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    International Business

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    International Business

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    6 views10 pages

    Chapter 8

    Uploaded by

    Sehar Dogar
    International Business

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 10
    Competitive Strategy for international business University College of Islamabad Prepared by Dr. Catalina Allionde for BCG xed) 8.1.1 Aims of the chapter + introducethe work of Michael Pores on compettvenes and strate, Including his Fv Forces and gener svateges famemori “ident the strengths and weakness of Porters posvonng sporoach tosratesy “exon the resource based approach to competitiveness 2s an iterative nd complementary mode of satis and management Pracice escribe the VIO framework value, rarity, nimitabilty, organisation 3 mode of resource based anaiyss vides platorm for debating the relative sengths of pstonng resource-based and stitutions perspectives on achieving compentvener. 8.1.2 Learning outcomes * describe, assess and apply the five forces framework for industry Analysis * articulate the generic strategies of cos leadership, Aiferentiation and focus, + define and assess the resource-based approach to competition, ‘and how tangible and intangible resources and capabilities can be utilised to achieve competitiveness. * apply the VRIO framework to organisational examples to assess strengths and weaknesses ofthe firm. + be aware of, and be able to participate in, the major debates arising from the study of competitive strategy fr international and K. Meyer international business. (London: Learning, 2011) Chapters 4, 13 and 14. .D, Wang and ¥, Jiang An institution-based view 8.1.5 Synopsis of chapter content + Competitive strategy analysis using Porter's Five Forces framework. + The nature of generic strategies; a resource- based perspective on international competitiveness. + the value, rarity, inimitability, organisation (VRIO) Framework. ‘ * institution based view of competition; assessing positioning and resource-based app 8.2 Porter's five forces framework *+ Michael Porter developed his five forces model in order to identify an industry's structure, and whether or not it was an attractive industry fora business unit to ‘compete in. * Porter's framework helps a business to position itself advantageously reiative to its ‘competitors. 8.2 Porter's Eee ES University Colege of slaabad 7S Prepared by Dr Gallina endo tor BCG Hg 8.2.1 Rivalry between competitors : * Competitive rivals are organisations with similar products and services aimed at the ame customer group and are direct competitors in the same industry/market {they are di seg. 8.2 Porter's five forces framework | jistinct from substitutes). Europe Air France and British Airway | compete directly for airline passenger are a substitute service. 8.2 Porter's five forces framework 8.2.1 Rivalry between competitors The degree of rivalry is increased when: t * The exit barriers ae high — (Se 2:8 due tohigh costs of redundancy or the decommissioning ‘Gapital equipment that is not easily resalable, * Theresa low eve ofcitferentiaion.—> 5)" Suncke CO" E.8 Providing goods/services with diferentattributes such as ° (olor and shape of tennis racquet, battery length ina portable | Gemputer or by pricing the goods/services differently, or by branding. ¢ of slamahad fe 8.2 Porter’s five forces framework 8.2.1 Rivalry between competitors * Competitors are of roughly equal size. + Competitors are aggressive in seeking leadership. * The market is mature or declining. < * There are high fixed costs — ¢ : * less (2013) Figures. gives an ample of compettiveriaeyin the degree of rivalry is increased when: 4 industries requiring high capitel equipment sts like the steel industry). 8.2 Porter's five forces framework dobal automobile ndusty Figure $2 Three Strategic Groups inthe Global Automobile Industry ae re 8.2 Porter’s five forces framework 8.2: C E i ite bargaining power of suppliers ing costs are high and extensive to change suppliers SoruntNe oF eg. Inducer reSOtts @ powerful supplier in the PC movin Decause of the high switching costs of moving from one operating system to another. suppliers can integrate forwards 2.8. for example, low » low co: Se of teed eee” C28 alines have cut cut the 8.2 Porter's five forces framework 8.2.6 Use and criticisms of Porter's five forces framework With the five forces framework you are trying to assess the attractiveness of an industry, and how to make it ‘more attractive, from a business perspective. Itis important, therefore, to ask + Should we enter or leave this industry? + What leverage can we exert to improve our chances of success? ‘ How are competitors reacting to the five forces, and how will they react to moves we make? The five forces framework is a useful tool but must be applied carefully. niversity College of isiamabad repared by . Catalina Alionde for BUCG Fatt) 3.2 Porter’s five forces framework Criticisms include the following: + The framework appropriate industry. applied at the most evel ~ not necessarily the whole * A five forces analysis may assume too much stability. In most modern competitive environments, there is a higher dynamism * Five forces analysis tends to growing importance of complerr 8.2 Porter's five forces framework 2.26 Use and etcams of Porter's ive forces famewor Complementors the sixth force 2 An organisation is your complementr when a}eustomers value your product more they use i along wth the ather company's product/service than when they use Your product alone, and : ean 2) tis move attractive for suppliers ta provide resources to both you and the other organisation(s) rather than fe you alone. 