What are reasons that domestic companies often have an advantage over global companies quizlet?

Home

Subjects

Solutions

Create

Log in

Sign up

Upgrade to remove ads

Only SGD 41.99/year

1. Social Science
2. Business
3. International Marketing

Terms in this set [22]

Competing in international markets allows companies to

[1] gain access to new customers,
[2] achieve lower costs through greater scale economies, learning curve effects, or purchasing power,
[3] leverage core competencies developed domestically in additional country markets,
[4] gain access to resources and capabilities located outside a company's domestic market, and
[5] spread business risk across a wider market base.

Strategy making is more complex for five reasons

[1] different countries have homecountry advantages in different industries;
[2] there exist location-based advantages to performing different value chain activities in different parts of the world;
[3] varying political and economic risks make the business climate of some countries more favorable than others;
[4] companies face the risk of adverse shifts in exchange rates when operating in foreign countries; and
[5] differences in buyer tastes and preferences present a conundrum concerning the trade-off between customizing and standardizing products and services.

Diamond of National Competitive Advantage framework

The strategies of firms that expand internationally are usually grounded in homecountry advantages concerning:
1. demand conditions,
2. factor conditions,
3. related and supporting industries, and
4. firm strategy,
5. structure, and
6. rivalry,

There are five strategic options for entering foreign markets.

These include:
1. maintaining a national [one-country] production base and exporting goods to foreign markets,
2. licensing foreign firms to produce and distribute the company's products abroad,
3. employing a franchising strategy,
4. establishing a foreign subsidiary via acquisition or greenfield venture,
5. and using strategic alliances or other collaborative partnerships.

A company must choose among three alternative approaches for competing internationally:

[1] a multidomestic strategy or think-local, act-local approach to crafting international strategy;
[2] a global strategy—a think-global, act-global approach; and
[3] a combination think-global, act-local approach, known as a transnational strategy.

When to use Multidomestic approach?

A "think-local, act-local," or multidomestic, strategy is appropriate for industries or companies that must vary their product offerings and competitive approaches from country to country in order to accommodate different buyer preferences and market conditions.

When to use Global approach?

The "think-global, act-global" approach [or global strategy] works best when there are substantial cost benefits to be gained from taking a standardized and globally integrated approach and little need for local responsiveness.

When to use Transnational approach?

A transnational approach [think global, act local] is called for when there is a high need for local responsiveness as well as substantial benefits from taking a globally integrated approach. In this approach, a company strives to employ the same basic competitive strategy in all markets but still customize its product offering and some aspect of its operations to fit local market circumstances.

There are three general ways in which a firm can gain competitive advantage [or offset domestic disadvantages] in international markets.

1. One way involves locating various value chain activities among nations in a manner that lowers costs or achieves greater product differentiation.
2. A second way draws on a multinational competitor's ability to extend its competitive advantage by cost-effectively sharing, replicating, or transferring its most valuable resources and capabilities across borders.
3. A third concerns benefiting from cross-border coordination in ways that are unavailable to domestic-only competitors.

Profit sanctuaries are country markets in which a company derives substantial profits because of its strong or protected market position.

1. They are a source of financial strength for mounting strategic offensives in selected country markets or for making defensive moves that can ward off mutually destructive competitive battles.
2. They are useful in waging strategic offenses in international markets through cross-subsidization—a practice of supporting competitive offensives in one market with resources and profits diverted from operations in another market.
3. They may be used defensively to encourage mutual restraint among competitors when there is international multimarket competition by signaling that each company has the financial capability for mounting a strong counterattack if threatened.

For companies with at least one profit sanctuary, having a presence in a rival's key markets can be enough to deter the rival from making aggressive attacks.

Companies racing for global leadership have to consider competing in developing markets like the BRIC countries, Brazil, Russia, India, and China—countries where the business risks are considerable but the opportunities for growth are huge. To succeed in these markets, companies often have to:

[1] compete on the basis of low price,
[2] modify aspects of the company's business model or strategy to accommodate local circumstances [but not so much that the company loses the advantages of global scale and branding], and/or
[3] try to change the local market to better match the way the company does business elsewhere.

Profitability is unlikely to come quickly or easily in developing markets, typically because of the investments needed to alter buying habits and tastes, the increased political and economic risk, and/or the need for infrastructure upgrades. And there may be times when a company should simply stay away from certain developing markets until conditions for entry are better suited to its business model and strategy.

Local companies in developing-country markets can seek to compete against large multinational companies by:

[1] developing business models that exploit shortcomings in local distribution networks or infrastructure,
[2] utilizing a superior understanding of local customer needs and preferences or local relationships,
[3] taking advantage of competitively important qualities of the local workforce with which large multinational companies may be unfamiliar,
[4] Using acquisition strategies and rapid-growth strategies to better defend against expansion-minded multinational companies, or
[5] Transferring company expertise to cross-border markets and initiating actions to compete on an international level.

