Restricted National Market Scope (a)- national market development over time- sustainability of national strategies - measuring competitive advantage- inter-market comparison- benchmarking*

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LowHighMarket Share ObjectiveGlobalNationalS c o p eGlobal High Share StrategyGlobal Niche StrategyNational High Share StrategyNational Niche Strategy

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Understand: (1) the conditions under which restrictive national market scope offers the basis of a sustainable business strategythe distinction between local, national region, national and intl strategiesthe role of product-market demand and competitive interdependencies in influencing the scope of business strategieshow changing external dynamics may influence the success of strategies with restricted national market scope?

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(2)the link between competitive advantage and business performancewhat measure to use in assessing competitive advantage, in what market and over which competitors?the importance of undertaking inter-market comparisonsthe role of benchmarking in assessing and developing performance improvement*

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Restricted national market scope feasiblewhenever product/market demand & competitive interdependencies enable firmsto become or remain viable competitorwithin their national boundariesFocus: on the competitive viability over time

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Restricted national market scopefocused on a single national marketdo not seek to leverage competencies, interdependencies across different national marketscritical: long term viability!What are the conditions for developing and sustaining a competitive advantage?*

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Worldwide

International regional

Intl market entry & development

Restricted national market scope

Figure 5.1 The phase model of international business developmentInternationalisationRetrenchmentPhase 1Phase 2Phase 3Phase 4

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Intl competitor: able to leverage greater competencies => national forced to become internationalWhen is current national competitive strategy is sustainable?

Both external and internal contexts are supportive!

Unstable, if one of them is unsupportive: reorientate itself => move*

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Natl focusIntl focusNatl focusStableStableUnstableUnstableIntl focusExternal context seekingFigure 5.2 International business development matrixInternal context seekingAnalyze current strategic posture as well as dynamics of competitive environment*

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Necessary conditions for natl strategy:product-market demand: national tastes and preferencescompetitive interdependencies: ability to supply market competitively

Sub-dividing natl strategy:local: highly localized, small local areanational regional: number of local marketsnational: cover natl market comprehensivelySize: show marked variation by individual nations (UK, US, Hungary)*

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Local: family owned boulangerie46,000 bread bakery in France (1-2 in a village)1 bakery/1200 people, no change over the last centurySo far: resisted to regional bakeriesCultural differences:- bread brought twice a day - Napoleon: regulated opening hours, purity, pricePosition less secure when:new kinds of bread acceptedchanges in cultural habits (promoted by larger retailers)

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National regional newspaperLocal newspaper: provide local newsNordwest Zeitung: WW-IIStrategic recipe: tailor common format to meet special needs of local marketsfront section exclusively devoted to local communityother three: the same in all editionFurther areal extensionlocal newspapers joinedNZ concentrates on nonlocal section, production, sales, advertisement Partners: on local news, distribution (competed on quality of local content)

NZ: advertising broker: saving in overhead, direct costs

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The national company: South African Breweries Ltd

Virtual monopoly: 98% lager beer, 10th largest in the worldSeries of regional markets, served by a regional brewery- centralization too expensive- homogenous national brand is supplied

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National market development over timeWhy do companies move from being local to national over time?What are the implications for key business functions and processes?How do companies grow and develop over time?*

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External context seekingInternal context seekingLocalNational regionalNationalLocalStableUnstableUnstableNational regionalUnstableStableUnstableNationalUnstableUnstableStableFigure 5.3 Local/national strategy matrixFocus Why?

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ExternalProduct-market demand: greater homogenuity in tast, preferences => acceptance of national brandsCompetitive interdependence: supply local market more competitively becoming a national supplier (economies of scale)Internalinnovative vision of key managers: combined with succession events results in a dramatic change to the strategic intentdevelopment of knowledge, competencies: able to exploit it

National regions: offer an intermediate stage*

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Current phaseNext phaseDiscontinuity:new strategic thrustExternal triggersInternal triggersFigure 5.4: Internal and external triggers to a discontinuity in business development

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ImplicationsExtending business scope: significant challengestraditional ways: no longer be appropriatemanaging important discontinuities in key functions, processesmanagerial needs will changeSpecific needs will vary according to a number of factors*

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CharacteristicsLocal National =================================================Market coveragelocalnational

Productslocal brandnatl brand

Marketingunsophisticatedhighly dev.Human resourcesfew employeesincreases

Operationsvery simplemanagerial needsLogisticsuncomplicatedcomplexity

Financecapital need lowsubstantial

Nr. of competitorsmany, few, fragmented concentrated

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How?How companies move from having local strategy to a national?

Organic (internal growth): in matured market can be difficultAcquisition (external growth): purchasing an established operation; greater risk *

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Internal growthContextindustry is still growingfragmented, not dominated by larger companiesResources requirementsdevelop its own resource basisdifficultneeds managerial and financial resourcesRelative benefits and disadvantagesincremental growth (learn from doing)risk: easier to managestrategy can be abandonslowinitially low level of market penetration (many years)

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External growthContextenter a mature markethighly concentratedsmall number of sellersResources requirementsmay be good managementmay require drastic actions make viablenecessary management and financial resources (?)Relative benefits and disadvantagesimmediate presence in the marketrisk: no guarantees of qualityafter entering not easily reversed (extra costs!)successful integration: management is crucial

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US microbreweriesEarly 80: American beers dull, uninterestingproduced by major national producersindistinguishable in tasteEarly 90: 400 new small local breweriesuniquely flavored productsvariety of local beersmarket nichemarket share in the region: 1%Larger breweries: start producing distinctive beers, too Concentration new entries!!

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