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
Generic
strategies
– Basic ways to keep and achieve
competitive advantage
DIFFERENTIATION
Find
ways to provide superior
value to customers
LOW COST
Produce
or deliver products or
services equal to those of their
competitors
Produce or deliver products or
services more efficiently than the
competition
HOW DO LOW COST AND
DIFFERENTIATION FIRMS
MAKE MONEY?
Differentiation
– People
will often pay a higher
price for extra value
Low cost
– Additional profits from cost
savings
EXHIBIT 4.1
COSTS, PRICES, & PROFITS
FOR DIFFERENTIATION AND
LOW COST STRATEGIES
90
80
70
60
50
$
40
30
20
10
0
C ost
P ric e
P ro fit
A v e ra ge
C o m p e tito r
Low C ost
S tr a te g y
D iffe r e n tia tio n
S tr a te g y
COMPETITIVE SCOPE
How
broadly a firm targets its
products or services
EXHIBIT 4.2
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)
EXHIBIT 4-3 THE VALUE CHAIN
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
COMPETITIVE STRATEGIES IN
INTERNATIONAL MARKETS
Offensive
Defensive
COUNTERPARRY
A popular
strategy for
multinationals
Fends off a competitor's attack
in one country by attacking them
in another country
E.G. Kodak versus Fuji
SUSTAINING COMPETITIVE
ADVANTAGE
Sustainable
means that
strategies are not easily
neutralized, copied, or attacked
by competitors
LOW COST LABOR
Most
imitated sources of lower
costs in the international market
Quickly copied by competitors
CORPORATE STRATEGY
Contrasts
with business level
strategy
How companies choose their
mixtures of different businesses
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 4-4 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
TECHNIQUES: TRADITIONAL
APPROACHES
STRATEGY FORMULATION
The
process by which managers
select the strategy to be used by
their company
ANALYSIS TECHNIQUES
Help
Managers Understand
– A 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
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
THE COMPETITIVE ANALYSIS
A competitive
analysis develops
profiles of your competitors'
strategies and objectives
FOUR STEPS
For competitors and 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 4-5 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 GROWTH-SHARE
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 4.6
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
Strategy: Invest
and Expand
Problem Child
Strategy: Invest
and Expand or
Cash Cow
Divest
Strategy: Invest
and Expand or
Cash Cow
Divest
Low
Relative Market Share
Strategy: Invest
and Expand or
Divest
Dog
Strategy: Defend Strategy: Divest
and Harvest
Dog
Strategy: Defend Strategy: Divest
and Harvest
Dog
Low Strategy: Defend Strategy: Divest
and Harvest
High
Strategy: Invest
and Expand
Problem Child
Problem Child
CONCLUSIONS
Few
students will work in
industries not touched by global
competition
All managers need to understand
the application of strategic
management to the international
arena