Copyright © 2014 by The McGraw-Hill Education All rights reserved. 19e Global Edition THOMPSON | PETERAF | GAMBLE | STRICKLAND CHAPTER 7 STRATEGIES FOR

Copyright © 2014 by The McGraw-Hill Education All rights reserved.

19e Global EditionTHOMPSON | PETERAF | GAMBLE | STRICKLAND

CHAPTER 7CHAPTER 7

STRATEGIES FOR COMPETING IN STRATEGIES FOR COMPETING IN INTERNATIONAL MARKETSINTERNATIONAL MARKETSSTRATEGIES FOR COMPETING IN STRATEGIES FOR COMPETING IN INTERNATIONAL MARKETSINTERNATIONAL MARKETS

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1. Develop an understanding of the primary reasons companies choose to compete in international markets.

2. Learn how and why differing market conditions across countries influence a company’s strategy choices in international markets.

3. Learn about the five major strategic options for entering foreign markets.

4. Gain familiarity with the three main strategic approaches for competing internationally.

5. Understand how multinational companies are able to use international operations to improve overall competitiveness.

6. Gain an understanding of the unique characteristics of competing in developing-country markets.

To further exploit core competencies

To spread business risk across a wider

market base

To gain access to new customers

To achieve lower costs through economies of scale, experience, and increased

purchasing power

To gain access to resources and

capabilities located in foreign markets

WHY COMPANIES DECIDE TO ENTER FOREIGN MARKETS

WHY COMPANIES DECIDE TO ENTER FOREIGN MARKETS

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WHY COMPETING ACROSS NATIONAL WHY COMPETING ACROSS NATIONAL BORDERS MAKES STRATEGY-MAKING BORDERS MAKES STRATEGY-MAKING

MORE COMPLEXMORE COMPLEX

1.1.Different countries have different home-country advantages in different industries

2.2.Location-based value chain advantages for certain countries

3.3.Differences in government policies, tax rates, and economic conditions

4.4. Currency exchange rate risks

5.5.Differences in buyer tastes and preferences for products and services

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The Diamond of National Advantage

FIGURE 7.1

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THE DIAMOND FRAMEWORKTHE DIAMOND FRAMEWORK

Answers important questions about Answers important questions about competing on an international basis by:competing on an international basis by:● Predicting where new foreign entrants are Predicting where new foreign entrants are

likely to come from and their strengths.likely to come from and their strengths.

● Highlighting foreign market opportunities Highlighting foreign market opportunities where rivals are weakest.where rivals are weakest.

● Identifying the location-based advantages Identifying the location-based advantages of conducting certain value chain activities of conducting certain value chain activities of the firm in a particular country.of the firm in a particular country.

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REASONS FOR LOCATING VALUE CHAIN REASONS FOR LOCATING VALUE CHAIN ACTIVITIES ADVANTAGEOUSLYACTIVITIES ADVANTAGEOUSLY

♦ Lower wage ratesLower wage rates

♦ Higher worker Higher worker productivityproductivity

♦ Lower energy costsLower energy costs

♦ Fewer environmental Fewer environmental regulationsregulations

♦ Lower tax ratesLower tax rates

♦ Lower inflation ratesLower inflation rates

♦ Proximity to suppliers Proximity to suppliers and technologically and technologically related industriesrelated industries

♦ Proximity to customersProximity to customers

♦ Lower distribution costsLower distribution costs

♦ Available\unique Available\unique natural resourcesnatural resources

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THE IMPACT OF GOVERNMENT POLICIES THE IMPACT OF GOVERNMENT POLICIES AND ECONOMIC CONDITIONS AND ECONOMIC CONDITIONS

IN HOST COUNTRIESIN HOST COUNTRIES

♦ PositivesPositives● Tax incentivesTax incentives

● Low tax ratesLow tax rates

● Low-cost loansLow-cost loans

● Site location and Site location and developmentdevelopment

● Worker trainingWorker training

♦ NegativesNegatives● Environmental regulationsEnvironmental regulations

● Subsidies and loans to Subsidies and loans to domestic competitorsdomestic competitors

