SYURGA FATHONAH BINTI ARIS@AZIS

201334395

PREPARED FOR:
ASSOC. PROF DR. NORZANAH MAT NOR

WHY COMPANIES DECIDE TO ENTERS FOREIGN

MARKETS
Gain access to resources
and capabilities in foreign
markets

Further exploit its core

competencies

Access to
new customers

Achieve lower
costs through economies
of scale experience and
increase purchasing power

Spread business risk

across wider market base

WHY COMPETING ACROSS NATIONAL BORDERS

MAKES STRATEGY-MAKING MORE COMPLEX

1
2
3
4

Different home-country advantages in

different industries
Location-based advantages

Different government
Currency exchange rate risks
Differences in cultural, demographic,
and market conditions

HOME
COUNTRY
ADVANTAGES

STRATEGIC OPTIONS FOR ENTERING AND

COMPETING IN INTERNATIONAL MARKETS

Export
strategies

Alliance and
Joint
Strategies

Foreign
Subsidiary
Strategies

Licensing
Strategies

Franchising
Strategies

EXPORT STRATEGIES

Involves using domestic plants as a production base for exporting to

foreign markets
Excellent initial strategy to pursue international sales
Advantages

Minimizes both risk and capital requirements

Conservative way to test international waters
Minimizes direct investments in foreign countries

An export strategy is vulnerable when

Manufacturing costs in home country are higher than in

foreign countries where rivals have plants
High shipping costs are involved

LICENSING STRATEGIES

Licensing makes sense when a firm

Has valuable technical know-how or a patented product
but does not have international capabilities or resources
to enter foreign markets
Desires to avoid risks of committing resources to
markets which:
Are unfamiliar
Present economic uncertainty
Are politically volatile

Disadvantage
Risk of providing valuable technical know-how to
foreign firms and losing some control over its use

FRANCHISING STRATEGIES

Often is better suited to global expansion efforts of service

and retailing enterprises

Advantages

Disadvantage

Franchisee bears most of costs

and risks of establishing foreign
locations
Franchisor has to expend only the
resources to recruit, train, and
support franchisees

Maintaining cross-country quality

control

FOREIGN SUBSIDIARY STRATEGY

A greenfield venture is a subsidiary business that is

established by setting up the entire operation from ground
up.

Four conditions make an internal start up strategy appealing:

When creating an internal startup is cheaper than making an
acquisition
When adding new production capacity will not adversely
impact the supply-demand balance in the local market
When a startup subsidiary has the ability to gain good
distribution access
When a startup subsidiary will have the size, cost structure,
and resource strength to complete head-to-head against local
rivals.

ALLIANCE AND JOINT VENTURE STRATEGIES

Collaborative strategies involving alliances or joint ventures

with foreign partners are a popular way for companies to
edge their way into the markets of foreign countries.

Cross-border alliances enables a growth-minded company

to:
Widen its geographic coverage
Strengthen its competitiveness in foreign markets
Offer flexibility and allow a company to retain some
degree of autonomy and operating control

COMPETING INTERNATIONALLY:
THE THREE MAIN STRATEGIC APPROACHES

Multidomestic
Strategy

Varies product offerings and

competitive approaches from country
to country.

Global
Strategy

Employs the same basic competitive

approach in all countries where the
firm operates.

Transnational
Strategy

Is a think-global, act-local approach

that incorporates elements of both
multidomestic and global strategies.

THREE APPROACHES FOR COMPETING

INTERNATIONALLY

ADVANTAGES AND DISADVANTAGES OF MULTIDOMESTIC,

GLOBAL, AND TRANSNATIONAL APPROACHES

Multidomestic Approach
Advantages

Disadvantages

Can meet the specific needs of

each market more precisely

Hinders resource and capability

sharing or cross-market transfers

Can respond more swiftly to

localized changes in demand

Higher production and distribution

costs

Can target reactions to the

moves of local rivals

Not conducive to a worldwide

competitive advantage

Can respond more quickly to

local opportunities and threats

ADVANTAGES AND DISADVANTAGES OF MULTIDOMESTIC,

GLOBAL, AND TRANSNATIONAL APPROACHES- CONT.

Transnational Approach
Advantages

Disadvantages

Offers the benefits of both local

responsiveness and global
integration

More complex and harder to

implement

Conflicting goals may be difficult to

Enables the transfer and sharing reconcile and require trade-offs
of resources and capabilities
Implementation more costly and
across borders
time-consuming
Provides the benefits of flexible
coordination

ADVANTAGES AND DISADVANTAGES OF MULTIDOMESTIC,

GLOBAL, AND TRANSNATIONAL APPROACHES- CONT.

Global Approach
Advantages

Disadvantages

Lower costs due to scale and

scope economies

Unable to address local needs

precisely

Greater efficiencies due to the

ability to transfer best practices
across markets

Less responsive to changes in

local market conditions

Higher transportation costs and

More innovation from knowledge tariffs
sharing and capability transfer
Higher coordination and integration
The benefit of a global brand
and reputation

costs

CASE STUDY:
HAIERS SURVIVAL STRATEGY TO COMPETE WITH
WORLD GIANTS

Haier did not follow any ready-made rules but implemented its
survival strategies very flexibly both in its exporting and FDI.

It follows its customer timely, meets competition bravely to build

a strong market position and, exchanges threat and finally
shapes the competition.