Purdue Global Chapter 7 Competing in International Markets paper Details: You are to create a paper on competing in international markets. Your paper MUST

Purdue Global Chapter 7 Competing in International Markets paper Details:

You are to create a paper on competing in international markets. Your paper MUST be 1000-1250 words. Please include all references as required.

General Requirements:

Use the following information to ensure successful completion of the assignment:

Instructors will be using a grading rubric to grade the assignments. It is recommended you review the rubric prior to beginning the assignment in order to become familiar with the assignment criteria and expectations for successful completion of the assignment.
You are required to use APA style for their writing assignments.

Directions:

Prepare a APA paper with 1000-1250 words. You should include facts learned from chapter 7 in the text.

Submit an outline of the paper. Refer to: https://owl.english.purdue.edu/owl/resource/544/02…
Select two major themes from chapter 7 on competing in international markets.
For each major theme, identify at least two empirical or scholarly articles related to the theme.
For each empirical article please include at least one quote or reference for the major theme.
Explain the benefit of each theme and provide an example if appropriate.

Paper Assignments – minimal requirements:

Papers that do not satisfy the minimal requirements below will receive a grade of zero.

*Outline (to be submitted with the paper, but is not part of the paper)

Refer to: https://owl.english.purdue.edu/owl/resource/544/02…

*Minimum word count – 1,000 word minimum (excluding title page and reference page)

*Times New Roman Font

* 12 Point Size

* Double-spaced

* 1” Margins

* Page numeration

*APA format

*Headers (on all pages, title page requires Running head: in the header)

* Proper citations, title page & reference page are mandatory

* Title page to include: Running head:, page number, paper title, Student name, University name

*Abstracts are not required

* Citations are to be from academic peer-reviewed articles (NOT magazine articles: points will be taken away!!!)

Sources: scholar.google.com

Paper must include:

