REVIEW ORGANIZATION STRATEGY Chiến Lược Tổ Chức

Contents: Review Organization Strategy CHAPTER 1: What Is Strategy and Why Is It Important? 1.WHAT DO WE MEAN BY STRATEGY? Basic Strategy Approaches: .6 Competitive Advantage .7 A COMPANY’S STRATEGY AND ITS BUSINESS MODEL KEY POINTS .8 Chapter 2: Charting a Company’s Direction Its Vision, Mission, Objectives, and Strategy 10 1.WHAT DOES THE STRATEGY-MAKING, STRATEGY-EXECUTING PROCESS ENTAIL? 10 STAGE 1: DEVELOPING A STRATEGIC VISION, MISSION STATEMENT, AND SET OF CORE VALUES 11 Vision 11 Mission: 11 Values: 11 STAGE 2: SETTING OBJECTIVES .11 Objectives: 11 KEY POINTS .12 CHAPTER 3: Evaluating a Company’s External Environment 14 The Six Principal Components of THE COMPANY’S MACRO-ENVIRONMent 14 The macro-environment encompasses the broad environmental context in which a company’s industry is situated 14 PESTEL analysis can be used to assess the strategic relevance of the six principal components of the macro-environment: Political, Economic, Social, Technological, Environmental, and Legal/2Regulatory forces 14 THE FIVE FORCES FRAMEWORK 16 Rivalry/Competitive Pressures Created by the Rivalry among Competing Sellers 18 Vũ Khí Cạnh Tranh chính: The Choice of Competitive Weapons 19 New Entrants: Competitive Pressures Associated with the Threat of New Entrants .20 Substitute: Competitive Pressures from the Sellers of Substitute Products 21 Supplier: Competitive Pressures Stemming from Supplier Bargaining Power 22 Buyer: Competitive Pressures Stemming from Buyer Bargaining Power and Price Sensitivity 23 Limitations of the Five Competitive Forces 23 Analysis of external environment 23 KEY POINTS .24 CHAPTER 4: Evaluating a Company’s Resources, Capabilities, and Competitiveness 26 Identifying the Components of a Single-Business Company’s Strategy 26 RESOURCES AND CAPABILITIES: .26 Types of Company Resources 27 Resources # Capability .28 VRIO: Assessing the Competitive Power of a Company’s Resources and Capabilities 28 SWOT: WHAT ARE THE COMPANY’S STRENGTHS AND WEAKNESSES IN RELATION TO THE MARKET OPPORTUNITIES AND EXTERNAL THREATS? 29 COMPANY’S VALUE CHAIN: HOW DO A COMPANY’S VALUE CHAIN ACTIVITIES IMPACT ITS COST STRUCTURE AND CUSTOMER VALUE PROPOSITION? .29 KEY POINTS .32 CHAPTER 5: The Five Generic Competitive Strategies 34 1.TYPES OF GENERIC COMPETITIVE STRATEGIES 34 LOW-COST PROVIDER STRATEGIES 35 Cost-Efficient Management of Value Chain Activities .35 Sửa chữa, cải tạo: Revamping of the Value Chain System to Lower Costs 37 BROAD DIFFERENTIATION STRATEGIES 38 Managing the Value Chain to Create the Differentiating Attributes 38 Revamping the Value Chain System to Increase Differentiation .40 Low-cost # Differentiation 41 CHAPTER 6: Strengthening a Company’s Competitive Position 43 HORIZONTAL MERGER AND ACQUISITION STRATEGIES: hợp + mua lại 43 The Disadvantages of a Vertical Integration Strategy 45 KEY POINTS .46 CHAPTER 7: Strategies for Competing in International Markets 48 1.WHY COMPANIES DECIDE TO ENTER FOREIGN MARKETS .48 The Choice of Entry Modes: A Decision Model 49 KEY POINTS 52 CHAPTER 8: Corporate Strategy 54 KEY POINTS 54 CHAPTER 1: What Is Strategy and Why Is It Important? 1.WHAT DO WE MEAN BY STRATEGY? - Definition: A company’s strategy is the set of actions that its managers take to outperform ( làm tốt hơn) the company’s competitors and achieve superior profitability Strategy Is about Competing Differently Strategy is about competing differently from rivals—doing what competitors don’t or, even better, doing what they can’t do! - appealing to buyers in ways that set a company apart from its rivals and staking out a market position that is not crowded with strong competitors Strategy and the Quest for Competitive Advantage A company achieves a competitive advantage when it provides buyers with superior value compared to rival sellers or offers the same value at a lower cost to the firm The advantage is sustainable (or durable) if it persists despite the best efforts of competitors to match or surpass this advantage Why a Company’s Strategy Evolves over Time: chiến lược cơng ty tiến hóa theo time A company’s strategy tends to evolve because of changing circumstances and ongoing efforts by management to improve the strategy Changing circumstances and ongoing (liên tục) management efforts to improve the strategy cause a company’s strategy to evolve overtime— a condition that makes the task of crafting (xây dựng) strategy a work in progress, not a one-time event A company’s strategy is shaped partly by management analysis and choice and partly by the necessity of adapting and learning by doing A Company’s Strategy Is Partly Proactive and Partly Reactive: chiến lược công ty phần sáng tạo, hoạt động + phần phản ứng A Company’s Strategy Is a Blend of Proactive Initiatives (sáng kiến chủ động) and Reactive Adjustments (1)proactive, planned initiatives to improve the company’s financial performance and secure a competitive edge (2)reactive responses to unanticipated developments and fresh market conditions A company’s deliberate strategy (chiến lược có chủ ý) consists of proactive strategy elements that are planned; its emergent strategy ( chiến lược lên ) consists of reactive strategy elements that emerge as changing conditions warrant THE IMPORTANCE OF CRAFTING AND EXECUTING STRATEGY Crafting and