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A host of external factors influence a firms choice of direction and action and, ultimately, its organizational structure and internal processes. These factors, which constitute the external environment, can be divided into three interrelat ed subcategories: factors in the remote environment, factors in the industry env ironment, and factors in the operating environment. The Exhibit suggests the int errelationship between the firm and its remote, industry, and operating environm ents. In combination, these factors form the basis of the opportunities and thre ats that a firm faces in its competitive environment.

2.1 INDUSTRY ENVIRONMENT - PORTERS FIVE FORCES MODEL The nature and degree of competition in an industry hinge on five forces: the th reat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products or services (where applicable), an d the jockeying among current contestants. How Competitive Forces Shape Strategy The essence of strategy formulation is coping with competition. The state of com petition in an industry depends on five basic forces, which are diagrammed 1 Threat of new Entry New entrants to an industry bring new capacity, the desire to gain market share, and often substantial resources. The seriousness of the threat of entry depends on the barriers present and on the reaction from existing competitors that the entrant can expect. The six major sources of barriers to entry are: Economies of scale Product differentiation Capital requirements Cost disadvantages independent of size Access to distribution channels Government policy a Economies of Scale Economies of Scale refer to the savings that companies achieve because of increa sed volume. These economies deter entry by forcing the aspirant either to come in on a large scale or to accept a cost disadvantage. Economies of scale also c an act as hurdles in distribution, utilization of the sales force, financing, an d nearly any other part of a business (including production, research, marketing , and service). b Product Differentiation Product differentiation is the extent to which customers perceive differences am ong products and services. Product differentiation, or brand identification, cr eates a barrier by forcing entrants to spend heavily to overcome customer loyalt y. Advertising, customer service, being first in the industry, and product diff erences are among the factors fostering brand identification. c Capital Requirements The need to invest large financial resources in order to compete creates a barri er to entry, particularly if the capital is required for unrecoverable expenditu res in upfront advertising or R&D. Capital is necessary not only for fixed faci lities but also for customer credit, inventories, and absorbing startup losses. While major corporations have the financial resources to invade almost any indu stry, the huge capital requirements in certain fields, such as computer manufact uring and mineral extraction, limit the pool of likely entrants.

d Cost Disadvantages Independent of Size Entrenched companies may have cost advantages not available to potential rivals, no matter what their size and attainable economies of scale. These advantages can stem from the effects of the learning curve (and the experience curve), prop rietary technology, access to the best raw material sources, assets purchased at pre-inflation prices, government subsidies, or favorable locations. Sometimes cost advantages are enforceable legally, as with patents. e Access to Distribution Channels The more limited the wholesale or retail channels are and the more that existing competitors have these tied up, obviously the tougher that entry into that indu stry will be. Sometimes this barrier is so high that, to surmount it, a new con testant must create its own distribution channels. f Government Policy The government can limit or even foreclose entry to industries, with such contro ls as license requirements, limits on access to raw materials, and tax incentive s. The potential rivals expectations about the reaction of existing competitors also will influence its decision on whether or not to enter. 2 Powerful Suppliers (Bargaining power) Suppliers can exert bargaining power on participants in an industry by raising p rices or reducing the quality of purchased goods and services. A supplier group is powerful if: It is dominated by a few companies and is more concentrated than the industry it sells to Its product is unique or at least differentiated, or it has built up switching c osts It is not obliged to contend with other products for sale to the industry It poses a threat of integrating forward into the industrys business The industry is not an important customer of the supplier group 3 Powerful Buyers (Bargaining power) Customers likewise can force down prices, demand higher quality or more service, and play competitors off against each otherall at the expense of industry profit s. A buyer group is powerful if: It is concentrated or purchases in large volumes. The products it purchases from the industry are standard or undifferentiated. The products it purchases from the industry form a component of its product and represent a significant fraction of its cost. It earns low profits, which create great incentive to lower its purchasing costs . The industrys product is unimportant to the quality of the buyers products or serv ices. The industrys product does not save the buyer money. The buyers pose a credible threat of integrating backward to make the industrys p roduct. 4 Substitute Products By placing a ceiling on prices it can charge, substitute products or services li mit the potential of an industry. They not only limit profits in normal times, t hey also reduce the bonanza an industry can reap in boom times. Substitute produ cts that deserve the most attention strategically are those that (a) are subject to trends improving their price-performance trade-off with the industrys product or (b) are produced by industries earning high profits. Forces Driving Industry Competition 5 Jockeying for Position (Intensity of rivalry) Rivalry among existing competitors takes the familiar form of jockeying for posi tionusing tactics like price competition, product introduction, and advertising s lugfests. This type of intense rivalry is related to the presence of a number of factors: Competitors are numerous or are roughly equal in size and power.

