Chapter 9: Competing in International Markets

Definition of International Strategy:
- The third type of strategy in strategic management, focusing on expanding into foreign markets or reducing costs through international operations.
Types of Strategies:
- Generic Business-Level/Competitive Strategy: Competing with rival firms directly based on products and services.
- Corporate Strategy: Diversifying into other industries or expanding geographically to reduce risk and increase profits.
Importance of International Strategy: Firms must evaluate potential risks and benefits when entering international markets.
Notable Tools for Assessment: Various frameworks help evaluate potential success, such as the CAGE Framework and methods of market entry.

Kia Motors Case Study:
- June 2, 2011, Kia plans to expand its US manufacturing facility, increasing capacity by 20% (from 300,000 to 360,000 vehicles).
- Estimated cost: $100 million, expected to create 1,000 new jobs.
- Kia's success attributed to robust performance in the US, with sales exceeding 350,000 vehicles in 2010, marking a 53% increase from the previous year.
Economic Revitalization:
- The establishment of KMMG (Kia Motors Manufacturing Georgia) revitalized the West Point region economically after local textile closures.
Corporate Welfare Example: State and local incentives amounting to over $400 million were provided to attract Kia’s investment.
International Trade Growth: Projections suggest the total dollar value of international trade will surpass internal trade in coming years, influenced by the opening of economies like China and Russia.

Access to New Customers:
- Example: China’s population (4x that of the US) presents substantial market opportunities despite political and cultural risks.
Lowering Costs:
- Outsourcing and offshoring to access cheaper labor and raw materials, exemplified by our reliance on Indian call centers.
Diversification of Business Risk:
- Firms can spread risk across multiple markets; Coca-Cola operates in 200 markets worldwide.

McDonald's Global Sales: By 2011, McDonald’s derived 40% of its revenue from Europe, shifting its reliance from the US.
Global Vehicle Sales: GM sold more vehicles in China (3.1 million) than in the US (2.9 million).

Purpose of CAGE Framework: Assesses risks by measuring distance across four dimensions when entering new markets.
Dimensions of CAGE:
1. Cultural Distance: Differences in language, customs, values.
2. Administrative Distance: Differences in legal and political systems, enforcement of laws.
3. Geographic Distance: Physical distance and transportation/logistics considerations.
4. Economic Distance: Differences in economic factors, development, and GDP per capita.
CAGE Example: Chipotle considering expansion to Canada vs. Spain based on cultural, geographic, and economic distances.

Multinational Corporations (MNCs): Entities that operate in multiple countries.
Four Main International Strategies:
1. International Strategy: Selling products with minimal changes across borders (e.g., Harley Davidson).
2. Multi-Domestic Strategy: Customizing products and services for local markets (e.g., Netflix, Heinz).
3. Global Strategy: Prioritizing cost efficiency, often selling similar products globally (e.g., Microsoft, P&G).
4. Transnational Strategy: Balancing cost efficiency and local responsiveness (e.g., McDonald's localized menu items).

Friedman’s World is Flat: Technological advances increase competitiveness among nations.
Porter’s Diamond Model: Framework that determines factors leading to national competitive advantage:
1. Demand Conditions: Local customer expectations shape global competitiveness.
2. Factor Conditions: Availability of resources, labor, and infrastructure in the home country.
3. Related and Supporting Industries: Strength of local suppliers enhances competitive success.
4. Firm Strategy, Structure, and Rivalry: The presence of fierce domestic rivalry fosters innovation.

Japanese firms succeed globally due to high domestic expectations and a culture of excellence.

Market Entry Options (Table 9.11):
- Exporting: Producing goods at home for sale abroad.
- Licensing: Allowing foreign firms to produce using your brand’s technology for a fee.
- Franchising: Renting the brand and business process to local entrepreneurs.
- Joint Ventures: Collaboration with local firms to form new entities.
- Acquisition: Purchasing existing businesses or establishing wholly owned subsidiaries.
- Greenfield Investment: Establishing new operations from the ground up.

Risk vs. Control vs. Profit Potential: Exporting is lower risk but offers low control/profit; greenfield investments entail high risk but high control/profit potential.

Summary of Key Determinants in International Market Competition:
- Firms must weigh the advantages against potential risks before expanding internationally.
- Utilizing the CAGE framework helps evaluate the fit between home and target markets.
- The diamond model provides insights into firm performance based on domestic market factors.
- Selecting appropriate market entry methods is critical to maximize profit and control.

Engage in group discussions about various international strategies and identify successful firms in each category.