executing strategy are core management functions How well a company performs and the degree of market success it enjoys are directly attributable to the caliber of its strategy and the proficiency with which the strategy is executed First, a clear and reasoned strategy is management’s prescription for doing business, its road map to competitive advantage, its game plan for pleasing customers, and its formula for improving performance High-performing enterprises are nearly always the product of astute, creative, and proactive strategy making Companies don’t get to the top of the industry rankings or stay there with flawed strategies, copycat strategies, or timid attempts to try to better or lucky breaks or the good fortune of having stumbled into the right market at the right time with the right product Second, even the best-conceived strategies will result in performance shortfalls if they are not executed proficiently The processes of crafting and executing strategies must go hand in hand if a company is to be successful in the long term Good Strategy + Good Strategy Execution = Good Management Basic Strategy Approaches: A low-cost provider strategy—achieving a cost-based advantage over rivals Low-cost provider strategies can produce a durable competitive edge when rivals find it hard to match the low-cost leader’s approach to driving costs out of the business EX: Walmart and Southwest Airlines have earned strong market positions because of the low-cost advantages they have achieved over their rivals A broad differentiation strategy—seeking to differentiate the company’s product or service from that of rivals in ways that will appeal to a broad spectrum of buyers One way to sustain this type of competitive advantage is to be sufficiently innovative to thwart the efforts of clever rivals to copy or closely imitate the product offering EX: Apple (innovative products), Johnson & Johnson in baby products (product reliability), LVMH (luxury and prestige), and BMW (engineering design and performance) A focused low-cost strategy—concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by having lower costs and thus being able to serve niche members at a lower price A focused differentiation strategy—concentrating on a narrow buyer segment (or market niche) and outcompeting rivals by offering buyers customized attributes that meet their specialized needs and tastes better than rivals’ products EX: Lululemon, for example, specializes in high-quality yoga clothing and the like, attracting a devoted set of buyers in the process Jiffy Lube International in quick oil changes, McAfee in virus protection software, and The Weather Channel in cable TV provide some other examples of this strategy A best-cost provider strategy—giving customers more value for the money by satisfying their expectations on key quality features, performance, and/or service attributes while beating their price expectations This approach is a hybrid strategy that blends elements of low-cost provider and differentiation strategies; the aim is to have lower costs than rivals while simultaneously offering better differentiating attributes Its dual focus on low costs as well as differentiation shows how a best-cost provider strategy can offer customers great value for the money EX: Target is an example of a company that is known for its hip product design (a reputation it built by featuring limited edition lines by designers (a reputation it built by featuring limited edition lines by designers such as Jason Wu), as well as a more appealing shopping ambience for discount store shoppers Competitive Advantage   Definition: Requires meeting customer needs either more effectively ( with products and services that customers value more highly) or more efficiently ( by providing products or services at a lower cost to customers) Characteristics: o Different & better than rivals o Set of many different advantages o Sustainable: require giving buyer lasting reasons to prefer a firm’s products or services over those of its competitor A COMPANY’S STRATEGY AND ITS BUSINESS MODEL A company’s business model sets forth the logic for how its strategy will create value for customers and at the same time generate revenues sufficient to cover costs and realize a profit A business model is management’s blueprint for delivering a valuable product or service to customers in a manner that will generate revenues sufficient to cover costs and yield an attractive profit The two elements of a company’s business model are (1) its customer value proposition (2) its profit formula KEY POINTS A company’s strategy is its game plan to attract customers, outperform its competitors, and achieve superior profitability The central thrust of a company’s strategy is undertaking moves to build and strengthen the company’s long-term competitive position and financial performance by competing differently from rivals and gaining a sustainable competitive advantage over them A company achieves a competitive advantage when it provides buyers with superior value compared to rival sellers or offers the same value at a lower cost to the firm The advantage is sustainable if it persists despite the best efforts of competitors to match or surpass this advantage A company’s strategy typically evolves over time, emerging from a blend of (1) proactive deliberate actions on the part of company managers to improve the strategy and (2) reactive emergent responses to unanticipated developments and fresh market conditions A company’s business model sets forth the logic for how its strategy will create value for customers and at the same time generate revenues sufficient to cover costs and realize a profit Thus, it contains two crucial elements: (1) the customer value proposition—a plan for satisfying customer wants and needs at a price customers will consider good value, and (2) the profit formula—a plan for a cost structure that will enable the company to deliver the customer value proposition profitably These elements are illustrated by the value-price-cost framework A winning strategy will pass three tests: (1) fit (external, internal, and dynamic consistency), (2) competitive advantage (durable competitive advantage), and (3) performance (outstanding financial and market performance) Crafting and executing strategy are core management functions How well a company performs and the degree of market success it enjoys are directly attributable to the caliber of its strategy and the proficiency with which the strategy is executed CHAPTER 6: Strengthening a Company’s Competitive Position Strategic Moves, Timing, and Scope of Operations HORIZONTAL MERGER AND ACQUISITION STRATEGIES: hợp + mua lại Mergers and acquisitions are much-used strategic options to strengthen a company’s market position A merger is the combining of two or more companies into a single corporate entity, with the newly created company often taking on a new name An acquisition is a combination in which one company, the acquirer, purchases and absorbs the operations of another, the acquired The difference between a merger and an acquisition relates more to the details of ownership, management control, and financial arrangements than to strategy and competitive advantage The resources and competitive capabilities of the newly created enterprise end up much the same whether the combination is the result of an acquisition or a merger Horizontal mergers and acquisitions, which involve combining the operations of firms within the same product or service market, provide an effective means for firms to rapidly increase the scale and horizontal scope of their core business For example, the merger of AMR Corporation (parent of American Airlines) with US Airways has increased the airlines’ scale of operations and extended their reach geographically to create the world’s largest airline Merger and acquisition strategies typically set sights on achieving any of five objectives: Creating a more cost-efficient operation out of the combined companies When a company acquires another company in the same industry, there’s usually enough overlap in operations that less efficient plants can be closed or distribution and sales activities partly combined and downsized Likewise, it is usually feasible to squeeze out cost savings in administrative activities, again by combining and downsizing such administrative activities as finance and accounting, information technology, human resources, and so on The combined companies may also be able to reduce supply chain costs because of greater bargaining power over common suppliers and closer collaboration with supply chain partners By helping consolidate the industry and remove excess capacity, such combinations can also reduce industry rivalry and improve industry profitability Expanding a company’s geographic coverage One of the best and quickest ways to expand a company’s geographic coverage is to acquire rivals with operations in the desired locations Since a company’s size increases with its geographic scope, another benefit is increased bargaining power with the company’s suppliers or buyers Greater geographic coverage can also contribute to product differentiation by enhancing a company’s name recognition and brand awareness Banks like JPMorgan Chase, Wells Fargo, and Bank of America have used acquisition strategies to establish a market presence and gain name recognition in an evergrowing number of states and localities Food products companies like Nestlé, Kraft, Unilever, and Procter & Gamble have made acquisitions an integral part of their strategies to expand internationally Extending the company’s business into new product categories Many times a company has gaps in its product line that need to be filled in order to offer customers a more effective product bundle or the benefits of one-stop shopping For example, customers might prefer to acquire a suite of software applications from a single vendor that can offer more integrated solutions to the company’s problems Acquisition can be a quicker and more potent way to broaden a company’s product line than going through the exercise of introducing a company’s own new product to fill the gap Coca-Cola has increased the effectiveness of the product bundle it provides to retailers by acquiring beverage makers Minute Maid, Odwalla, Hi-C, and Glacéau Vitaminwater Gaining quick access to new technologies or other resources and capabilities Making acquisitions to bolster a company’s technological know-how or to expand its skills and capabilities allows a company to bypass a time-consuming and expensive internal effort to build desirable new resources and