Industry growth is slow, precipitating fights for market share that involve expa nsion-minded members. The product or service lacks differentiation or switching costs, which lock in b uyers and protect one combatant from raids on its customers by another. Fixed costs are high or the product is perishable, creating strong temptation to cut prices. Capacity is normally augmented in large increments. Such additions, as in the ch lorine and vinyl chloride businesses, disrupt the industrys supply-demand balance and often lead to periods of overcapacity and price-cutting. Exit barriers are high. Exit barriers keep companies competing even though they may be earning low or even negative returns on investment. The rivals are diverse in strategies, origins, and personalities. 2.2 STRATEGIC GROUPS COMPETITIVE CHANGES DURING INDUSTRY EVOLUTION

Companies in an industry often differ from each other with respect to the way th ey position their products in the market in terms of Distribution cannels The market segments they serve Quality of their products Technological leadership Customer service Pricing policy Advertising policy and promotions It is possible to observe groups of companies which follow a business model in t he group, but different from the business model followed by companies in other g roups. There different groups of companies are known as STRATEGIC GROUPS. (eg) Pharma industry. Merck and Pfizer Heavy R&D (Proprietary strategic group) focus on developing new, proprieta ry blockbuster drings. Pursue high risk, high return Forest Labs, Mylan labs High price characterize (Generic drug strategic group) Low cost copies of drugs Low R&D Production efficiency Low price characterize Low risk & low returns (Industries can be divided into, fragmented industries, emerging industries, mat uring industries and declining industries.) 1. Fragmented industries: o No firm has significant market share o Most of the firms influence the outcome of the industry o Contain privately owned small- and medium signed companies (eg) service industries, retailing, distribution, wood & metal fabrication, agri cultural products Why are industries fragmented? Low overall entry barriers Absence of economies of scale or experience curve(eg) fishing boats High transportation costs influence size & location of a plant o high in cement, chemical & fluid milk o high in service industry (customer/supplier) Erratic sales fluctuations (Small firms can adapt to changes in output more easi ly than specialized firms) No advantage of size in dealing with buyers or suppliers Diseconomies of scale in some important aspect Low overheads (owner manager) High level of creative contact Highly diverse product line (small plants customize easily) Diverse market needs

Exit barriers (fishing industries) Local regulation (liquor retailing industry)

2. Emerging industries: Created by Technological innovations Emergence of new customer needs Fundamental rules of competition change due to environment Formulating strategy involves indentifying early buyers or early adopters, becau se they influence the industry development. Common characterizes of these industries are: Technological uncertainty (eg) optical fibres 5 ways of manufacturing Strategic uncertainty (no reliable information about competitors, industry sales and market share) high initial costs but steep cost reduction due to small production volume Embryonic companies and spin offs,(leave company & start their own) (Embryonic companies: Emerging industries are characterized by the presence of m any players usually newly formed companies.) First-time buyers (teach the customers) Subsidies (early entrants with new technology) Formulating strategies in an emerging industry Involves uncertainty and risk Rules of competition are not clear Structure of the industry is emerging Identification of competitors is incomplete Due to the above factors firms should leverage on right strategic choices like Shaping industry stretcher (Set rules for competition in areas like pelt polity, pricing strategy & marketing approach) Extreme abilities in industry development (Industry conferences & associations) Changing role of suppliers and channels Shifting mobility barriers 3. Maturing industries Such industries where growth rates reach saturation Maturity stage in not reached at affixed point in time Strategic break troughs may also cause maturity industries to regain their rapi d growth Characteristics of a maturing industry Slowing growth means more competition for market share Firms in the industry sell to experienced, repeat buyers Competition is concentrated on cost and service Manufacturing, mktg, distributing, selling and research methods are often underg oing change New products and applications are harder to come by International competition increases (due to technology maturity & product standa rdization) Industry profits fall during the transition period, sometimes temporarily and so metimes permanently Dealers margins fall, but their power increases. Formulating strategies in maturing industries Sophisticated cost analysis (price pdts correctly) Rationalizing the product mix (cost competition & fight for market share are maj or concerns than broad pdt line and introduction of new varieties) Correct pricing (use average cost pricing and pricing the line method) Process innovation and design for manufacture Increasing scope for purchases Buy cheap assets Buyers selection


