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What determines success in international markets?
Published on February 28, 2023 9 min
A selection of talks on Strategy
Hi, my name is Dave Ketchen. I serve as the Harbert Eminent Scholar and Professor of Management at Auburn University in Auburn, Alabama in the United States. We're going to talk today about what determines success in international markets.
First, we want to think about why exactly do companies want to enter international markets? Why do they want to expand beyond their domestic borders into new countries? Well, there's several key reasons. One, obviously is access to new customers. If you think about an American or British or German company that wants to enter China, if you are successfully able to pull that off, all of a sudden you have access to billions of customers. A second reason why we might expand to new countries is lowering costs, this is particularly the case on the manufacturing side. There are countries where the cost of labor is much lower than in other countries, so if we can set up, say, a factory in a low labor cost country, that improves our cost structure and in some cases, very dramatically. We also have this concept of diversification of business risk. There's this old saying, don't put all your eggs in one basket, and that applies here. If we are operating in different countries then let's say there's a problem in one particular country, a competitor comes along and really kicks us around, or a particular government becomes hostile to us. Well, if we're operating in say, 10 or 12 or 20 different countries, then a problem in one country is not going to hurt our company all that much. We can think about a company like Coca-Cola that has a presence in over 200 markets worldwide. If they have a problem in one or two markets, it's not going to be a killer for the company.