capabilities From 2000 through December 2015, Cisco Systems purchased 128 companies to give it more technological reach and product breadth, thereby enhancing its standing as the world’s largest provider of hardware, software, and services for creating and operating Internet networks Leading the convergence of industries whose boundaries are being blurred by changing technologies and new market opportunities In fast-cycle industries or industries whose boundaries are changing, companies can use acquisition strategies to hedge their bets about the direction that an industry will take, to increase their capacity to meet changing demands, and to respond flexibly to changing buyer needs and technological demands News Corporation has prepared for the convergence of media services with the purchase of satellite TV companies to complement its media holdings in TV broadcasting (the Fox network and TV stations in various countries), cable TV (Fox News, Fox Sports, and FX), filmed entertainment (Twentieth Century Fox and Fox studios), newspapers, magazines, and book publishing Horizontal mergers and acquisitions can strengthen a firm’s competitiveness in five ways: (1) by improving the efficiency of its operations, (2) by heightening its product differentiation, (3) by reducing market rivalry, (4) by increasing the company’s bargaining power over suppliers and buyers, and (5) by enhancing its flexibility and dynamic capabilities The Disadvantages of a Vertical Integration Strategy Vertical integration has some substantial drawbacks beyond the potential for channel conflict.18 The most serious drawbacks to vertical integration include the following concerns: ∙ Vertical integration raises a firm’s capital investment in the industry, thereby increasing business risk (what if industry growth and profitability unexpectedly go sour?) ∙ Vertically integrated companies are often slow to adopt technological advances or more efficient production methods when they are saddled with older technology or facilities A company that obtains parts and components from outside suppliers can always shop the market for the newest, best, and cheapest parts, whereas a vertically integrated firm with older plants and technology may choose to continue making suboptimal parts rather than face the high costs of writing off undepreciated assets ∙ Vertical integration can result in less flexibility in accommodating shifting buyer preferences It is one thing to eliminate use of a component made by a supplier and another to stop using a component being made in-house (which can mean laying off employees and writing off the associated investment in equipment and facilities) Integrating forward or backward locks a firm into relying on its own in-house activities and sources of supply Most of the world’s automakers, despite their manufacturing expertise, have concluded that purchasing a majority of their parts and components from best-in-class suppliers results in greater design flexibility, higher quality, and lower costs than producing parts or components in-house ∙ Vertical integration may not enable a company to realize economies of scale if its production levels are below the minimum efficient scale Small companies in particular are likely to suffer a cost disadvantage by producing in-house ∙ Vertical integration poses all kinds of capacity-matching problems In motor vehicle manufacturing, for example, the most efficient scale of operation for making axles is different from the most economic volume for radiators, and different yet again for both engines and transmissions Building the capacity to produce just the right number of axles, radiators, engines, and transmissions in-house—and doing so at the lowest unit costs for each—poses significant challenges and operating complications ∙ Integration forward or backward typically calls for developing new types of resources and capabilities Parts and components manufacturing, assembly operations, wholesale distribution and retailing, and direct sales via the Internet represent different kinds of businesses, operating in different types of industries, with different key success factors Many manufacturers learn the hard way that company-owned wholesale and retail networks require skills that they lack, fit poorly with what they best, and detract from their overall profit performance Similarly, a company that tries to produce many components in-house is likely to find itself very hard-pressed to keep up with technological advances and cutting-edge production practices for each component used in making its product In today’s world of close working relationships with suppliers and efficient supply chain management systems, relatively few companies can make a strong economic case for integrating backward into the business of suppliers The best materials and components suppliers stay abreast of advancing technology and best practices and are adept in making good quality items, delivering them on time, and keeping their costs and prices as low as possible KEY POINTS Once a company has settled on which of the five generic competitive strategies to employ, attention turns to how strategic choices regarding (1) competitive actions, (2) timing of those actions, and (3) scope of operations can complement its competitive approach and maximize the power of