Competing internationally (industry in more structured) Declining Industries These industries have decline in sales over a period. Decline in these i ndustries are due to slower economic growth, product substitution, continued tec hnological changes, (eg) electronics, computers & chemicals. Decline can be reve rsed by innovations, cost reductions and changes in other circumstances. Factors that influence competition are Conditions of demand (substitute pdts, shrinkage size of customer group, shift i n buyer taster, sociological & other resource) Exit barriers (specialized assets cant be sold easily) o (govt. & social barriers might discourage a firm from leaving the indust ry) o (Fixed obligation such as labor settlements, maintain spare parts for ex ishing customers, long term contracts to supply or buy inputs) Volatility of rivalry Formulating strategies in declining industries Leadership Niche (identify a segment of the declining industry that will offer stable marke t a high returns) Harvest (optimize its cash flow from the business by reducing the diversity of p roduct line, reaching the no of channels employed, eliminating small customers r educing the quality of service in terms of time, speed of repair Quick divestment (selling early in decline) 2.3 GLOBALIZATION AND INDUSTRY STRUCTURE LPG colorfully stated by T.N. Seshan as Liberalization set of measure and reforms aimed at the creation of an open econo my Privatization refers to the process of selling of state owned enterprises (publi c sector units) to private individuals or corporations. Globalization means the integration of a countrys economy with the global economy The global environment consists of all those factors that operate at the transnational, cross-cultural and across- the border level, having an impact on the business of an organization. Some of the important factors and influences operating in the global environment are Globalization, its process, content and direction Global economic forces, organizations, blocks & forums Global trade and commerce, its process and trends Global financial system, resources of financing & accounting standards Global demographic patterns and shifts Global technological and quality systems and standards Global markets and competitiveness Global legal system and arbitration mechanisms. Globalization has emerged as a potent force owing to global integrationthe intensification of economic linkages among nations- and the internationaliz ation of markets, trade, finance, technology, labor, communication, transportati on and the economic institutions. Porter, in The Competitive Advantage of Nations in his opinion, four natio nal characteristics creates an environment that is conducive to creating globally competitive firms in particular in industries. Four factors are called as diam ond determinants. Diagram in popularly known as Porters diamond.

Two sets of factors impinge upon a firms decision to adopt international strategi es: a) Cost pressures denote the demand on a firm to minimize its unit costs b) Pressures for local responsiveness make a firm tailor its strategies to

respond to national level differences in terms of variables like customer prefe rences and tastes, government policies or business practices. Industry structure is determined by the competitive forces. These forces are fiv e in number: 1. The threat of new entrants 2. The threat of substitute products or services 3. The bargaining power of suppliers 4. The bargaining power of buyers and 5. The rivalry among the exiting competitors in an industry. What is a structure? The arrangement of tasks and subtasks required to implement a strategy. An organization structure specifies three key components that are given below: 1) It identifies the formal reporting relationships, including the number l evels in the hierarchy and the span of control of managers 2) It specifies the grouping of individuals into departments and of departm ents into the total organization. 3) It consists of design of systems to ensure effective communication, coor dination and integration of efforts across departments. (1 & 2 constitute the st ructural framework which is the vertical structure which involves division of la bor and specialization, 3 Components refers to the pattern of interaction among members in the organization and is the horizontal structure.) The vertical structure in designed for exercising control by superiors o ver subordinates work in the organization. The horizontal structure in designed for coordination and collaboration of work among peers in the organization. Characteristic of vertical structure: Specialized tasks Hierarchy of authority Rules and regulation Vertical communication and formal reporting systems Centralized decision making Emphasis on efficiency Characteristics of horizontal structure: Shared tasks Flexible authority Few rules and regulations Horizontal communication and sharing of information Decentralized decision making Emphasis an learning Vertical structures are best suited for organizations making standardized produc ts and services in large volumes, through mass production systems with establish ed technologic, serving a wide market, having customers seeking undifferentiated items for consumption. Horizontal structures are lean and mean organizations with few layers of management, liberal exchange of information between different layers & across d epartments, flexible systems, much delegation of authority. Interrelationship of structure and strategy: DETERMINES AFFECTS Why in structural implementation needed?

