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BASIC STRATEGY BASIC STRATEGY CONTENT AND THE CONTENT AND THE
MULTINATIONAL MULTINATIONAL COMPANYCOMPANY
• Strategy content includes the strategic options available to companies–multinational companies use many of the same strategies as domestic companies
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STRATEGY Cont.STRATEGY Cont.Strategic plan • Articulate values • Mission statement • SWOT analysis • Establish realistic goals and
objectives• Formulate strategies • Implement strategies
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CORPORATE CORPORATE STRATEGYSTRATEGY
• How companies choose their mixtures of different businesses
• Contrasts with business level strategy
• Diversification–related –unrelated
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COMPETITIVE COMPETITIVE ADVANTAGE AND ADVANTAGE AND
GENERIC GENERIC STRATEGIESSTRATEGIES
• Competitive advantage –When a company can out match its rivals in attracting and maintaining its targeted customers
• Sustained competitive advantage
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Competitive Competitive advantage and advantage and
generic strategies, generic strategies, continuedcontinued
• Generic strategies–basic ways to keep and achieve competitive advantage
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DIFFERENTIATIONDIFFERENTIATION
• Providing superior value to customers
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LOW COSTLOW COST
• Produce or deliver products or services equal to those of competitors WHILE–producing or delivering products or services more efficiently than competitors
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SOURCES OF SOURCES OF PROFIT FOR LOW PROFIT FOR LOW
COST AND COST AND DIFFERENTIATIONDIFFERENTIATION
• Differentiation –customers often pay a higher price for extra value
• Low cost –additional profits come from cost savings
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0102030405060708090
AverageCompetitor
Low CostStrategy
DifferentiationStrategy
$
Cost
Price
Profit
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COMPETITIVE COMPETITIVE SCOPESCOPE
• How broadly a firm targets its products or services
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EXHIBIT 5.2EXHIBIT 5.2 PORTER’S GENERIC PORTER’S GENERIC
STRATEGIESSTRATEGIES
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Scope ofCompetitive Target
Source of Competitive Advantage
Lower Cost Differentiation
Broad Market General CostLeader
GeneralDifferentiator
Niche Market Focused CostLeader
FocusedDifferentiator
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THE VALUE CHAINTHE 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)
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InputLogistics
Operations
Marketingand Sales
Service
SUPPORT ACTIVITIES
PRIMARY ACTIVITIES DOWNSTREAMUPSTREAM
R&D OutputLogistics
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COMPONENTS OF COMPONENTS OF THE VALUE CHAIN THE VALUE CHAIN
• Primary activities• Support activities• Upstream and downstream
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SOURCES OF COMPETITIVE ADVANTAGE
• Distinctive competencies• Resources• Capabilities
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SUSTAINABLE COMPETITIVE ADVANTAGE
• Firm capabilities that are:–valuable– rare–difficult to imitate–nonsubsitutable
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LOW COST LABORLOW COST LABOR
• Most imitated sources of lower costs in the international market
• Quickly copied by competitors
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COMPETITIVE COMPETITIVE STRATEGIES IN STRATEGIES IN
INTERNATIONAL INTERNATIONAL MARKETSMARKETS
• Offensive• Defensive
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COUNTERPARRYCOUNTERPARRY
• 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
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MULTINATIONAL MULTINATIONAL DIVERSIFICATIONDIVERSIFICATION
• A quick way to gain a market presence
• Coordinate and use resources from any location
• Establishes global brand names• Cross subsidization
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Company (Headquarters Location)
Major Business Lines
GE (U.S.A.)
Aircraft engines, aerospace, appliances communications and services, electrical distribution and control, financial services, industrial and power systems, lighting, medical systems, motors, NBC, plastics, transportation
Nestlé (Switzerland)
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
Philips (Netherlands)
Lighting, components, consumer electronics, domestic appliances and personal care, medical systems, industrial and electric acoustic systems, information systems, communication systems
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STRATEGY FORMULATION: STRATEGY FORMULATION: TRADITIONAL TRADITIONAL APPROACHESAPPROACHES
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STRATEGY STRATEGY FORMULATIONFORMULATION
• The process by which managers select the strategy to be used by their company
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ANALYSIS ANALYSIS TECHNIQUESTECHNIQUES
• Help managers understand–company's competitive position in the industry
–opportunities and threats faced by their company
–company's strengths and weaknesses
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INDUSTRY INDUSTRY EFFECTS ON EFFECTS ON
STRATEGY STRATEGY SELECTIONSELECTION
• Market size• Ease of entry and exit• Whether there are economies of
scale in production • Driving forces of change • Nature of competition in
industry
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EXAMPLE KEY EXAMPLE KEY SUCCESS SUCCESS
FACTORSFACTORS
• Innovative technology• Broad product line• Distribution channel
effectiveness• Price advantages • Promotion effectiveness
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• Superior physical facilities• Experience of firm in business• Cost position for raw materials
Example key Example key success factors, success factors,
continuedcontinued
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FORMULATING FORMULATING THE BEST THE BEST
STRATEGIESSTRATEGIES
• Know the industry and KSFs• Understand and anticipate your
competitors' strategies
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COMPETITOR COMPETITOR ANALYSISANALYSIS
• A competitor analysis develops profiles of your competitors' strategies and objectives
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FOUR STEPSFOUR STEPS For major competitors, assess: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
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KEY POINTS FOR KEY POINTS FOR MULTINATIONAL MULTINATIONAL
MANAGEMENTMANAGEMENT
• Use a country by country competitive analysis
• Plan distinct competitive strategies by competitors and countries
• See exhibit 5.6 for examples
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COMPANY COMPANY SITUATION SITUATION ANALYSISANALYSIS
• The most common tool: the SWOT –strengths–weaknesses–opportunities–threats
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KEY POINT FOR KEY POINT FOR MULTINATIONAL MULTINATIONAL
MANAGEMENTMANAGEMENT
• 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