its overall strategy Strategic offensives should, as a general rule, be grounded in a company’s strategic assets and employ a company’s strengths to attack rivals in the competitive areas where they are weakest Companies have a number of offensive strategy options for improving their market positions: using a cost-based advantage to attack competitors on the basis of price or value, leapfrogging competitors with next-generation technologies, pursuing continuous product innovation, adopting and improving the best ideas of others, using hit-and-run tactics to steal sales away from unsuspecting rivals, and launching preemptive strikes A blue-ocean type of offensive strategy seeks to gain a dramatic new competitive advantage by inventing a new industry or distinctive market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand The purposes of defensive strategies are to lower the risk of being attacked, weaken the impact of any attack that occurs, and influence challengers to aim their efforts at other rivals Defensive strategies to protect a company’s position usually take one of two forms: (1) actions to block challengers or (2) actions to signal the likelihood of strong retaliation The timing of strategic moves also has relevance in the quest for competitive advantage Company managers are obligated to carefully consider the advantages or disadvantages that attach to being a first mover versus a fast follower versus a late mover Decisions concerning the scope of a company’s operations—which activities a firm will perform internally and which it will not—can also affect the strength of a company’s market position The scope of the firm refers to the range of its activities, the breadth of its product and service offerings, the extent of its geographic market presence, and its mix of businesses Companies can expand their scope horizontally (more broadly within their focal market) or vertically (up or down the industry value chain system that starts with raw-material production and ends with sales and service to the end consumer) Horizontal mergers and acquisitions (combinations of market rivals) provide a means for a company to expand its horizontal scope Vertical integration expands a firm’s vertical scope Horizontal mergers and acquisitions typically have any of five objectives: lowering costs, expanding geographic coverage, adding product categories, gaining new technologies or other resources and capabilities, and preparing for the convergence of industries They can strengthen a firm’s competitiveness in five ways: (1) by improving the efficiency of its operations, (2) by heightening its product differentiation, (3) by reducing market rivalry, (4) by increasing the company’s bargaining power over suppliers and buyers, and (5) by enhancing its flexibility and dynamic capabilities Vertical integration, forward or backward, makes most strategic sense if it strengthens a company’s position via either cost reduction or creation of a differentiation-based advantage Otherwise, the drawbacks of vertical integration (increased investment, greater business risk, increased vulnerability to technological changes, less flexibility in making product changes, and the potential for channel conflict) are likely to outweigh any advantages Outsourcing involves contracting out pieces of the value chain formerly performed in-house to outside vendors, thereby narrowing the scope of the firm Outsourcing can enhance a company’s competitiveness whenever (1) an activity can be performed better or more cheaply by outside specialists; (2) the activity is not crucial to the firm’s ability to achieve sustainable competitive advantage; (3) the outsourcing improves organizational flexibility, speeds decision making, and cuts cycle time; (4) it reduces the company’s risk exposure; and (5) it permits a company to concentrate on its core business and focus on what it does best 10 Strategic alliances and cooperative partnerships provide one way to gain some of the benefits offered by vertical integration, outsourcing, and horizontal mergers and acquisitions while minimizing the associated problems They serve as an alternative to vertical integration and mergers and acquisitions, and as a supplement to outsourcing, allowing more control relative to outsourcing via arm’slength transactions 11 Companies that manage their alliances well generally (1) create a system for managing their alliances, (2) build relationships with their partners and establish trust, (3) protect themselves from the threat of opportunism by setting up safeguards, (4) make commitments to their partners and see that their partners the same, and (5) make learning a routine part of the management process CHAPTER 7: Strategies for Competing in International Markets 1.WHY COMPANIES DECIDE TO ENTER FOREIGN MARKETS A company may opt to expand outside its domestic market for any of five major reasons: To gain access to new customers Expanding into foreign markets offers potential for increased revenues, profits, and long-term growth; it becomes an especially attractive option when a company encounters dwindling growth opportunities in its home market Companies often expand internationally to extend the life cycle of their products, as Honda has done with its classic 50-cc motorcycle, the Honda Cub (which is still selling