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Copyright © 2014 by The McGraw-Hill Education All right reer!ed"

19e Global Edition

THOMPSON | PETERAF | GAMBLE | STRICKLAND

CHAPTER 7

STRATEGIES FOR COMPETING INSTRATEGIES FOR COMPETING IN

INTERNATIONAL MARKETSINTERNATIONAL MARKETS

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7–2

1. Develop an understanding of the primary reasons companieschoose to compete in international marets.

!. "earn ho# and #hy differing maret conditions across

countries influence a company$s strategy choices in

international marets.

%. "earn a&out the five ma'or strategic options for entering

foreign marets.

(. )ain familiarity #ith the three main strategic approaches for

competing internationally.

*. +nderstand ho# multinational companies are a&le to useinternational operations to improve overall competitiveness.

,. )ain an understanding of the uni-ue characteristics

of competing in developingcountry marets.

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To further e/ploit

core competencies

To spread &usiness

ris across a #ider

maret &ase

To gain access to

ne# customers

To achieve lo#er costs

through economies of scale0

e/perience0 and increased

purchasing po#er

To gain access to

resources and

capa&ilities located

in foreign marets

H2 C34PA56E DEC6DE T3

E5TER 83RE6)5 4AR9ET

7–3

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H2 C34PET65) ACR3 5AT635A"H2 C34PET65) ACR3 5AT635A"

:3RDER 4A9E TRATE)24A965):3RDER 4A9E TRATE)24A965)43RE C34P"E;43RE C34P"E;1.1.

Different countries h!e "ifferent ho#e$

countr% "!nt&es in "ifferent in"ustries

!.!.Loction$'se" !(ue chin "!nt&es

for certin countries

%.%.Differences in &o!ern#ent )o(icies* t+

rtes* n" econo#ic con"itions

(.(. Currenc% e+chn&e rte ris,s

*.*.Differences in 'u%er tstes n"

)references for )ro"ucts n" ser!ices

7–4

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The Diamond of

5ational Advantage

86)+RE 7.1

7–5

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THE D6A435D 8RA4E3R9THE D6A435D 8RA4E3R9

Ans-ers i#)ortnt .uestions 'out Ans-ers i#)ortnt .uestions 'outco#)etin& on n interntion( 'sis '%/co#)etin& on n interntion( 'sis '%/

0 Pre"ictin& -here ne- forei&n entrnts rePre"ictin& -here ne- forei&n entrnts re

(i,e(% to co#e fro# n" their stren&ths1(i,e(% to co#e fro# n" their stren&ths1

0 Hi&h(i&htin& forei&n #r,et o))ortunitiesHi&h(i&htin& forei&n #r,et o))ortunities

-here ri!(s re -e,est1-here ri!(s re -e,est1

0 I"entif%in& the (oction$'se" "!nt&esI"entif%in& the (oction$'se" "!nt&es

of con"uctin& certin !(ue chin cti!itiesof con"uctin& certin !(ue chin cti!itiesof the fir# in )rticu(r countr%1of the fir# in )rticu(r countr%1

7–6

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REA35 83R "3CAT65) <A"+E CHA65REA35 83R "3CAT65) <A"+E CHA65ACT6<6T6E AD<A5TA)E3+"2ACT6<6T6E AD<A5TA)E3+"2

2 Lo-er -&e rtesLo-er -&e rtes

2 Hi&her -or,erHi&her -or,er

)ro"ucti!it%)ro"ucti!it%

2 Lo-er ener&% costsLo-er ener&% costs

2 Fe-er en!iron#ent(Fe-er en!iron#ent(

re&u(tionsre&u(tions

2 Lo-er t+ rtesLo-er t+ rtes2 Lo-er inf(tion rtesLo-er inf(tion rtes

2 Pro+i#it% to su))(iersPro+i#it% to su))(iersn" techno(o&ic((%n" techno(o&ic((%

re(te" in"ustriesre(te" in"ustries

2 Pro+i#it% to custo#ersPro+i#it% to custo#ers2 Lo-er "istri'ution costsLo-er "istri'ution costs

2 A!i('(e3uni.ue A!i('(e3uni.ue

ntur( resourcesntur( resources

7–7

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THE 64PACT 38 )3<ER54E5T P3"6C6ETHE 64PACT 38 )3<ER54E5T P3"6C6EA5D EC35346C C35D6T635A5D EC35346C C35D6T635

65 H3T C3+5TR6E65 H3T C3+5TR6E2 Positi!esPositi!es

0 T+ incenti!esT+ incenti!es

0 Lo- t+ rtesLo- t+ rtes

0 Lo-$cost (onsLo-$cost (ons

0 Site (oction n"Site (oction n"

"e!e(o)#ent"e!e(o)#ent

0

4or,er trinin&4or,er trinin&

2 Ne&ti!esNe&ti!es

0 En!iron#ent( re&u(tionsEn!iron#ent( re&u(tions

0 Su'si"ies n" (ons toSu'si"ies n" (ons to

"o#estic co#)etitors"o#estic co#)etitors0 I#)ort restrictionsI#)ort restrictions

0 Triffs n" .uotsTriffs n" .uots

0

Loc($content re.uire#entsLoc($content re.uire#ents0 Re&u(tor% ))ro!(sRe&u(tor% ))ro!(s

