Evaluate the competitive strategies for firms in foreign markets in respect of:
a. Niche market exporting
b. Licensing and contract manufacturing
c. Joint ventures
d. Wholly owned subsidiaries
Globalization is the tactic of following opportunities everyplace in the world that allows a firm to improve its business functions in the nations in which it functions. In today’s dynamic business world:
It’s equally important for planners of global cooperation to be aware of the strategic opportunities and threats in their domestic industry. It’s gradually becoming a requirements and competence for strategic managers to understand the dynamics of competing in global markets.
Strategic orientation of Global firms
An organization that ensures that values and important actions of the mother organization be a guideline for the strategic decision making of all its operations. An organization with a poly centric orientation believes that its values and strategic decision making should be guided by the culture of the country. It operates in. A region centric orientation occurs when the mother organization attempts to blend its own values with those of the region under consideration, thereby arriving at a regionally delicate compromise. Strategic decision making, with emphasis on global integration is an approach that is used by a corporation with a geocentric orientation.
The starting point for Globalization is to conduct
Due to the dynamics and complexities that strategic planning, it is important to conduct an outward assessment and an internal assessment of important characteristics of the global environment (PESTLE) and an internal assessment to identify the strategic capabilities of the firm’s operations (SWOT-Strategic capability).multiple of these interactions could be complex
As a result:
Strategic decision to move towards globalization is motivated by two main factors. The first is the degree of complexity of each foreign market being targeted and the diversity in a company’s product line Complexity refers to the number of critical success factors required to prosper in a given competitive arena. When a company offers many product lines, diversity is high. These two factors results in different competitive strategies for firms as seen below:
Niche Market Exporting
A niche market is a Concentrated, achievable share of a market. Business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers Narrowly defined group of potential customers. Small but profitable segment of a market suitable for focused attention by a marketer. The splitting of conventional markets into smaller segments and then devising separate marketing programs for each of these smaller segments or niches (Linneman & Stanton, 1992)
Customers in niche have a distinct set of needs Greater profit margins due to premium price. Possibility to gain certain economies through specialization must have size, profit and growth potential not likely to attract competitors (Kotler, 2003). Created by the identification of unaddressed needs/wants not spotted by competitors.
Example specializing in window cleaning services instead of general cleaning.
The advantage of being perhaps alone in the niche because other small businesses may be unaware of that niche market and large businesses might not be interested. Possible entrenchment ‘ the opportunity to provide products and services to a group that other businesses have overlooked and possibly entrench yourself.
The primary niche market approach for the company that wants to export is to modify select product performance or measurement characteristics to special foreign demands.
The delegation of authority of some market property right form an original institution to a motivated licensee is called licensing. Two main difficulties that occur with licensing, One is the likelihood that the oversees partner will acquire the knowledge and grow into a major competitor later when the contract expires. The other difficulty stems from the control that the licensor forfeits on production, marketing, and general distribution of its products.
A distinct method of authorizing is franchising, which permits the franchisee to sell a highly publicized product or service, using the parent’s brand name or trademark, carefully developed procedures, and marketing strategies. In exchange, the smaller organization is made to pay a specific fee agreed upon depending on the market area and sales. The franchise is run by the local financier, who must obey the parent’s stern rules.
As the multinational strategies of U.S. firms mature, most will include some form of joint venture (JV) with a target nation firm. JVs provide a variety of benefits to each partner:
‘ Sheared management task and cash regulations often at exchange rate helps organizations without the managerial or financial assets to make a profitable independent impact on the integrated foreign markets.
‘ there is the reciprocal flow of technical information and market intelligence data through coordination of manufacturing and marketing.
‘ Joint venture speeds up the determination of organizations to assimilate into the political, corporate, and cultural infrastructure of the foreign environment, most often acquire foreign subsidiary with lower commitment.
Many difficult challenges are faced by organizations considering either parity or non-equity based JVs. Taking advantage of the organization in the foreign country’s comparative advantage may involve managerial relationships where no single authority exists to make strategic decisions or solve conflicts. There may be the need to disclose important strategic information when dealing with host company management which may lead to the potential loss of control over the organization standards. How compatible partners are and how they endure commitment to support goals that are mutual to them is a critical aspect of joint venture.
An organization foreign branch is its extension in a foreign market. This a separately located business unit that has been set up by cooperate management to provide specific services, including sales, customer service, and physical distribution.
Wholly Owned Foreign Subsidiaries
Cooperate organization that are willing and able to make very high investment in foregn market usually consider foreign subsidiary Due to managerial efficiency cooperate organizations seek to acquire full ownership of organizations. There are a lot of risks that organizations who seek to improve their competitive postures through a foreign subsidiary in their normal mode of operations.