well in developing markets, more than 50 years after it was first introduced in Japan) A larger target market also offers companies the opportunity to earn a return on large investments more rapidly This can be particularly important in R&D-intensive industries, where development is fast-paced or competitors imitate innovations rapidly To achieve lower costs through economies of scale, experience, and increased purchasing power Many companies are driven to sell in more than one country because domestic sales volume alone is not large enough to capture fully economies of scale in product development, manufacturing, or marketing Similarly, firms expand internationally to increase the rate at which they accumulate experience and move down the learning curve International expansion can also lower a company’s input costs through greater pooled purchasing power The relatively small size of country markets in Europe and limited domestic volume explains why companies like Michelin, BMW, and Nestlé long ago began selling their products all across Europe and then moved into markets in North America and Latin America To gain access to low-cost inputs of production Companies in industries based on natural resources (e.g., oil and gas, minerals, rubber, and lumber) often find it necessary to operate in the international arena since raw-material supplies are located in different parts of the world and can be accessed more cost-effectively at the source Other companies enter foreign markets to access low-cost human resources; this is particularly true of industries in which labor costs make up a high proportion of total production costs To further exploit its core competencies A company may be able to extend a market-leading position in its domestic market into a position of regional or global market leadership by leveraging its core competencies further H&M is capitalizing on its considerable expertise in online retailing to expand its reach internationally By bringing its easy-to-use and mobile-friendly online shopping to 23 different countries, the company hopes to pave the way for setting up physical stores in these countries Companies can often leverage their resources internationally by replicating a successful business model, using it as a basic blueprint for international operations, as Starbucks and McDonald’s have done.1 To gain access to resources and capabilities located in foreign markets An increasingly important motive for entering foreign markets is to acquire resources and capabilities that may be unavailable in a company’s home market Companies often make acquisitions abroad or enter into cross-border alliances to gain access to capabilities that complement their own or to learn from their partners.2 In other cases, companies choose to establish operations in other countries to utilize local distribution networks, gain local managerial or marketing expertise, or acquire technical knowledge In addition, companies that are the suppliers of other companies often expand internationally when their major customers so, to meet their customers’ needs abroad and retain their position as a key supply chain partner For example, when motor vehicle companies have opened new plants in foreign locations, big automotive parts suppliers have frequently opened new facilities nearby to permit timely delivery of their parts and components to the plant Similarly, NewellRubbermaid, one of Walmart’s biggest suppliers of household products, has followed Walmart into foreign markets The Choice of Entry Modes: A Decision Model KEY POINTS Competing in international markets allows a company to (1) gain access to new customers; (2) achieve lower costs through greater economies of scale, learning, and increased purchasing power; (3) gain access to low-cost inputs of production; (4) further exploit its core competencies; and (5) gain access to resources and capabilities located outside the company’s domestic market Strategy making is more complex for five reasons: (1) Different countries have home-country advantages in different industries; (2) there are location-based advantages to performing different value chain activities in different parts of the world; (3) varying political and economic risks make the business climate of some countries more favorable than others; (4) companies face the risk of adverse shifts in exchange rates when operating in foreign countries; and (5) differences in buyer tastes and preferences present a conundrum concerning the trade-off between customizing and standardizing products and services The strategies of firms that expand internationally are usually grounded in homecountry advantages concerning demand conditions; factor conditions; related and supporting industries; and firm strategy, structure, and rivalry, as described by the Diamond of National Competitive Advantage framework There are five strategic options for entering foreign markets These include maintaining a home-country production base and exporting goods to foreign markets, licensing foreign firms to produce and distribute the company’s products abroad, employing a franchising strategy, establishing a foreign subsidiary via an acquisition or greenfield venture, and using strategic alliances or other collaborative partnerships A company must choose among three alternative