8

Chapter 8
Managing
chapter

Global
Competitive
Dynamics

Global Strategy
Global Strategy
Mike W. Peng
Mike W. Peng

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2014 Cengage
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 Outline
• Strategy as action
• Industry-based considerations
• Resource-based considerations
• Antitrust and antidumping laws
• Attack and counterattack
• Local firms versus multinational enterprises
• Debates and extensions
• The savvy strategist

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 Strategy as Action

Source: C. M. Grimm & K. G. Smith, 1997, Strategy as Action: Industry

Rivalry and Coordination (p. 62), Cincinnati: Thomson South-Western. Figure 8.1
8–3
A Comprehensive
Model of Global
Competitive
Dynamics

Figure 8.2
8–4
 Strategy as Action
• Strategy is interaction
• Firms, like militaries, often compete aggressively
• Military principles cannot be completely applied in
business
• Business is simultaneously war and peace
• Militaries fight over geography, firms compete in markets
• Markets involve products and geography
• Multimarket competition: Firms engaging the same rivals
in multiple markets
• Multimarket competition may result in mutual forbearance

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accessible website, in whole or in part.
 Industry-Based Considerations

• Collusion and “prisoners’ dilemma”

• Industry characteristics and collusion vis-à-vis
competition
 Concentration ratio
 Industry price leader
 Homogeneous products
 High entry barriers vs. low entry barriers
 High market commonality (mutual forbearance)

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7
Industry Characteristics and Possibility
of Collusion vis-à-vis Competition

Table 8.1
8–8
 Resource-Based Considerations: VRIO
• Value
• Rarity
• Imitability
• Organization
• Resource Similarity
• Fighting low-cost rivals

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accessible website, in whole or in part.
10
 Institution-based Considerations

• Formal institutions governing domestic

competition: a focus on antitrust
 Competition policy
 Antitrust policy
 Competition/antitrust policy focuses on: collusive
price setting, predatory pricing, and extraterritoriality

• Formal institutions governing international

competition: a focus on antidumping
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accessible website, in whole or in part.
 Three Main Types of Attack

Thrust
Thrust Feint
Feint

Attacks
Attacks

Gambit
Gambit
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accessible website, in whole or in part.
 Thrust
(e.g., Microsoft fights Netscape)

Source: Adapted from R. G. McGrath, M. Chen, & I. C. MacMillan, 1998, Multimarket

maneuvering in uncertain spheres of influence: Resource diversion strategies (p. 729),
8–13
Academy of Management Review, 23: 724–740.
 Feint
(e.g., Philip Morris fights RJR in the US and CEE)

Source: Adapted from R. G. McGrath, M. Chen, & I. C. MacMillan, 1998, Multimarket

maneuvering in uncertain spheres of influence: Resource diversion strategies (p. 731),
8–14
Academy of Management Review, 23: 724–740.
 Gambit
(e.g., Gillette fights BIC in lighters and razors)

Source: Adapted from R. G. McGrath, M. Chen, & I. C. MacMillan, 1998, Multimarket

maneuvering in uncertain spheres of influence: Resource diversion strategies (p. 733), Figure 8.7
8–15
Academy of Management Review, 23: 724–740.
 Attack and Counterattack

• Three main types of attack

 Thrust
 Feint
 Gambit
• Awareness, motivation, and capabilities
 Is the attack so subtle that rivals are not aware of it?
 Is the attacked market of marginal value?
 Strong capabilities required for counterattacks

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 Cooperation and Signaling

• Signaling
 Market entry
 Truce seeking
 Communication via governments
 Strategic alliances for cost reduction

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How Local Firms in
Emerging Economies
Respond to
MNE Actions

Source: Adapted from N. Dawar & T. Frost, 1999, Competing with

giants: Survival strategies for local companies in emerging markets
8–18
(p. 122), Harvard Business Review, March-April: 119–129.
 Local Firms versus MNEs (cont’d)
• Cell 1 (Dodger)
 Market conditions:
 Industries with high pressures for globalization.
 Competitive assets based on a superior. understanding
of local markets are not enough.
 Appropriate strategy: Dodger
 Must cooperate with MNEs through JVs with MNEs,
agreeing to buyouts by MNEs, and/or becoming MNE
suppliers and service providers.
 All major Chinese automakers: MNE JV partners
 Skoda in the Czech Republic: Sell out to Volkswagen
 Many post-NAFTA Mexican manufacturers (since 1994):
MNE suppliers and service providers
8–19
 Local Firms versus MNEs (cont’d)
• Cell 2 (Contender)
 Market conditions
 Local firms find hope even in industries with high
pressures of globalization.
 Must develop combinative capabilities in integrating core
technology with locally adapted design and marketing.
 Appropriate strategy: Contender
 Rapid learning and upgrading of capabilities to approach
those of the MNEs and then to thrust overseas.
 Chinese cell phone makers (TCL and Bird) vs. Motorola and
Nokia

8–20
 Local Firms versus MNEs
• Cell 3 (Defender)
 Market conditions:
 Pressures to globalize are relatively low.
 Primary strengths lie in a deep understanding of
local markets.
 Appropriate strategy: Defender
 Cede some markets to MNEs while building
strongholds in other markets by leveraging local
assets in market segments which MNEs are weak or
unaware of – in essence, a gambit
 Bimbo vs. PepsiCo in Mexico
 Ahava vs. cosmetics giants in Israel
8–21
 Local Firms versus MNEs (cont’d)
• Cell 4 (Extender)
 Market conditions
 Pressures for globalization are relatively low.
 Possess skills and assets that are transferable
overseas.
 Appropriate strategy: Extender
 Leverage home-grown competencies abroad by
expanding into similar markets – a thrust
 Jollibee: Venture out of the Philippines
 Asian Paints: From India to the rest of the developing
world.
8–22
 Two Most Significant Debates
• Strategy versus IO economics and Antitrust Policy
 Antitrust laws were created to deal with old realities
 Anticompetitive or hypercompetitive?
 US antitrust laws create strategic confusion
 US antitrust laws, which combat “unfair” practice, may be unfair,
especially to large US firms

• Competition versus Antidumping

 Two arguments against antidumping restrictions
 Difficult to prove the case concerning “cost”
 Virtually all firms lose money in first year
 “Fair trade laws” (such as antidumping laws) in one country -
regarded as “unfair” trade laws elsewhere
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accessible website, in whole or in part.
 The Savvy Strategist
• “Strategy as action” highlights the power of creative
destruction
• To thoroughly understand the nature of your industry
• To strengthen capabilities that more effectively compete
and/or cooperate
• To understand the rules of the game governing
competition
• Apply the four fundamental questions
• “Look ahead, reason back”

Copyright © 2014 Cengage Learning. All Rights Reserved. May not

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accessible website, in whole or in part.