Global Strategy Mike W. Peng c h a p t e r 88 Copyright © 2014 Cengage Learning. All Rights...

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Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Global StrategyGlobal StrategyMike W. PengMike W. Peng

Chapter 8

Managing Global

Competitive Dynamics

Copyright © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Outline

• Strategy as action

• Industry-based considerations

• Resource-based considerations

• Antitrust and antidumping laws

• Attack and counterattack

• Local firms versus multinational enterprises

• Debates and extensions

• The savvy strategist

8–3

Strategy as Action

Figure 8.1Source: C. M. Grimm & K. G. Smith, 1997, Strategy as Action: Industry Rivalry and Coordination (p. 62), Cincinnati: Thomson South-Western.

8–4

A Comprehensive Model of Global Competitive Dynamics

Figure 8.2


Strategy as Action

• Strategy is interaction

• Firms, like militaries, often compete aggressively

• Military principles cannot be completely applied in business

• Business is simultaneously war and peace

• Militaries fight over geography, firms compete in markets

• Markets involve products and geography

• Multimarket competition: Firms engaging the same rivals in multiple markets

• Multimarket competition may result in mutual forbearance


Industry-Based Considerations

• Collusion and “prisoners’ dilemma”

• Industry characteristics and collusion vis-à-vis competition Concentration ratio Industry price leader Homogeneous products High entry barriers vs. low entry barriers High market commonality (mutual forbearance)

8–8

Industry Characteristics and Possibility of Collusion vis-à-vis Competition

Table 8.1


Resource-Based Considerations: VRIO

• Value

• Rarity

• Imitability

• Organization

• Resource Similarity

• Fighting low-cost rivals


Institution-based Considerations

• Formal institutions governing domestic competition: a focus on antitrust

Competition policy

Antitrust policy

Competition/antitrust policy focuses on: collusive price setting, predatory pricing, and extraterritoriality

• Formal institutions governing international competition: a focus on antidumping


Three Main Types of Attack

GambitGambitGambitGambit

ThrustThrustThrustThrust FeintFeintFeintFeint

AttacksAttacksAttacksAttacks

8–13

Thrust (e.g., Microsoft fights Netscape)

Source: Adapted from R. G. McGrath, M. Chen, & I. C. MacMillan, 1998, Multimarket maneuvering in uncertain spheres of influence: Resource diversion strategies (p. 729), Academy of Management Review, 23: 724–740.

8–14

Feint(e.g., Philip Morris fights RJR in the US and CEE)

Source: Adapted from R. G. McGrath, M. Chen, & I. C. MacMillan, 1998, Multimarket maneuvering in uncertain spheres of influence: Resource diversion strategies (p. 731), Academy of Management Review, 23: 724–740.

8–15

Gambit(e.g., Gillette fights BIC in lighters and razors)

Figure 8.7Source: Adapted from R. G. McGrath, M. Chen, & I. C. MacMillan, 1998, Multimarket maneuvering in uncertain spheres of influence: Resource diversion strategies (p. 733), Academy of Management Review, 23: 724–740.


Attack and Counterattack

• Three main types of attackThrustFeintGambit

• Awareness, motivation, and capabilities Is the attack so subtle that rivals are not aware

of it? Is the attacked market of marginal value?Strong capabilities required for counterattacks


Cooperation and Signaling

• SignalingMarket entryTruce seekingCommunication via governmentsStrategic alliances for cost reduction

8–18

How Local Firms in Emerging Economies Respond to MNE Actions

Source: Adapted from N. Dawar & T. Frost, 1999, Competing with giants: Survival strategies for local companies in emerging markets (p. 122), Harvard Business Review, March-April: 119–129.

8–19

• Cell 1 (Dodger)Market conditions:

Industries with high pressures for globalization.Competitive assets based on a superior. understanding

of local markets are not enough.Appropriate strategy: Dodger

Must cooperate with MNEs through JVs with MNEs, agreeing to buyouts by MNEs, and/or becoming MNE suppliers and service providers.

All major Chinese automakers: MNE JV partnersSkoda in the Czech Republic: Sell out to VolkswagenMany post-NAFTA Mexican manufacturers (since

1994): MNE suppliers and service providers

Local Firms versus MNEs (cont’d)

8–20


• Cell 2 (Contender)Market conditions

Local firms find hope even in industries with high pressures of globalization.

Must develop combinative capabilities in integrating core technology with locally adapted design and marketing.

Appropriate strategy: ContenderRapid learning and upgrading of capabilities to approach

those of the MNEs and then to thrust overseas.Chinese cell phone makers (TCL and Bird) vs.

Motorola and Nokia

8–21

Local Firms versus MNEs• Cell 3 (Defender)

Market conditions:Pressures to globalize are relatively low.Primary strengths lie in a deep understanding of

local markets.Appropriate strategy: Defender

Cede some markets to MNEs while building strongholds in other markets by leveraging local assets in market segments which MNEs are weak or unaware of – in essence, a gambit

Bimbo vs. PepsiCo in MexicoAhava vs. cosmetics giants in Israel

8–22


• Cell 4 (Extender)Market conditions

Pressures for globalization are relatively low.Possess skills and assets that are transferable

overseas.Appropriate strategy: Extender

Leverage home-grown competencies abroad by expanding into similar markets – a thrust

Jollibee: Venture out of the PhilippinesAsian Paints: From India to the rest of the

developing world.


Two Most Significant Debates

• Strategy versus IO economics and Antitrust Policy Antitrust laws were created to deal with old realities Anticompetitive or hypercompetitive? US antitrust laws create strategic confusion US antitrust laws, which combat “unfair” practice, may

be unfair, especially to large US firms

• Competition versus Antidumping Two arguments against antidumping restrictions

Difficult to prove the case concerning “cost” Virtually all firms lose money in first year

“Fair trade laws” (such as antidumping laws) in one country - regarded as “unfair” trade laws elsewhere


The Savvy Strategist

• “Strategy as action” highlights the power of creative destruction

• To thoroughly understand the nature of your industry

• To strengthen capabilities that more effectively compete and/or cooperate

• To understand the rules of the game governing competition

• Apply the four fundamental questions

• “Look ahead, reason back”

Global Strategy Mike W. Peng c h a p t e r 88 Copyright © 2014 Cengage Learning. All Rights...

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