unique patented product
has neither the internal organizational capability nor the resources to enter foreign markets.
2. Licensing also has the advantage of avoiding the risks of committing resources to country markets
that are unfamiliar, politically volatile, economically unstable, or otherwise risky.
3. The big disadvantage of licensing is the risk of providing valuable technological know-how to
foreign companies and thereby losing some degree of control over its use.

2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

622

Chapter 7 Strategies for Competing in International Markets

C. Franchising Strategies
1. While licensing works well for manufacturers and owners of proprietary technology, franchising is
often better suited to the global expansion efforts of service and retailing enterprises.
2. Franchising has much the same advantages as licensing.
3. The franchisee bears most of the costs and risks of establishing foreign locations while the franchisor
has to expend only the resources to recruit, train, support, and monitor franchisees.
4. The big problem a franchisor faces is maintaining quality control.
5. Another problem that may arise is whether to allow foreign franchisees to make modifications in the
franchisors product offerings so as to better satisfy the tastes and expectations of local buyers.
D. Establishing a Subsidiary in a Foreign Market
1. Companies pursuing international expansion may elect to take responsibility for the performance of
all essential value chain activities in foreign markets.
2. Companies that prefer direct control over all aspects of operating in a foreign market can establish
a wholly owned subsidiary
a. Acquisition quicker option and might be the least risky and cost effective means of entry
b. Internal Development requires experience and strong global position
c. A subsidiary business that is established by setting up the entire operation from the ground up
is called a greenfield venture .

CORE CONCEPT
A greenfield venture is a subsidiary business that is established by setting up the
entire operation from the ground up.
3. The big issue an acquisition-minded firm must consider is whether to pay a premium price for a
successful local company or to buy a struggling competitor at a bargain price.
4. Four other conditions make an internal startup strategy appealing:
a. When creating an internal startup is cheaper than making an acquisition.
b. When adding new production capacity will not adversely impact the supplydemand balance in
the local market.
c. When a startup subsidiary has the ability to gain good distribution access (perhaps because of
the companys recognized brand name).
d. When a startup subsidiary will have the size, cost structure, and resource strengths to compete
head-to-head against local rivals.
E. Alliances and Joint Venture Strategies
1. Export minded firms in industrialized nations have traditionally sought alliances with firms in
less developed countries to import and market their products locallysuch approvals were often
necessary to win approval for entry from the host countrys government.

2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

623

Chapter 7 Strategies for Competing in International Markets

2. The strategic appeal of cooperative arrangements between domestic and foreign companies:
a. Firms can benefit immensely from a foreign partners familiarity with local government
regulations, its knowledge of the buying habits and product preferences of consumers, its
distribution channel relationships, and so on.
b. By joining forces in producing components, assembling models, and marketing their products,
firms can realize cost savings not achievable with their own small volumes.
c. Firms can fill gaps in technical expertise and/or knowledge of local markets
d. Firms can share distribution facilities and dealer networks, and to mutually strengthen each
partners access to buyers.
e. Firms can direct their competitive energies more toward mutual rivals and less toward one
another; teaming up may help them close the gap on leading companies.
f. Firms wanting to enter a new foreign market conclude that alliances with local companies
are an effective way to establish working relationships with key officials in the host-country
government.
g. Alliances can be a particularly useful way for firms across the world to gain agreement on
important technical standards.
3. The Risks of Strategic Alliances with Foreign Partners - Alliances and joint ventures with foreign
partners have their pitfalls.
a. Sometimes the knowledge and expertise of local partners turns out to be less valuable than
expected.
b. Cross-border allies typically must overcome language and cultural barriers and figure out how
to deal with diverse (or perhaps conflicting) operating practices.
c. The transaction costs of working out a mutually agreeable arrangement and monitoring partner
compliance with the terms of the arrangement can be high.
d. All of these factors can create problems in communication and trust as well as conflicting
objectives and strategies.
4. Illustration Capsule 7.1 shows how California-based Solazyme, a maker of biofuels and other green
products, has used cross-border strategic alliances to fuel its growth.

ILLUSTRATION CAPSULE 7.1

Solazymes Cross-Border Alliances with Unilever, Sephora, Qantas, and Roquette


Discussion Question: How has Solazyme been able to use alliances to fuel its rapid global growth?
Answer: Solyazyme is a small US developer and producer of renewable oils and has used cross
border strategic alliances to partner with much larger firms that have facilitated entry into new
markets as well as opportunities for sharing resources and spreading risk. The partnership with
Uniliver focuses on research and development while the agreement with Sephora focuses on
marketing and distribution agreements. The firms agreement with Quantas is for the testing and
refinement of renewable jet fuel, and the agreement with Roquette is for the supply of raw materials
required for the firms renewable oil products. From this portfolio of agreements, it is clear that this
series of partnerships allows Solyazyme to present a much larger global footprint than it would
otherwise be able to.