0 Profit re)trition (i#itsProfit re)trition (i#its

0 Minorit% o-nershi) (i#itsMinorit% o-nershi) (i#its

7–8

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CORE CONCEPTCORE CONCEPT

2 Political rissPolitical riss ste# fro# inst'i(it% orste# fro# inst'i(it% or-e,nesses in ntion( &o!ern#ents n"-e,nesses in ntion( &o!ern#ents n"

hosti(it% to forei&n 'usiness1hosti(it% to forei&n 'usiness1

2 Economic rissEconomic riss ste# fro# the st'i(it% of ste# fro# the st'i(it% of

countr%5s #onetr% s%ste#* econo#ic n"countr%5s #onetr% s%ste#* econo#ic n"

re&u(tor% )o(icies* the (c, of )ro)ert% ri&htsre&u(tor% )o(icies* the (c, of )ro)ert% ri&hts

)rotections1)rotections1

7–9

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THE R69 38 AD<ERETHE R69 38 AD<EREE;CHA5)E RATE H68TE;CHA5)E RATE H68T

Effects of E+chn&e Rte Shifts/Effects of E+chn&e Rte Shifts/

0 E+)orters e+)erience risin& "e#n" for theirE+)orters e+)erience risin& "e#n" for their

&oo"s -hene!er their currenc% &ro-s -e,er&oo"s -hene!er their currenc% &ro-s -e,er

re(ti!e to the i#)ortin& countr%5s currenc%1re(ti!e to the i#)ortin& countr%5s currenc%10 E+)orters e+)erience f((in& "e#n" for theirE+)orters e+)erience f((in& "e#n" for their

&oo"s -hene!er their currenc% &ro-s stron&er&oo"s -hene!er their currenc% &ro-s stron&er

re(ti!e to the i#)ortin& countr%5s currenc%1re(ti!e to the i#)ortin& countr%5s currenc%1

7–10

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STRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLE

2 F(uctutin& e+chn&e rtes )ose si&nificntF(uctutin& e+chn&e rtes )ose si&nificntecono#ic ris,s to fir#5s co#)etiti!eness inecono#ic ris,s to fir#5s co#)etiti!eness in

forei&n #r,ets1 E+)orters re "is"!nt&e"forei&n #r,ets1 E+)orters re "is"!nt&e"

-hen the currenc% of the countr% -here &oo"s-hen the currenc% of the countr% -here &oo"s

re 'ein& #nufcture" &ro-s stron&er re(ti!ere 'ein& #nufcture" &ro-s stron&er re(ti!eto the currenc% of the i#)ortin& countr%1to the currenc% of the i#)ortin& countr%1

7–11

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2 Do#estic co#)nies fcin& co#)etiti!eDo#estic co#)nies fcin& co#)etiti!e)ressure fro# (o-er$cost i#)orts 'enefit -hen)ressure fro# (o-er$cost i#)orts 'enefit -hen

their &o!ern#ent5s currenc% &ro-s -e,er intheir &o!ern#ent5s currenc% &ro-s -e,er in

re(tion to the currencies of the countriesre(tion to the currencies of the countries

-here the (o-er$cost i#)orts re 'ein& #"e1-here the (o-er$cost i#)orts re 'ein& #"e1

7–12

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THINKING STRATEGICALL6

2 4ht effects hs the "o)tion of the euro h"4ht effects hs the "o)tion of the euro h"on the 'i(it% of Euro)en 7nion 8E79 countrieson the 'i(it% of Euro)en 7nion 8E79 countries

8n" fir#s9 to res)on" chn&es in intr$ntion(8n" fir#s9 to res)on" chn&es in intr$ntion(

econo#ic con"itions in other E7 countriesecono#ic con"itions in other E7 countries

&i!en tht the% no- shre co##on currenc%:&i!en tht the% no- shre co##on currenc%:

2 4ht shou(" E7 fir# "o to res)on" to 4ht shou(" E7 fir# "o to res)on" to

"!erse currenc% e+chn&e rte shift in non$"!erse currenc% e+chn&e rte shift in non$

E7 countr%:E7 countr%:

7–13

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CR3C3+5TR2 D688ERE5CECR3C3+5TR2 D688ERE5CE

65 DE43)RAPH6C0 C+"T+RA"065 DE43)RAPH6C0 C+"T+RA"0A5D 4AR9ET C35D6T635A5D 4AR9ET C35D6T635

To )ursue strte&% of offerin&To )ursue strte&% of offerin&

#ost(% stn"r"i;e" )ro"uct #ost(% stn"r"i;e" )ro"uct

-or("-i"e1-or("-i"e1

To custo#i;e offerin&s in echTo custo#i;e offerin&s in ech

countr% #r,et to #tch the tstescountr% #r,et to #tch the tstesn" )references of (oc( 'u%ersn" )references of (oc( 'u%ers

9ey trategic

Considerations

7–14

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TRATE)6C 3PT635 83RTRATE)6C 3PT635 83RE5TER65) A5D C34PET65)E5TER65) A5D C34PET65)

