Strategies companies adopt when they expand outside their domestic marketplace and start to compete on a global scale. One alternative available for companies is to follow the same strategy worldwide, which is referred to as a global strategy. Selling the same product the same way in every nation allows a company to realize substantial cost savings from greater economies of scale. These cost savings can then be passed on to consumers in the form of lower prices, enabling firms to gain market share from competitors. However, to succeed in a new marketplace, it may have to customize its product offering to cater to the tastes and preferences of local consumers. While this may help, the shorter production runs associated with such a strategy sometimes raise the costs of competing and lower a firm’s profit margins.
The decision to standardize or customize is a classic dilemma that confronts global companies. In this unit, we consider the different strategies that companies use to compete in the global marketplace and discuss the advantages and disadvantages of each. In this unit we also examine the different approaches that companies employ to enter foreign markets-including exporting, licensing, setting up a joint venture, and setting up a wholly owned subsidiary. The benefits and costs of entering into strategic alliances with global competitors.
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