● Import restrictionsImport restrictions

● Tariffs and quotasTariffs and quotas

● Local-content requirementsLocal-content requirements

● Regulatory approvalsRegulatory approvals

● Profit repatriation limitsProfit repatriation limits

● Minority ownership limitsMinority ownership limits

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CORE CONCEPTCORE CONCEPTCORE CONCEPTCORE CONCEPT

♦ Political risks Political risks stem from instability or stem from instability or weaknesses in national governments and weaknesses in national governments and hostility to foreign business.hostility to foreign business.

♦ Economic risks Economic risks stem from the stability of a stem from the stability of a country’s monetary system, economic and country’s monetary system, economic and regulatory policies, the lack of property rights regulatory policies, the lack of property rights protections.protections.

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THE RISKS OF ADVERSE THE RISKS OF ADVERSE EXCHANGE RATE SHIFTSEXCHANGE RATE SHIFTS

Effects of Exchange Rate Shifts:Effects of Exchange Rate Shifts:● Exporters experience a rising demand for their Exporters experience a rising demand for their

goods whenever their currency grows weaker goods whenever their currency grows weaker relative to the importing country’s currency.relative to the importing country’s currency.

● Exporters experience a falling demand for their Exporters experience a falling demand for their goods whenever their currency grows stronger goods whenever their currency grows stronger relative to the importing country’s currency.relative to the importing country’s currency.

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STRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLESTRATEGIC MANAGEMENT PRINCIPLE

♦ Fluctuating exchange rates pose significant Fluctuating exchange rates pose significant economic risks to a firm’s competitiveness in economic risks to a firm’s competitiveness in foreign markets. Exporters are disadvantaged foreign markets. Exporters are disadvantaged when the currency of the country where goods when the currency of the country where goods are being manufactured grows stronger relative are being manufactured grows stronger relative to the currency of the importing country.to the currency of the importing country.

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♦ Domestic companies facing competitive Domestic companies facing competitive pressure from lower-cost imports benefit when pressure from lower-cost imports benefit when their government’s currency grows weaker in their government’s currency grows weaker in relation to the currencies of the countries relation to the currencies of the countries where the lower-cost imports are being made.where the lower-cost imports are being made.

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THINKING STRATEGICALLYTHINKING STRATEGICALLY

♦ What effects has the adoption of the euro had What effects has the adoption of the euro had on the ability of European Union (EU) countries on the ability of European Union (EU) countries (and firms) to respond changes in intra-national (and firms) to respond changes in intra-national economic conditions in other EU countries economic conditions in other EU countries given that they now share a common currency?given that they now share a common currency?

♦ What should a EU firm do to respond to a What should a EU firm do to respond to a adverse currency exchange rate shift in a non-adverse currency exchange rate shift in a non-EU country?EU country?

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CROSS-COUNTRY DIFFERENCES CROSS-COUNTRY DIFFERENCES IN DEMOGRAPHIC, CULTURAL, IN DEMOGRAPHIC, CULTURAL,

AND MARKET CONDITIONSAND MARKET CONDITIONS

To pursue a strategy of offering To pursue a strategy of offering a mostly standardized product a mostly standardized product worldwide.worldwide.

To customize offerings in each To customize offerings in each country market to match the tastes country market to match the tastes and preferences of local buyersand preferences of local buyers

Key Strategic Considerations

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STRATEGIC OPTIONS FOR STRATEGIC OPTIONS FOR ENTERING AND COMPETING ENTERING AND COMPETING IN INTERNATIONAL MARKETSIN INTERNATIONAL MARKETS

1.1. Maintain a national (one-country) production base and Maintain a national (one-country) production base and export goods to foreign markets.export goods to foreign markets.