65 65TER5AT635A" 4AR9ET65 65TER5AT635A" 4AR9ET

<1<1 Mintin ntion( 8one$countr%9 )ro"uction 'se n"Mintin ntion( 8one$countr%9 )ro"uction 'se n"

e+)ort &oo"s to forei&n #r,ets1e+)ort &oo"s to forei&n #r,ets1

=1=1 License forei&n fir#s to )ro"uce n" "istri'ute theLicense forei&n fir#s to )ro"uce n" "istri'ute the

fir#5s )ro"ucts 'ro"1fir#5s )ro"ucts 'ro"1

>1>1 E#)(o% n o!erses frnchisin& strte&%1E#)(o% n o!erses frnchisin& strte&%1

?1?1 Est'(ish -ho((%$o-ne" su'si"ir% '% either c.uirin&Est'(ish -ho((%$o-ne" su'si"ir% '% either c.uirin&

forei&n co#)n% or throu&h @&reenfie(" !enture1 forei&n co#)n% or throu&h @&reenfie(" !enture1

11 Re(% on strte&ic ((inces or oint !entures -ith forei&nRe(% on strte&ic ((inces or oint !entures -ith forei&n

co#)nies1co#)nies1

7–15

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E;P3RT TRATE)6EE;P3RT TRATE)6E

2 A"!nt&es A"!nt&es0 Lo- c)it(Lo- c)it(

re.uire#entsre.uire#ents

0

Econo#ies of sc(eEcono#ies of sc(ein uti(i;in& e+istin&in uti(i;in& e+istin&

)ro"uction c)cit%)ro"uction c)cit%

0 No "istri'ution ris,No "istri'ution ris,

0 No "irect in!est#entNo "irect in!est#entris,ris,

2 Dis"!nt&esDis"!nt&es0 Mintinin& re(ti!e costMintinin& re(ti!e cost

"!nt&e of ho#e$"!nt&e of ho#e$

'se" )ro"uction'se" )ro"uction

0 Trns)orttion n"Trns)orttion n"

shi))in& costsshi))in& costs

0 E+chn&e rtes ris,sE+chn&e rtes ris,s

0 Triffs3i#)ort "utiesTriffs3i#)ort "uties0 Loss of chnne( contro(Loss of chnne( contro(

7–16

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"6CE565) A5D 8RA5CH665)"6CE565) A5D 8RA5CH665)

TRATE)6ETRATE)6E

2 A"!nt&es A"!nt&es

0 Lo- resourceLo- resource

re.uire#entsre.uire#ents

0 Inco#e fro# ro%(tiesInco#e fro# ro%(tiesn" frnchisin& feesn" frnchisin& fees

0 R)i" e+)nsion intoR)i" e+)nsion into

#n% #r,ets#n% #r,ets

2 Dis"!nt&esDis"!nt&es

0 Mintinin& contro( ofMintinin& contro( of

)ro)rietr% ,no-$ho-)ro)rietr% ,no-$ho-

0 Loss of o)ertion( n"Loss of o)ertion( n".u(it% contro(.u(it% contro(

0 A")tin& to (oc( #r,et A")tin& to (oc( #r,et

tstes n" e+)ecttionststes n" e+)ecttions

7–17

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83RE6)5 +:6D6AR283RE6)5 +:6D6AR2

TRATE)6ETRATE)6E

2 A"!nt&es A"!nt&es

0 Hi&h (e!e( of contro(Hi&h (e!e( of contro(

0 uic, (r&e$sc(euic, (r&e$sc(e

#r,et entr%#r,et entr%0 A!oi"s entr% 'rriers A!oi"s entr% 'rriers

0 Access to c.uire" Access to c.uire"

fir#5s s,i((sfir#5s s,i((s


0 Costs of c.uisitionCosts of c.uisition

0 Co#)(e+it% of c.uisitionCo#)(e+it% of c.uisition

)rocess)rocess0 Inte&rtion of the fir#s5Inte&rtion of the fir#s5

structures* cu(tures*structures* cu(tures*

o)ertions n" )ersonne(o)ertions n" )ersonne(

7–18

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2 A A greenfield venturegreenfield venture is su'si"ir% 'usinessis su'si"ir% 'usinesstht is est'(ishe" '% settin& u) the entiretht is est'(ishe" '% settin& u) the entire

o)ertion fro# the &roun" u)1o)ertion fro# the &roun" u)1

7–19

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83RE6)5 +:6D6AR2 TRATE)6E83RE6)5 +:6D6AR2 TRATE)6E

Con"itions re f!or'(e for usin& n intern(Con"itions re f!or'(e for usin& n intern(strtu) strte&% -hen/strtu) strte&% -hen/

0 Cretin& n intern( strtu) is che)er thn #,in&Cretin& n intern( strtu) is che)er thn #,in&

n c.uisition1n c.uisition1

0 A""in& )ro"uction c)cit% -i(( not "!erse(% i#)ct A""in& )ro"uction c)cit% -i(( not "!erse(% i#)ctthe su))(%"e#n" '(nce in the (oc( #r,et1the su))(%"e#n" '(nce in the (oc( #r,et1

0 A strtu) su'si"ir% hs the 'i(it% to &in &oo" A strtu) su'si"ir% hs the 'i(it% to &in &oo"

"istri'ution ccess1"istri'ution ccess1

0 A strtu) su'si"ir% -i(( h!e the si;e* cost structure* A strtu) su'si"ir% -i(( h!e the si;e* cost structure*

n" resource stren&ths to co#)ete he"$to$he"n" resource stren&ths to co#)ete he"$to$he"

