BASIC STRATEGY CONTENT AND THE MULTINATIONAL COMPANY u Strategy content includes the strategic options available to companies u Multinational companies use many of the same strategies as domestic companies

COMPETITIVE ADVANTAGE AND GENERIC STRATEGIES u Competitive advantage – When a company can out match its rivals in attracting and maintaining its targeted customers

u Generic strategies – Basic ways to keep and achieve competitive advantage

DIFFERENTIATION u Find ways to provide superior value to customers

LOW COST u Produce or deliver products or services equal to those of their competitors u Produce or deliver products or services more efficiently than the competition

HOW DO LOW COST AND DIFFERENTIATION FIRMS MAKE MONEY? u Differentiation – People will often pay a higher price for extra value u Low cost – Additional profits from cost savings

EXHIBIT 4.1 COSTS, PRICES, & PROFITS FOR DIFFERENTIATION AND LOW COST STRATEGIES

COMPETITIVE SCOPE u How broadly a firm targets its products or services

EXHIBIT 4.2 PORTER’S GENERIC STRATEGIES

THE VALUE CHAIN u 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

COMPONENTS OF THE VALUE CHAIN u Primary activities u Support activities u Upstream and downstream

COMPETITIVE STRATEGIES IN INTERNATIONAL MARKETS u Offensive u Defensive

COUNTERPARRY u A popular strategy for multinationals u Fends off a competitor's attack in one country by attacking them in another country u E.G. Kodak versus Fuji

SUSTAINING COMPETITIVE ADVANTAGE u Sustainable means that strategies are not easily neutralized, copied, or attacked by competitors

LOW COST LABOR u Most imitated sources of lower costs in the international market u Quickly copied by competitors

CORPORATE STRATEGY u Contrasts with business level strategy u How companies choose their mixtures of different businesses u Diversification – Related – Unrelated

MULTINATIONAL DIVERSIFICATION u A quick way to gain a market presence u Coordinate and use resources from any location u Establishes global brand names u Cross subsidization

Exhibit 4-4 Shows a Selection of Diversified Multinationals With Their Major Lines of Businesses

STRATEGY FORMULATION TECHNIQUES: TRADITIONAL APPROACHES

STRATEGY FORMULATION u The process by which managers select the strategy to be used by their company

ANALYSIS TECHNIQUES u 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 u Market size u Ease of entry and exit u Whether there are economies of scale in production u Driving forces of change u Nature of competition in industry

EXAMPLE KEY SUCCESS FACTORS u Innovative technology u Broad product line u Distribution channel effectiveness u Price advantages u Promotion effectiveness

u Superior physical facilities u Experience of firm in business u Cost position for raw materials

FORMULATING THE BEST STRATEGIES u Know the industry and KSFs u Understand and anticipate your competitors' strategies

THE COMPETITIVE ANALYSIS u 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 u Use a country by country competitive analysis u Plan distinct competitive strategies by competitors and countries u See exhibit 4-5 for examples

COMPANY SITUATION ANALYSIS u The most common tool: the SWOT – Strengths – Weaknesses – Opportunities – Threats

KEY POINT FOR MULTINATIONAL MANAGEMENT u The SWOT analysis for the MNC is more complex u Each country provides its own operating environment u A country-by-country SWOT is probably most prudent

CORPORATE STRATEGY SELECTION u 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 u The basic tool: matrix analyses u The most popular is the growth- share matrix of the Boston consulting group (BCG)

THE BCG GROWTH-SHARE MATRIX u Based on the industry growth rate the relative market share – Stars – Dogs – Cash cows – Problem children

MATRIX ANALYSES FOR THE DIVERSIFIED MULTINATIONAL COMPANY u The portfolio assessment becomes more complex u 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

CONCLUSIONS u Few students will work in industries not touched by global competition u All managers need to understand the application of strategic management to the international arena