CHAPTER : 04COURSE: INTERNATIONAL MANAGEMENT

COURSE INSTRUCTOR : SIR ZULFIQAR FAREED

GROUP MEMBERSS.NO NAME OF STUDENT QUALIFICATION EXPERIENCE

I HIRA NOOR KHAN(GL) MASTERS IN ECONOMICS AND FINANCE

O’LEVELS MATHEMATICS TEACHER/ SECTION HEAD OF PRIMARY

II AQSA MASOOD B.COM ELEMENTARY TEACHER AT AVID SCHOOL

III TAIMUR HASSAN B.COM CASHIER AT SONARI BANK

IV AAMIR ISLAM TEACHER AT KARACHI UNIVERSITY

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TOPICS

• Generic Competitive Strategies.• Competitive Advantage And Value Chain.• Distinctive Competencies.• Offensive and Defensive Strategies.• Traditional Strategy, Formulation apply on MNCs.• Basic MN Diversification.• National Context affects(Convergence, Divergence)

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Generic Competitive Strategies Generic Competitive Strategies

Generic strategies represent very basic ways that both Generic strategies represent very basic ways that both domestic and multinational companies achieve and maintain domestic and multinational companies achieve and maintain competitive advantage.competitive advantage.

Competitive advantage • A competitive advantage is one gained over competitors by offering

consumers better value. You increase value by decreasing prices or increasing benefits and services to justify the higher prices.

The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry:

• Cost leadership• Differentiation• Focus.

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Low Cost Leadership Strategy Companies that adopt a low cost strategy produce or deliver

products or services equal to those of their competitors. Low cost of products without sacrificing quality acceptable for the consumer. Cost saving that improve efficiency any where from the creation of the product.

Differentiation Strategy Differentiation strategy calls for a company to provide a

product or service with distinguishing qualities valued by customers.

• A highly skilled and creative product development team• A strong sales and marketing team. • A company reputation for quality and innovation.

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• Focus Strategy Focus strategy is just what it sounds like: concentrate on a

particular customer, product line, geographical area, market niche, etc. The idea is to serve a limited group of customers better than your competitors who serve a broader range of customers.

It involves focusing the cost leadership or differentiation on a small scale

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COMPETITIVE ADVANTAGE AND COMPETITIVE ADVANTAGE AND VALUE CHAINVALUE CHAIN

• One convenient way of thinking about firm’s activities is called the value chain.

Porter used term Value Chain :To represent all the activities that a firm uses “to design,

produce, market, deliver and support its product”.Porter divide the value chain into Primary and support activities.These activities represent:• The process of creating good and services.• The organizational system necessary to support the creative

activities.

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Primary Activities: Primary Activities: It It involve the physical actions of creating , selling and after

sale services. Early activities dealing with suppliers called Up stream and dealing with distributers are called down stream.

Support Activities:Support Activities: It include the human resource management, organizational

design , control and firm basic technology.

Value chain identifies the area in the process where MNCs can

find resources of differentiation and low cost.

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DISTINCTIVE COMPETENCIESDistinctive competencies are the strengths anywhere in the

value chain that allow a company to outperform rivals in areas such as efficiency , quality , innovation, or customer

service

DISTINCTIVE COMPETENCIES

RESOURCES CAPABILITIES

Resources:

Resources are the inputs into a company’s production or services processes. Resources can be both tangible and intangible such as building, equipment, trained employees,

patents, trademarks, etc.Capabilities:

Capabilities represent the ability of companies to assemble and coordinate their available resources in ways that lead to lower costs or differentiated output.

Sustaining Competitive Advantage• For long-term profitability, successful low-cost or

differentiation strategy must be sustainable.• Sustainable means that strategies are not easily neutralized

or attacked by competitors.• Sustainable leads to capabilities that have four characteristics.

– Valuable capabilities– Rare capabilities– Difficult to imitate capabilities– Nonsubstitutable capabilities

Valuable capabilities: Valuable capabilities create demand for a company’s services or products or give companies cost advantage.

Rare capabilities: Rare capabilities are those that a company possesses but that no competition or only a few competitors also possess.

Difficult to imitate capabilities: Difficult to imitate capabilities are those capabilities that are not easily copied by competitors .

Nonsubstitutable capabilities: Non substitutable capabilities leave no strategic equivalent available to competitors.

