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Global Environment

Strategy Options

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Strategy Options to enter into New Foreign Markets

• Maintain National Product Base and export goods to foreign Market

• License foreign firms to use company’s technology or to produce or distribute the company’s product.

• Employ a franchising strategy• Follow Multicountry strategy• Follow a global Strategy• Use strategic alliances or joint ventures with

foreign companies as primary vehicle for foreign market

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1. Export strategy

• Using domestic Plants as production base for export .Features- Conservative way to test international Market- Capital requires is minimal- Contract with foreign wholesaler/distribution channel- Minimizes direct investments in foreign market- Adopted by Korean, Chinese, Italian companies Successful when… Firms gain additional scale of economies, output

capacity increasesVulnerable when..1. Manufacturing cost in domestic country is higher rather that foreign

where rivals have plants and we are exporting2. Cost of shipping is very high3. Shift in currency rate

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2. Franchising Strategy• Best Suited for Global Expansion of

services and retailing.• Franchisee bear the cost of risk for

establishing in foreign market• Franchisor has to spend in recruitment,

training, supporting 1. Biggest problem is maintaining quality

control.2. Whether to allow foreign franchisor to

change as per local tastes..

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3.Licensing strategy• Licensing strategy works when firms with valuable

technical know-how or unique patented products has neither internal organizational capability of resources to enter into foreign market.

• Works with manufacturers and owners of technology• Advantage- Avoid risk of committing resources which may be affected

by volatile politics, unstable economics- No cost/risk if entering foreign market but earnings from

royalties. Disadvantage- Providing valuable technology which can be misused,

not monitored,If Royalty potential is considerable.. very attractive optionSoftware & Pharmaceutical

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Multicountry Strategy or a Global Strategy

1. The need for a Multicountry strategy comes from the vast differences in cultural, economic, political, and competitive conditions in different countries.

2. Multicountry strategies are tailored to fit each host country’s market situation.

3. Global strategies are where the company’s approach is mostly the same in all countries.

4. global strategy involves:• a. integrating and coordinating the company’s strategic moves

world wide• b. selling in many if not all nations where there is significant

buyer demand. 5.The strength of a Multicountry strategy is that it matches the

company’s competitive approach to host-country circumstances

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Drawback in Multicountry Strategy

6. Multicountry strategy has two drawbacks:

1. it is very difficult to transfer a company’s competencies and resources across country boundaries.

2. It does not promote building a single, unified competitive advantage.

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Multicountry Vs Global

7. The primary orientation of a Multicountry strategy is responsiveness to local country conditions.

• a. Companies using this strategy face big hurdles as they try to encourage staff to lower costs.

8. A global strategy can concentrate on building resource strengths to secure a sustainable low-cost or differentiation-based competitive advantage over both domestic rivals and global rivals for the world market leadership.