Structures for internationalization strategies: We know that there are four types of internationalization strategies: in

ternational, multi-domestic, global and transnational. Each of these internation alization strategies creates its own requirements for organization design and st ructure. Global strategy GLOBAL PRODUCT STRUCTURE Transnational strategy GLOBAL MATRIX STRUCTURE International strategy INTERNATIONAL DIVISION STRUCTURE Multi-domestic strategy GLOBAL GEOGRAPHIC STRUCTURE Pressures of local responsiveness International strategies that create value by transferring products and services to foreign markets where these products and services are not available could be implemented by setting up an international division as part of a hybrid structu re. By using global strategies, organizations adopt a low-cost approach to o ffer standardized products and services globally. A global product structure cou ld serve the need of a global strategy. Structures for implementing international strategies 1. International Strategies: International division structure

2. 3. 4.

Global Strategies: Global Product structure Multi-domestic Strategies: Global Geographic structure Transnational strategies: Global Matrix Structure

2.4 NATIONAL CONTEXT AND COMPETITIVE ADVANTAGE RESOURCES (DIAMOND MODEL) In the mid-1980s, Professor Michael Porter of Harvard Business School developed a framework to assess the competitiveness of regions, states and nations. In the early 1980s, U.S. industry saw its economic competitiveness eroded by Jap anese and European competitors. Porter concluded that classical international tr ade theories, which mainly focused on slowly changing, inherited variables such as natural resources, climate, size of working population, etc., could only partia lly explain why nations gain competitive advantage in a given industry. This obs ervation initiated a four year study of ten major trading nations and 100 indust ries that covered 50% of total world exports in 1985. Successful international industries tend to be located within particular cities and regions. Geographic concentration is vital for firms to efficiently draw on each others resources and capabilities and to benefit from a shared culture and l earning experience, supply capabilities and local infrastructure. Industry clust ers are geographical concentrations of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters lead to productivity in creases, higher innovation rates and faster new business developments. Porter ar gued that productivity is the main factor for international competitiveness and that the standard of living of a countrys population can be improved as a direct result of increases in that factor. Clusters may take different forms between fi rms producing different products across value-added chains or between firms prod ucing similar products at different stages of the same chain. Examples are banki ng in London and New York, chemical transport in Rotterdam, Houston and Singapor e, film in Mumbai and Hollywood and Internet/Software in Silicon Valley and Bang alore. Porters Diamond of competitive advantage model of nations consists of four main a