1. Achieving good reward from high capital investment means, managers must attain broad knowledge of the market, of the host nation. The culture of the host nation and its language
2. The country hosting the organization may expect a long term commitment and a portion of their national in management positions.
3. An organizations Niche may be eliminated by a foreign regulation changing standard
2) Critically explain how you might use value chain analysis, resource-based view and SWOT analysis to get a better sense of what might be a firm’s key building blocks for a successful strategy.
Another way of diagnosing strategic capabilities within an organization is the use of Value Chain analysis or value network. A value chain describes the categories of activities within and around an organization, which together create a product or service. A perspective in which business is seen as a chain of activities that transforms inputs into outputs that customer’s value. It attempts to understand how a business creates customer value by examining the contributions of different activities within the business to that value
VCA divides the business into two kinds of activities:
Primary Activities – The activities in a firm that are involved in the physical creation of the product, marketing and transfer to the buyer, and after-sales support
Support Activities – The activities in a firm that assist the firm as a whole by providing infrastructure or inputs that allow the primary activities to take place on an ongoing basis
Both the primary and support activities are subdivided into nine possible separate value activities which together comprise a chain of adding value to products/services by a company and its suppliers and distributors in the marketplace.
Primary activities are directly concerned with the creation or delivery of a product or service and include the following Five:
Inbound logistics – Involve the process of receiving, storing, and disseminating inputs from suppliers as well as inspection and inventory management.
Operations: These involve the processes involved in converting inputs into finished products ‘ production, assembly, packaging, equipment maintenance, quality assurance, environmental protection’
Outbound logistics – Activities involved in getting products out to customers. Deals with physically distributing the products to the buyer – warehousing, order processing, order picking and packaging, shipping, delivery vehicle operation etc.
Marketing and Sales ‘ The means of making consumers aware of the product or service i.e. sales force effort – advertising and promotion, market research and planning, distributor support
Service – Activities involved in looking after or providing assistance to customers ‘ installation, spare parts delivery, maintenance and repairs, technical assistance, buyer inquiries and complaints ‘ general after sales services etc.
Support activities are those which serve to facilitate the five primary activities. They include:
Procurement ‘ acquisition of the necessary resource inputs to the primary activities
Technology development ‘ product or process development
Human resource management ‘ recruitment, training, development of people in the firm
Company infrastructure ‘ systems vital to the organisation’s strategic capability, which usually support the whole chain, e.g. planning, finance, quality management.
Benefits Helps Identify clusters of activities providing particular benefit to customers Highlight activities that are less efficient and which might be de-emphasized or outsourced requires managers to think about the role of such activities Can be used to identify the cost and value of activities
RBV is a method of analyzing and identifying a firm’s strategic advantages based on examining its distinct combination of assets, skills, capabilities, and intangibles. The RBV’s underlying premise is that firms differ in fundamental ways because each firm possesses a unique ‘bundle’ of resources. Each firm develops competencies from these resources, and these become the source of the firm’s competitive advantages
The four Guidelines:
Is the resource or skill critical to fulfilling a customer’s need better than that of the firm’s competitors? Is the resource scarce? Is it in short supply or not easily substituted for or imitated? Appropriability: Who actually gets the profit created by a resource? Durability: How rapidly will the resource depreciate?
The key strategic message from both the business environment and strategic capability could be summarised into SWOT analysis. SWOT is a traditional approach to internal analysis with acronym for the internal Strengths and Weaknesses of a firm and the environmental Opportunities and Threats facing that firm.Historically popular technique to assess a company’s strategic situation. SWOT summarises the key issues from the business environment and the strategic capability of an organisation that are most likely to impact on strategy development SWOT is useful to generate strategic options and assess future courses of action
Figure: 3 SWOT Analysis
So what are the inputs into strategizing? At the most basic level, you will need to gather information and conduct analysis about the internal characteristics of the organization and the external market conditions. This means an internal appraisal and an external appraisal. On the internal side, you will want to gain a sense of the organization’s strengths and weaknesses; on the external side, you will want to develop some sense of the organization’s opportunities and threats. Together, these four inputs into strategizing are often called SWOT analysis which stands for strengths, weaknesses, opportunities, and threats (see the SWOT analysis figure). It does not matter if you start this appraisal process internally or externally, but you will quickly see that the two need to mesh eventually. At the very least, the strategy should leverage strengths to take advantage of opportunities and mitigate threats, while the downside consequences of weaknesses are minimized or managed.
