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CHAPTER 5 BASIC STRATEGIES FOR THE MULTINATIONAL COMPANY: CONTENT AND FORMULATION. 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 .

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CHAPTER 5 BASIC STRATEGIES FOR THE MULTINATIONAL COMPANY: CONTENT AND FORMULATION

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CHAPTER 5

BASIC STRATEGIES

FOR THE

MULTINATIONAL COMPANY:

CONTENT AND FORMULATION


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


STRATEGY Cont.

Strategic plan

  • Articulate values

  • Mission statement

  • SWOT analysis

  • Establish realistic goals and objectives

  • Formulate strategies

  • Implement strategies


CORPORATE STRATEGY

  • How companies choose their mixtures of different businesses

  • Contrasts with business level strategy

  • Diversification

    • related

    • unrelated


COMPETITIVE ADVANTAGE AND GENERIC STRATEGIES

  • Competitive advantage

    • When a company can out match its rivals in attracting and maintaining its targeted customers

  • Sustained competitive advantage


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


COMPETITIVE SCOPE

  • How broadly a firm targets its products or services


EXHIBIT 5.2 PORTER’S GENERIC STRATEGIES


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

DOWNSTREAM

Output

R&D

Operations

Logistics

Input

Marketing

Service

Logistics

and Sales

SUPPORT ACTIVITIES


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


COMPETITIVE STRATEGIES IN INTERNATIONAL MARKETS

  • Offensive

  • Defensive


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


MULTINATIONAL DIVERSIFICATION

  • A quick way to gain a market presence

  • Coordinate and use resources from any location

  • Establishes global brand names

  • Cross subsidization


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 STEPSFor 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


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