summary and action plan

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Topic 6: Generic

Global Business

Strategies Guiding Strategies for Defining

and Directing Business Operations

Generic Deployment/Development Strategy • Deployment Strategies for Compensating Weaknesses

– Strategies Emphasizing External Compensation • Vertical Integration • Conglomerate Diversification

– Strategies Emphasizing Internal Compensation • Turnaround/Retrenchment • Divestiture/Liquidation

• Deployment Strategies for Maximizing Strengths – Strategies Emphasizing External Development

• Horizontal Integration • Concentric Diversification • Cooperative Arrangement

– Strategies Emphasizing Internal Development • Concentration • Market Development • Product Development and Innovation

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Generic Deployment/Development Strategies Defined (1)

• Vertical Integration is merger of companies at different stages of production and/or distribution in the same industry. When a company acquires its input supplier it is called backward integration. When it acquires companies in its distribution chain it is called forward integration.

• Conglomerate Diversification is a type of diversification strategy whereby a firm enters (through acquisition or merger) an entirely different market that has little or no synergy with its core business or technology.

• Turnaround/Retrenchment is a strategy used by corporations to reduce the diversity or the overall size of the operations of the company. This strategy is often used in order to cut expenses with the goal of becoming a more financial stable business. Typically the strategy involves withdrawing from certain markets or the discontinuation of selling certain products or service in order to make a beneficial turnaround.

• Divestiture is selling of, or otherwise disposal of, a firm's assets to achieve a desired objective, such as greater liquidity or reduced debt burden. In accounting, divestiture transactions are recorded as a one time, non-recurring gain or loss. – Liquation – is winding up of a firm by selling off its free (un-pledged) assets

to convert them into cash to pay the firm's unsecured creditors. • Horizontal (Lateral) Integration is the merger of companies at the same

stage of production in the same or relevant industries. When the products of both companies are similar, it is a merger of competitors.

• Concentric Diversification is a type of diversification strategy in which a company acquires or develops new products or services (closely related to its core business or technology) to enter one or more new markets.

Generic Deployment/Development Strategies Defined (2)

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• Cooperative Arrangement is a strategy to enter an arrangement or alliance with another party or parties for expanding the firm’s market access, product development or production.

• Concentration is a strategic approach in which a business focuses on a single market or product – allowing the firm to invest more resources in production and marketing in that one area.

• Market Development is to expand a firm’s business beyond its current market.

• Product Development and Innovation is to expand a firm’s business via developing new/better products.

Generic Deployment/Development Strategies Defined (3)

Entry Strategy and Form of Foreign Presence Entry Strategies

 Indirect Exporting  Direct Exporting  Correspondence and Representation/Service Arrangement  Licensing and Franchising  Equity Participation and Joint Venture  J. V. with Management Contract  Full Ownership – Acquisition  Full Ownership – Greenfield  Other Forms (e.g., strategic alliance, consortia/syndicate, straight

management contract [including turnkeys])  Forms of Foreign Presence

 Multinational/International/Foreign Buyer  Distributor/Agent  Licensee and Franchisee  Contract Manufacturing  Foreign Correspondence/Associate  Joint Venture and Foreign Affiliate  Foreign Subsidiary  Foreign Branch

Exports that are not handled directly by the manufacturer or producer but through an export agent, foreign/domestic distributor, or buying agent.

J. V. with Management Contract is an arrangement under which operational control of an enterprise is vested by contract in a separate enterprise or a minority shareholder that performs the necessary managerial functions.

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Factors Influencing Entry (and Presence) Decision

• Market Size and Potential • Resource Commitments and Capability Requirements • Competitive Advantage • Risks • Need for Control • Profitability and Other Company Objectives • Liability • Market Accessibility and Local Infrastructure • Flexibility • Government Regulations (e.g., IPR Protection, Taxation, Government Controls) • Others (e.g., Technology/Product Nature)

Global Competitive Product Definition

Product Positioning

Product Differentiation

Product Life Cycle

Product Portfolio

Target Country/ Market

Generic Competitive

Strategy

Product Class Identification

Other Analyses

Perceptual Map

Global Competitive Product Definition

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Elements of Competitive Product Definition• Positioning

– the act of designing the company’s offering and image so that they occupy a meaningful and distinct competitive position in the target customers’ minds

• Generic Competitive Strategy – the fundamental competitive position/direction a

company takes in/for a particular market to guide all of its functional strategies as well as its resource allocation to compete against its competitors

• Differentiation – the act of designing a set of meaningful differences to

distinguish the company’s offering from competitors’

Michael Porter’s Scheme of Generic Competitive Strategies (p. 314)

Chapter 9

Industry-wide

Single Segment

Competitive Scope

Source of Competitive Advantage Low Cost Differentiation

Cost Leadership Differentiation

Focus

Czinkota: International Business, 8e

Figure 9.4

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An Alternative Scheme of Generic Global Competitive Strategies

• Cost Leadership Strategies – Strict Price-Based Competition Strategy – Value-Based Competition Strategy

• Non-Cost Differentiation Strategies – Quality-/Status-Based Premium Strategy – Feature-/Function-/Service-Based Differentiation Strategy

• Market Niche (Focus) Strategies – Country-of-Origin Specific Niche (Focus) Strategy – Feature-/Function-Based Niche (Focus) Strategy – Geographic Niche (Focus) Strategy

• Monopolistic Dominance Strategies – Technology-Based Dominance Strategy – Regulation-Based Dominance Strategy – Cartel or Cartel-like Dominance Strategy

• Irregular Strategies – Strict Personal-Relation-Based Account-Specific Exclusion Strategy, Hit-and-Run Strategy, etc..

Country-of-Origin Effect • Country-of-Origin Effect

– stereotyped attitudes toward foreign products in general or products from a specific foreign country

– due to the origin of the brand, the company and/or where the product is made

– can favour or hinder marketing efforts • If the quality is perceived to be low

– Foreign origin of the product can be disguised – Foreign identity of the product can be continued &

consumer attitudes towards the product can be changed

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Tools/Variables for Competitive Differentiation • Product Differentiation

– Features – Performance – Conformance – Durability – Reliability – Reparability – Style – Design

• Service – Ordering Ease – Delivery – Installation – Customer Training – Customer Consulting – Maintenance and

Repair – Miscellaneous

• Personnel – Competence – Courtesy – Credibility – Reliability – Responsiveness – Communication

• Channel – Coverage – Expertise – Performance

• Image – Symbol – Written & Audiovisual

Media – Atmosphere – Events