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

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

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

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  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. STRATEGY Cont. Strategic plan • Articulate values • Mission statement • SWOT analysis • Establish realistic goals and objectives • Formulate strategies • Implement strategies

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

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

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

  7. DIFFERENTIATION • Providing superior value to customers

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

  9. 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

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

  11. EXHIBIT 5.2 PORTER’S GENERIC STRATEGIES

  12. 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)

  13. UPSTREAM PRIMARY ACTIVITIES DOWNSTREAM Output R&D Operations Logistics Input Marketing Service Logistics and Sales SUPPORT ACTIVITIES

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

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

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

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

  18. COMPETITIVE STRATEGIES IN INTERNATIONAL MARKETS • Offensive • Defensive

  19. 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

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

  21. STRATEGY FORMULATION: TRADITIONAL APPROACHES

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

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

  24. 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

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

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

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

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

  29. 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

  30. 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

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

  32. 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

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