A company may normally desirous of competing in overseas country markets for just about any of the four major reasons which is to gain access to new customers, to attain lower costs and enhances the firm's competitiveness, to capitalize on its key competencies or even to spread its business risk across a wider market foundation. Each of the factors explained at length below
To access new customers
A company which extend into foreign markets offers potential for an increased revenue, increased revenues and also potential of long-term progress which becomes a stylish option when a company's home marketplaces are mature.
To achieve lower costs and enhance the firm's competitiveness
Many companies are powered to sell in several country sales. It is because domestic sales volume level is normally not large enough to fully capture developing economies of level or learning curve effects and thereby significantly enhance the firm's cost-competitiveness.
To capitalize on its central competencies
A company may be able to leverage its competencies and features into a position of competitive gain in foreign marketplaces as well as just local markets.
To pass on its business risk across a wider market base
A company may spread its business risk by operating in several different foreign countries rather than depending totally on operations in its local market.
Besides all the above factors allures companies to venture into international country market segments, companies also have to plan and also have to pay close attention to the advantages of cross-border of competencies and functions. One of the biggest concerns of companies fighting in foreign markets is whether to modify their product offerings in each different country market to complement the tastes and tastes of local customers or whether to give a generally standardized product worldwide. It is because cross-border distinctions in cultural, demographic and market conditions are strong. As a result, regardless of a company's determination for widening outside its home markets, the strategies it uses to contend in foreign marketplaces must be situation influenced.
Cultural, demographic, and market conditions vary significantly among the list of countries of the world. Ethnicities and lifestyles are the most clear areas in which countries change; market demographics are close back of.
Market growth can vary from country to country. In appearing markets, market progress potential is considerably greater than in the more mature economies.
Aside from basic ethnical and market variations among countries, a corporation also offers to pay special attention to location advantages that stem from country-to-country variations in production and distribution costs, the potential risks of fluctuating exchange rates, and the economic and political demands of host government authorities. Differences in wage rates, worker productivity, inflation rates, energy costs, taxes rates, government regulations, and so on create sizable modifications in production costs from country to country.
Besides that, fluctuating exchange rates also have an effect on a company's competitiveness. Competitiveness of an company's operations partly depends upon whether exchange rate changes influence costs favorably or unfavorably. Once the exchange rates are fluctuating, exporters always gain in competitiveness when the currency of the country where goods are manufactured grows weaker. Exporters are disadvantaged when the currency of the country where goods are created grows stronger.
Furthermore, the impact of number government regulations on the local business climate also will have impact to the new venturing companies. Some of the host government guidelines impacting on foreign-based companies are local content requirements on goods made of their borders by foreign-based companies, insurance policies that protect local companies from foreign competition, limitations on exports because of national security concerns, price legislation of brought in and locally produced goods, intentionally burdensome strategies and requirements for imported goods to cross custom inspection, tariffs or quotas on the transfer of certain goods and subsidies and low-interest loans for domestic companies rivalling against foreign rivals.
There are 3 ways in which a firm can gain competitive advantage by expanding outside its local markets:
Use location to lower costs or achieve greater product differentiation
Companies that be competitive multinationally can pursue competitive advantages in world market segments by finding their value string activities in whatever countries prove most helpful.
To use location to generate competitive advantage, a corporation must consider two issues:
Whether to concentrate each activity it carries out in a few select countries or even to disperse performance of the experience to numerous nations
In which countries to find particular activities
When to Concentrate Activities in a Few Locations
When the expenses of manufacturing or alternative activities are significantly reduced some geographic locations than in others
When there are significant size economies
When there is a steep learning curve associated with undertaking an activity in one location
When certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages
When to Disperse Internal Operations across Many Locations
In several instances, dispersing activities is more helpful than concentrating them.
The classic reason behind locating an activity in a particular country is low-cost.
Using Cross-Border Coordination to generate Competitive Advantage
Transferring competencies, functions, and resource advantages from country to country contributes to the development of broader and deeper competences and functions - ideally helping a firm achieve dominating depth in a few competitively valuable area. Dominating depth in a competitively valuable ability, reference, or value string activity is a solid base for ecological competitive benefits over multinational or global competitors and especially so over domestic-only competitors.
Using Cross-Border Coordination to make Competitive Advantage
Multinational and global opponents are able to organize activities across different countries to generate competitive edge.
If a company learns how to assemble its product more proficiently at one seed, the accumulated know-how and knowledge can be shared with assembly plant life in other world locations.
Efficiencies can be achieved by shifting workloads from where they can be unusually heavy to locations where employees are underutilized.
Question 2: In creating a strategy-supportive reward composition, it is important to define careers and projects in terms of the leads to be accomplished not simply in conditions of the duties to be performed. True or bogus? Explain and justify your answer.
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Question 3: Can an industry be attractive to one company and unattractive to another company? Why or why not?