&inst (oc( ri!(s1&inst (oc( ri!(s1

7–20

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)REE586E"D TRATE)6E)REE586E"D TRATE)6E

2 A"!nt&es A"!nt&es

0 Hi&h (e!e( of contro(Hi&h (e!e( of contro(

o!er !entureo!er !enture

0 @@Lernin& '% "oin&Lernin& '% "oin&in the (oc( #r,etin the (oc( #r,et

0 Direct trnsfer of theDirect trnsfer of the

fir#5s techno(o&%*fir#5s techno(o&%*

s,i((s* 'usinesss,i((s* 'usiness)rctices* n" cu(ture)rctices* n" cu(ture


0 C)it( costs of initi(C)it( costs of initi(

"e!e(o)#ent"e!e(o)#ent

0 Ris,s of (oss "ue toRis,s of (oss "ue to)o(itic( inst'i(it% or (c, of)o(itic( inst'i(it% or (c, of

(e&( )rotection of(e&( )rotection of

o-nershi)o-nershi)

0 S(o-est for# of entr% "ueS(o-est for# of entr% "ueto e+ten"e" ti#e re.uire"to e+ten"e" ti#e re.uire"

to construct fci(it%to construct fci(it%

7–21

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:E5E86T 38 A""6A5CE A5D:E5E86T 38 A""6A5CE A5D=365T <E5T+RE TRATE)6E=365T <E5T+RE TRATE)6E

Ginin& )rtner5s ,no-(e"&e of (oc( #r,et con"itionsGinin& )rtner5s ,no-(e"&e of (oc( #r,et con"itions

Achie!in& econo#ies of sc(e throu&h oint o)ertions Achie!in& econo#ies of sc(e throu&h oint o)ertions

Ginin& technic( e+)ertise n" (oc( #r,et ,no-(e"&eGinin& technic( e+)ertise n" (oc( #r,et ,no-(e"&e

Shrin& "istri'ution fci(ities n" "e(er net-or,s* n"Shrin& "istri'ution fci(ities n" "e(er net-or,s* n"

#utu((% stren&thenin& ech )rtner5s ccess to 'u%ers1#utu((% stren&thenin& ech )rtner5s ccess to 'u%ers1

Directin& co#)etiti!e ener&ies #ore to-r" #utu( ri!(sDirectin& co#)etiti!e ener&ies #ore to-r" #utu( ri!(s

n" (ess to-r" one nother n" (ess to-r" one nother

Est'(ishin& -or,in& re(tionshi)s -ith ,e% offici(s in theEst'(ishin& -or,in& re(tionshi)s -ith ,e% offici(s in the

host$countr% &o!ern#enthost$countr% &o!ern#ent

7–22

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2 Co(('orti!e strte&ies in!o(!in& ((incesCo(('orti!e strte&ies in!o(!in& ((incesor oint !entures -ith forei&n )rtners reor oint !entures -ith forei&n )rtners re

)o)u(r -% for co#)nies to e"&e their )o)u(r -% for co#)nies to e"&e their

-% into the #r,ets of forei&n countries1-% into the #r,ets of forei&n countries1

7–23

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THE R69 38 TRATE)6C A""6A5CETHE R69 38 TRATE)6C A""6A5CE6TH 83RE6)5 PART5ER6TH 83RE6)5 PART5ER

Out"te" ,no-(e"&e n" e+)ertise of (oc( )rtnersOut"te" ,no-(e"&e n" e+)ertise of (oc( )rtners

Cu(tur( n" (n&u&e 'rriersCu(tur( n" (n&u&e 'rriers

Costs of est'(ishin& the -or,in& rrn&e#entCosts of est'(ishin& the -or,in& rrn&e#ent

Conf(ictin& o'ecti!es n" strte&ies n"or "ee)Conf(ictin& o'ecti!es n" strte&ies n"or "ee)

"ifferences of o)inion 'out oint contro("ifferences of o)inion 'out oint contro(

Differences in cor)orte !(ues n" ethic( stn"r"s1Differences in cor)orte !(ues n" ethic( stn"r"s1

Loss of (e&( )rotection of )ro)rietr% techno(o&% orLoss of (e&( )rotection of )ro)rietr% techno(o&% orco#)etiti!e "!nt&eco#)etiti!e "!nt&e

O!er "e)en"ence on forei&n )rtners for essenti(O!er "e)en"ence on forei&n )rtners for essenti(

e+)ertise n" co#)etiti!e c)'i(ities1e+)ertise n" co#)etiti!e c)'i(ities1

7–24

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2 Cross$'or"er ((inces en'(e &ro-th$#in"e"Cross$'or"er ((inces en'(e &ro-th$#in"e"co#)n% to -i"en its &eo&r)hic co!er&e n"co#)n% to -i"en its &eo&r)hic co!er&e n"

stren&then its co#)etiti!eness in forei&nstren&then its co#)etiti!eness in forei&n

#r,ets t the s#e ti#e* the% offer f(e+i'i(it%#r,ets t the s#e ti#e* the% offer f(e+i'i(it%

n" ((o- co#)n% to retin so#e "e&ree ofn" ((o- co#)n% to retin so#e "e&ree ofutono#% n" o)ertin& contro(1utono#% n" o)ertin& contro(1