2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

624

Chapter 7 Strategies for Competing in International Markets

IV. Competing Internationally: The three main strategic approaches


A. Companies must choose whether to vary the competitive approach to fit specific market conditions and
buyer preferences in each country or to employ essentially the same strategy in all countries. Figure 7.2,
Three Approaches for Competing Internationally illustrates the two main drivers for this choice.

CORE CONCEPT
An international strategy is a strategy for competing in two or more countries
simultaneously.
B. Multidomestic Strategy Think Local, Act Local
1. The bigger the differences in buyer tastes, cultural traditions, and marker conditions in different
countries, the stronger the case for a think-local, act-local approach to strategy making.
2. The strength of this approach is that the companys actions and business approach are deliberately
crafted to accommodate differing tastes and expectations of buyers in each country and to stake out
the most attractive market positions vis-E0-vis local competitors.

CORE CONCEPT
A multidomestic strategy is one in which a company varies its product offering
an competitive approach from country to country in an effort to be responsive to
differing buyer preferences and market conditions. It is a think-local, act-local type of
international strategy facilitated by decision making decentralized to the local level.
3. There are three main disadvantages to this strategic choice:
a. Hinders the transfer of company capabilities, knowledge, and other resources across borders.
b. Raises production and distribution costs.
c. Is not conducive to building a single worldwide competitive advantage.
C. Global Strategy Think-Global, Act-Global
1. A global strategy sells the same products under the same brand names everywhere, uses much of the
same distribution channels in all countries, and competes on the basis of the same capabilities and
marketing approaches worldwide.

CORE CONCEPT
A global strategy is one in which a company employs the same basic competitive
approach in all countries where it operates, sells much the same products
everywhere, strives to build global brands, and coordinates its actions worldwide
with strong headquarters control. It represents a think-global, act global approach.
2. This strategic theme prompts company managers to integrate and coordinate the companys strategic
moves worldwide and to expand into most if not all nations where there is significant buyer demand.

2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

625

Chapter 7 Strategies for Competing in International Markets

3. There are four main disadvantages to this approach:


a. Does not enable firms to address local needs.
b. Is less responsive to changes in local market conditions.
c. Raises transportation costs and may involve higher tariffs.
d. Raises coordination costs.
D. Transnational Strategy Think-Global, Act-Local
1. This middle-ground approach sometimes called globalization entails using the same basic
competitive theme in each country but allowing local managers the latitude to (1) incorporate
whatever country-specific variations in product attributes are needed to best satisfy local buyers
and (2) make whatever adjustments in production, distribution, and marketing are needed to be
responsive to local market conditions and compete successfully against local rivals.

CORE CONCEPT
A transnational strategy is a think-global, act local approach that incorporates
elements of both multidomestic and global strategies.
2. While a transnational strategy is more conducive for transferring and leveraging subsidiary skills
and capabilities, it can have significant drawbacks:
a. It is the most difficult to implement due to added complexity
b. It can place demands on the organization to pursue conflicting objectives.
c. It is likely to be costly and time consuming to implement.
E. Table 7.1, Advantages and Disadvantages of Multidomestic, Global, and Transnational Approaches
provides a summary of the pros and cons of each approach.
V. The Quest for Competitive Advantage in the International Arena
A. There are three ways in which a firm can gain competitive advantage or offset domestic disadvantages
by expanding outside its domestic markets:
1. Use location to lower costs or achieve greater product differentiation
2. Transfer competitively valuable competencies and capabilities from its domestic markets to foreign
markets
3. Use cross-border coordination in ways that a domestic-only competitor cannot
B. Using Location to Build Competitive Advantage
1. To use location to build competitive advantage, a company must consider two issues:
a. Whether to concentrate each activity it performs in a few select countries or to disperse per
formance of the activity to many nations
b. In which countries to locate particular activities
c. Companies that compete multi-nationally can pursue competitive advantages in world markets
by locating their value chain activities in whatever nations prove most advantageous.
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

