Transcript PowerPoint Presentation - Murray State University

Chapter Two
Theoretical Foundations
MKT568
Global Marketing Management
Dr. Fred Miller
Sample Essay Questions
1. Given the following production data, which country(ies)
enjoy an absolute advantage and in what commodity? Which
enjoy a comparative advantage and in what commodity?
Using the Cappuccino Trail video as an example, explain the
difficulties of basing competitive advantage on locational
factors such as climate and growing conditions.
2. Using the Cappuccino Trail video as an example; 1) explain
how a country might use Porter’s Diamond model to create a
competitive advantage in beans/brands and 2) explain how Café
Direct/Nescafe/Starbucks might use Porter’s Value Chain model
to establish a competitive advantage in the retail coffee market.
Theories of International Production
Country specific advantages - (CSA’s)
absolute and comparative, locational
International product life cycle
Porter’s diamond
factors, interaction, government, man-made
New trade theory
firm specific advantages (FSA’s)
Eclectic theory – matching CSA’s & FSA’s
Absolute and Comparative Advantage
Absolute Advantage
England
Portugal
Totals
England Portugal
Totals
Wine
40
50
90
Wine
0
100
100
Wool
50
35
85
Wool
100
0
100
Totals
90
85
175
Totals
100
100
200
Comparative Advantage
England
Portugal
Totals
England Portugal
Totals
Wine
45
40 (88%)
85
Wine
0
80
80
Wool
50
35 (70%)
85
Wool
100
0
100
Totals
95
75
170
Totals
100
80
180
Cappuccino Trail Video
What CSA’s give equatorial countries comparative
advantage in coffee production?
What are the benefits of relying on locational factors
for comparative advantage?
What are the dangers of relying on locational factors
for comparative advantage?
Cappuccino Trail Video
A
B
Totals
Switzerland
Totals
Peru
Beans
25
50
75
Beans
0
100
100
Brands
50
30
85
Brands
100
0
100
Totals
75
85
160
Totals
100
100
200
Based on the video, which country is Peru
and which is Switzerland?
In this scenario, who benefits from
specialization and trade? By how much?
Cappuccino Trail Video
Switzerland
Totals
Peru
Beans
45
40
85
Brands
50
25
75
Totals
95
65
160
In this situation, which of the following are true?
1. Switzerland has an absolute advantage in beans
2. Switzerland has a comparative advantage in brands
3. Peru has an absolute advantage in brands
2. Peru has a comparative advantage in beans
Cappuccino Trail Video
Switzerland
Totals
Peru
Switzerland
Totals
Peru
Beans
45
40
85
Beans
0
80
80
Brands
50
25
75
Brands
100
0
100
Totals
95
65
160
Totals
100
80
180
In this scenario, who benefits from
specialization and trade? By how much?
Porter’s Diamond
Competitive Advantage for Countries
Firm strategy,
structure and rivalry
Factor
conditions
Demand
conditions
Related and
supporting industries
Source: Adapted and reprinted with the permission of the Free Press, a division of Simon and Schuster, from The Competitive
Advantage of Nations, by Michael E. Porter. Copyright © 1990 by Michael E. Porter
Porter’s Diamond
Competitive Advantage for Countries
Beer
Fashion
Consumer
Apparel
Electronics
Beans or Brands?
Firm Strategy, Structure and Rivalry
Large,
diverse
brewers
Innovative
Strong
firms
designers
Multiple
cooperatives
Complex
positioning
Competitive
Competitive
styles
features
Diverse growing strategies
Factor Conditions
Demand Conditions
Hops,
barley,
yeast
Fabric
Components
suppliers
Skilled
farmers
Brewers
Fashion
Design
Engineers
designers
Regional system
Social
acceptance
Stylistic
Innovative
buyers
buyers
Knowledgeable
Knowledgeable
Fashion
Knowledgeable
conscious
Selective
Related and Supporting Industries
Advertising
industry
Specialty
Media suppliers
retailing
Transportation
infrastructure
Hospitality
infrastructure
Promotional
Retail infrastructure
Media
Agricultural supports
How would you revise this strategy to one supporting
firms strong in developing coffee brands?
FSA’s and Marketing Strategy
Production-based vs marketing specific advantage
Product price focus vs market satisfaction focus
Market orientation vs knowledge/resource-based
orientation
Who can we serve? vs Who needs our skills?
The value chain and internationaliztion
Johanssen’s model, Porter’s model
Foreign entry, local marketing & global management
Value-Added Analysis for Consumer
Electronic Products
Components
Assembly
Panasonic
Marketing, sales, Retailing
and distribution
Radio Shack
Source: Reprinted from “Designing Global Strategies: Comparative and Competitive Value-Added Chains,” by Bruce Kogut,
Sloan Management Review, Summer 1985, pp. 27-38 by permission of publisher. ©1985 by the Sloan Management Review
Association. All rights reserved
Porter’s Value Chain
Competitive Advantage for Companies
Location
Production
Retail Mgt
Engineering
Product
Design
Inventory
Mgt
Online
Customer
Service
Support
Ads
Inventory
Sales
Production
Product Suppliers
Components
Coffee producers
Panasonic
Radio
Shack
Café Direct
Nescafe
Starbucks
Internationalization Theory
Modes of entry
internalization of FSA’s - export, foreign direct investment (FDI)
externalization of FSA’s – licensing, alliances
Transaction cost theory
The Competitive Environment
Rivalry, new entrants, substitutes, buyer and supplier power
Global competitors
Strength, repertoire, rivalry, hypercompetition
Cappuccino Trail Video
What firm specific advantages does CafeDirect seek
in serving consumer coffee markets? Is it working?
What firm specific advantages does Nestle’s seek in
serving consumer coffee markets? Is it working?
How has Starbucks responded to criticism of its use of
Ethiopian place names in its branding strategies?
CaféDirect’s Competitive Advantage
Peru
Mexico
Tanzania
Uganda
Fair Trade and Local
Production as Competitive Advantages
Fair Trade products include:
Fresh fruit
Cocoa and chocolate
Coffee and tea
Honey
Wine and spirits
Sports balls
Flowers and cosmetics
Sugar and confectionary
Fair trade products Fruit juice and yogurt
have up to 15%
Herbs and spices
share of some UK Nuts and snacks
market sectors
Cotton products
Rice and quinoa
Ethiopia and Starbucks
WSJ article discussing the issues
YouTube video for Oxfam’s position
Starbuck’s response
Oxfam’s comments on
the resolution of the dispute
Ethiopia’s Branding Strategy
Chapter Two
Theoretical Foundations
MKT568
Global Marketing Management
Dr. Fred Miller