7–25

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6""+TRAT635 CAP+"E 7.16""+TRAT635 CAP+"E 7.1

Solazyme’s Cross-Border Alliances withSolazyme’s Cross-Border Alliances with

Unilever, Sehora, !antas, and "o#$etteUnilever, Sehora, !antas, and "o#$ette

2 4ht re the ris,s tht S(o;%#e fces in4ht re the ris,s tht S(o;%#e fces in

)rtnerin& -ith #uch (r&er fir#s 8e1&1*)rtnerin& -ith #uch (r&er fir#s 8e1&1*

7ni(e!er9 on co(('orti!e reserch )roects:7ni(e!er9 on co(('orti!e reserch )roects:

2 4h% "i" S(o;%#e for# n ((ince -ith4h% "i" S(o;%#e for# n ((ince -ith

Se)hor* fir# in the s#e )ro"uct #r,et:Se)hor* fir# in the s#e )ro"uct #r,et:

2 4hich one of So(;%#e5s ((inces )resents4hich one of So(;%#e5s ((inces )resents

the #ost )otenti( ris,: 4hich ((ince cou("the #ost )otenti( ris,: 4hich ((ince cou("%ie(" the &retest 'enefit:%ie(" the &retest 'enefit:

7–26

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C34PET65) 65TER5AT635A""2>C34PET65) 65TER5AT635A""2>

THREE TRATE)6C APPR3ACHETHREE TRATE)6C APPR3ACHE

4ultidomestic4ultidomestic

trategytrategy

)lo&al

trategy

Transnational

trategy

Competing

6nternationally

7–27

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CORE CONCEPTSCORE CONCEPTS

2 An An international strategyinternational strategy is strte&% foris strte&% forco#)etin& in t-o or #ore countriesco#)etin& in t-o or #ore countries

si#u(tneous(%1si#u(tneous(%1

2 A A multidomestic strategymultidomestic strategy is one in -hich is one in -hich

fir# !ries its )ro"uct offerin& n" co#)etiti!efir# !ries its )ro"uct offerin& n" co#)etiti!e))roch fro# countr% to countr% in n effort to))roch fro# countr% to countr% in n effort to

'e res)onsi!e to "ifferin& 'u%er )references'e res)onsi!e to "ifferin& 'u%er )references

n" #r,et con"itions1 It is thin,$(oc(*n" #r,et con"itions1 It is thin,$(oc(*

ct$(oc( t%)e of interntion( strte&%*ct$(oc( t%)e of interntion( strte&%*

fci(itte" '% "ecision #,in&fci(itte" '% "ecision #,in&

"ecentr(i;e" to the (oc( (e!e(1"ecentr(i;e" to the (oc( (e!e(1

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2 A A glo&al strategyglo&al strategy is one in -hich co#)n%is one in -hich co#)n%e#)(o%s the s#e 'sic co#)etiti!e ))roche#)(o%s the s#e 'sic co#)etiti!e ))roch

in (( countries -here it o)ertes* se((s #uchin (( countries -here it o)ertes* se((s #uch

the s#e )ro"ucts e!er%-here* stri!es to 'ui("the s#e )ro"ucts e!er%-here* stri!es to 'ui("

&(o'( 'rn"s* n" coor"intes its ctions&(o'( 'rn"s* n" coor"intes its ctions-or("-i"e -ith stron& he".urters contro(1 It-or("-i"e -ith stron& he".urters contro(1 It

re)resents thin,$&(o'(* ct$&(o'( ))roch1re)resents thin,$&(o'(* ct$&(o'( ))roch1

2 A A transnational strategytransnational strategy is thin,$&(o'(*is thin,$&(o'(*

ct$(oc( ))roch tht incor)ortesct$(oc( ))roch tht incor)ortes

e(e#ents of 'oth #u(ti"o#estice(e#ents of 'oth #u(ti"o#estic

n" &(o'( strte&ies1n" &(o'( strte&ies1

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Three Approaches for Competing 6nternationally86)+RE 7.!

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Advantages and Disadvantages of 4ultidomestic0

)lo&al0 and Transnational Approaches

4ultidomestic Approach?thin local0 act local@

Advantages Disadvantages

Cn #eet the s)ecific nee"s ofech #r,et #ore )recise(%

Cn res)on" #ore s-ift(% to(oc(i;e" chn&es in "e#n"

Cn tr&et rections to the#o!es of (oc( ri!(s

Cn res)on" #ore .uic,(% to(oc( o))ortunities n" threts

Hin"ers resource n" c)'i(it%shrin& or cross$#r,et trnsfers

Hi&her )ro"uction n" "istri'utioncosts

Not con"uci!e to -or("-i"eco#)etiti!e "!nt&e

TA:"E 7.1

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)lo&al0 and Transnational Approaches ?cont$d@

Transnational Approach?thin glo&al0 act local@


Offers the 'enefits of 'oth (oc(res)onsi!eness n" &(o'(inte&rtion

En'(es the trnsfer n"shrin& of resources n"c)'i(ities cross 'or"ers

Pro!i"es the 'enefits of f(e+i'(ecoor"intion

More co#)(e+ n" hr"er toi#)(e#ent

Conf(ictin& &o(s #% 'e "ifficu(t toreconci(e n" re.uire tr"e$offs

I#)(e#enttion #ore cost(% n"ti#e$consu#in&

TA:"E 7.1

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)lo&al0 and Transnational Approaches ?cont$d@

