CH 7: Stratgies for global companies

Question 1

Why expand to international markets?

Answer 1

1. Follow rivals
2. Faltering domestic demand
3. further exploit core competencies
4. Gain access to resources and capabilities
5. Spread business risk

Question 2

The differences faced when entering a new market

Answer 2

1. Adjustments to local buyer tastes
2. Differences in market growth potential
3. Differences in the intensity of local competition

Question 3

How markets demographic differ from country to another?

Answer 3

1. Taste and preferences
2. Purchasing power
3. Buying habits
4. Distribution channel emphasis
5. Demands for localized products
6. The strength of local competitive rivalry

Question 4

Strategic options for entering foreign markets:

Answer 4

1. Maintain a national production base, and export
2. License foreign firms to produce and distribute products abroad
3. Employ a franchising strategy
4. Establish a subsidiary
5. Rely on strategic alliances or joint ventures with foreign partners.

Question 5

Advantages and disadvantages of exporting strategy:

Answer 5

Advantages:

1. Conservative way to test international waters
2. Minimize both risk and capital investment req.
3. More control maintained

Disadvantages: (firm is vulnerable when)

1. Manufacturing costs are higher in home country than in foreign country
2. High product transportation costs
3. Rapid changes in exchange rates

Question 6

Advantages and disadvantages of licensing strategies:

Answer 6

Advantages: (Best when)

1. Has valuable technical know-how or patent but no resources to go to foreign markets
2. Avoid risk of committing resources
3. Generate income from royalties

Disadvantage:
1. Difficulty in maintaining control over the use of technical know-how.

Question 7

Advantages and disadvantages of franchising strategies:

Answer 7

(best for services and retailing enterprises)
Advantages:
1. Franchisee bears many of the costs and risks of doing business
2. Franchisor has to expend only the resources to recruit, train, and support franchisees

Disadvantages:

1. Maintaining quality control
2. Allowing franchisees discretion in adapting product offerings to local tastes and expectations

Question 8

Pitfalls to the success of alliances:

Answer 8

1. Language and cultural barriers
2. Diversity in ethical standards
3. Development of trust, coordination, and effective communications
4. Interpersonal conflicts between mangers
5. Over-dependence on foreign partners

Question 9

Options for tailoring a company’s international strategy:

Answer 9

1. Multi-domestic strategy (think local, act local)
2. Trans-national strategy (think global, act local)
3. Global strategy (think global, act global)