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OUTLIN E
Implications of International Competition for Industry Analysis Analyzing Competitive Advantage within an International Context Applying the Framework (1) International location of production (2) Foreign market entry strategies Multinational Strategies: Globalization versus National Differentiation Strategy and Organization of the Multinational Corporation
International Industries
--aerospace --military hardware --diamond mining --agriculture
Global Industries
--automobiles --oil --semiconductors --consumer electronics
International Trade
Domestic Industries
--railroads --laundries/dry cleaning --hairdressing --milk
LO W
LOW
HIGH
Wiring harness: S. Korea Radio: Assembly: Marketing & distribution: N. America Singapore S. Korea
PROFITABILITY Other things remaining equal, internationalization tends to reduce an industrys margins & rate of return on capital
COMPETITIVE ADVANTAGE
THE NATIONAL ENVIRONMENT
-- National resources and capabilities (raw materials; national culture; human resources; transportation, communication, legal infrastructure -- Domestic market conditions -- Government policies -- Exchange rates -- Related and supporting industries
When exchange rates are well-behaved, comparative advantage becomes competitive advantage.
Chemicals
Machinery and transportation equipment Other manufacturers
.42
.12
-.16
-.19
.20
.34
-.06
.22
-.58
.80
-.68
-.07
.01
.29
.40
Note:
Revealed comparative advantage for each product group is measured as: (Exports less Imports)/ Domestic production
Sustained competitive advantage depends upon dynamic factors-- innovation and the upgrading of resources and capabilities
The critical role of the national environment is its impact upon the dynamics of innovation and upgrading.
FACTOR CONDITIONS
DEMAND CONDITIONS
1. 2. 3. 4.
FACTOR CONDITIONSHome grown resources/capabilities more important than natural endowments. RELATED AND SUPPORTING INDUSTRIESKey role of industry clusters DEMAND CONDITIONSDiscerning domestic customers drive quality & innovation STRATEGY, STRUCTURE, RIVALRY. E.g. domestic rivalry drives upgrading.
National resource conditions: What are the major resources which the product requires? Where are these available at low cost?
Firm-specific advantages: to what extent is the companys competitive advantage based upon firmspecific resources and capabilities, and are these transferable?
Tradability issues: Can the product be transported at economic cost? If not, or if trade restrictions exist, then production must be close to the market.
Country
Stage of Processing
Country
Hong Kong
1 2 3 4 1 2 3 4
Japan
1 2 3 4 1 2 3 4
Italy
U.S.A.
What internal resources and capabilities does the firm possess in particular locations?
What is the firms business strategy (e.g. cost vs. differentiation advantage)?
The importance of links between activity X and other activities of the firm
Key issues: Is the firms competitive advantages based upon firm-specific or country-specific resources and capabilities? Is the product tradable and what are the barriers to/ costs of trade? Does the firm possess the full range of resources and capabilities needed to serve the overseas market? Can the firm directly appropriate the returns to its resources? What transaction costs are involved?
TOYOTA
50%owned
DAEWOO
The Evolution of Multinational Strategies and Structures: (1) 1900-1939Era of the Europeans
The European MNC as Decentralized Federation : National subsidiaries self-sufficient and autonomous Parent control through appointment of subsidiaries senior management Organization and management systems reflect conditions of transport and communications at the time e.g. Unilever, Phillips, Courtaulds, Royal Dutch/Shell.
The Evolution of Multinational Strategies and Structures: (3) 1970s and 1980sThe Japanese Challenge
equipment
Packaged
Cement
Marketing Global Strategies and Situations to Industry Conditions: Firm Success in Different Industries
Consumer Electronics
global integration
Telecommunications Equipment
global integration NEC Erickson
- Global industry
- Matsushita the most successful - Philips the survivor - GE sold out
- Substantial national differentiation, few global scale economies - Kao has limited success outside Japan - Unilever and P&G most successful
- Requires both global integration and national differentiation. - NEC only partially successful - ITT sold out - Ericsson most successful
Tight complex controls and coordination and a shared strategic decision process.
Heavy flows of technology, finances, people, and materials between interdependent units.
2.
3.
4.
5.