)lo&al Approach?thin glo&al0 act glo&al@


Lo-er costs "ue to sc(e n"sco)e econo#ies

Greter efficiencies "ue to the'i(it% to trnsfer 'est )rcticescross #r,ets

More inno!tion fro# ,no-(e"&e

shrin& n" c)'i(it% trnsfer The 'enefit of &(o'( 'rn"

n" re)uttion

7n'(e to ""ress (oc( nee"s)recise(%

Less res)onsi!e to chn&es in(oc( #r,et con"itions

Hi&her trns)orttion costs n"triffs

Hi&her coor"intion n" inte&rtioncosts

TA:"E 7.1

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THE +ET 83R C34PET6T6<ETHE +ET 83R C34PET6T6<E

AD<A5TA)E 65 THEAD<A5TA)E 65 THE65TER5AT635A" ARE5A65TER5AT635A" ARE5A

+se internationallocation to lo#er

cost or differentiate

product

hare resources

and capa&ilities

)ain cross&ordercoordination

&enefits

:uild Competitive Advantage

in 6nternational 4arets

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+65) "3CAT635 T3 :+6"D+65) "3CAT635 T3 :+6"DC34PET6T6<E AD<A5TA)EC34PET6T6<E AD<A5TA)E

To )ursue strte&% of offerin&To )ursue strte&% of offerin&

#ost(% stn"r"i;e" )ro"uct #ost(% stn"r"i;e" )ro"uct

-or("-i"e1-or("-i"e1

To custo#i;e offerin&s in echTo custo#i;e offerin&s in ech

countr% #r,et to #tch tstescountr% #r,et to #tch tstes

n" )references of (oc( 'u%ersn" )references of (oc( 'u%ers

9ey "ocation

6ssues

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2 Co#)nies tht co#)ete interntion((% cnCo#)nies tht co#)ete interntion((% cn)ursue co#)etiti!e "!nt&e in -or(" #r,ets)ursue co#)etiti!e "!nt&e in -or(" #r,ets

'% (octin& their !(ue chin cti!ities in'% (octin& their !(ue chin cti!ities in

-hte!er ntions )ro!e #ost "!nt&eous1-hte!er ntions )ro!e #ost "!nt&eous1

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HE5 T3 C35CE5TRATE ACT6<6T6EHE5 T3 C35CE5TRATE ACT6<6T6E65 A 8E "3CAT63565 A 8E "3CAT635

The costs of #nufcturin& or otherThe costs of #nufcturin& or other

cti!ities re si&nificnt(% (o-er in so#ecti!ities re si&nificnt(% (o-er in so#e

&eo&r)hic (octions thn in others1&eo&r)hic (octions thn in others1

There re si&nificnt sc(e econo#iesThere re si&nificnt sc(e econo#ies

in )ro"uction or "istri'ution1in )ro"uction or "istri'ution1

There re si;'(e (ernin& n" e+)erienceThere re si;'(e (ernin& n" e+)erience

'enefits ssocite" -ith )erfor#in& n'enefits ssocite" -ith )erfor#in& n

cti!it% in sin&(e (oction1cti!it% in sin&(e (oction1

Certin (octions h!e su)erior resources*Certin (octions h!e su)erior resources*

((o- 'etter coor"intion of re(te" cti!ities*((o- 'etter coor"intion of re(te" cti!ities*

or offer other !(u'(e "!nt&es1or offer other !(u'(e "!nt&es1

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HE5 T3 D6PERE ACT6<6T6EHE5 T3 D6PERE ACT6<6T6EACR3 4A52 "3CAT635ACR3 4A52 "3CAT635

Bu%er$re(te" cti!ities cn 'e con"ucte" t "istnce1Bu%er$re(te" cti!ities cn 'e con"ucte" t "istnce1

There re hi&h trns)orttion costs1There re hi&h trns)orttion costs1

There re "isecono#ies of (r&e si;e1There re "isecono#ies of (r&e si;e1

Tr"e 'rriers #,e centr( (oction too e+)ensi!e1Tr"e 'rriers #,e centr( (oction too e+)ensi!e1

Dis)ersin& cti!ities re"uces e+chn&e rte ris,s1Dis)ersin& cti!ities re"uces e+chn&e rte ris,s1

Dis)ersion he()s )re!ent su))(% interru)tions1Dis)ersion he()s )re!ent su))(% interru)tions1

Dis)ersion he()s !oi" "!erse )o(itic( "e!e(o)#ents1Dis)ersion he()s !oi" "!erse )o(itic( "e!e(o)#ents1

Dis)ersion ((o-s for (oction$'se" techno(o&% n"Dis)ersion ((o-s for (oction$'se" techno(o&% n"

)ro"uction cost co#)etiti!e "!nt&es1)ro"uction cost co#)etiti!e "!nt&es1

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HAR65) A5D TRA58ERR65)HAR65) A5D TRA58ERR65)RE3+RCE A5D CAPA:6"6T6ERE3+RCE A5D CAPA:6"6T6E