Title page (Running head:, page number, paper title, student name, university name)
Thesis/introduction paragraph (Tell me what you are going to tell me)
Body (Tell me)
Conclusion paragraph (Tell me what you told me)
References • When adding new production capacity will not adversely impact the supply-demand balance in the local market.
• When a startup subsidiary has the ability to gain good distribution access (perhaps because of the company’s recognized brand name).
• When a startup subsidiary will have the size, cost structure, and capabilities to compete head-to-head against local rivals.
Greenfield ventures in foreign markets can also pose problems, just as other entry strategies do. They represent a costly capital investment, subject to a high level of risk. They require numerous other company resources
s well, diverting them from other uses. They do not work well in countries without strong, well-functioning markets and institutions that protect the rights of foreign investors and provide other legal protections.
Moreover, an important disadvantage of greenfield ventures relative to other means of international expansion is that they are the slowest entry route-particularly if the objective is to achieve a sizable market Page 191
share. On the other hand, successful greenfield ventures may offer higher returns to compensate for their high risk and slower path.
Alliance and Joint Venture Strategies
Strategic alliances, joint ventures, and other cooperative agreements with foreign companies are a widely used means of entering foreign
markets. A company can benefit immensely from a foreign partner’s familiarity with local government regulations, its knowledge of the
buying habits and product preferences of consumers, its distribution-channel relationships, and so on. Both Japanese and American
companies are actively forming alliances with European companies to better compete in the 27-nation European Union (and the five
countries that are candidates to become EU members). Many U.S. and European companies are allying with Asian companies in their
efforts to enter markets in China, India, Thailand, Indonesia, and other Asian countries.
Collaborative strategies involving alliances or joint ventures with
foreign partners are a popular way for companies to edge their
way into the markets of foreign countries.
Another reason for cross-border alliances is to capture economies of scale in production and/or marketing. By joining forces in producing
components, assembling models, and marketing their products, companies can realize cost savings not achievable with their own small
Cross-border alliances enable a growth-minded company to
volumes. A third reason to employ a collaborative strategy is to share distribution facilities and dealer networks, thus mutually
widen its geographic coverage and strengthen its
competitiveness in foreign markets, at the same time, they offer
strengthening each partner’s access to buyers. A fourth benefit of a collaborative strategy is the learning and added expertise that comes
flexibility and allow a company to retain some degree of
from performing joint research, sharing technological know-how, studying one another’s manufacturing methods, and understanding how to
autonomy and operating control.
tailor sales and marketing approaches to fit local cultures and traditions. A fifth benefit is that cross-border allies can direct their
competitive energies more toward mutual rivals and less toward one another, teaming up may help them close the gap on leading
companies. And, finally, alliances can be a particularly useful way for companies across the world to gain agreement on important technical
standards—they have been used to arrive at standards for assorted PC devices, Internet-related technologies, high-definition televisions, and mobile phones.
Cross-border alliances are an attractive means of gaining the aforementioned types of benefits (as compared to merging with or acquiring foreign-based companies) because they allow a company to preserve its
independence (which is not the case with a merger) and avoid using scarce financial resources to fund acquisitions. Furthermore, an alliance offers the flexibility to readily disengage once its purpose has been served or
if the benefits prove elusive, whereas mergers and acquisitions are more permanent arrangements.?
Alliances may also be used to pave the way for an intended merger, they offer a way to test the value and viability of a cooperative arrangement with a foreign partner before making a more permanent commitment.
Illustration Capsule 7.1 shows how Walgreens pursued this strategy with Alliance Boots in order to facilitate its expansion abroad.
ILLUSTRATION CAPSULE 7.1
STRATEGIC OPTIONS FOR ENTERING INTERNATIONAL MARKETS
Once a company decides to expand beyond its domestic borders, it must consider the question of how to enter foreign markets. There are
five primary strategic options for doing so:
LO 3
The five major strategic options for entering foreign markets.
1. Maintain a home-country production base and export goods to foreign markets.
2. License foreign firms to produce and distribute the company’s products abroad.
3. Employ a franchising strategy in foreign markets.
4. Establish a subsidiary in a foreign market via acquisition or internal development
5. Rely on strategic alliances or joint ventures with foreign companies.
Which option to employ depends on a variety of factors, including the nature of the firm’s strategic objectives, the firm’s position terms of whether it has the full range of resources and capabilities needed to operate
abroad, country-specific factors such as trade barriers, and the transaction costs involved (the costs of contracting with a partner and monitoring its compliance with the terms of the contract, for example). The options
vary considerably regarding the level of investment required and the associated risks—but higher levels of investment and risk generally provide the firm with the benefits of greater ownership and control.
Export Strategies
Using domestic plants as a production base for exporting goods to foreign markets is an excellent initial strategy for pursuing international sales. It is a conservative way to test the international waters. The amount of
capital needed to begin exporting is often minimal; existing production capacity may well be sufficient to make goods for export. With an export-based entry strategy, a manufacturer can limit its involvement in foreign
markets by contracting with foreign wholesalers experienced in importing to handle the entire distribution and marketing function in their countries or regions of the world. If it is more advantageous to maintain control