approaches for competing internationally: (1) a multidomestic strategy—a think-local, act-local approach to crafting international strategy; (2) a global strategy—a think-global, actglobal approach; and (3) a combination think-global, act-local approach, known as a transnational strategy A multidomestic strategy (think local, act local) is appropriate for companies that must vary their product offerings and competitive approaches from country to country in order to accommodate different buyer preferences and market conditions The global strategy (think global, act global) works best when there are substantial cost benefits to be gained from taking a standardized, globally integrated approach and there is little need for local responsiveness A transnational strategy (think global, act local) is called for when there is a high need for local responsiveness as well as substantial benefits from taking a globally integrated approach In this approach, a company strives to employ the same basic competitive strategy in all markets but still customizes its product offering and some aspect of its operations to fit local market circumstances There are three general ways in which a firm can gain competitive advantage (or offset domestic disadvantages) in international markets One way involves locating various value chain activities among nations in a manner that lowers costs or achieves greater product differentiation A second way draws on an international competitor’s ability to extend its competitive advantage by cost-effectively sharing, replicating, or transferring its most valuable resources and capabilities across borders A third looks for benefits from cross-border coordination that are unavailable to domestic-only competitors Two types of strategic moves are particularly suited for companies competing internationally Both involve the use of profit sanctuaries—country markets where a company derives substantial profits because of its strong or protected market position Profit sanctuaries are useful in waging strategic offenses in international markets through cross-subsidization—a practice of supporting competitive offensives in one market with resources and profits diverted from operations in another market (the profit sanctuary) They may be used defensively to encourage mutual restraint among competitors when there is international multimarket competition by signaling that each company has the financial capability for mounting a strong counterattack if threatened For companies with at least one profit sanctuary, having a presence in a rival’s key markets can be enough to deter the rival from making aggressive attacks Companies racing for global leadership have to consider competing in developing markets like the BRIC countries—Brazil, Russia, India, and China—where the business risks are considerable but the opportunities for growth are huge To succeed in these markets, companies often have to (1) compete on the basis of low price, (2) modify aspects of the company’s business model to accommodate local circumstances, and/or (3) try to change the local market to better match the way the company does business elsewhere Profitability is unlikely to come quickly or easily in developing markets, typically because of the investments needed to alter buying habits and tastes, the increased political and economic risk, and/or the need for infrastructure upgrades And there may be times when a company should simply stay away from certain developing markets until conditions for entry are better suited to its business model and strategy Local companies in developing-country markets can seek to compete against large international companies by (1) developing business models that exploit shortcomings in local distribution networks or infrastructure, (2) utilizing a superior understanding of local customer needs and preferences or local relationships, (3) taking advantage of competitively important qualities of the local workforce with which large international companies may be unfamiliar, (4) using acquisition strategies and rapid-growth strategies to better defend against expansion-minded international companies, or (5) transferring company expertise to cross-border markets and initiating actions to compete on an international level CHAPTER 8: Corporate Strategy KEY POINTS A “good” diversification strategy must produce increases in long-term shareholder value increases that shareholders cannot otherwise obtain on their own For a move to diversify into a new business to have a reasonable prospect of adding shareholder value, it must be capable of passing the industry attractiveness test, the cost-of-entry test, and the better-off test Entry into new businesses can take any of three forms: acquisition, internal startup, or joint venture The choice of which is best depends on the firm’s resources and capabilities, the industry’s entry barriers, the importance of speed, and relative costs There are two fundamental approaches to diversification—into related businesses and into unrelated businesses The rationale for related diversification is to benefit from strategic fit: Diversify into businesses with commonalities across their respective value chains, and then capitalize on the strategic fit by sharing or transferring the resources and capabilities across matching value