Global Strategic Analyses: Frameworks and Approaches

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9 Δεκ 2012 (πριν από 4 χρόνια και 8 μήνες)

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Global Strategic Analyses:

Frameworks and Approaches

How do firms identify their core
competencies and competitive
advantages?




“With whom and how does our
company compete?”


In an older era, a company’s competition was
relatively easy to define: firms with similar
performance and capabilities at a national level.

Now, with technological innovations in the way of
transportation and communications, competitive
environments have expanded greatly.

Our challenge will be developing processes to
identify global competitors and to be prudent in
keeping up with the times

Keep you thumb on the pulse of your industry

Seven Theoretical Perspectives


Resource Based View


Core Competence


Competitive Advantage of Nations


Strategic Groups (I
-
O Economics)


Cognitive Communities


Network Approaches


Competing for the Future

Resource Based View


RBV (resource based view) comes from
Michael Porter’s five forces model


The firm is a collection of capabilities


Based on the idea of economic rent


Economic rent, or Economic Value Added (EVA), is
what companies earn over and above the
company’s cost of capital


In other words, it’s the company’s competitive
advantage

What makes a core competency?


Provides access to a wide variety of markets.


Contributes to perceived customer benefits of
the end product.


Difficult for competitors to imitate.

Real Life Examples of Core
Competencies


Walmart


Southwest Airlines


Google


Others?

Determinants of National Advantage


1. Factor Conditions


2. Demand Conditions


3. Related and Supporting Industries


4. Firm Strategy, Structure, and Rivalry

Factor Conditions



What is a nation’s quantity and quality of
production factors?


-
Human resources


-
Physical resources


-
Advanced factors (knowledge, capital,
infrastructure)

Demand Conditions


-
Demand for products greater than in other
countries.


-
Domestic firms can benefit from the presence
of demanding customers.


-
Needs of domestic buyers anticipate the
needs of foreign buyers.

Related and Supporting Industries


Presence of supporting industries allows
organizations to coordinate a strategy.


What are some examples?

Firm Strategy, Structure, and Rivalry


National performance correlates with
strategies and structure of firms in a particular
segment.


Domestic competition is usually more intense
and has more effect than foreign competition.

Domestic Competition

Can it lead to competitive advantage??




Rivals push for innovation


Improve quality and characteristics of their products


Firms expand into foreign market


Lobby their govt. to take actions that benefit the
industry as a whole

-
Open foreign markets

-
Subsidies, tax breaks, direct investment


Competition and Strategic Groups


Similar firms, same industry


similar competitive
strategies


Similar performance levels

-
>>Structure of industry
-
> strategic behavior of firms
-
>
performance

Example:
Automotive industry study by
Norhia

and Garcia
-
Pont


-

11 strategic groups based on 6 factors : size,
market share, product line, technological sophistication,
organizational capability and labor costs

-
Major US (Ford , GM), Sec. (Chrysler), Major
Japanese (Toyota , Nissan) Secondary US( Honda,
Mitsubishi)

-
Small (Hyundai, Daewoo ); Sports (Ferrari ,
Lambor
-
ghini
) etc


Competition and Strategic Groups


Findings

-
US and Japanese medium and large groups
compete in some but not all markets

-
Sports cars
-
> carved a niche and do not face
competition from outside their strategic group.



Strategic Groups are useful for
determining relative performance and
appropriateness of a firm’s strategy!!

Competition and Strategic Groups

Another approach to indentify groups


Psychology and focuses on cognitive processes of
managers
-

Their thought regarding firms
capabilities


Managers develop a mental map of firms position
through


trial and error, observation and
interaction with others in industry

-
This common set of belief about the nature of
industry results in ‘Cognitive community’

Example


Scottish knitwear industry


Border towns of
Galashiels

and
Hawick

produce
high quality by combining yarns of different colors
on knitting machine


Opposite to the cut
-
and
-
sew technique used
elsewhere, though cheaper, lacks in quality

Competition and Strategic Groups


Scottish knitwear industry competitors groups based on
-

financial and economic assets, public or private,
output volume

-

Also based on network of relationships with other
firms and managers social networks


Each of these perspectives provide a different view of
the strategic dynamics within the Scottish knitwear
industry

Strategic Groups & Cognitive approach



Strategic group approach


begins at industry level and
work downwards and groups together the firms that
appears similar using a set of criteria


Cognitive approach


begins at firm level and moves
upwards using managers mental models to identify firms
whose managers have similar thoughts regarding
industry structure and rivalries


Challenge
-



Managers are not likely to discuss openly with
competitors regarding market competitive dynamics


Lack statistical modeling skills

Solution
-


Board meetings, conferences, trade association
meetings


Interorganizational

Networks in Cooperation
and Competition


Difficult for a single firm to succeed alone


Global Firms are creating alliance and joint ventures


Often created with current and potential competition


Gaining of Knowledge


Compete more effectively

Network Approaches to Studying


The idea of asking who competes with whom and how, recently new idea


Managers can build a more accurate picture of the competition


At the same time can build upon the idea of how companies within a industry
can collaborate


Network strategy is used in the forming of alliances, join ventures, equity
sharing, collaborative research pacts


Allow the forming of new skills, leverage, or to compensate for weaknesses



Strategic networks can include


Suppliers, Competitors, and Customers


Gaining of new markets, new technology, or benefits

from economies of scale


Sharing of Risk


While keeping certain resources separate and secret



Examples of Cooperation


Industries include

Auto, Movie, Textile, Biotechnology, Mining, Energy

Firms frequently share parts, product designs, and production facilities


Mitsubishi Eclipse and Plymouth Laser


Dodge Viper and Mitsubishi 30000GT

Chryser

and Mitsubishi; Ford and Mazda; GM, Isuzu, and Suzuki

Cooperation in Pharmaceuticals

Biotech start
-
ups and Major Pharmaceuticals


Gain access to capital, production, distribution


Gain access to new technologies and innovation

Different Competencies

Merck and Johnson & Johnson Alliance

R&D and OTC Marketing


Pepcid

to OTC

Possible Limitations to Networks


Constraints if Environment suddenly Changes


Alliance can lead to not being able to adapt


Significant Cost


One partner may take advantage of the other






However


The correct
a
lliance should outweigh these costs


Partners can provide clues about the competition and their intent

Competing in the Future

Firms Successful in the Future


Compete for the opportunity to define the structure


In Nascent Markets (New Markets) must compete

for opportunity share and not simply market share


A single firm is unlikely to succeed alone


Coalitions and Joint Ventures must be created

10 to 15 Years


Time develop Leadership in new industry

Competition in New Markets

Develops in three stages

First Stage


Identify the opportunities available

Second Stage


Firms compete to shape the direction of industry development


Accumlatoin

of necessary competencies


Testing of product and services


Attracting partners

Final Stage


Firms will compete for market position and market share


Questions of technology platforms, products, and distribution

channels have been resolved

Weaknesses to Developing new Markets


Can shift attention away from existing markets


Time Lag



Risk of focusing large amounts of time

10 to 15 years to dominate new market


Can miss what opportunities exist in current

developed market


Dominating a new market can have an enormous payoff, but there are risk

“Each perspective contains elements of the other, and all must
be considered in order to respond effectively to the demands
of the globally competitive environment”