SWOT was developed by Ken Andrews in the early 1970s.Andrews, K. (1971). The concept of corporate strategy. Homewood, IL: R. D. Irwin. An assessment of strengths and weaknesses occurs as a part of organizational analysis; that is, it is an audit of the company’s internal workings, which are relatively easier to control than outside factors. Conversely, examining opportunities and threats is a part of environmental analysis’the company must look outside of the organization to determine opportunities and threats, over which it has lesser control.
Andrews’s original conception of the strategy model that preceded the SWOT asked four basic questions about a company and its environment: (1) What can we do? (2) What do we want to do? (3) What might we do? and (4) What do others expect us to do?
Strengths and Weaknesses
A good starting point for strategizing is an assessment of what an organization does well and what it does less well. In general good strategies take advantage of strengths and minimize the disadvantages posed by any weaknesses. Michael Jordan, for instance, is an excellent all-around athlete; he excels in baseball and golf, but his athletic skills show best in basketball. As with Jordan, when you can identify certain strengths that set an organization well apart from actual and potential competitors, that strength is considered a source of competitive advantage. The hardest thing for an organization to do is to develop its competitive advantage into a sustainable competitive advantage where the organization’s strengths cannot be easily duplicated or imitated by other firms, nor made redundant or less valuable by changes in the external environment.
Opportunities and Threats
On the basis of what you just learned about competitive advantage and sustainable competitive advantage, you can see why some understanding of the external environment is a critical input into strategy. Opportunities assess the external attractive factors that represent the reason for a business to exist and prosper. These are external to the business. What opportunities exist in its market, or in the environment, from which managers might hope the organization will benefit? Threats include factors beyond your control that could place the strategy, or the business, at risk. These are also external’managers typically have no control over them, but may benefit by having contingency plans to address them if they should occur.
SWOT Analysis of Unnamed Publisher
Unnamed Publisher is a new college textbook company (and the publisher of this POM text!) that operates with the tagline vision of ‘Free textbooks. Online. Anytime. Anywhere. Anyone.’Retrieved October 28, 2008, from http://www.gone.2012books.lardbucket.org.
1.Great management team.
2.Great college business textbooks.
3.Experienced author pool.
1.Limited number of books.
3.Relatively small firm size.
1.External pressure to lower higher education costs, including textbook prices.
2.Internet savvy students and professors.
3.Professors and students largely displeased with current textbook model.
4.Technology allows textbook customization.
2.Competitors are few, very large, and global.
3.Substitute technologies exist.
In summary, SWOT analysis assist you find strategic substitutes that take care of the subsequent questions:
1. Strengths and Opportunities (SO)’How can you use your strengths to take advantage of the opportunities?
2. Strengths and Threats (ST)’How can you take advantage of your strengths to avoid real and potential threats?
3. Weaknesses and Opportunities (WO)’How can you use your opportunities to overcome the weaknesses you are experiencing?
4. Weaknesses and Threats (WT)’How can you minimize your weaknesses and avoid threats?
3) Describe two organizations you have been part of based on differences in their organizational cultures
Organizational culture also affects strategic leaders and their work. In turn, strategic leaders’ decisions and actions shape a firm’s culture. Organizational culture refers to the complex set of ideologies, symbols, and core values that are shared throughout the firm and that influence how the firm conducts business. (Steven L. 2000.) It is the social energy that drives’or fails to drive’the organization. For example, Southwest Airlines is known for having a unique and valuable culture. Its culture encourages employees to work hard but also to have fun while doing so. Moreover, its culture entails respect for others’employees and customers alike. The firm also places a premium on service, as suggested by its commitment to provide POS (Positively Outrageous Service) to each customer. (Steven L. 2000.) Some organizational cultures are a source of disadvantage. It is important for strategic leaders to understand, however, that whether the firm’s culture is functional or dysfunctional, their work takes place within the context of that culture. The relationship between organizational culture and strategic leaders’ work is reciprocal in that the culture shapes how they work while their work helps shape an ever-evolving organizational culture (Steven L. 2000.)
Organizational culture, the dominant cultures is what we are actually referring to: the organizations values that it preaches and sheared most widely by it employee’s .due to globalization, organizations are characterized by various divisions, occupational groups and geographical regions. Some subcultures enhance the dominant culture by espousing parallel
Assumptions, values, and beliefs; others are called countercultures because they directly oppose the organization’s core values. Subcultures, particularly countercultures, potentially create conflict and dissension among employees, but they also serve two important functions. First, they maintain the organization’s standards of performance and ethical behavior. (Steven L. 2000.)