chain activities to gain competitive advantages Unrelated diversification strategies surrender the competitive advantage potential of strategic fit at the value chain level in return for the potential that can be realized from superior corporate parenting or the sharing and transfer of general resources and capabilities An outstanding corporate parent can benefit its businesses through (1) providing high-level oversight and making available other corporate resources, (2) allocating financial resources across the business portfolio, and (3) restructuring under performing acquisitions Related diversification provides a stronger foundation for creating shareholder value than does unrelated diversification, since the specialized resources and capabilities that are leveraged in related diversification tend to be more valuable competitive assets than the general resources and capabilities underlying unrelated diversification, which in most cases are relatively common and easier to imitate Analyzing how good a company’s diversification strategy is consists of a six-step process: Step 1: Evaluate the long-term attractiveness of the industries into which the firm has diversified Determining industry attractiveness involves developing a list of industry-attractiveness measures, each of which might have a different importance weight Step 2: Evaluate the relative competitive strength of each of the company’s business units The purpose of rating the competitive strength of each business is to gain a clear understanding of which businesses are strong contenders in their industries, which are weak contenders, and what the underlying reasons are for their strength or weakness The conclusions about industry attractiveness can be joined with the conclusions about competitive strength by drawing a nine-cell industry-attractiveness–competitive-strength matrix that helps identify the prospects of each business and the level of priority each business should be given in allocating corporate resources and investment capital Step 3: Check for the competitive value of cross-business strategic fit A business is more attractive strategically when it has value chain relationships with the other business units that offer the potential to (1) combine operations to realize economies of scope, (2) transfer technology, skills, know-how, or other resource capabilities from one business to another, (3) leverage the use of a trusted brand name or other resources that enhance differentiation, (4) share other competitively valuable resources among the company’s businesses, and (5) build new resources and competitive capabilities via cross-business collaboration Cross-business strategic fit represents a significant avenue for producing competitive advantage beyond what any one business can achieve on its own Step 4: Check whether the firm’s resources fit the resource requirements of its present business lineup In firms with a related diversification strategy, resource fit exists when the firm’s businesses have matching resource requirements at points along their value chains that are critical for the businesses’ market success In companies pursuing unrelated diversification, resource fit exists when the company has solid parenting capabilities or resources of a general nature that it can share or transfer to its component businesses When there is financial resource fit among the businesses of any type of diversified company, the company can generate internal cash flows sufficient to fund the capital requirements of its businesses, pay its dividends, meet its debt obligations, and otherwise remain financially healthy Step 5: Rank the performance prospects of the businesses from best to worst,and determine what the corporate parent’s priority should be in allocating resources to its various businesses The most important considerations in judging business unit performance are sales growth, profit growth, contribution to company earnings, and the return on capital invested in the business Normally, strong business units in attractive industries should head the list for corporate resource support Step 6: Craft new strategic moves to improve overall corporate performance This step draws on the results of the preceding steps as the basis for selecting one of four different strategic paths for improving a diversified company’s performance: (1) Stick closely with the existing business lineup and pursue opportunities presented by these businesses, (2) broaden the scope of diversification by entering additional industries, (3) retrench to a narrower scope of diversification by divesting poorly performing businesses, or (4) broadly restructure the business lineup with multiple divestitures and/or acquisitions ... companies, the strategy- making hierarchy consists of four levels, each of which involves a corresponding level of management: corporate strategy (multibusiness strategy) , business strategy (strategy. .. improve the strategy cause a company’s strategy to evolve overtime— a condition that makes the task of crafting (xây dựng) strategy a work in progress, not a one-time event A company’s strategy. .. company’s deliberate strategy (chiến lược có chủ ý) consists of proactive strategy elements that are planned; its emergent strategy ( chiến lược lên ) consists of reactive strategy elements that