Transcript Document 7593521

BASIC STRATEGY CONTENT
AND THE MULTINATIONAL
COMPANY
• Strategy content includes the
strategic options available to
companies
– multinational companies use
many of the same strategies as
domestic companies
COMPETITIVE
ADVANTAGE AND
GENERIC
STRATEGIES
• Competitive advantage
– When a company can out match
its rivals in attracting and
maintaining its targeted
customers
Competitive advantage
and generic strategies,
continued
• Generic strategies
– basic ways to keep and achieve
competitive advantage
DIFFERENTIATION
• Providing superior value to
customers
LOW COST
• Produce or deliver products or
services equal to those of
competitors WHILE
– producing or delivering products or
services more efficiently than
competitors
SOURCES OF
PROFIT FOR LOW
COST AND
DIFFERENTIATION
• Differentiation
– customers often pay a higher
price for extra value
• Low cost
– additional profits come from
cost savings
EXHIBIT 5.1
COSTS, PRICES, & PROFITS
FOR DIFFERENTIATION AND
LOW COST STRATEGIES
90
80
70
60
50
$
40
30
20
10
0
Cost
Price
Profit
Average
Competitor
Low Cost
Strategy
Differentiation
Strategy
COMPETITIVE SCOPE
• How broadly a firm targets its
products or services
EXHIBIT 5.2
PORTER’S GENERIC
STRATEGIES
Scope of
Competitive Target
Source of Competitive Advantage
Lower Cost
Broad Market
Niche Market
General Cost
Leader
Focused Cost
Leader
Differentiation
General
Differentiator
Focused
Differentiator
THE VALUE CHAIN
• Michael porter uses the term value
chain to represent all the activities
that a firm uses ".. To design,
produce, market, deliver, and support
its product" (Porter 1985: 36)
UPSTREAM
PRIMARY ACTIVITIES
R&D
Oput
Logistics
Operations
Input
Logistics
DOWNSTREAM
Marketing
and Sales
SUPPORT ACTIVITIES
Service
COMPONENTS OF
THE VALUE CHAIN
• Primary activities
• Support activities
• Upstream and downstream
SOURCES OF
COMPETITIVE
ADVANTAGE
• Distinctive competencies
• Resources
• Capabilities
SUSTAINABLE
COMPETITIVE
ADVANTAGE
• Firm capabilities that are:
– valuable
– rare
– difficult to imitate
– nonsubsitutable
LOW COST LABOR
• Most imitated sources of lower costs
in the international market
• Quickly copied by competitors
• Offensive
• Defensive
COMPETITIVE
STRATEGIES IN
INTERNATIONAL
MARKETS
COUNTERPARRY
• Fends off a competitor's attack in
one country by attacking them in
another country
– a popular strategy for
multinationals
– e.g., Kodak versus Fuji
CORPORATE
STRATEGY
• How companies choose their
mixtures of different businesses
• Contrasts with business level
strategy
• Diversification
– related
– unrelated
MULTINATIONAL
DIVERSIFICATION
• A quick way to gain a market
presence
• Coordinate and use resources from
any location
• Establishes global brand names
• Cross subsidization
Exhibit 5.5 shows a Selection
of Diversified Multinationals
With Their Major Lines of
Businesses
Company
(Headquarters
Location)
GE
(U.S.A.)
Nestlé
(Switzerland)
Philips
(Netherlands)
Major Business Lines
Aircraft engines, aerospace, appliances
communications and services, electrical
distribution and control, financial services,
industrial and power systems, lighting, medical
systems, motors, NBC, plastics, transportation
Drinks, dairy products, chocolate and
confectionery, culinary products, frozen food and
ice cream, food service products, hotels and
restaurants, instant food and dietetic products, pet
foods, pharmaceutical products and cosmetics,
refrigerated products
Lighting, components, consumer electronics,
domestic appliances and personal care, medical
systems, industrial and electric acoustic systems,
information systems, communication systems
STRATEGY FORMULATION:
TRADITIONAL APPROACHES
STRATEGY
FORMULATION
• The process by which managers
select the strategy to be used by
their company
ANALYSIS
TECHNIQUES
• Help managers understand
– company's competitive position
in the industry
– opportunities and threats faced
by their company
– company's strengths and
weaknesses
INDUSTRY EFFECTS
ON STRATEGY
SELECTION
• Market size
• Ease of entry and exit
• Whether there are economies of
scale in production
• Driving forces of change
• Nature of competition in industry
EXAMPLE KEY
SUCCESS
FACTORS
• Innovative technology
• Broad product line
• Distribution channel
effectiveness
• Price advantages
• Promotion effectiveness
Example key success
factors, continued
• Superior physical facilities
• Experience of firm in business
• Cost position for raw materials
FORMULATING THE
BEST STRATEGIES
• Know the industry and KSFs
• Understand and anticipate your
competitors' strategies
COMPETITOR
ANALYSIS
• A competitor analysis develops
profiles of your competitors'
strategies and objectives
FOUR STEPS
For major competitors, assess:
(1) Strategic intent
(2) Current and anticipated generic
strategies
(3) Current and anticipated
offensive and defensive
competitive strategies
(4) Current positions
KEY POINTS FOR
MULTINATIONAL
MANAGEMENT
• Use a country by country
competitive analysis
• Plan distinct competitive strategies
by competitors and countries
• See exhibit 5.6 for examples
COMPANY
SITUATION
ANALYSIS
• The most common tool: the SWOT
– strengths
– weaknesses
– opportunities
– threats
KEY POINT FOR
MULTINATIONAL
MANAGEMENT
• The SWOT analysis for the MNC is
more complex
• Each country provides its own
operating environment
• A country-by-country SWOT is
probably most prudent
CORPORATE
STRATEGY
SELECTION
• Deciding which businesses in the
portfolio are targets for growth and
investment and which are targets for
divestment or harvesting
ASSESSING A
CORPORATE
BUSINESS
PORTFOLIO
• The basic tool: matrix analyses
• The most popular is the growthshare matrix of the Boston
Consulting Group (BCG)
THE BCG GROWTHSHARE MATRIX
• Based on the industry growth rate
the relative market share
– stars
– dogs
– cash cows
– problem children
MATRIX ANALYSES
FOR THE
DIVERSIFIED
MULTINATIONAL
COMPANY
• The portfolio assessment
becomes more complex
• Portfolio analyses must be
conducted for each business in
each country or region of
operation
EXHIBIT 5.7
THE BCG GROWTH SHARE
MATRIX FOR A
DIVERSIFIED
MULTINATIONAL COMPANY
Country C
Star
Country B
Star
Country A
Industry Growth Rate
Star
High
Strategy: Invest
and Expand
Cash Cow
Low Strategy: Defend
and Harvest
High
Strategy: Invest
and Expand
Problem Child
Strategy: Invest
and Expand or
Cash Cow
Divest
Strategy: Defend
and Harvest
Dog
Strategy: Divest
Low
Relative Market Share
Strategy: Invest
and Expand
Problem Child
Strategy: Invest
and Expand or
Cash Cow
Divest
Strategy: Defend
and Harvest
Dog
Strategy: Divest
Problem Child
Strategy: Invest
and Expand or
Divest
Dog
Strategy: Divest
CONCLUSIONS
• Few managers will work in
industries not touched by global
competition
• All managers need to understand
the application of strategic
management to the international
arena