CHAPTER 5 BASIC STRATEGIES FOR THE MULTINATIONAL COMPANY: CONTENT AND FORMULATION

1. CHAPTER 5 BASIC STRATEGIES FOR THE MULTINATIONAL COMPANY: CONTENT AND FORMULATION

2. 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

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

4. Competitive advantage and generic strategies, continued • Generic strategies • basic ways to keep and achieve competitive advantage

5. DIFFERENTIATION • Providing superior value to customers

6. LOW COST • Produce or deliver products or services equal to those of competitors WHILE • producing or delivering products or services more efficiently than competitors

7. 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

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

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

11. EXHIBIT 5.2 PORTER’S GENERIC STRATEGIES

13. 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)

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

16. SOURCES OF COMPETITIVE ADVANTAGE • Distinctive competencies • Resources • Capabilities

17. SUSTAINABLE COMPETITIVE ADVANTAGE • Firm capabilities that are: • valuable • rare • difficult to imitate • nonsubsitutable

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

19. COMPETITIVE STRATEGIES IN INTERNATIONAL MARKETS • Offensive • Defensive

20. 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

21. CORPORATE STRATEGY • How companies choose their mixtures of different businesses • Contrasts with business level strategy • Diversification • related • unrelated

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

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

25. STRATEGY FORMULATION: TRADITIONAL APPROACHES

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

27. ANALYSIS TECHNIQUES • Help managers understand • company's competitive position in the industry • opportunities and threats faced by their company • company's strengths and weaknesses

28. 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

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

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

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

32. COMPETITOR ANALYSIS • A competitor analysis develops profiles of your competitors' strategies and objectives

33. FOUR STEPSFor major competitors, assess: (1) Strategic intent (2) Current and anticipated generic strategies (3) Current and anticipated offensive and defensive competitive strategies (4) Current positions

34. 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

35. COMPANY SITUATION ANALYSIS • The most common tool: the SWOT • strengths • weaknesses • opportunities • threats

36. 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

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

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

39. THE BCG GROWTH-SHARE MATRIX • Based on the industry growth rate the relative market share • stars • dogs • cash cows • problem children

40. 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

41. EXHIBIT 5.7 THE BCG GROWTH SHARE MATRIX FOR A DIVERSIFIED MULTINATIONAL COMPANY

43. 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