International Markets

Summary

The script discusses the strategies companies can adopt to compete successfully in global markets. It emphasizes the significance of globalization in shaping the competitive landscape, offering both opportunities and challenges. The video outlines five key reasons for international expansion, such as accessing new customers, reducing costs, leveraging core competencies, acquiring foreign resources, and spreading business risk. It also highlights five entry strategies, including exporting, licensing, franchising, establishing subsidiaries, and forming strategic alliances. Additionally, it touches on factors like market differences, location-based advantages, currency risks, and government policies that influence decision-making in international markets.

Takeaways

• 😀 Companies aiming for 21st-century leadership must think globally and adapt to the forces of globalization.
• 🌍 Globalization is reshaping industries, offering new opportunities while also introducing competitive threats.
• 📈 Expanding into foreign markets provides companies with the potential for increased revenues, profits, and long-term growth.
• 💰 Companies may expand internationally to lower costs, achieve economies of scale, and enhance competitiveness.
• 🚀 Expanding globally allows companies to leverage core competencies and create competitive advantages in foreign markets.
• 🌍 Gaining access to resources and capabilities that are unavailable in the home market is a key motivator for international expansion.
• ⚖️ Spreading business risks across multiple markets is an important reason for companies to expand internationally.
• 📊 Key factors shaping international market strategies include demographic differences, location-based advantages, currency risks, and government policies.
• 🛠️ Companies may choose one of five modes of entry into foreign markets: exporting, licensing, franchising, acquisitions, or strategic alliances/joint ventures.
• 📦 Exporting goods to foreign markets is an effective strategy for companies just beginning international sales.
• 🔑 Licensing works well for firms with valuable technology but limited resources to enter foreign markets, avoiding political and economic risks.
• 🏪 Franchising is ideal for service and retail businesses looking to expand globally, relying on local partners to manage operations.
• 🤝 Strategic alliances and joint ventures with foreign companies are valuable methods for entering new markets and boosting competitiveness.
• 🌍 Differing market conditions across countries heavily influence a company's international strategy choices.

Q & A

Why do companies seek to expand internationally in the 21st century?

Companies aim to expand internationally to access new customers, achieve lower costs, exploit core competencies, acquire resources unavailable in their home market, and spread business risks across a broader base.

What are the five major reasons companies expand into foreign markets?

The five major reasons for international expansion are: 1) to gain access to new customers, 2) to achieve lower costs and improve competitiveness, 3) to exploit core competencies, 4) to access resources and capabilities in foreign markets, and 5) to spread business risks.

How does expanding internationally help companies access new customers?

Expanding into foreign markets offers potential for increased revenues and long-term growth, especially when domestic markets are saturated or mature.

What is the significance of lower costs when expanding internationally?

Lower costs can be achieved through factors like wage rates, worker productivity, and local tax rates, which can improve a company's competitiveness in global markets.

What does exploiting core competencies mean in the context of international expansion?

Exploiting core competencies refers to leveraging a company’s unique strengths and capabilities, such as specialized knowledge or technology, to gain competitive advantages in foreign markets.

Why do companies consider accessing resources and capabilities in foreign markets?

Accessing resources and capabilities in foreign markets allows companies to obtain materials, technology, or labor that are not readily available in their home country, which can be critical for innovation and growth.

How does expanding internationally help companies reduce business risk?

By operating in multiple countries, companies can spread their risks, ensuring that they are not entirely dependent on a single market. This diversification protects against market volatility or adverse changes in one country.

What factors should companies consider when developing strategies for competing in foreign markets?

Companies should consider cross-country differences in demographics, culture, and market conditions, location-based advantages, currency exchange risks, and how government policies impact local business climates.

What are the five general modes of entry into a foreign market?

The five general modes of entry are: 1) exporting goods from a domestic base, 2) licensing foreign firms to produce and distribute products, 3) franchising, 4) establishing a subsidiary via acquisition or internal development, and 5) forming strategic alliances or joint ventures with foreign partners.

When is licensing an attractive strategy for international expansion?

Licensing is particularly useful when a company possesses valuable technology or patents but lacks the internal resources or capabilities to enter foreign markets independently. It also avoids the risks of committing resources to unstable or unfamiliar markets.

How does franchising differ from other entry strategies in terms of international expansion?

Franchising is often more suitable for service and retail industries compared to manufacturing. It allows a company to expand internationally by partnering with local entities to replicate its business model, thus minimizing risks and resource commitments.

What role do strategic alliances and joint ventures play in entering foreign markets?

Strategic alliances and joint ventures enable companies to share resources, knowledge, and risks with foreign partners, making it easier to enter new markets or strengthen competitiveness in international markets.