Two types of Investment Risks are:

1. Political risks stem from instability or weakness in national governments and hostility to foreign businesses.
2. Economic risks stem from the stability of a country's monetary system, economic and regulartory policies, and the lack of property rights protections.

Multidomestic strategy:

A multidomestic strategt is one in which a company varies its product offering and 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.

Global strategy

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, strive to build global brands, and coordinates its actions worldwide with strong headquarters control.

It represents a think-global, act-global approach.

Transnational strategy

A transnational strategy is a think-global, act-local approach that incorporates elements of both multidomestic and global strategies.

Multidomestic Pros and Cons

Pros:
1. Can meet the specific needs of each market more precisely
2. Can respond more swiftly to localized changes in demand
3. Can target reactions to the moves of local rivals
4. Can respond more quickly to local opportunities and threats

Cons:
1. Hinders resource and capability sharing or cross-market transfers
2. Higher production and distribution costs
3. Not conductive to a worldwide competitive advantages

Transnational Pros and Cons

Pros:
1. Offers benefits of both local responsiveness and global integration
2. Enables the transfer and sharing of resources and capabilities across borders
3. Provides the benefits of flexible coordination

Cons:
1. More complex and harder to implement
2. Conflicting goals may be difficult to reconcile and require trade-offs
3. Implementation more costly and time-consuming

Global Pros and Cons

Pros:
1. Lower costs due to scale and scope economies
2. Greater efficiencies due to the ability to transfer best practices across markets
3. More Innovation from knowledge sharing and capability transfer
4. The benefit of a global brand and reputation

Cons:
1. Unable to address local needs precisely
2. Less responsive to changes in local market conditions
3. Higher transportation costs and tariffs
4. Higher coordination and integration costs

Profit sanctuaries

Profit sanctuaries are country markets that provide a company with substantial profits because of a strong or protected market position.

Cross-market subsidization

Cross-market subsidization is a supporting competitive offensives in one market with resources and profits diverted from operations in another market -- Can be a powerful competitive weapon.

Mutual Restraint

When the same companies compete against one another in multiple geographic markets the threat of cross-border counter-attacks may be enough to deter aggressive competitive moves and encourage mutual restraint among international rivals.

Chapter 7

14 terms

UglyDog20

Chapter 7 Quiz

20 terms

britneytuttle

CH 7

31 terms

cgarcia504

Strategic Management - Ch 7

45 terms

glenda_wise1

Strategy Chapter 12

11 terms

Qiaoran_Li

Strategy 11

5 terms

Qiaoran_Li

Strategy Chapter 10

10 terms

Qiaoran_Li

Evidence For Atomic Theory

9 terms

Qiaoran_Li

QUESTION

Talk with four people you know from different places or in different ways. Ask them about their interests [hobbies or what they like to do in their spare time]. After you have spoken with each person, identify the role each plays in society and in their work or school group.

Verified answer

QUESTION

What is a cash budget, and how can this statement be used to help reduce the amount of cash that a firm needs to carry? What are the advantages and disadvantages of daily over monthly cash budgets, and how might a cash budget be used when a firm is negotiating a loan from its bank?

Verified answer

QUESTION

Two investors are evaluating GE’s stock for possible purchase. They agree on the expected value of $D_1$ and on the expected future dividend growth rate. Further, they agree on the riskiness of the stock. However, one investor normally holds stocks for 2 years, while the other holds stocks for 10 years. On the basis of the type of analysis done in this chapter, should they both be willing to pay the same price for GE’s stock? Explain.

Verified answer

QUESTION

Distinguish among beta [or market] risk, within-firm [or corporate] risk, and stand-alone risk for a project being considered for inclusion in the capital budget.

Verified answer

Account Management Framework

13 terms

breweli

Chapter 8: International Strategy

23 terms

averyccamp

Management Final

119 terms

maggie116

Session 22 Global Management II

30 terms

oslo91

QUESTION

true or false: Expropriation involves the forced transfer of assets from a company to the government without compensation.

2 answers

QUESTION

Key differences between the domestic and international HRM function

2 answers

QUESTION

product that has a high product market growth and low relative market share

5 answers

QUESTION

product costs, warehouse costs, opportunity costs

3 answers

What is the major advantage of a multidomestic strategy quizlet?

What are reasons that companies expand into foreign markets?

What are drawbacks of a multidomestic strategy quizlet?

What is a benefit of using a global strategy quizlet?