1. MNCs face a fundamental strategic dilemma when competing internationally. Explain the complexities of the global-local dilemma facing multinational organizations. Compare and contrast local-responsiveness solution and global integration solution. Do not forget to mention multidomestic strategy, transnational strategy, international strategy, and regional strategy in your answer.
Your response should be at least 200 words in length.
- As a major form of political risks, the world has witnessed the impact of terrorism on the operations of multinationals, especially within the past decade. Explain the different kinds of political risks and tools multinationals use in fighting them.
Your response should be at least 200 words in length.
- Explain basic and generic strategies multinationals use in competing locally and internationally. How can generic strategies strengthen competitive advantage in multinational business?
Your response should be at least 200 words in length.
- Some MNCs operate a single business. However, many MNCs have more than one type of business strategy. What are the basics of multinational diversification? How do they choose their mix of different businesses? Explain both related and unrelated diversification.
Your response should be at least 200 words in length.
Chapter 4 Chapter © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5 Strategic Management in the Multinational Company: Content and Formulation © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives (1 of 2) • Define generic strategies of differentiation and low cost • Understand how low-cost and differentiation strategists make money. • Recall multinational examples of the use of generic strategies. • Understand competitive advantage and the value chain and how they apply to multinational operations. • Understand how multinational firms use offensive and defensive strategies. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives (2 of 2) • Understand the basics of multinational diversification. • Understand how to apply the traditional strategy formulation techniques, industry and competitive analysis, and company situation analysis to the multinational company. • Realize that the national context affects both convergence and divergence in the strategies used by multinational companies. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Basic Strategic Content Applied to the Multinational Company (1 of 2) • Strategy: • the central, comprehensive, integrated, and externally oriented set of choices structuring how a company exploits its core competencies to achieve its objectives © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Basic Strategic Content Applied to the Multinational Company (2 of 2) • Ideally, a strategy must address important areas such as: • which businesses a company wants to be in • how the company will create presence in a market • how the company will win customers • Multinational companies use many of the same strategies practiced by domestic companies. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Competitive Advantage and Multinational Applications of Generic Strategies (1 of 2) • Generic Strategies are basic ways for companies to achieve and sustain a competitive advantage • Competitive Advantage: • when a company’s strategy creates superior value for targeted customers, and is too difficult or costly for competitors to copy • Two primary ways to gain a competitive advantage: • Differentiation • Low cost © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Competitive Advantage and Multinational Applications of Generic Strategies (2 of 2) • Differentiation Strategy: • finding ways of providing superior value to customers (i.e., exceptional quality, unique features, rapid innovation) • Example: BMW’s high-quality, high-performance sports cars • Low-cost Strategy: • Produce or deliver products or services equal to those of competitors, but at a lower cost • Example: Korean semiconductor firms’ low-cost and productive labor © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. How Do Low-Cost and Differentiation Firms Make Money? • Differentiation: • Customers often pay a higher price for the extra value of a superior product or service • Example: Swiss chocolatier Tobler-Jacobs charges more for its specially produced (not mass-produced) chocolate • Low-cost • Additional profits come from cost savings at every step of the process © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 5.1: Costs, Prices, & Profits for Differentiation & Low-Cost Strategies © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Focus Strategy • Strategies can be further subdivided on the basis of competitive scope: • Competitive scope: how broadly a firm targets its products or services • Narrow competitive scope for limited products or only certain buyers or geographic areas • Broad competitive scope when many products and a large range of buyers are targeted © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 5.2: Porter’s Generic Strategies © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Competitive Advantage and the Value Chain • A firm can gain competitive advantage by finding sources of differentiation or low costs in its activities. • The value chain is a convenient way of looking at the firm’s activities. • Value Chain: • all the activities that a firm uses to design, produce, market, deliver, and support its product © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 5.3: The Value Chain © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Components of the Value Chain (1 of 2) • Primary activities and support activities: • Primary Activities: the physical actions of creating, selling, and after-sale service of products • Upstream: early activities in the value chain, including Research & Development (R&D) and dealing with suppliers • Downstream: later value chain activities such as sales and dealing with distribution channels © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Components of the Value Chain (2 of 2) • Primary activities and support activities (cont’d): • Support Activities: • systems for human resources management, organizational design and control, and a firm’s basic technology • Utility of value chain: helps determine internal cost structure by assessing cost levels of different activities • Benchmarked against industry & competitors to know if and where cost advantages or disadvantages exist © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Outsourcing (1 of 2) • Outsourcing: • a deliberate decision to have outsiders or strategic allies perform certain activities in the value chain • Increasingly, MNCs outsource across borders to take advantage of lower costs in other countries. • Outsourcing is a popular and controversial way to correct internal cost disadvantages. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Outsourcing (2 of 2) • When should a multinational company outsource? • Outsourcing makes sense if an outsider can perform a value-chain task better or more cheaply. • However, outsourced tasks should not be ones that are crucial to the MNC’s ability to achieve competitive advantage, or the MNC creates competitors. • The value chain identifies areas in the input, throughput, and output processes where MNCs can find sources of low cost or differentiation advantages. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Distinctive Competencies • Distinctive Competencies: • Strengths anywhere in the value chain that allow companies to outperform rivals • Examples: Quality, innovation, customer service • Distinctive Competencies come from two sources: • Resources • Capabilities © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Resources and Capabilities • Resources: • inputs into the production or service processes. • Ex.: Buildings, land, equipment, employees - Resources provide potential capabilities • Capabilities: • the ability to assemble and coordinate resources effectively • For long-term success, capabilities must lead to a sustainable competitive advantage. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Sustaining Competitive Advantage • Sustainable Stragtegies: • strategies not easily neutralized by competitors • Capabilities leading to competitive advantage must be: - Valuable - Rare - Difficult to imitate - Non-substitutable © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 5.4: How Distinctive Competencies Lead to Successful Strategies © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Competitive Strategies in International Markets • Competitive Strategies are strategic moves multinationals use to defeat competitors. - Offensive Competitive Strategies directly attack rivals to capture market share. - Defensive Competitive Strategies attempt to beat back or discourage a rival’s offensive strategies. - Counter-parries fend off a competitor’s attack in one country while attacking it in another country. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Offensive Strategies Offensive strategies include: • Direct Attacks: price cutting, adding new features, or going after poorly served markets • End-run Offensives: avoid direct competition by seeking unoccupied, ignored, or underserved markets • Preemptive Competitive Strategies: being first to obtain particular advantageous position • Acquisitions: buying out a competitor © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Defensive Strategies • Defensive Strategies attempt to: • reduce the risk of being attacked • Convince an attacking firm to seek other targets • Blunt the impacts of any attack • MNCs may defend themselves at various points in the value chain, such as: • Exclusive contracts with best suppliers • New