2.2. License foreign firms to produce and distribute the License foreign firms to produce and distribute the firm’s products abroad.firm’s products abroad.

3.3. Employ an overseas franchising strategy.Employ an overseas franchising strategy.

4.4. Establish a wholly-owned subsidiary by either acquiring Establish a wholly-owned subsidiary by either acquiring a foreign company or through a “greenfield” venture.a foreign company or through a “greenfield” venture.

5.5. Rely on strategic alliances or joint ventures with foreign Rely on strategic alliances or joint ventures with foreign companies.companies.

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EXPORT STRATEGIESEXPORT STRATEGIES

♦ AdvantagesAdvantages● Low capital Low capital

requirementsrequirements

● Economies of scale in Economies of scale in utilizing existing utilizing existing production capacityproduction capacity

● No distribution risk No distribution risk

● No direct investment No direct investment riskrisk

♦ DisadvantagesDisadvantages● Maintaining relative cost Maintaining relative cost

advantage of home-advantage of home-based productionbased production

● Transportation and Transportation and shipping costsshipping costs

● Exchange rates risksExchange rates risks

● Tariffs\import dutiesTariffs\import duties

● Loss of channel controlLoss of channel control

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LICENSING AND FRANCHISING LICENSING AND FRANCHISING STRATEGIESSTRATEGIES

♦ AdvantagesAdvantages● Low resource Low resource

requirementsrequirements

● Income from royalties Income from royalties and franchising feesand franchising fees

● Rapid expansion into Rapid expansion into many marketsmany markets

♦ DisadvantagesDisadvantages● Maintaining control of Maintaining control of

proprietary know-howproprietary know-how

● Loss of operational and Loss of operational and quality controlquality control

● Adapting to local market Adapting to local market tastes and expectationstastes and expectations

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FOREIGN SUBSIDIARY FOREIGN SUBSIDIARY STRATEGIESSTRATEGIES

♦ AdvantagesAdvantages● High level of controlHigh level of control

● Quick large-scale Quick large-scale market entrymarket entry

● Avoids entry barriersAvoids entry barriers

● Access to acquired Access to acquired firm’s skillsfirm’s skills

♦ DisadvantagesDisadvantages● Costs of acquisitionCosts of acquisition

● Complexity of acquisition Complexity of acquisition processprocess

● Integration of the firms’ Integration of the firms’ structures, cultures, structures, cultures, operations and personneloperations and personnel

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♦ A A greenfield venture greenfield venture is a subsidiary business is a subsidiary business that is established by setting up the entire that is established by setting up the entire operation from the ground up.operation from the ground up.

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FOREIGN SUBSIDIARY STRATEGIESFOREIGN SUBSIDIARY STRATEGIES

Conditions are favorable for using an internal Conditions are favorable for using an internal startup strategy when:startup strategy when:● Creating an internal startup is cheaper than making Creating an internal startup is cheaper than making

an acquisition.an acquisition.

● Adding production capacity will not adversely impact Adding production capacity will not adversely impact the supply–demand balance in the local market.the supply–demand balance in the local market.

● A startup subsidiary has the ability to gain good A startup subsidiary has the ability to gain good distribution access.distribution access.

● A startup subsidiary will have the size, cost structure, A startup subsidiary will have the size, cost structure, and resource strengths to compete head-to-head and resource strengths to compete head-to-head against local rivals.against local rivals.

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GREENFIELD STRATEGIESGREENFIELD STRATEGIES

♦ AdvantagesAdvantages● High level of control High level of control

over ventureover venture

● ““Learning by doing” Learning by doing” in the local marketin the local market

● Direct transfer of the Direct transfer of the firm’s technology, firm’s technology, skills, business skills, business practices, and culturepractices, and culture

♦ DisadvantagesDisadvantages● Capital costs of initial Capital costs of initial

developmentdevelopment

● Risks of loss due to Risks of loss due to political instability or lack of political instability or lack of legal protection of legal protection of ownershipownership