T3 :+6"D C34PET6T6<E AD<A5TA)ET3 :+6"D C34PET6T6<E AD<A5TA)E

Bui(" Resource$Bse"Bui(" Resource$Bse"

Co#)etiti!e A"!nt&e B%/Co#)etiti!e A"!nt&e B%/

0 7sin& )o-erfu( 'rn" n#es to e+ten"7sin& )o-erfu( 'rn" n#es to e+ten" "ifferentition$'se" co#)etiti!e "ifferentition$'se" co#)etiti!e

"!nt&e 'e%on" the ho#e #r,et1"!nt&e 'e%on" the ho#e #r,et1

0 Coor"intin& cti!ities for shrin& n" trnsferrin&Coor"intin& cti!ities for shrin& n" trnsferrin&

resources n" )ro"uction c)'i(ities cross "ifferentresources n" )ro"uction c)'i(ities cross "ifferentcountries5 "o#ins to "e!e(o) #r,et "o#intin&countries5 "o#ins to "e!e(o) #r,et "o#intin&

"e)th in ,e% co#)etencies1"e)th in ,e% co#)etencies1

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2 Profit sanctuariesProfit sanctuaries re countr% #r,ets thtre countr% #r,ets tht)ro!i"e fir# -ith su'stnti( )rofits 'ecuse)ro!i"e fir# -ith su'stnti( )rofits 'ecuse

of stron& or )rotecte" #r,et )osition1of stron& or )rotecte" #r,et )osition1

2 Crossmaret su&sidiBationCrossmaret su&sidiBationsu))ortin&su))ortin&

co#)etiti!e offensi!es in one #r,et -ithco#)etiti!e offensi!es in one #r,et -ith

resources n" )rofits "i!erte" fro# o)ertionsresources n" )rofits "i!erte" fro# o)ertions

in nother #r,etcn 'e )o-erfu(in nother #r,etcn 'e )o-erfu(

co#)etiti!e -e)on1co#)etiti!e -e)on1

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86)+RE 7.% Profit anctuary Potential of Domesticonly0 6nternational0

and )lo&al Competitors

7–41

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86)+RE 7.% Profit anctuary Potential of Domesticonly0 6nternational0

and )lo&al Competitors ?cont$d@

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D+4P65) A A TRATE)2D+4P65) A A TRATE)2

Du#)in&Du#)in&0 Se((in& &oo"s in forei&n #r,ets t )ricesSe((in& &oo"s in forei&n #r,ets t )rices

tht re either 'e(o- nor#( ho#e #r,ettht re either 'e(o- nor#( ho#e #r,et

)rices or 'e(o- the fu(( costs )er unit1)rices or 'e(o- the fu(( costs )er unit1

Du#)in& is NOT fir$tr"e )rcticeDu#)in& is NOT fir$tr"e )rctice

0 Go!ern#ents cn 'e e+)ecte" to ret(iteGo!ern#ents cn 'e e+)ecte" to ret(ite

&inst such )rctices '% forei&n co#)etitors1&inst such )rctices '% forei&n co#)etitors1

0 The 4or(" Tr"e Or&ni;tion 84TO9 cti!e(%The 4or(" Tr"e Or&ni;tion 84TO9 cti!e(%)o(ices "u#)in& to "iscour&e such )rctices1)o(ices "u#)in& to "iscour&e such )rctices1

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+65) PR386T A5CT+AR6E T3 DE8E5D+65) PR386T A5CT+AR6E T3 DE8E5DA)A65T 65TER5AT635A" R6<A"A)A65T 65TER5AT635A" R6<A"

6nternational

8irm A6nternational

8irm :

Fir# A #o!es &inst Fir# B in Countr% B

Profit anctuary

Fir# B counters -ith res)onse in Countr% C

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2 4hen the s#e co#)nies co#)ete &inst4hen the s#e co#)nies co#)ete &instone nother in #u(ti)(e &eo&r)hic #r,ets*one nother in #u(ti)(e &eo&r)hic #r,ets*

the thret of cross$'or"er counterttc,s #%the thret of cross$'or"er counterttc,s #%

'e enou&h to "eter &&ressi!e co#)etiti!e'e enou&h to "eter &&ressi!e co#)etiti!e

#o!es n" encour&e #utu( restrint #on&#o!es n" encour&e #utu( restrint #on&interntion( ri!(s1interntion( ri!(s1

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TRATE)2 3PT635 83R C34PET65)TRATE)2 3PT635 83R C34PET65)65 THE 4AR9ET 38 DE<E"3P65)65 THE 4AR9ET 38 DE<E"3P65)

C3+5TR6EC3+5TR6E

Pre)re to co#)ete on the 'sis of (o- )rice1Pre)re to co#)ete on the 'sis of (o- )rice1

Pre)re to #o"if% the fir#5s 'usiness #o"e( orPre)re to #o"if% the fir#5s 'usiness #o"e( or

strte&% to cco##o"te (oc( circu#stnces1strte&% to cco##o"te (oc( circu#stnces1 Tr% to chn&e the (oc( #r,et to 'etter #tchTr% to chn&e the (oc( #r,et to 'etter #tch

the -% the fir# "oes 'usiness e(se-here1the -% the fir# "oes 'usiness e(se-here1

A!oi" "e!e(o)in& #r,ets -here it is too "ifficu(t A!oi" "e!e(o)in& #r,ets -here it is too "ifficu(tor cost(% to cco##o"te (oc( circu#stnces1or cost(% to cco##o"te (oc( circu#stnces1