over these functions, however, a manufacturer can establish its own distribution and sales organizations in some or all of the target foreign markets. Either way, a home-based production and export strategy helps the firm
minimize its direct investments in foreign countries. Such strategies are commonly favored by Chinese, Korean, and Italian companies-products are designed and manufactured at home and then distributed through
local channels in the importing countries. The primary functions performed abroad relate chiefly to establishing a network of distributors and perhaps conducting sales promotion and brand-awareness Page 189
activities.
Whether an export strategy can be pursued successfully over the long run depends on the relative -competitiveness of the home-country production base. In some industries, firms gain additional scale economies and
learning-curve benefits from centralizing production in plants whose output capability exceeds demand in any one country market; exporting enables a firm to capture such economies. However, an export strategy is
vulnerable when (1) manufacturing costs in the home country are substantially higher than in foreign countries where rivals have plants, (2) the costs of shipping the product to distant foreign markets are relatively high,
(3) adverse shifts occur in currency exchange rates, and (4) importing countries impose tariffs or erect other trade barriers. Unless an exporter can keep its production and shipping costs competitive with rivals’ costs,
secure adequate local distribution and marketing support of its products, and effectively hedge against unfavorable changes in currency exchange rates, its success will be limited.
Licensing Strategies
Licensing as an entry strategy makes sense when a firm with valuable technical know-how, an appealing brand, or a unique patented product has neither the internal organizational capability nor the resources to enter
foreign markets. Licensing also has the advantage of avoiding the risks of committing resources to country markets that are unfamiliar, politically volatile, economically unstable, or otherwise risky. By licensing the
technology, trademark, or production rights to foreign-based firms, a company can generate income from royalties while shifting the costs and risks of entering foreign markets to the licensee. The big disadvantage of
technology, trademark, or production rights to foreign-based firms, a company can generate income from royalties while shifting the costs and risks of entering foreign markets to the licensee. The big disadvantage of
licensing is the risk of providing valuable technological know-how to foreign companies and thereby losing some degree of control over its use, monitoring licensees and safeguarding the company’s proprietary know-
how can prove quite difficult in some circumstances. But if the royalty potential is considerable and the companies to which the licenses are being granted are trustworthy and reputable, then licensing can be a very
attractive option. Many software and pharmaceutical companies use licensing strategies to participate in foreign markets.
Franchising Strategies
While licensing works well for manufacturers and owners of proprietary technology, franchising is often better suited to the international expansion efforts of service and retailing enterprises. McDonald’s, Yum! Brands
(the parent of Pizza Hut, KFC, Taco Bell, and Wing Street), the UPS Store, Roto-Rooter, 7-Eleven, and Hilton Hotels have all used franchising to build a presence in foreign markets. Franchising has many of the same
advantages as licensing. The franchisee bears most of the costs and risks of establishing foreign locations, a franchisor has to expend only the resources to recruit, train, support, and monitor franchisees. The problem a
franchisor faces is maintaining quality control; foreign franchisees do not always exhibit strong commitment to consistency and standardization, especially when the local culture does not stress the same kinds quality
concerns. A question that can arise is whether to allow foreign franchisees to make modifications in the franchisor’s product offering so as to better satisfy the tastes and expectations of local buyers. Should McDonald’s
give franchisees in each nation some leeway in what products they put on their menus? Should franchised KFC units in China be permitted to substitute spices that appeal to Chinese consumers? Or should the
Page 190
same menu offerings be rigorously and unvaryingly required of all franchisees worldwide?
Foreign Subsidiary Strategies
Very often companies electing to compete internationally or globally prefer to have direct control over all aspects of operating in a foreign market. Companies that want to direct performance of all essential value chain
activities typically establish a wholly owned subsidiary, either by acquiring a local company or by establishing its own new operating organization from the ground up. A subsidiary business that is established internally
from scratch is called an internal startup or a greenfield venture.
Acquiring a local business is the quicker of the two options; it may be the least risky and most cost-efficient means of hurdling such entry
barriers as gaining access to local distribution channels, building supplier relationships, and establishing working relationships with
government officials and other key constituencies. Buying an ongoing operation allows the acquirer to move directly to the task of
transferring resources and personnel to the newly acquired business, redirecting and integrating the activities of the acquired business into
its own operation, putting its own strategy into place, and accelerating efforts to build a strong market position.
CORE CONCEPT
A greenfield venture (or internal startup) is a subsidiary business
that is established by setting up the entire operation from the
ground up.
One thing an acquisition-minded firm must consider is whether to pay a premium price for a successful local company or to buy a
competitor a bargain price. If the firm has little ledge of the local market but ample ital, it is often better off purchasing a capable, strongly positioned firm. However, when the
promising ways to transform a weak firm into a strong one and has the resources and managerial know-how to do so, a struggling company can be the better long-term investment
quirer sees
Entering a new foreign country via a greenfield venture makes sense when a company already operates in a number of countries, has experience in establishing new subsidiaries and overseeing their operations, and has a
sufficiently large pool of resources and capabilities to rapidly equip a new subsidiary with the personnel and competencies it needs to compete successfully and profitably. Four other conditions make a greenfield venture