● Slowest form of entry due Slowest form of entry due to extended time required to extended time required to construct facilityto construct facility

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BENEFITS OF ALLIANCE AND BENEFITS OF ALLIANCE AND JOINT VENTURE STRATEGIESJOINT VENTURE STRATEGIES

Gaining partner’s knowledge of local market conditionsGaining partner’s knowledge of local market conditions

Achieving economies of scale through joint operationsAchieving economies of scale through joint operations

Gaining technical expertise and local market knowledgeGaining technical expertise and local market knowledge

Sharing distribution facilities and dealer networks, and Sharing distribution facilities and dealer networks, and mutually strengthening each partner’s access to buyers.mutually strengthening each partner’s access to buyers.

Directing competitive energies more toward mutual rivals Directing competitive energies more toward mutual rivals and less toward one anotherand less toward one another

Establishing working relationships with key officials in the Establishing working relationships with key officials in the host-country governmenthost-country government

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♦ Collaborative strategies involving alliances Collaborative strategies involving alliances or joint ventures with foreign partners are or joint ventures with foreign partners are a popular way for companies to edge their a popular way for companies to edge their way into the markets of foreign countries.way into the markets of foreign countries.

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THE RISKS OF STRATEGIC ALLIANCES THE RISKS OF STRATEGIC ALLIANCES WITH FOREIGN PARTNERSWITH FOREIGN PARTNERS

Outdated knowledge and expertise of local partnersOutdated knowledge and expertise of local partners

Cultural and language barriersCultural and language barriers

Costs of establishing the working arrangementCosts of establishing the working arrangement

Conflicting objectives and strategies and/or deep Conflicting objectives and strategies and/or deep differences of opinion about joint controldifferences of opinion about joint control

Differences in corporate values and ethical standards.Differences in corporate values and ethical standards.

Loss of legal protection of proprietary technology or Loss of legal protection of proprietary technology or competitive advantagecompetitive advantage

Over dependence on foreign partners for essential Over dependence on foreign partners for essential expertise and competitive capabilities.expertise and competitive capabilities.

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♦ Cross-border alliances enable a growth-minded Cross-border alliances enable a growth-minded company to widen its geographic coverage and company to widen its geographic coverage and strengthen its competitiveness in foreign strengthen its competitiveness in foreign markets; at the same time, they offer flexibility markets; at the same time, they offer flexibility and allow a company to retain some degree of and allow a company to retain some degree of autonomy and operating control.autonomy and operating control.

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ILLUSTRATION CAPSULE 7.1ILLUSTRATION CAPSULE 7.1

Solazyme’s Cross-Border Alliances with Solazyme’s Cross-Border Alliances with Unilever, Sephora, Qantas, and RoquetteUnilever, Sephora, Qantas, and Roquette

♦ What are the risks that Sloazyme faces in What are the risks that Sloazyme faces in partnering with much larger firms (e.g., partnering with much larger firms (e.g., Unilever) on collaborative research projects?Unilever) on collaborative research projects?

♦ Why did Sloazyme form an alliance with Why did Sloazyme form an alliance with Sephora, a firm in the same product market?Sephora, a firm in the same product market?

♦ Which one of Solazyme’s alliances presents Which one of Solazyme’s alliances presents the most potential risk? Which alliance could the most potential risk? Which alliance could yield the greatest benefit?yield the greatest benefit?

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COMPETING INTERNATIONALLY: COMPETING INTERNATIONALLY: THREE STRATEGIC APPROACHESTHREE STRATEGIC APPROACHES

Multidomestic Multidomestic StrategyStrategy

GlobalStrategy

Transnational Strategy

Competing Internationally

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CORE CONCEPTSCORE CONCEPTSCORE CONCEPTSCORE CONCEPTS

♦ An An international strategy international strategy is a strategy for is a strategy for competing in two or more countries competing in two or more countries simultaneously.simultaneously.

