Survival in the international environment requires the skillful use of defensive and offensive strategies. Identify some offensive strategies that a U.S. multinational retail giant may use in attacking multinational rivals. Why do you think it is effective?
APA references.. In-text reference also
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