According to the OCP framework, companies that have innovative cultures are flexible, adaptable, and experiment with new ideas. These companies are characterized by a flat hierarchy and titles and other status distinctions tend to be downplayed. For example, W. L. Gore & Associates is a company with innovative products such as GORE-TEX?? (the breathable fabric that is windproof and waterproof), Glade dental floss, and Elixir guitar strings, earning the company the distinction as the most innovative company in the United States by Fast Company magazine in 2004.
Companies with aggressive cultures value competitiveness and outperforming competitors; by emphasizing this, they often fall short in corporate social responsibility. For example, Microsoft is often identified as a company with an aggressive culture.
The OCP framework describes outcome-oriented cultures as those that emphasize achievement, results, and action as important values. A good example of an outcome-oriented culture may be the electronics retailer Best Buy. Having a culture emphasizing sales performance, Best Buy tallies revenues and other relevant figures daily by department. Employees are trained and mentored to sell company products effectively, and they learn how much money their department made every day.Copeland, M. V. (2004, July).
Stable cultures are predictable, rule-oriented, and bureaucratic. When the environment is stable and certain, these cultures may help the organization to be effective by providing stable and constant levels of output.Westrum, R. (2004, August).
People-oriented cultures value fairness, supportiveness, and respecting individual rights. In these organizations, there is a greater emphasis on and expectation of treating people with respect and dignity.Erdogan, B., Liden, R. C., & Kraimer, M. L. (2006).
Companies with a team-oriented culture are collaborative and emphasize cooperation among employees. For example, Southwest Airlines facilitates a team-oriented culture by cross-training its employees so that they are capable of helping one another when needed. The company also emphasizes training intact work teams.Bolino, M. C., & Turnley, W. H. (2003).
Detailed oriented culture
Organizations usually priorities and emphasize on precision as a frame work as well as paying attention to details are detailed oriented cultural organizations
Organizations differ in their cultural content; that is, the relative ordering of beliefs, values, and assumptions. The following companies and their apparent dominant cultures have been conceded: Golden star Wassa limited is a mining company in the western region of Ghana. Responsive and collegial best describes the corporate culture of Golden star Wassa. The Denver, USA, conglomerate is a leader in Gold exploration and production in Ghana. But don’t expect employees to personally take credit for their own successes. Unlike the ‘me first’ cultures found in high technology firms, Golden star emphasizes understated collegiality. Also Frugality is clearly a corporate value at GSR. Everyone’s desks are made from doors. Monitors are propped up on telephone books to avoid paying for monitor stands. Extra chairs are considered an extravagance. ‘By watching your overhead you can spend more on business expansion, and we don’t snap our Suspenders,’ says GSR CEO Michael Hunt.
G-tech system is a soft wear company in Oregon. This company treats dogs like common CD- ROM’s.this is a please where it is not unusual to see a company chief executive shearing hall with a dog. There are hundred pets within the organization. For some staff it is work place therapy but for others it is a chance to work long hour’s guilt free. One employee said, ‘You probably don’t cut off as early because you want to run home and let the dog out, feed the dog, that kind of thing. You don’t do that because you’ve got it here with you.’ however there are rules within the firm which are no barking, no meetings, no fleas. When caught relieving itself inside the building three times, then doggy has to stay home. But dogs usually behave, gathering around the water cooler, or visiting offices that are known for their treats. It also seems that pets are bringing people closer together. One woman employee noted, ‘I probably wouldn’t have half of the visitors that I have if I didn’t have the dog.’ And while dogs seems to dominate this company’s image, even having conference rooms named after them.
Collegiality, informality, and a focus on doing whatever it takes to increase personal productivity are the cultural values expressed at G-Tech systems. G-Tech systems have gone for the more relax informal culture that wants people to be comfortable and has dropped the corporate appearance and thus become more productive. A cultural artifact is defined as the observable symbols and signs of an organization’s culture. The presence of personal pets is an atmosphere that visitors will notice when they visit G-Tech systems. The presence of these pets is a strong symbol to visitors that the company values its employees and wants them to feel at home while they are at work. Several of the employees interviewed at G-Tech said that the dog policy is one of the primary reasons they chose to work at the firm. In the competitive world of high technology talent, the ability to retain key people through perks such as that used by G-tech systems is vitally important
4) Think about your post-graduation job search as a strategic decision. How would the strategic management model be helpful to you in identifying and securing the most promising position?