♦ A A multidomestic strategy multidomestic strategy is one in which a is one in which a firm varies its product offering and competitive firm varies its product offering and competitive approach from country to country in an effort to approach from country to country in an effort to be responsive to differing buyer preferences be responsive to differing buyer preferences and market conditions. It is a think-local, and market conditions. It is a think-local, act-local type of international strategy, act-local type of international strategy, facilitated by decision making facilitated by decision making decentralized to the local level.decentralized to the local level.

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♦ A A global strategy global strategy is one in which a company is one in which a company employs the same basic competitive approach employs the same basic competitive approach in all countries where it operates, sells much in all countries where it operates, sells much the same products everywhere, strives to build the same products everywhere, strives to build global brands, and coordinates its actions global brands, and coordinates its actions worldwide with strong headquarters control. It worldwide with strong headquarters control. It represents a think-global, act-global approach.represents a think-global, act-global approach.

♦ A A transnational strategy transnational strategy is a think-global, is a think-global, act-local approach that incorporates act-local approach that incorporates elements of both multidomestic elements of both multidomestic and global strategies.and global strategies.

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Three Approaches for Competing InternationallyFIGURE 7.2

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Advantages and Disadvantages of Multidomestic, Global, and Transnational Approaches

Multidomestic Approach(think local, act local)

Advantages Disadvantages

• Can meet the specific needs of each market more precisely

• Can respond more swiftly to localized changes in demand

• Can target reactions to the moves of local rivals

• Can respond more quickly to local opportunities and threats

• Hinders resource and capability sharing or cross-market transfers

• Higher production and distribution costs

• Not conducive to a worldwide competitive advantage

TABLE 7.1

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Advantages and Disadvantages of Multidomestic, Global, and Transnational Approaches (cont’d)

Transnational Approach(think global, act local)


• Offers the benefits of both local responsiveness and global integration

• Enables the transfer and sharing of resources and capabilities across borders

• Provides the benefits of flexible coordination

• More complex and harder to implement

• Conflicting goals may be difficult to reconcile and require trade-offs

• Implementation more costly and time-consuming

TABLE 7.1

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Advantages and Disadvantages of Multidomestic, Global, and Transnational Approaches (cont’d)

Global Approach(think global, act global)


• Lower costs due to scale and scope economies

• Greater efficiencies due to the ability to transfer best practices across markets

• More innovation from knowledge sharing and capability transfer

• The benefit of a global brand and reputation

• Unable to address local needs precisely

• Less responsive to changes in local market conditions

• Higher transportation costs and tariffs

• Higher coordination and integration costs

TABLE 7.1

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THE QUEST FOR COMPETITIVE THE QUEST FOR COMPETITIVE ADVANTAGE IN THE ADVANTAGE IN THE

INTERNATIONAL ARENAINTERNATIONAL ARENA

Use international location to lower

cost or differentiate product

Share resources and capabilities

Gain cross-border coordination

benefits

Build Competitive Advantage in International Markets

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USING LOCATION TO BUILD USING LOCATION TO BUILD COMPETITIVE ADVANTAGECOMPETITIVE ADVANTAGE

To pursue a strategy of offering To pursue a strategy of offering a mostly standardized product a mostly standardized product worldwide.worldwide.

To customize offerings in each To customize offerings in each country market to match tastes country market to match tastes and preferences of local buyersand preferences of local buyers

Key LocationIssues

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♦ Companies that compete internationally can Companies that compete internationally can pursue competitive advantage in world markets pursue competitive advantage in world markets by locating their value chain activities in by locating their value chain activities in whatever nations prove most advantageous.whatever nations prove most advantageous.

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WHEN TO CONCENTRATE ACTIVITIES WHEN TO CONCENTRATE ACTIVITIES IN A FEW LOCATIONSIN A FEW LOCATIONS

The costs of manufacturing or other The costs of manufacturing or other activities are significantly lower in some activities are significantly lower in some geographic locations than in others.geographic locations than in others.

