The entry of companies into foreign markets is determined by four main reasons [15 p.212-213]:
Attracting new customers. The development of foreign markets opens up opportunities for higher revenues, profits and long-term growth. This option is especially attractive in cases where the domestic market of the country is already saturated. Companies such as Cisco Systems, Intel, Sony, Nokia and Toyota, striving for global leadership in their industries, must quickly and vigorously expand their presence in markets around the world; Reduce costs and increase competitiveness. Many companies are faced with the need to export products because the maximum volume of sales in their domestic markets is insufficient to achieve economies of scale or due to the learning effect and ensuring a competitive level of costs on this basis. Due to the relatively small volume of European domestic markets, companies such as Michelin and Nestle have been selling their products throughout Europe for quite some time, and have recently expanded their operations to the markets of the North and Latin Americas; Benefits through core competency. A company with competitive capabilities and competencies achieves a competitive advantage not only in domestic markets, but also in foreign ones. Nokia’s competitiveness and capabilities in the mobile phone industry have contributed to the achievement of leadership in the global wireless telecommunications market; Reducing risk due to market expansion. The development of foreign markets reduces entrepreneurial risk, reducing the company’s dependence on operations in the domestic market. Then, if the economy of Asian countries is in decline, losses in this market can be compensated by increasing sales in Latin America or Europe.
Companies specializing in the extraction and processing of natural resources (oil and gas, minerals, rubber, timber) usually seek to enter the international market, since attractive raw materials from the point of view of economic efficiency are located in other countries.
The company, entering one or more selected foreign markets, enters into international competition. We talk about global competition when the company expands its activities on several continents and fights for leadership in the world market. There is an obvious difference in the scale of competition between companies, some of which operate in several countries, while others sell their products in 50, or even in 100 countries, and also annually expand operations to the markets of other countries. The first company can be called a competitor of a transnational (or multinational) scale, the second – a global competitor. Thus, an international (or multinational) competitor is a company that competes in the markets of several countries; a global competitor is a company that has or seeks a presence in the markets of all (most) countries.
Competition in foreign markets, with their cultural, social, demographic and market differences, places much higher demands on the development of the company’s strategy than competition in the domestic market. Therefore, regardless of the motives that guide the company in expanding its activities beyond domestic markets, it must adapt its competitive strategy to the situation in a particular country, because the tastes, preferences and purchasing behavior of Spanish, for example, consumers differ from Norwegian ones. It happens that a product developed for one country is not suitable for another. For example, in the United States, all electrical appliances are designed for a voltage of 110 volts, and in many European countries the voltage in the network is 220 volts, and this difference must be taken into account by manufacturers of household and other appliances. The French prefer vertical loading washing machines and this is different from the consumers of most European countries, who prefer front-loading machines. In northern Europe, large refrigerators are mainly used, since it is customary to make purchases once a week in large supermarkets. Residents of southern Europe can do with small refrigerators, because they make purchases daily. In some Asian countries, the refrigerator serves as an indicator of the position in society, it is usually installed in the living room; Color and design are of great importance. In India, for example, the most popular colors of refrigerators are bright blue and red. In other Asian countries, where the houses are small, refrigerators with a height of only 1-1.2 m are popular, because they can serve as a stand. In Hong Kong, preference is given to compact household appliances of the European style, in Taiwan bulky American ones are more popular.
The potential for the development of the market of different countries is different, for example, in India, China, Brazil and Malaysia, it is much higher than in countries with more developed economies, such as the UK, France, Canada, Japan. India has efficient, developed national distribution channels for trucks, scooters, agricultural machinery and equipment, groceries, personal care items and other packaged products; about three million retailers work in these channels. In China, the distribution is mostly local and regional, and there is no single national distribution network for the main products. Countries of the world differ in the intensity of competition, factors of influence on the development of industry and other features.
Thus, the need to adapt goods and services to local cultural, demographic and market conditions is one of the factors that complicate competition in the global market. The company must find the optimal balance between adapting to the market situation of each country and ensuring competitive prices and production costs.