ttributes that shape the national environment in which local, connected firms co mpete: 1. Factor conditions The nations relative position in vital industrial production factors such as skil led labour or infrastructure, are important determinants of national competivene ss. Both the level of individual factors and the overall composition of the reso urce mix must be considered. Factors can be country specific or industry specifi c. For example, Japans large pool of engineers - reflected by a much higher numbe r of engineering graduates per capita than almost any other nation - has been vi tal to Japans success in many manufacturing industries. 2. Demand conditions The nature of home demand for an industrys products and services requires conside ring both the quantity and quality of the demand. For example, Japans sophisticat ed and knowledgeable buyers of cameras helped stimulate the Japanese camera indu stry to improve product quality and to launch new, innovative models. 3. Related and supporting industries The presence or absence in the nation of internationally competitive supplier an d related industries is a key factor. Until the mid-1980s for example, the techn ological leadership in the U.S. semiconductor industry provided the basis for U. S. success in personal computers and several other technically advanced electron ic products. Adoption of the automobile took off in the USA after the constructi on of a national system of highways and gas stations. 4. Firm strategy, structure, and rivalry The national conditions that determine how companies are created organized and m anaged, as well as the nature and extent of domestic rivalry. For example, the p redominance of engineers on the top-management teams of German and Japanese firm s results in emphasizing the improvement of the manufacturing processes and prod uct design. Furthermore, domestic rivalry creates pressure to launch new product s, to improve quality, to reduce costs and to invest in new, more advanced techn ologies. Porter stated two additional variables that indirectly influence the diamond: 5. Chance events Disruptive developments outside the control of firms and governments that allow in new players who exploit opportunities arising from a reshaped industry struct ure. For example, radical innovations, unexpected oil price rises, revolutions, wars, etc. 6. Government Government choice of policies can influence each of the four determinants. Succe ssful government policies work in those industries where underlying determinants of national advantage are present and reinforced by government actions. Governm ent can raise the odds of gaining competitive advantage but lacks the power to c reate advantages on its own. These six attributes promote or impede the creation of competitive advantages of firms, clusters, and nations. All conditions need to be present and favorable f or an industry/company within a country to attain global supremacy. Managers can use the diamond model during their internationalization efforts to determine if the home market can support and sustain a successful internationali zation effort or to asses in which country to invest next. The model helps entre preneurs decide where to start their next venture. Government officials can use the model for guidance on how to best build a supporting policy framework for a given industry. 2.5 CAPABILITIES AND COMPETENCIESCORE COMPETENCIES Like individuals, all organizations have strengths and weakness that lea d to their having capabilities. These capabilities stand the organization in goo d stead when they complete for resources, customers and market share. In strate gic management we give a lot of importance to an organizations capabilities, as t

hey are for gaining long term objective. Organizational capability rests on an o rganizations capacity and the ability to use its competencies to excel in a parti cular field, thereby giving it strategic advantage. Definition: organizational capability in the inherent capacity or potential of a n organization to use its strengths and overcome its weakness in order to exploi t the opportunities and face the threats in its external environment. It is also viewed as a skill for coordinating resources and putting them to productive use. Without capability, resources-even though valuable and uniqu e-may be worthless. Organizational capability or potential of an organization me ans that it is a measurable attribute. As an attribute, it is the sum total of resources & behavior strengths and weakness, synergistic effects occurring in an d the competiveness of any organization. Strategists are primarily interested in organizational capability because of two reasons. Wish to know what capacity exits within the organization to exploit opportunitie s or face threats Interested in knowing what potential should be developed within the organization so that opportunities could be exploited and threats could be faced in future.. Organizational capability is measured and compared through organizational apprai sal. A few organizational capability factors are Financial capability Marketing capability Operations capability Personnel capability Information management capability General management capability Distinctive competence Competencies are special qualities possessed by an organization that mak e them withstand the pressures of competition in the market place. The net results of the strategic advantages and disadvantages that exist for an organization determines its ability to complete with its rivals Definition: When specific ability in possessed by a particular organization exclusively or r elatively in large measure, it is called a distinctive competence. Many organizations achieve strategic success by building distinctive com petencies around the critical success factors. Critical success factors are tho se which are crucial for organizational success (eg) Creation of a marketing which by supplying highly specialized products to a particular market segment (eg) a two-wheeler, which in more fuel efficient than its competitor products. A distinctive competence is any advantage a company has over its competitors beca use it can do something which they cannot or it can do something better than the y can. It is not weessary for all organizations to possess a distinctive competence. Ne ither do all organizations which possess certain DC, use there for strategic pur poses. Coe or DC serve a useful purpose it they are used to develop a sustained strateg ic advantage through building up of organizational capability. Critical sources factors and distinctive competencies are important issues in en vironmental and organizational appraise. How they are perceived by strategists w ake them important subjective factors in strategic choice. While considering se veral strategic alternatives, strategists could be girded by the distinctive com petencies that the organization possesses and the critical success, factors that ensure success in an industry. The important thing in to focus on the extent o f the match that exist between the competencies and CFs. If the distinctive com petence it has, can lead the organization to build its strategy around the CSf, the success is more likely. (eg) if the CSFs in a particular industy are: low-cost production, ensured haw materials supply and the quality of the ofter-sales service, then an organizati on can evaluate itself on these bases.