There are significant scale economies There are significant scale economies in production or distribution.in production or distribution.

There are sizable learning and experience There are sizable learning and experience benefits associated with performing an benefits associated with performing an activity in a single location.activity in a single location.

Certain locations have superior resources, Certain locations have superior resources, allow better coordination of related activities, allow better coordination of related activities, or offer other valuable advantages.or offer other valuable advantages.

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WHEN TO DISPERSE ACTIVITIES WHEN TO DISPERSE ACTIVITIES ACROSS MANY LOCATIONSACROSS MANY LOCATIONS

Buyer-related activities can be conducted at a distance.Buyer-related activities can be conducted at a distance.

There are high transportation costs.There are high transportation costs.

There are diseconomies of large size.There are diseconomies of large size.

Trade barriers make a central location too expensive.Trade barriers make a central location too expensive.

Dispersing activities reduces exchange rate risks.Dispersing activities reduces exchange rate risks.

Dispersion helps prevent supply interruptions.Dispersion helps prevent supply interruptions.

Dispersion helps avoid adverse political developments.Dispersion helps avoid adverse political developments.

Dispersion allows for location-based technology and Dispersion allows for location-based technology and production cost competitive advantages.production cost competitive advantages.

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SHARING AND TRANSFERRING SHARING AND TRANSFERRING RESOURCES AND CAPABILITIES RESOURCES AND CAPABILITIES

TO BUILD COMPETITIVE ADVANTAGETO BUILD COMPETITIVE ADVANTAGE

Build a Resource-Based Build a Resource-Based Competitive Advantage By:Competitive Advantage By:● Using powerful brand names to extend Using powerful brand names to extend

a differentiation-based competitive a differentiation-based competitive advantage beyond the home market.advantage beyond the home market.

● Coordinating activities for sharing and transferring Coordinating activities for sharing and transferring resources and production capabilities across different resources and production capabilities across different countries’ domains to develop market dominating countries’ domains to develop market dominating depth in key competencies. depth in key competencies.

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♦ Profit sanctuaries Profit sanctuaries are country markets that are country markets that provide a firm with substantial profits because provide a firm with substantial profits because of a strong or protected market position.of a strong or protected market position.

♦ Cross-market subsidizationCross-market subsidization—supporting —supporting competitive offensives in one market with competitive offensives in one market with resources and profits diverted from operations resources and profits diverted from operations in another market—can be a powerful in another market—can be a powerful competitive weapon.competitive weapon.

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FIGURE 7.3 Profit Sanctuary Potential of Domestic-only, International, and Global Competitors

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FIGURE 7.3 Profit Sanctuary Potential of Domestic-only, International, and Global Competitors (cont’d)

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DUMPING AS A STRATEGYDUMPING AS A STRATEGY

DumpingDumping● Selling goods in foreign markets at prices Selling goods in foreign markets at prices

that are either below normal home market that are either below normal home market prices or below the full costs per unit.prices or below the full costs per unit.

Dumping is NOT a fair-trade practiceDumping is NOT a fair-trade practice● Governments can be expected to retaliate Governments can be expected to retaliate

against such practices by foreign competitors. against such practices by foreign competitors.

● The World Trade Organization (WTO) actively The World Trade Organization (WTO) actively polices dumping to discourage such practices.polices dumping to discourage such practices.

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USING PROFIT SANCTUARIES TO DEFEND USING PROFIT SANCTUARIES TO DEFEND AGAINST INTERNATIONAL RIVALSAGAINST INTERNATIONAL RIVALS

International Firm A

International Firm B

Firm A moves against Firm B in Country B

Profit Sanctuary

Firm B counters with a response in Country C

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♦ When the same companies compete against When the same companies compete against one another in multiple geographic markets, one another in multiple geographic markets, the threat of cross-border counterattacks may the threat of cross-border counterattacks may be enough to deter aggressive competitive be enough to deter aggressive competitive moves and encourage mutual restraint among moves and encourage mutual restraint among international rivals.international rivals.