Strategic management is the set of managerial decision and action that determines the long-run performance of a corporation. It includes environmental scanning (both external and internal), strategy formulation (strategic or long range planning), strategy implementation, and evaluation and control. The study of strategic management therefore emphasizes the monitoring and evaluating of external opportunities and threats in lights of a corporation’s strengths and weaknesses. Hunger D & Wheelen T.L, 2002)
Strategic management is concerned primarily with actions organizations take to achieve competitive advantage and create value for organizations and its stake holders. (Hoskisson et al. 2000) this definition from Hoskission can be divided into two on is creating competitive advantage. That is finding ways for customers to give them their money. But also in creating the competitive advantage one will also want to give value to the customer as well as recapture value to the organization that is making profit, of which without it the organization will be stuck.
Strategic business model refers to the sequence of steps that is to be followed to achieve the objectives of a company. Organizations choose different strategic management models based on their convenience. Management models could also be referred to as strategic planning model. This is used to formulate and implement the strategic management plan of an organization. In
A large number of corporations followed a recognized strategic planning model, which is top down in nature. According to this model, strategic planning was a calculated procedure where the top management would design the strategy of the company and after that it was passed on down to the company for implementation.
The steps involved in this strategic planning model were the following:
‘ Situation Analysis
‘ Formulation of Strategies
Using the above strategic management model in identifying and securing the most promising position, I would:
I would set a mission for myself that is the unique purpose that sets me apart from other competitors also seeking the same job type and identify the scope of what am capable of delivering to the company. In short, my mission will describe my individual’s skills, experience, and knowledge areas of emphasis in a way that reflects my personal values and priorities of my strategic decision.
My social responsibility is a critical consideration for a my strategic decision since my mission must express how the I intends to contribute to the organization that will sustain me . As firm needs to set social responsibility aspirations for it, just as it does in other areas of corporate performance, so would I.
I would analyzes the internal skill and quality that I possess, and physical resources. I will also assesse my strengths and weaknesses in relation to the management and organizational structure of the position. Finally, I will contrasts my past successes and traditional concerns with my current capabilities in an attempt to identify my future capabilities.
I will consider my external environment which consists of all the conditions and forces that affect my strategic options and define my competitive situation. The strategic management model shows the external environment as three interactive segments: the remote, industry, and operating environments. I will consider those that am competing with respect to the above three segments
Strategic Analysis and Choice
A continues assessment of my external environment and my personal profile enables me to identify a range of possibly attractive interactive opportunities. These opportunities are possible avenues for me to balance my skills to the position within the organization. However, the position responsibilities will be screened through the criterion of my mission to generate a set of possible and desired opportunities. This screening process results in the selection of options from which a strategic choice is made.
The results that a professional like me seeks over a multiyear period are my long-term objectives. Such objectives typically involve some or all of the following areas: income, career development, knowledge to be gained, productivity, employee relations and public responsibility.
Generic and Grand Strategies
Many individuals explicitly and all implicitly adopt one or more generic strategies characterizing their competitive orientation in the marketplace. Low cost, differentiation, or focus strategies define the three fundamental options. Enlightened managers seek to create ways their firm possesses both low cost and differentiation competitive advantages as part of their overall generic strategy. They usually combine these capabilities with a comprehensive, general plan of major actions through which their firm intends to achieve its long-term objectives in a dynamic environment. Called the grand strategy, this statement of means indicates how the objectives are to be achieved.
Action Plans and Short-Term Objectives
Actions plans translate generic and grand strategies into ‘action’ by incorporating four elements. First, they identify specific functional skills and actions to be undertaken in the next week, month, or quarter as part of the individual effort to build competitive advantage. The second element is a clear time frame for completion. Third, action plans create accountability by identifying what to do in each ‘action’ in the plan. Fourth, each ‘action’ in an action plan has one or more specific, immediate objectives that are identified as outcomes that action should generate.
Within the general framework created by the business’s generic and grand strategies, each business function needs to identify and undertake activities unique to their function that help build a sustainable competitive advantage. Managers in each business function develop tactics which delineate the functional activities undertaken in their part of the business and usually include them as a core part of their action plan. Functional tactics are detailed statements of the ‘means’ or activities that will be used to achieve short-term objectives and establish competitive advantage.
Strategic Control and Continuous Improvement
Strategic control is concerned with tracking a strategy as it is being implemented, detecting problems or changes in its underlying premises, and making necessary adjustments. In contrast to post action control, strategic control seeks to guide action in behalf of the generic and grand strategies as they are taking place and when the end results are still several years away. The rapid, accelerating change of the global marketplace of the last 10 years has made continuous improvement another aspect of strategic control in many organizations. Continuous improvement provides a way for managers to provide a form of strategic control that allows their organization to respond more proactively and timely to rapid developments in hundreds of areas that influence a business’s success.
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