8 Microsoft Windows and MeAfee computer secuy systems: ‘Samsung and Android " ‘dae 2} complement. Boeing ints relationships to aitnes isa type 8) ‘ample. Here, Boing invests huge sums in innovation because ithasso many airines a potenti cafomess 8.2 Porter’s five forces framework 8.2.6 Use and criticisms of Porter's five forces framework The view of competition inherent in the five forces framework ‘assumes that in conditions of high market uncertainty the Company is best advised to integrate backwards to compete with suppliers. ‘0r forwards to compete with buyers, in order to lessen the threats from these two sources. 3 In modern environment there may be advantages in the ‘alternative approach of outsourcing (see Chapter 12). 8.2 Porter’s five forces framework 8.2.6 Use and criticisms of Porter's five forces framework. « The industry-positioning perspective that the five forces framework represents has been challenged by: the resource-based perspective ‘on competition. Peng (2001). challenged by the idea of institution-specific determinants of company performance (see Peng et al, 2008). ee 8.3 Generic strategies Porter’s work suggests three generic strategies to choose from: + 1 Cost leadership +2 + 3 Focus (or niche) strategy rentiation University College of Isiamabad ay ay Dr. Catalina Allende for BuCG neh 8.3 Generic strategies wines 2005 Fee 53 =] “Three Generic Competitive Swatagies cv runcronan anes ee ne 8.3 Generic strategies 8.3.1 Cost leadership + This competitive strategy centers on competing through low costs and prices. + lentes pursuit ofcostreductions duh + overhead control — PEAY ese 8S SY so gets * avoidance of marginal customers — * cost minimisations in non-key areas like R&D * marketing, service and perhaps advertising * The idea is to offer better value to customer through the same value at a lower price 8.3 Generic strategies 8.3.1 Costleadership weaknesses. + Arelentless drive to cut costs might compromise value thatcustomers desire. + Only competing on price leaves. + little room for competitive manoeuvre if a competitor finds ways of reducing thelr own costs. + eg. innovating in its supply chain or finding 2 substitute product. * eg, Tatas’ ‘one lakh’ car; Mc Donald fast food chain. 8.3 ocpemgatcies 832 offerentiation + Adifereniaon strategy delivers products/servics that tustomers perceive tbe valuable and diferent, even unique + Company targets customers in smal, wel-defined segments who are wing to pay premium prices. + alow volume high margin approach, + dependent on products/services with unique atbutes (actual or perceived). +, foresample in terms of quality sophistication, presige or unary. (Maker Copies), eg + Key functional ares are R&D (88. source of innovation). a emerges erie ; 8.3 Generic strategies 8.3.2 Differentiation Weaknesses + Differentiation erodes and becomes commoditised as competitors find ways of replicating the original product. + eg. in terms of quality, sophistication, prestige or luxury: Swiss designer watches. + e.g Apple products like IPad and! phone 8.3 Generic strategies 8.3.3 Focus (or niche) strategy + Here. company concentrates on serving the needs of particular segment or niche of an industry such 35 4 Peographical market, Type of customer or product ine, + Aspectalsed differentiator has a smaller, narrower and ‘sharper focus than a large differentiator. + Aspecialised cost leader deals with a narrower Segment compared with the traditional cost leader. + Focusing is particularly successful when 2 company arenes ikabwiedge of a particular market AEE ond wanks o a rove fapanese shipbullde's te ses and Brees ersten ona thee focus Gilosgrout te eat 3 Ahearn ns ch 3 AEE: 8 cet trend te oiopton of + focused on prov fraintenance an aos I 3 rsity College of 'slamahad 5) Prepared by 5 Dr. Catalina Alli 2 J 1a Alliende for BMCG iC, 4 sy 8.3 Generic strategies alee recat enol ail Sih sneer ac re Belles wl pv veo ei sc wii Ee ee raat a reat kal Seen si tower cots ca of process methodoosie® sme from owe" 8.3 Generic strategies 8.3.3 Focus (or niche) strategy weaknesses + You are only expert in one area: + the limited demand available within a niche. + Once its target market is being well served expansion to other markets might be the only way to expand. + The niche could disappear or be take! larger competitors competitiveness The resource-based view focuses 07 resources and capabilities needed to and deals with the internal strengths weaknesses of the company. + Do the resources add value? + Dothe resources enal neutralise an external threat? Re 5.4. resource-based perspective of the compete and a. company to exploit an external opportunity and/or 8.4 A resource-based perspective of competitiveness = Resources are the tangible and intangible assets a company uses to choose and implement its strategies. « Capabilities are a company’s capacity to technically deploy those resources to deliver strategy. sound capa crs 23 Figure Sree Tir A revource-based perspective of compettiveness Tngibe Resourcer and [ores cxpatities Ayton inal as | Siig oe external apt aati aTaans offrernd ewoment 1 ess tora material and bution chant - poseson of prmnswradenwrs #0899 ahs {i anngcommnameconsloeter | tegrated managementnfarationsy27 acet(2013) gue. umes mca and apnaes [ntangble Resources and Capabilities [Ramen trast Knowledge, managerial talent and organizational culture + supportive enironment for new ideas - + research and development capabilities + capacties for organizational innovation and |crange - perceptions of product quali, durabinty and relabity among customers + reputation as good employer +Reputation as socially responsible, corporate linen Innovation Reputational \ University Cotege of stabad Prepared by aN Dr. atalna Alende 2 ; SS, Wa is 3, San prow bred pexpecra teompettneness | 8.4 A resource-based perspective of _ competitiveness Tongibleasses «Tangible assets ae assets that are observable and more

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