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STRATEGY OPTIONS FOR COMPETING STRATEGY OPTIONS FOR COMPETING IN THE MARKETS OF DEVELOPING IN THE MARKETS OF DEVELOPING

COUNTRIESCOUNTRIES

Prepare to compete on the basis of low price.Prepare to compete on the basis of low price. Prepare to modify the firm’s business model or Prepare to modify the firm’s business model or

strategy to accommodate local circumstances.strategy to accommodate local circumstances. Try to change the local market to better match Try to change the local market to better match

the way the firm does business elsewhere.the way the firm does business elsewhere. Avoid developing markets where it is too difficult Avoid developing markets where it is too difficult

or costly to accommodate local circumstances.or costly to accommodate local circumstances.

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DEFENDING AGAINST GLOBAL GIANTS: DEFENDING AGAINST GLOBAL GIANTS: STRATEGIES FOR LOCAL COMPANIES STRATEGIES FOR LOCAL COMPANIES

IN DEVELOPING COUNTRIESIN DEVELOPING COUNTRIES

Develop a business model that exploits shortcomings in Develop a business model that exploits shortcomings in local distribution networks or infrastructure.local distribution networks or infrastructure.

Utilize knowledge of local customer needs and Utilize knowledge of local customer needs and preferences to create customized products or services.preferences to create customized products or services.

Take advantage of aspects of the local workforce with Take advantage of aspects of the local workforce with which large multinational firms may be unfamiliar.which large multinational firms may be unfamiliar.

Use local acquisition and rapid-growth strategies to Use local acquisition and rapid-growth strategies to defend against expansion-minded internationals.defend against expansion-minded internationals.

Transfer the firm’s expertise to cross-border markets.Transfer the firm’s expertise to cross-border markets.

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ILLUSTRATION CAPSULE 7.2ILLUSTRATION CAPSULE 7.2Lock&Lock’s Strategy for Becoming the Lock&Lock’s Strategy for Becoming the Leading Food Service Brand in ChinaLeading Food Service Brand in China

♦ Why has Lock&Lock been so successful in Why has Lock&Lock been so successful in expanding its restaurant operations into expanding its restaurant operations into developing countries?developing countries?

♦ How should Lock&Lock’s local competitors How should Lock&Lock’s local competitors respond to its continued expansion in their respond to its continued expansion in their markets?markets?

♦ Why has the global economic slowdown not Why has the global economic slowdown not dampened demand for Lock&Lock’s dampened demand for Lock&Lock’s restaurant offerings?restaurant offerings?

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♦ Profitability in developing markets rarely comes Profitability in developing markets rarely comes quickly or easily—new entrants have to adapt quickly or easily—new entrants have to adapt their business models to local conditions and their business models to local conditions and be patient in earning a profit.be patient in earning a profit.

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♦ What were the key elements of Ctrip’s business What were the key elements of Ctrip’s business model that allowed it to successfully fend off the model that allowed it to successfully fend off the entry of international rivals in its market?entry of international rivals in its market?

♦ What changes in Ctrip’s external competitive What changes in Ctrip’s external competitive environment will eventually threaten its continued environment will eventually threaten its continued success?success?

♦ How could the Diamond of National Competitive How could the Diamond of National Competitive Advantage be useful to Ctrip in predicting the Advantage be useful to Ctrip in predicting the future of the travel industry in China? future of the travel industry in China?

ILLUSTRATION CAPSULE 7.3 ILLUSTRATION CAPSULE 7.3 How Ctrip Successfully Defended against How Ctrip Successfully Defended against International Rivals to Become China’s Largest International Rivals to Become China’s Largest Online Travel AgencyOnline Travel Agency

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Copyright © 2014 by The McGraw-Hill Education All rights reserved. 19e Global Edition THOMPSON | PETERAF | GAMBLE | STRICKLAND CHAPTER 7 STRATEGIES FOR