Avoiding failures and sustaining competitive advantage Why companies fail When a company loses its competitive advantage, its profitability falls (ie) average or below average. A failing company is one whose profitability in now lower than the average profitability of its competitors (ie) it has lost the ability to attract and generate resources so that its profit margins and invest ed capital are shrinking rapidly 3 reasons for failure: a) Inertia b) Prior strategic commitments c) Icarus paradox Inertia: Says that companies find it difficult to change their strategies and str uctures in order to adapt to changing competitive conditions. Those who play key roles in a decision-making process clearly have more power. Proposal for change trigger battles. Power struggle and political resis tance associated with trying to alter at the way brings on inertia. Prior strategic commitments: This not only limits its ability to instate revivals but may also cause competitive advantage. Resources are not suited for the newly emerging tends in business. Icarus paradox: According to Dancy Miller may companies are dazzled by their early sucde ss that they belive move of the same type of effort in the way to future success . As a result, they become so specialized and inner directed that they lose sig ht of market realities and the fundamental regurkernents for achieving a competi tive advantage. Sooner or later this leads to failure. Miller identifies four major categories among the rising and falling companies, which he calls Craftsmen Builders Pioneers Salesman Steps to avoid failures: 1. Focus on the building blocks of competitive advantage Maintain a competi tive advantage requires a company to continue focusing on all four generic build ing blocks of competitive advance-efficiency. a. Quality, innovation and responsiveness to customers-and to develop disti nctive competencies that contribute to superior performance in these areas 2. Institute continuous improvement and learning: The only constant in the world is change. The only way that a company can maint ain a competitive advantage over time is to continually improve its efficiency, quality, innovation and responsiveness to customers. The way to do this is to re cognize the importance of learning within the organization. He most successful companies are those that are always seeking out ways of improving their operatio ns and in the process is constantly upgrading the value or crating new competenc ies. 3. Track Bust Industrial Practice and use benchmarking One of the best ways to develop distinctive competencies that contributes to sup erior efficiency, quality, innovation and responsiveness to customers in to iden tify and adapt best industrial practice. Only in this way will a company be abl e to build and maintain the resources and capabilities/ (eg) Xerox benchmarked L.L Bean for distribution procedures Deer & company for central company operations P& G for marketing 4. Overcome inertia Overcoming the inertial forces that are a barrier to change within an organizati on is one of the key requirements for maintaining a competitive advantage. 5. The role of luck

Luck plays a critical role in determining competitive success and failure. In t he face of uncertainty some companies just happen to fick the correct strategy. (eg) J.P. Morgan once said, The harder J work, the luckier J seem to get 2.6 BUILDING COMPETITIVE ADVANTAGE Business managers evaluate and choose strategies that they think will ma ke their business successful. Business becomes successful because they possess s ome advantage relative to their competitors. The two most prominent sources of c ompetitive advantage can be found in the businesss cost structure and its ability to differentiate the business from competitors. Business that create competitiv e advantages from one or both of these sources usually experience above average profitability within their industry. Businesses that lack a cost or differentiat ion advantage usually experience average or below average profitability. Two wel l-recognized studies found that businesses that do not have either form of compe titive advantage perform the poorest among their peers, while business that poss ess both forms of competitive advantage enjoy the highest levels of profitabilit y with their industry. Initially managers were advised to evaluate and choose st rategies that emphasized one type of competitive advantage. Often referred to a generic strategies, firms were encourages to become either a differentiation ori ented or low cost oriented company. In so doing it was logical that organization al member would develop a clear understanding of company priorities and as these studies suggest likely experience profitability superior to competitors without either a differentiation or low cost orientation. Thus the challenges for todays business mangers is to evaluate and choose busines s strategies based on core competencies and value chain activates that sustain b oth type of competitive advantage simultaneously. 2.7 RESOURCES AND CAPABILITIES DURABILITY OF COMPETITIVE ADVANTAGE Practically all firms base their business objectives on satisfying their custome rs needs. This is a valuable approach for aligning products, services and objecti ves with existing markets. It satisfies the Opportunities and Threats half of a SWOT (Strenghts, Weaknesses, Opportunities, and Threats) analysis. Resource and competence-based strategy making provides real insight into your firms Strengths and Weaknesses, an aspect many firms neglect. Why? Partly because it is much eas ier to analyze markets that are, so to speak, "out there" than to talk about str engths and weaknesses which are "in here, in you, round this table and just outs ide that door" and partly because there are few pragmatic methods to help manage rs. However the achievement of any of your business objectives is dependent on your strengths and weaknesses. For example, all firms in a market may wish to reduce their new product lead-times but one will do so more quickly and reliably than o thers. Why is that? Is it because of the market? No - it is to do with the resou rces each company has or can access (cash, knowledge, equipment, values, reward systems etc.) and the effectiveness of the management of those resources towards reducing lead-time. Resource-based strategy is the one approach that concentrates on the individuali ty of each firm, the important differences between each firm and its competitors . According to this approach every firm, including yours, is unique. And it is o n the peculiarities that make your firm unique that sustainable competitive adva ntages can be based. Being aware of and then improving and protecting these uniq ue resources and managing them more effectively will reinforce your strengths an d ameliorate your weaknesses and thereby improve your competitive position. Resource and competence-based approaches are particularly valuable when: You are considering changing the boundaries of your business, for example: By acquisition or divestment Entering joint ventures or other partnership arrangements Considering Make versus Buy alternatives Entering new markets Taking on new technologies Disaster is at hand. You are trying to build a more sustainable competitive advantage.

