Global Strategy 1e Michael Peng Global Strategy Mike W Peng c h a p t e r 8 Copyright © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly acce.
chapte r Chapter Managing Global Competitive Dynamics Global Strategy Strategy Global Mike W Peng Mike W Peng Copyright Copyright © © 2014 2014 Cengage Cengage Learning Learning All All Rights Rights Reserved Reserved May May not not be be scanned, scanned, copied copied or or duplicated, duplicated, or or posted posted to to a publicly publicly accessible accessible website, website, in in whole whole or or in in part part Outline • Strategy as action • Industry-based considerations • Resource-based considerations • Antitrust and antidumping laws • Attack and counterattack • Local firms versus multinational enterprises • Debates and extensions ã The savvy strategist Copyright â 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Strategy as Action Source: C M Grimm & K G Smith, 1997, Strategy as Action: Industry Rivalry and Coordination (p 62), Cincinnati: Thomson South-Western Figure 8.1 8–3 A Comprehensive Model of Global Competitive Dynamics Figure 8.2 8–4 Strategy as Action • Strategy is interaction • Firms, like militaries, often compete aggressively • Military principles cannot be completely applied in business • • • • Business is simultaneously war and peace Militaries fight over geography, firms compete in markets Markets involve products and geography Multimarket competition: Firms engaging the same rivals in multiple markets • Multimarket competition may result in mutual forbearance Copyright © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Industry-Based Considerations • Collusion and “prisoners’ dilemma” • Industry characteristics and collusion vis-à-vis competition Concentration ratio Industry price leader Homogeneous products High entry barriers vs low entry barriers High market commonality (mutual forbearance) Copyright © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 7 Industry Characteristics and Possibility of Collusion vis-à-vis Competition Table 8.1 8–8 Resource-Based Considerations: VRIO • Value • Rarity • Imitability • Organization • Resource Similarity ã Fighting low-cost rivals Copyright â 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part 10 Institution-based Considerations • Formal institutions governing domestic competition: a focus on antitrust Competition policy Antitrust policy Competition/antitrust policy focuses on: collusive price setting, predatory pricing, and extraterritoriality • Formal institutions governing international competition: a focus on antidumping Copyright © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Three Main Types of Attack Thrust Thrust Feint Feint Attacks Attacks Gambit Gambit Copyright © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Thrust (e.g., Microsoft fights Netscape) Source: Adapted from R G McGrath, M Chen, & I C MacMillan, 1998, Multimarket maneuvering in uncertain spheres of influence: Resource diversion strategies (p 729), Academy of Management Review, 23: 724–740 8–13 Feint (e.g., Philip Morris fights RJR in the US and CEE) Source: Adapted from R G McGrath, M Chen, & I C MacMillan, 1998, Multimarket maneuvering in uncertain spheres of influence: Resource diversion strategies (p 731), Academy of Management Review, 23: 724–740 8–14 Gambit (e.g., Gillette fights BIC in lighters and razors) Source: Adapted from R G McGrath, M Chen, & I C MacMillan, 1998, Multimarket maneuvering in uncertain spheres of influence: Resource diversion strategies (p 733), Academy of Management Review, 23: 724–740 Figure 8.7 8–15 Attack and Counterattack • Three main types of attack Thrust Feint Gambit • Awareness, motivation, and capabilities Is the attack so subtle that rivals are not aware of it? Is the attacked market of marginal value? Strong capabilities required for counterattacks Copyright © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Cooperation and Signaling • Signaling Market entry Truce seeking Communication via governments Strategic alliances for cost reduction Copyright © 2014 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 Local Firms in Emerging Economies Respond to MNE Actions Source: Adapted from N Dawar & T Frost, 1999, Competing with giants: Survival strategies for local companies in emerging markets (p 122), Harvard Business Review, March-April: 119–129 8–18 Local Firms versus MNEs (cont’d) • Cell (Dodger) Market conditions: Industries with high pressures for globalization Competitive assets based on a superior understanding of local markets are not enough Appropriate strategy: Dodger Must cooperate with MNEs through JVs with MNEs, agreeing to buyouts by MNEs, and/or becoming MNE suppliers and service providers All major Chinese automakers: MNE JV partners Skoda in the Czech Republic: Sell out to Volkswagen Many post-NAFTA Mexican manufacturers (since 1994): MNE suppliers and service providers 8–19 Local Firms versus MNEs (cont’d) • Cell (Contender) Market conditions Local firms find hope even in industries with high pressures of globalization Must develop combinative capabilities in integrating core technology with locally adapted design and marketing Appropriate strategy: Contender Rapid learning and upgrading of capabilities to approach those of the MNEs and then to thrust overseas Chinese cell phone makers (TCL and Bird) vs Motorola and Nokia 8–20 Local Firms versus MNEs • Cell (Defender) Market conditions: Pressures to globalize are relatively low Primary strengths lie in a deep understanding of local markets Appropriate strategy: Defender Cede some markets to MNEs while building strongholds in other markets by leveraging local assets in market segments which MNEs are weak or unaware of – in essence, a gambit Bimbo vs PepsiCo in Mexico Ahava vs cosmetics giants in Israel 8–21 Local Firms versus MNEs (cont’d) • Cell (Extender) Market conditions Pressures for globalization are relatively low Possess skills and assets that are transferable overseas Appropriate strategy: Extender Leverage home-grown competencies abroad by expanding into similar markets – a thrust Jollibee: Venture out of the Philippines Asian Paints: From India to the rest of the developing world 8–22 Two Most Significant Debates • Strategy versus IO economics and Antitrust Policy Antitrust laws were created to deal with old realities Anticompetitive or hypercompetitive? US antitrust laws create strategic confusion US antitrust laws, which combat “unfair” practice, may be unfair, especially to large US firms • Competition versus Antidumping Two arguments against antidumping restrictions Difficult to prove the case concerning “cost” Virtually all firms lose money in first year “Fair trade laws” (such as antidumping laws) in one country - regarded as “unfair” trade laws elsewhere Copyright © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part The Savvy Strategist • “Strategy as action” highlights the power of creative destruction • To thoroughly understand the nature of your industry • To strengthen capabilities that more effectively compete and/or cooperate • To understand the rules of the game governing competition • Apply the four fundamental questions • “Look ahead, reason back” Copyright © 2014 Cengage Learning All Rights Reserved May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part ... Coordination (p 62), Cincinnati: Thomson South-Western Figure 8. 1 8? ??3 A Comprehensive Model of Global Competitive Dynamics Figure 8. 2 8? ??4 Strategy as Action • Strategy is interaction • Firms, like... Business Review, March-April: 119–129 8? ?? 18 Local Firms versus MNEs (cont’d) • Cell (Dodger) Market conditions: Industries with high pressures for globalization Competitive assets based on a superior... I C MacMillan, 19 98, Multimarket maneuvering in uncertain spheres of influence: Resource diversion strategies (p 733), Academy of Management Review, 23: 724–740 Figure 8. 7 8? ??15 Attack and Counterattack