Offensive And Defensive Competitive Strategies

Offensive strategies: In offensive strategies, companies directly target

rivals from whom they want to capture market share.

Defensive strategies: In defensive strategies, companies seek to beat back

or discourage the offensive strategies of rivals.

Examples of offensive strategies

• Direct Attacks: Direct attacks include price cutting, adding new features, comparison that show lesser quality in competitors products.

• End-run offensives: with these strategies, companies try to avoid direct competition and seek unoccupied markets.

• Preemptive competitive strategies: These strategies involve being the first to gain a particular advantageous position.

• Acquisitions: This can be the most effective competitive strategy against rivals because the acquired competitor no longer exists

Multinational Diversification StrategyRelated diversification: In related diversification, companies start or acquire

businesses that are similar in some way to their original or core business. Firms choose related diversification for three basic reasons: sharing of activity, transfer of core competencies, and developing market power.

Unrelated Diversification: In unrelated diversification, firms acquire businesses

in any industry. Their main concern is whether a business represents a good financial investment. Businesses can be acquired as long-term investments.

STRATEGY FORMULATION:TRADITIONAL APPROACHES.

Strategy Formulation Is A Process Which Managers Use To Select Strategy For The Company.•Managers Uses Popular Type Of Information Analysis To Formulate Successful strategies.INDUSTRY AND COMPITITIVE ANALYSIS.•Industries identify the main competitive arenas of a companies businesses.•Managers must understand their industries well to formulate good strategies.•Understand the economic character of the industries.Managers knows about the driving forces of change and completion in the industry.

Issues influence strategy selection.

• Market size.• Ease of entry and exit.• Economies of scale in production.• E.g. Market with high growth rate often attract new

competitors.• Companies must prepared to evoke defensive

strategies against new rivals.

Key Success Factors(ksf)• The factors that lead to success in an industry are

called key success factors. like• Innovative technology or product.• Broad product line.• Price advantages• Quality of human resources.• Cost position for raw material.• Experience of firm in business.• R n D quality.• Financial assets .• Product quality.

Company-situation Analysis.

• The most common tool for a company-situation analysis is called SWOT .

• The SWOT has an internal component, which focuses on an organization’s STRENGTHS and WEAKNESSES ,and external component, which focuses on OPPORTUNITIES OR THREATS from the environment.

• Corporate Strategies

Top management’s overall plan for the entire organization and its strategic business units.

• Types of Corporate Strategies

– Growth: expansion into new products and markets

– Stability: maintenance of the status quo

– Renewal: redirection of the firm into new markets

Convergence & Divergence Convergence & Divergence Theory Theory

• The convergence theory increasing similarity of management practice is called convergence.

Cross border competition, trade, mergers & acquisitions provide more opportunities to learn about & copy successful managerial practices from anywhere in the world.

• Divergence theory maintains the opposite, namely that cultural diversity will persist or even be reinforced by the rejection of external team spirit.

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GLOBALIZATION & BOTH GLOBALIZATION & BOTH THEORIESTHEORIES

• There is no doubt that globalization is everywhere. Trade, communication, technology, migration are all areas in which we are becoming more and more globalised. Some suggest that this globalization is fueling convergence. Due to advances in technology such as the Internet.

• It is clear that convergence has occurred particularly in western cultures, with advances in technology greatly aiding all flows of globalization, while on the other hand divergence is also obvious in that globalization has contributed to a greater gap between developed and developing countries.

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National Context

• The national context comprises of respective national cultures & social institutions of any society.

Four key social Institutions : (most like to influence the business environment)• Economic system ( socialism or capitalism )• Level of Industrialization• Type of religion• Educational type

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Effect of globalization on Effect of globalization on convergence strategies for convergence strategies for

MNCsMNCs

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CONCLUSIONCONCLUSION

• MULTINATIONAL STRATEGIC MANAGEMENT BASED ON:

• Generic Strategies of low cost and differentiation.• To compete the rivals of MNCs.• To use Offensive and defensive strategies.• To have related and unrelated portfolios to

formulate the strategies.

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Multinational Managers should :Multinational Managers should :• Determine the Best plan of His/ Her company

and the competitive and general environment.

• Aware of differences because they affect the collaborator and competitor.

• Modify and change strategies in response to new opportunity.

• Tackle other issues related to the strategy .

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