strategy appealing:
• When creating an internal startup is cheaper than making an acquisition.
• When adding new production capacity will not adversely impact the supply-demand balance in the local market.
• When a startup subsidiary has the ability to gain good distribution access (perhaps because of the company’s recognized brand name).
• When a startup subsidiary will have the size, cost structure, and capabilities to compete head-to-head against local rivals.
Greenfield ventures in foreign markets can also pose problems, just as other entry strategies do. They represent a costly capital investment, subject to a high level of risk. They require numerous other company resources
s well, diverting them from other uses. They do not work well in countries without strong, well-functioning markets and institutions that protect the rights of foreign investors and provide other legal protections.
Moreover, an important disadvantage of greenfield ventures relative to other means of international expansion is that they are the slowest entry route-particularly if the objective is to achieve a sizable market Page 191
share. On the other hand, successful greenfield ventures may offer higher returns to compensate for their high risk and slower path.
Alliance and Joint Venture Strategies
Strategic alliances, joint ventures, and other cooperative agreements with foreign companies are a widely used means of entering foreign
markets. A company can benefit immensely from a foreign partner’s familiarity with local government regulations, its knowledge of the
buying habits and product preferences of consumers, its distribution-channel relationships, and so on. Both Japanese and American
companies are actively forming alliances with European companies to better compete in the 27-nation European Union (and the five
countries that are candidates to become EU members). Many U.S. and European companies are allying with Asian companies in their
efforts to enter markets in China, India, Thailand, Indonesia, and other Asian countries.
Collaborative strategies involving alliances or joint ventures with
foreign partners are a popular way for companies to edge their
way into the markets of foreign countries.
Another reason for cross-border alliances is to capture economies of scale in production and/or marketing. By joining forces in producing
components, assembling models, and marketing their products, companies can realize cost savings not achievable with their own small
Cross-border alliances enable a growth-minded company to
volumes. A third reason to employ a collaborative strategy is to share distribution facilities and dealer networks, thus mutually
widen its geographic coverage and strengthen its
competitiveness in foreign markets, at the same time, they offer
strengthening each partner’s access to buyers. A fourth benefit of a collaborative strategy is the learning and added expertise that comes
flexibility and allow a company to retain some degree of
from performing joint research, sharing technological know-how, studying one another’s manufacturing methods, and understanding how to
autonomy and operating control.
tailor sales and marketing approaches to fit local cultures and traditions. A fifth benefit is that cross-border allies can direct their
competitive energies more toward mutual rivals and less toward one another, teaming up may help them close the gap on leading
companies. And, finally, alliances can be a particularly useful way for companies across the world to gain agreement on important technical
standards—they have been used to arrive at standards for assorted PC devices, Internet-related technologies, high-definition televisions, and mobile phones.
Cross-border alliances are an attractive means of gaining the aforementioned types of benefits (as compared to merging with or acquiring foreign-based companies) because they allow a company to preserve its
independence (which is not the case with a merger) and avoid using scarce financial resources to fund acquisitions. Furthermore, an alliance offers the flexibility to readily disengage once its purpose has been served or
if the benefits prove elusive, whereas mergers and acquisitions are more permanent arrangements.?
Alliances may also be used to pave the way for an intended merger, they offer a way to test the value and viability of a cooperative arrangement with a foreign partner before making a more permanent commitment.
Illustration Capsule 7.1 shows how Walgreens pursued this strategy with Alliance Boots in order to facilitate its expansion abroad.
ILLUSTRATION CAPSULE 7.1
The Risks of Strategic Alliances with Foreign Partners
Alliances and joint ventures with foreign partners have their pitfalls, however. Sometimes a local partner’s knowledge and expertise turns out to be less valuable than expected (because its knowledge is rendered obsolete
by fast-changing market conditions or because its operating practices are archaic). Cross-border allies typically must overcome language and cultural barriers and figure out how deal with diverse (or conflicting)
operating practices. The transaction costs of working out a mutually agreeable arrangement and monitoring partner compliance with the terms of the arrangement can be high. The communication, trust Page 192
building, and coordination costs are not trivial in terms of management time. Often, partners soon discover they have conflicting objectives and strategies, deep differences of opinion about how proceed,
or important differences in corporate values and ethical standards. Tensions build, working relationships cool, and the hoped-for benefits never materialize. It is not unusual for there to be little personal Page 193
chemistry among some of the key people on whom the success or failure of the alliance depends—the rapport such personnel need to work well together may never emerge. And even if allies are able to
develop productive personal relationships, they can still have trouble reaching mutually agreeable ways to deal with key issues or launching new initiatives fast enough to stay abreast of rapid advances in technology or
shifting market conditions.
One worrisome problem with alliances or joint ventures is that a firm may risk losing some of its competitive advantage if an alliance partner is given full access to its proprietary technological expertise or other
competitively valuable capabilities. There is a natural tendency for allies to struggle to collaborate effectively in competitively sensitive areas, thus spawning suspicions on both sides about forthright exchanges of
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