Competitive Advantage within an International Context: The Basic Framework. Competitive Advantage within an International Context: The Basic Framework.[r]
(1)Global Strategies and the Multinational Corporation
Global Strategies and the Multinational Corporation
• Implications of International Competition for Industry Analysis
• Analyzing Competitive Advantage within an International Context
• Applying the Framework
(1) International location of production (2) Foreign market entry strategies
• Multinational Strategies: Globalization versus National Differentiation
• Strategy and Organization of the Multinational Corporation
(2)The Internationalization Process The Internationalization Process
International Global Industries Industries
aerospace automobiles military hardware oil
diamond mining semiconductors
agriculture consumer electronics
Domestic Multinational/
Industries Multidomestic
railroads Industries
laundries/dry cleaning investment banking hairdressing hotels
milk consulting
In te rn at io n al T ra d e
Foreign Direct Investment
(3)The Automobile Goes Global: The GM Pontiac Le Mans
The Automobile Goes Global: The GM Pontiac Le Mans
Design: Germany (by Opel) Brakes: France, U.S. Sheetsteel: Japan S Korea Stamping of body parts: S Korea Tires: S Korea Engines: 1.6 liter S Korea Windshield: S Korea 2.0 liter Australia Battery: S Korea Fuel injection: U.S. Wiring harness: S Korea Fuel pump: U.S. Radio: Singapore Transmission: Canada & U.S. Assembly: S Korea Rear axle: U.S. Marketing &
(4)Implications of Internationalization for Industry Analysis
Implications of Internationalization for Industry Analysis
INDUSTRY STRUCTURE
• Lower entry barriers around national markets
• Increased industry rivalry - lower seller concentration
- greater diversity of competitors
• Increased buyer power: wider choice for dealers & consumers
COMPETITION
• Increased intensity of competition
PROFITABILITY
(5)COMPETITIVE ADVANTAGE
THE INDUSTRY ENVIRONMENT
Key Success Factors
FIRM RESOURCES & CAPABILITIES
Financial resources Physical resources Technology
Reputation
Functional capabilities General management capabilities
THE NATIONAL ENVIRONMENT
National resources and capabilities (raw materials; national culture; human resources; transportation, communication, legal infrastructure
Domestic market conditions Government policies
Exchange rates
Related and supporting industries
Competitive Advantage within an International Context: The Basic Framework
(6)National Influences on
Competitiveness: The Theory of Comparative Advantage
National Influences on
Competitiveness: The Theory of Comparative Advantage
A country has a relative efficiency advantage in those products that make intensive use of resources that are relatively
abundant within the country E.g.
• Philippines relatively more efficient in the production of
footwear, apparel, and assembled electronic products than in the production of chemicals and automobiles.
• U.S is relatively more efficient in the production of
semiconductors and pharmaceuticals than shoes or shirts.
(7)Revealed Comparative Advantage for a Certain Broad Product Categories Revealed Comparative Advantage for
a Certain Broad Product Categories
USA Canada W Germany Italy Japan Food, drink & tobacco 31 28 -.36 -.29 -.85 Raw materials 43 51 -.55 -.30 -.88 Oil & refined products -.64 34 -.72 -.74 -.99 Chemicals 42 -.16 20 -.06 -.58 Machinery and trans- 12 -.19 34 22 80 portation equipment
Other manufacturers -.68 -.07 01 29 40
(8)Porter’s Competitive Advantage of Nations
Porter’s Competitive Advantage of Nations
Extends and adapts traditional theory of comparative advantage to take account of three factors:
International competitive advantage is about companies
not countries—the role of the national environment is providing a home base for the company.
Sustained competitive advantage depends upon dynamic
factors innovation and the upgrading of resources and capabilities
The critical role of the national environment is its impact
(9)FACTOR CONDITIONS
DEMAND CONDITIONS
RELATING AND SUPPORTING
INDUSTRIES
STRATEGY, STRUCTURE, AND RIVALRY
Porter’s National Diamond Framework Porter’s National Diamond Framework
1. FACTOR CONDITIONS—“Home grown” resources/capabilities more important than natural endowments.
2 RELATED AND SUPPORTING INDUSTRIES—Key role of “industry clusters”
(10)Consistency Between Strategy and National Conditions
Consistency Between Strategy and National Conditions
In globally-competitive industries, firm strategy needs to take account of national conditions:
– U.S textile manufacturers must compete on the basis of advanced process technologies and focus on high quality, less price-sensitive market segments
– In the semiconduictor industry, CA-based firms concentrate mainly upon design of advanced chips, Malaysian firms
concentrate upon fabrication of high volume, less technologically advanced items (e.g DRAM chips)
– Dispersion of value chain to exploit different national