A country that develops foreign markets, among others, faces a very important question: whether to adapt its offers to the tastes and preferences of local buyers or to offer standard products in all markets. Adaptation of the product to the preferences of local consumers undoubtedly contributes to its popularity, however, it must be borne in mind that personalization always leads to an increase in production and distribution costs due to an increase in the number of models and modifications, a decrease in batches of manufactured goods, difficulties with managing distribution channels. Product standardization makes it possible to take full advantage of economies of scale and learning, which increases the competitiveness of the company in terms of costs. Therefore, the search for the optimal combination of adaptation and standardization is of great importance for all companies operating in foreign markets.
In addition, the company should study the benefits that can be gained from transferring part of the functions to other countries where production and circulation costs are lower, and take into account fluctuations in the exchange rate of foreign currencies, economic and political requirements of local governments.
It should also be noted that the one hundred strategic decision to locate production facilities in a region with low production costs, providing the company with a competitive advantage, should be made immediately, otherwise competitors will capture the profitable region, and the company will lose its competitive advantage.
Models of international competition in different sectors of the economy vary greatly [46 pp.53-54]. At one extreme, as noted above, is mulip national competition, or competition in separate, isolated national markets. Buyers in different markets have different expectations, preferences and characteristics; competition in the domestic market of one country does not depend on competition in the domestic markets of other countries, the composition of competing companies in each country is different. For example, in France, Brazil and Japan, banking models are completely different, market conditions and customer expectations are markedly different, competing banks in France are not at all the same as in Brazil and Japan, and competition in banking in France does not affect competition in Brazil and Japan. With multinational competition, the company does not have an international or global market, but only a set of isolated domestic markets of individual countries. The advantages of a country-specific strategy and any competitive advantage achieved in that country do not extend beyond that country’s borders and do not extend to other countries in which the company operates. Multinational competition is characteristic of industries such as the beer industry, life insurance, garment production, metal smelting, the production of certain types of food (coffee, cereals, canned food, frozen products) and many types of retail trade.
At the other extreme is global competition, in which prices and competitive conditions in different domestic markets are closely interrelated, so the term international, or global market is filled with real meaning. In a global industry, a company’s competitiveness in each country depends on competitiveness in other countries. Competition is particularly intense in countries where sales volumes are high and where the company’s presence is strategically necessary to strengthen its position in the industry. With global competition, the company strengthens its position by conducting operations all over the world; the competitive advantage created in the domestic market is complemented by the advantages created in other countries (placement of enterprises in low-wage countries, transfer of experience and skills from one country to another, servicing multinational customers, brand reputation). The company’s global advantages directly depend on its competitive advantages in the national market. Global competition is observed in the production of cars, televisions, tires and tires, telecommunications equipment, copiers, watches, in commercial air transportation.
Different segments of the same industry may contain segments with different levels of competition – global, multinational, local [46 p.61]. In the hotel and hotel business, for example, in the segment of inexpensive and medium-sized hotels, there is multinational competition, as competing companies serve their customers in the same countries. In the business and luxury hotel segments, competition is global. Companies such as Nikki, Marriott, Sheraton and Hilton have hotels in many countries around the world, use a single system for booking places in hotels of any country, the same standards of quality and service. They focus on businessmen and tourists making frequent international trips.
In the fuel and lubricants industry, the marine engine fuel segment is characterized by global competition, as ships require the same type of fuel. Companies in this segment are fighting for global brand recognition, so leading manufacturers of fuels and lubricants (Exxon Mobil, BPAmoco and Shell) operate in many countries around the world. There is multinational competition in the automotive motor oil segment (Quaker State and Pennzoil in the US and Castrol in the UK). Countries differ in weather conditions, driver behavior, retail organization; production provides limited cost reduction due to economies of scale; transport costs are high.
Thus, with multinational competition, rival companies are fighting for leadership in the markets of different countries. In global industries, competing firms are fighting for leadership at the global level [15 pp.214-217].