Competing in Foreign Markets
Competing in
Foreign Markets
I. Introduction
1. Any company that aspires to industry leadership in the 21st century must think in terms of global, not domestic, market leadership.
2. Companies in industries that are already globally competitive or in the process of becoming so are under the gun to come up with a strategy for competing successfully in foreign markets.
II. Why Companies Expand Into Foreign Markets
1. A company may opt to expand outside its domestic market for any of four major reasons:
a. To gain access to new customers – Expanding into foreign markets offers potential for increased revenues, profits, and long-term growth and becomes an especially attractive option when a company’s home markets are mature.
b. To achieve lower costs and enhance the firm’s competitiveness – Many companies are driven to sell in more than one country because domestic sales volume is not large enough to fully capture manufacturing economies of scale or learning curve effects and thereby substantially improve the firm’s cost-competitiveness.
c. To capitalize on its core competencies – A company may be able to leverage its competencies and capabilities into a position of competitive advantage in foreign markets as well as just domestic markets.
d. To spread its business risk across a wider market base – A company spreads business risk by operating in a number of different foreign countries rather than depending entirely on operations in its domestic market.
A. The Difference between Competing Internationally and Competing Globally
1. Typically, a company will start to compete internationally by entering just one or maybe a select few foreign markets.
2. There is a meaningful distinction between the competitive scope of a company that operates in a select few foreign countries (accurately termed an international competitor) and a company that markets its products in 50 to 100 countries and is
Foreign Markets
I. Introduction
1. Any company that aspires to industry leadership in the 21st century must think in terms of global, not domestic, market leadership.
2. Companies in industries that are already globally competitive or in the process of becoming so are under the gun to come up with a strategy for competing successfully in foreign markets.
II. Why Companies Expand Into Foreign Markets
1. A company may opt to expand outside its domestic market for any of four major reasons:
a. To gain access to new customers – Expanding into foreign markets offers potential for increased revenues, profits, and long-term growth and becomes an especially attractive option when a company’s home markets are mature.
b. To achieve lower costs and enhance the firm’s competitiveness – Many companies are driven to sell in more than one country because domestic sales volume is not large enough to fully capture manufacturing economies of scale or learning curve effects and thereby substantially improve the firm’s cost-competitiveness.
c. To capitalize on its core competencies – A company may be able to leverage its competencies and capabilities into a position of competitive advantage in foreign markets as well as just domestic markets.
d. To spread its business risk across a wider market base – A company spreads business risk by operating in a number of different foreign countries rather than depending entirely on operations in its domestic market.
A. The Difference between Competing Internationally and Competing Globally
1. Typically, a company will start to compete internationally by entering just one or maybe a select few foreign markets.
2. There is a meaningful distinction between the competitive scope of a company that operates in a select few foreign countries (accurately termed an international competitor) and a company that markets its products in 50 to 100 countries and is