626

Chapter 7 Strategies for Competing in International Markets

2. When to Concentrate Activities in a Few Locations


a. When the costs of manufacturing or other activities are significantly lower in some geographic
locations than in others
b. When there are significant scale economies in production or distribution
c. There are sizable learning and experience benefits associated with performing an activity in a
single location.
d. When certain locations have superior resources, allow better coordination of related activities,
or offer other valuable advantages
3. When to Disperse Activities Across Many Locations
a. In several instances, dispersing activities is more advantageous than concentrating them.
b. The classic reason for locating an activity in a particular country is low-cost.
C. Sharing and Transferring Resources and Capabilities across Borders to Build Competitive
Advantage
1. Transferring competences, capabilities, and resource strengths from country to country contributes
to the development of broader and deeper competences and capabilitiesideally helping a company
achieve dominating depth in some competitively valuable area.
2. Dominating depth in a competitively valuable capability, resource, or value chain activity is a strong
base for sustainable competitive advantage over multinational or global competitors and especially
so over domestic-only competitors.
D. Benefiting from Cross-Border Coordination
1. Coordinating company activities across different countries contributes to sustainable competitive
advantage in several different ways:
a. Multinational and global competitors can choose where and how to challenge rivals
b. Using Internet technology applications, companies can collect ideas for new and improved
products from customers and sales and marketing personnel all over the world
VI. Profit Sanctuaries and Cross-Border Strategic Moves
1. Profit Sanctuaries are country markets or geographic areas in which a firm derives substation
profits. Sanctuaries can be created by a protected market position or some unassailable competitive
advantage.

CORE CONCEPT
Profit sanctuaries are country markets that provide a company with substantial
profits because of a protected market position or sustainable competitive advantage.
2. Figure 7.3, Profit Sanctuary Potential of Domestic only, International, and Global Competitors,
provides an illustration of the concept.
3. Using Cross Market Subsidization to Wage a Strategic Offensive Profit sanctuaries can provide
a firm with the opportunity to use the higher profits derived in the protected market to offset lower
profits in markets where it is using price to gain market share.
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

627

Chapter 7 Strategies for Competing in International Markets

CORE CONCEPT
Cross-market subsidization supporting competitive offensives in one market with
resources and profits diverted from operations in another market can be a
powerful competitive weapon.
4. When taken to the extreme, pricing cutting moves in foreign markets might draw charges of
dumping, the act of selling products well below the price charged in home markets or well below
its full costs.
5. Using Cross-Border Tactics to Defend against International Rivals Companies can also employ
these tactics to defend against attacks in their home markets by launching a counter-attack in the
rivals least defended or most vulnerable market.

CORE CONCEPT
When the same companies compete against one another in multiple geographic
markets, the great of cross-border counterattacks may be enough to deter
aggressive competitive moves and encourage mutual restraint among international
rivals.
VIII. Strategies for Competing in the Markets of Developing Countries
A. Strategy Options for Emerging Country Markets
1. Prepare to compete on the basis of low price.
2. Be prepared to modify aspects of the companys business model or strategy to accommodate local
circumstances (but not so much that the company loses the advantage of global scale and global
branding).

ILLUSTRATION CAPSULE 7.2

Yum! Brands Strategy for Becoming the Leading Food Service Brand in China
Discussion Question: Describe Yum! Brands strategy as for becoming the leading food services
brand in China.
Answer: In addition to adopting its menu to local tastes by adding new units, Yum! Brands also
adapted the restaurant ambience to appeal to local consumer preferences and behavior. The
companys 3,100 units in China represented only 2 restaurants per 1 million people. It is believed
that continued expansion in the number of restaurants and additional menu refinements would allow
its operating profit from restaurants in China to account for 40 percent of system wide operating
profits by 2017.
3. Try to change the local market to better match the way the company does business elsewhere.
4. Stay away from emerging markets where it is impractical or uneconomic to modify the companys
business model to accommodate local circumstances.
5. Profitability in emerging markets rarely comes quickly or easilynew entrants have to adapt their
business models and strategies to local conditions and be patient in earning a profit.

2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

628

Chapter 7 Strategies for Competing in International Markets

IX. Defending against Global Giants: Strategies for Local Companies in Emerging Markets
A. Local firms must be able to defend themselves against resource rich multinational companies. They
have several methods to choose from:
1. Develop business models that exploit shortcomings in local distribution networks or infrastructure.

