How Can Domestic Firm Gain Competitive Advantage on New International Market?

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HOW CAN DOMESTIC FIRM GAIN COMPETITIVE ADVANTAGE ON NEW INTERNATIONAL MARKET?

MD3442
INTERNATIONAL STRATEGIC MANAGEMENT

MICHAL GIERDA
G20443172

Marketing can be explained as a process of gaining the competitive advantage and sustaining it. Many firms across the world which get to that point on their domestic markets decides to start their businesses on the international markets. This process is well known as internationalization and with proper strategy and market entry mode can lead to getting sustained competitive advantage on a new geographical market. The task of achieving it in a global competitive environment can be very challenging and hard especially if local competitors are supported by their governments. The reason for that paper is to explain: What is competitive advantage?

What are the drivers of internationalization?
Why some companies succeed and other fail on international markets? What are the company’s main unique advantages?
What are the global strategies and entry modes for company?
COMPETITIVE ADVANTAGE
What exactly is competitive advantage? Competitive advantage theory is known thanks to comparative advantage theory which was made by David Ricardo, an English political economist. David Ricardo asked what might happen when one country has an absolute advantage in the production of all goods. Ricardo demonstrated that even though a country may be absolutely more efficient than another in the production of all tradable goods, nevertheless trade will be mutually advantageous. Ricardo’s theory of comparative advantage suggests that it makes sense for a country to specialize in the production of those goods they produce most efficiently and buy goods that they produce less efficiently from other countries. The theory of comparative advantage assumes: 1. Only two countries and two goods.

2. Zero transportation costs.
3. Similar prices and values.
4. Resources are mobile between goods within countries, but not across countries. 5. Constant returns to scale.
6. Fixed stocks of resources.
7. No effects on income distribution within countries.
There is a difference between comparative advantage and competitive advantage. These two concepts are often confused. Comparative advantage deals with countries and competitive advantage deals with companies.

“Countries do not compete with each other in the same way that Toyota competes with Renault. Trade between countries can be win-win, whereas companies such as Toyota and Renault are almost pure rivals- the success of one tends to be at the other’s expense. A country is therefore, not the same as a large company.” (Bradley, 1999, p.187).

Comparative advantage focuses on efficiency of national production, while competitive advantage focuses on company’s effectiveness. “While comparative advantage concentrates on lover costs and prices, competitive advantage stresses superior management policies aimed at providing consumers with products and services required.” (Samli and Jacobs, 1995, p.24).

In today’s business environment competitive advantage is significant advantage that an organisation has over its competitors. Such advantage allows the organisation to add more value than its competitors in the same market. Any business with a competitive advantage is able to attract more customers than its competitors by having some special factor that no one else possesses. DRIVERS FOR INTERNATIONALISATION

There are many different drivers of internationalization and we can classify them under four specific groups. Market drivers
There are three different elements in that group. First one is the existence of similar needs and tastes among consumers. It is common that in many developed societies consumers have similar needs and easy access to credits offered by companies such as Visa. Second element is the existence of global customers. For example car companies which produce components for their customers such as Ford or Toyota,...
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