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

EXHIBIT 5.1 COSTS, PRICES, & PROFITS FOR DIFFERENTIATION AND LOW COST STRATEGIES

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)

Input Logistics Operations Marketing and Sales Service SUPPORT ACTIVITIES PRIMARY ACTIVITIESDOWNSTREAMUPSTREAM R&D Output Logistics

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

Exhibit 5.5 shows a Selection of Diversified Multinationals With Their Major Lines of Businesses

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

Superior physical facilities Experience of firm in business Cost position for raw materials Example key success factors, continued

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 STEPS For 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

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 growth- share 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 5.7 THE BCG GROWTH SHARE MATRIX FOR A DIVERSIFIED MULTINATIONAL COMPANY

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