7–46

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DE8E5D65) A)A65T )"3:A" )6A5T>DE8E5D65) A)A65T )"3:A" )6A5T>TRATE)6E 83R "3CA" C34PA56ETRATE)6E 83R "3CA" C34PA56E

65 DE<E"3P65) C3+5TR6E65 DE<E"3P65) C3+5TR6E

De!e(o) 'usiness #o"e( tht e+)(oits shortco#in&s inDe!e(o) 'usiness #o"e( tht e+)(oits shortco#in&s in

(oc( "istri'ution net-or,s or infrstructure1(oc( "istri'ution net-or,s or infrstructure1

7ti(i;e ,no-(e"&e of (oc( custo#er nee"s n"7ti(i;e ,no-(e"&e of (oc( custo#er nee"s n"

)references to crete custo#i;e" )ro"ucts or ser!ices1)references to crete custo#i;e" )ro"ucts or ser!ices1

T,e "!nt&e of s)ects of the (oc( -or,force -ithT,e "!nt&e of s)ects of the (oc( -or,force -ith

-hich (r&e #u(tintion( fir#s #% 'e unf#i(ir1-hich (r&e #u(tintion( fir#s #% 'e unf#i(ir1

7se (oc( c.uisition n" r)i"$&ro-th strte&ies to7se (oc( c.uisition n" r)i"$&ro-th strte&ies to"efen" &inst e+)nsion$#in"e" interntion(s1"efen" &inst e+)nsion$#in"e" interntion(s1

Trnsfer the fir#5s e+)ertise to cross$'or"er #r,ets1Trnsfer the fir#5s e+)ertise to cross$'or"er #r,ets1

7–47

6""+TRAT635 CAP+"E 7.!6""+TRAT635 CAP+"E 7.!

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6""+TRAT635 CAP+"E 7.!6""+TRAT635 CAP+"E 7.!

%oc&'%oc&’s Strate(y )or Becomin( the%oc&'%oc&’s Strate(y )or Becomin( the

%eadin( *ood Service Brand in China%eadin( *ood Service Brand in China

2 4h% hs Loc,JLoc, 'een so successfu( in4h% hs Loc,JLoc, 'een so successfu( in

e+)n"in& its resturnt o)ertions intoe+)n"in& its resturnt o)ertions into

"e!e(o)in& countries:"e!e(o)in& countries:

2 Ho- shou(" Loc,JLoc,5s (oc( co#)etitorsHo- shou(" Loc,JLoc,5s (oc( co#)etitorsres)on" to its continue" e+)nsion in theirres)on" to its continue" e+)nsion in their

#r,ets:#r,ets:

2 4h% hs the &(o'( econo#ic s(o-"o-n not4h% hs the &(o'( econo#ic s(o-"o-n not"#)ene" "e#n" for Loc,JLoc,5s"#)ene" "e#n" for Loc,JLoc,5s

resturnt offerin&s:resturnt offerin&s:

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2 Profit'i(it% in "e!e(o)in& #r,ets rre(% co#esProfit'i(it% in "e!e(o)in& #r,ets rre(% co#es.uic,(% or esi(%ne- entrnts h!e to ")t.uic,(% or esi(%ne- entrnts h!e to ")t

their 'usiness #o"e(s to (oc( con"itions n"their 'usiness #o"e(s to (oc( con"itions n"

'e )tient in ernin& )rofit1'e )tient in ernin& )rofit1

7–49

6""+TRAT635 CAP+"E 7 %6""+TRAT635 CAP+"E 7 %

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2 4ht -ere the ,e% e(e#ents of Ctri)5s 'usiness4ht -ere the ,e% e(e#ents of Ctri)5s 'usiness

#o"e( tht ((o-e" it to successfu((% fen" off the#o"e( tht ((o-e" it to successfu((% fen" off the

entr% of interntion( ri!(s in its #r,et:entr% of interntion( ri!(s in its #r,et:

2 4ht chn&es in Ctri)5s e+tern( co#)etiti!e4ht chn&es in Ctri)5s e+tern( co#)etiti!een!iron#ent -i(( e!entu((% threten its continue"en!iron#ent -i(( e!entu((% threten its continue"

success:success:

2 Ho- cou(" the Di#on" of Ntion( Co#)etiti!eHo- cou(" the Di#on" of Ntion( Co#)etiti!e A"!nt&e 'e usefu( to Ctri) in )re"ictin& the A"!nt&e 'e usefu( to Ctri) in )re"ictin& the

future of the tr!e( in"ustr% in Chin:future of the tr!e( in"ustr% in Chin:

6""+TRAT635 CAP+"E 7.%6""+TRAT635 CAP+"E 7.%

+ow Ctri S$ccess)$lly e)ended a(ainst+ow Ctri S$ccess)$lly e)ended a(ainst

nternational "ivals to Become China’s %ar(estnternational "ivals to Become China’s %ar(est

.nline /ravel A(ency.nline /ravel A(ency

ipptchap007

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