ILLUSTRATION CAPSULE 7.3

How Ctrip Successfully Defended against Multinationals to Become Chinas


Largest Online Travel Agency
Discussion Question: How did Ctrip use a combination of the above five strategies to become the
largest travel consolidator and online travel agent.
Answer: Ctrip took advantage of the lack of infrastructure (no national ticketing agency in China
and of national or global hotel chains) to create its own proprietary data base to provide travel
information for up to 100,000 customers per day. Since the Chinese prefer paper tickets, and only
30 percent of customers use the internet, the company is able to hire low cost couriers to collect
payments and deliver tickets.
2. Utilize keen understanding of local customer needs and preferences to create customized products
or services.
3. Take advantage of aspects of the local workforce with which large multinational companies may be
unfamiliar.
4. Use acquisition and rapid growth strategies to better defend against expansion-minded multinationals.
5. Transfer company expertise to cross-border markets and initiate actions to contend on a global
level.

ASSURANCE OF LEARNING EXERCISES


1. Chiles largest producer of wine, Concha y Toro, chooses to compete in Europe, North America, the
Caribbean, and Asia using an export strategy. Go to the investor relations section of the companys website
(www.conchaytoro.com/the-company/investor-relations) to review the companys press releases, annual
reports, and presentations.
Why does it seem that the company has avoided developing vineyards and wineries in wine growing regions
outside of South America?
What reasons does Concha y Toro likely have to pursue exporting rather than stick to a domestic-only sales
and distribution strategy?
Answer: The student should identify the benefits gained through economies of scale and quality in producing
in a single location and exporting. Secondly, Chile offers the firm location advantages in terms of the raw
materials used in production that are not easily copied in foreign countries. Despite the issues associated
with sales in foreign markets, the firm is making a solid strategic choice in expanding into foreign markets.
After weighing the benefits and risks associated with the various entry methods, the firm has correctly
chosen to export.

2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

629

Chapter 7 Strategies for Competing in International Markets

2. Collaborative agreements with foreign companies in the form of strategic alliances or joint ventures are
widely used as a means of entering foreign markets. They are also used as a means of acquiring resources
and capabilities by learning from foreign partners. And they are used to put together powerful combinations
of complementary resources and capabilities by accessing the complementary resources and capabilities of
a foreign partner. Illustration Capsule 7.1 provides examples of four cross-border strategic alliances that
Solazyme has participated in. What were each of these partnerships (with Unilever, Sephora, Qantas, and
Roquette) designed to achieve and why would they make sense for a company like Solazyme. (Analyze each
partnership separately based on the information provided in the capsule.)
Answer: The student should identify that Solyazyme is a small US developer and producer of renewable
oils that has used cross border strategic alliances to partner with much larger firms. Through these alliances,
the firm has been able to gain entry into new markets as well as develop opportunities for sharing resources
and spreading risk.
The partnership with Uniliver focuses on research and development in the area of personal hygiene products
which utilize Solyazymes renewable oils.
The agreement with Sephora focuses on marketing and distribution agreements for luxury skin care products
that utilize Solyazymes renewable oils.
The agreement with Quantas is for the testing and refinement of renewable jet fuel based upon Solyazymes
renewable oils.
Finally, the agreement with Roquette is for the supply of raw materials required for the firms renewable oil
products
The student should redily identify that through this portfolio of partnerships, Solyazyme is able to present
a much larger global footprint and gain more market share than it would otherwise be able to individually.
3. Assume you are in charge of developing the strategy for a multinational company selling products in
some 50 countries around the world. One of the issues you face is whether to employ a multidomestic, a
transnational, or a global strategy.
a. If your companys product is mobile phones, do you think it would make better strategic sense to
employ a multidomestic strategy, a transnational strategy, or a global strategy? Why?
b. If your companys product is dry soup mixes and canned soups, would a multidomestic strategy seem to
be more advisable than a transnational or global strategy? Why?
c. If your companys product is large home appliances such as washing machines, ranges, ovens, and
refrigerators, would it seem to make more sense to pursue a multidomestic strategy or a transnational
strategy or a global strategy? Why?
Answer: All student responses will be contingent on their understanding of multicountry versus global
strategies. Again, students should reference information from Figure 7.1 to support and validate their chosen
viewpoints. All responses should be supported with rational information gleaned from the text material
differentiating the two strategies.
4. Using your university librarys subscription to Lexis-Nexis, EBSCO, or a similar database, identify and
discuss three key strategies that Volkswagen is using to compete in China.
Answer: The student should identify several key initiatives that Volkswagen has undertaken in the Chinese
market. These could include:
They have entered into a partnership with First Auto Works (FAW) to produce a product specifically aimed
at the Chinese market
They have established a dedicated dealership network, doubling the number of dealers.
They have established a strategic objective of developing improved powertrains that will reduce average
fuel consumption and generate more power. They are leveraging this into a Green Fleet marketing initiative.
2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.

630