You need fresh perspectives on how to improve your business. You wish to take account of your resources in plans to achieve your objectives. 2.8 STRATEGY IN THE GLOBAL ENVIRONMENT Globalization was the buzzword of the 1990s, and in the twenty first century, th ere is no evidence that globalization will diminish. Essentially, globalization refers to growth of trade and investment, accompanied by the growth in internati onal businesses, and the integration of economies around the world. According to Punnett (2004) the globalization concept is based on a number of relatively sim ple premises: Technological developments have increased the ease and speed of international co mmunication and travel. Increased communication and travel have made the world smaller. A smaller world means that people are more aware of events outside of their home country, and are more likely to travel to other countries. Increased awareness and travel result in a better understanding of foreign oppor tunities. A better understanding of opportunities leads to increases in international trad e and investment, and the number of businesses operating across national borders . These increases mean that the economies around the world are more closely integr ated. Managers must be conscious that markets, supplies, investors, locations, partner s, and competitors can be anywhere in the world. Successful businesses will take advantage of opportunities wherever they are and will be prepared for downfalls . Successful managers, in this environment, need to understand the similarities and differences across national boundaries, in order to utilize the opportunitie s and deal with the potential downfalls. The globalization of business is easy to recognize in the spread of many brands and services throughout the world. For example, Japanese electronics and automob iles are common in Asia, Europe, and North America, while U.S. automobiles, ente rtainment, and financial services are also common in Asia, Europe, and North Ame rica. Moreover, companies have become transnational or multinational-that is, th ey are based in one country but have operations in others. For example, Japan-ba sed automaker Honda operates the largest single factory in the United States, wh ile U.S. based Coca-Cola operates plants in other countries including France and Belgiumwith about 80 percent of that company s profits come from overseas sales. 2.9 STRATEGY AND TECHNOLOGY Technology Management focuses on managing the systems that enable the creation, acquisition and exploitation of technology for competitive advantage and wealth creation through commercialization. Strategic Alignment Model of Business and Technology The business strategy and technology need to be strategically aligned to achieve the companies goals and to achieve the best return on its technology investment s. The integrated business-and-technology plan, shown above, involves an 11-step ma nagement process. In the early phases of the planning process, step (1, 2, 4, 5) the business strategy and technology strategy are developed separately. This in itial separation in the planning effort is desirable for a number of reasons: The two areas of strategic analysis require different expertise. The planning for the business and the technology aspects of the firm is often co nducted at different times. Corporate & technology strategy Technology strategy can be approached from two directions: 1. Identify where technology can contribute most to profit and customer ser vice a strategic analysis taking full account of corporate strategy and the envi ronment 2. Audit current technologies and technology acquisition processes, with th

e objectives, key indicators, governance and competences that drive them.

Technology may mean IT or operating technologies. We have conducted similar proj ects in railways, electricity companies, mines, food & drink, wholesale and reta il distribution.