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BASIC STRATEGY CONTENT AND THE MULTINATIONAL COMPANY

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. COMPETITIVE ADVANTAGE AND GENERIC STRATEGIES. Competitive advantage

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BASIC STRATEGY CONTENT AND THE MULTINATIONAL COMPANY

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  1. 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

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

  3. Generic strategies • Basic ways to keep and achieve competitive advantage

  4. DIFFERENTIATION • Find ways to provide superior value to customers

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

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

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

  8. COMPETITIVE SCOPE • How broadly a firm targets its products or services

  9. EXHIBIT 4.2 PORTER’S GENERIC STRATEGIES

  10. 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)

  11. EXHIBIT 4-3 THE VALUE CHAIN

  12. COMPONENTS OF THE VALUE CHAIN • Primary activities • Support activities • Upstream and downstream

  13. COMPETITIVE STRATEGIES IN INTERNATIONAL MARKETS • Offensive • Defensive

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

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

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

  17. CORPORATE STRATEGY • Contrasts with business level strategy • How companies choose their mixtures of different businesses • Diversification • Related • Unrelated

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

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

  20. STRATEGY FORMULATION TECHNIQUES: TRADITIONAL APPROACHES

  21. STRATEGY FORMULATION • The process by which managers select the strategy to be used by their company

  22. ANALYSIS TECHNIQUES • Help Managers Understand • A company's competitive position in the industry • Opportunities and threats faced by their company • Company's strengths and weaknesses

  23. 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

  24. EXAMPLE KEY SUCCESS FACTORS • Innovative technology • Broad product line • Distribution channel effectiveness • Price advantages • Promotion effectiveness

  25. Superior physical facilities • Experience of firm in business • Cost position for raw materials

  26. FORMULATING THE BEST STRATEGIES • Know the industry and KSFs • Understand and anticipate your competitors' strategies

  27. THE COMPETITIVE ANALYSIS • A competitive analysis develops profiles of your competitors' strategies and objectives

  28. 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

  29. KEY POINTS FOR MULTINATIONAL MANAGEMENT • Use a country by country competitive analysis • Plan distinct competitive strategies by competitors and countries • See exhibit 4-5 for examples

  30. COMPANY SITUATION ANALYSIS • The most common tool: the SWOT • Strengths • Weaknesses • Opportunities • Threats

  31. 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

  32. CORPORATE STRATEGY SELECTION • Deciding which businesses in the portfolio are targets for growth and investment and which are targets for divestment or harvesting

  33. ASSESSING A CORPORATE BUSINESS PORTFOLIO • The basic tool: matrix analyses • The most popular is the growth-share matrix of the Boston consulting group (BCG)

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

  35. 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

  36. EXHIBIT 4.6 THE BCG GROWTH SHARE MATRIX FOR A DIVERSIFIED MULTINATIONAL COMPANY

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

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