8/6/2019 International Company Strategies
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
1/22
International Company Strategies
Content
CONTENT................................................................................................................................ 1
1 INTRODUCTION............................................................................................................ 3
1.1 GOALS &POLICIES...................................................................................................... 3
1.2 KEY FACTORS FOR STRATEGY ...................................................................................... 4
1.3 TEST OF CONSISTENCY ................................................................................................ 4
1.4 APPROACH (TO DEVELOP A COMPANY STRATEGY) ..................................................... 4
2 BASICS ............................................................................................................................. 6
2.1 DEVELOPMENT OF MODERN COMPANIES ..................................................................... 62.2 STRUCTUAL ANALYSIS ................................................................................................ 8
2.3 DIFFERENCES ON COMPETITION INTERNATIONALLY .................................................. 10
3 GENERIC STRATEGIES TO DEAL WITH COMPETITIVE FORCES .............. 10
3.1 GLOBAL COMPETITIVE ADVANTAGE .......................................................................... 11
4 TECHNIQUES OF ANALYSIS I: OBJECTIVES OF COMPETITOR ANALYSIS
13
4.1 FUTURE GOALS ......................................................................................................... 13
4.2 ASSUMPTIONS ........................................................................................................... 14
4.3 CURRENT STRATEGIES .............................................................................................. 154.4 CAPABILITIES ............................................................................................................ 15
4.5 RESPONSE PROFILE ................................................................................................... 15
4.6 DEFENSIVE CAPABILITY............................................................................................16
5 TECHNIQUES OF ANALYSIS II: MARKET SIGNALS ........................................16
5.1 RECOGNIZE MARKET SIGNALS .................................................................................. 16
5.2 UNDERSTAND THE MARKET SIGNALS......................................................................... 16
6 TECHNIQUES OF ANALYSIS III: COMPETITIVE MOVES............................... 17
6.1 PRISONERS DILEMMA ................................................................................................ 17
6.2 STRUCTURAL CRITERIA FOR INTENSIVE COMPETITION ...............................................186.3 STRUCTURAL CRITERIA FOR LESS COMPETITION ........................................................ 18
6.4 COMPETITIVE MOVES ................................................................................................. 18
6.5 DEFENSIVE MOVES .................................................................................................... 18
7 ENTER NEW MARKETS ............................................................................................20
7.1 STRATEGIC ALTERNATIVES OF GLOBAL MARKET ENTRY ...........................................20
7.2 TIME TO ENTER NEW MARKETS .................................................................................. 20
8 BUSINESS LEVEL STRATEGIES ............................................................................. 21
8.1 BUSINESS LEVEL STRATEGIES: ................................................................................... 21
8.2 CORPORATE
LEVEL
STRATEGIES
............................................................................... 228.3 ISSUE......................................................................................................................... 22
8/6/2019 International Company Strategies
2/22
International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
2/22
8/6/2019 International Company Strategies
3/22
International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
3/22
2004-03-24
1 Introduction
1.1 Goals & Policies
1) how to compete2) what goal3) which policy
figure 01: wheel of competive strategy
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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1.2 key factors for strategy
CompanysStrengths & Weaknesses
- Finances- HR- brand identification- products- technicals
Industrial Environment(opportunities/potentials
& threads/risks)
Personal valueskey persons
- Attitudes- Motives- Needs
Broader Social
Expectations(laws, regulations,political strategies)
Competetiv
Strategy
company intern factors company extern factors
figure 02: strategy influencing factors
1.3 Test of consistency
1) Internal Consistencygoal and policies must fit together
2) Environmental FitDo goals and policies exploit the industrial opportunities?Do they match the societal expectation?Is there a need of special timing between goals and policies?
3) Resource FitDo goals and policies match the available resources?
4) Communication & ImplementationAre goals and policies communicated well to all layers?
Is (new) personnel able to fulfil the tasks to implement goals and policies?
1.4 Approach (to develop a Company Strategy)
A) What is the Business doing now?1. identification of (actual) strategy2. identification of implied assumption
threats
weaknesses
trend
fears
B) What is happening in the environment?
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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1. market trends / industry analysis2. competitors3. social analysis
C) What should the business be doing?1. test if A) fit to B)2. think of alternative strategies regarding B)3. strategic choice
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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2004-03-31
2 Basics
2.1 Development of modern companies
The evolution of firms
1840/50 Mr. Schmidt merchant by selling potatoesManagement role:
he was an AGENT/BROKER (from farmer to market)Risks:
no/low demand at destination
lack of knowledge (e.g. about demand)
Business structure: production by small family farmers
owner(shareholder) = manager
need own resources to investInfrastructure:
Transportation waterways, some railway, horsecarriage
Communication postal, telegraph many individual, regional firms
Finances:
no shares systems,
Production technology: no standards
Government:
not much supporting by government
Conditionschangedbusiness
1910/20 Change to: input production distributionBusiness structure:
owner manager
hierarchy
vertical integration
horizontal expansion (expand product portfolio) divisions came up
taylorism (control performance, manage employees)Production technology:
mass production high volume, low costInfrastructure:
Transport: railroad(!) faster, saver, more reliable
Communication: postal, telegraph, telephoneFinances:
shares came up reporting was necessaryGovernment/Environment:
school education as norm
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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Today Business structure:- high diversification- holdings- wide portfolios mergers & acquisitions high coordination is necessary (e.g. matrix
organisation)Infrastructure:
- Transportation: Automotive, Airways, ContainerShipping
- Communication: Computing, Telecommunications Globalisation firms without boundaries e-Commerce
Finances:- good market for financesProduction Technology:
- high Automation- Computerization
Government:-
scientific books about evolution of firms:
- Alvin Tofler- Naisbitt
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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2004-04-07
2.2 Structual analysis
goal: finding out competitive rules
potential strategies available
2.2.1 Goal of competitive strategies
- to be profitable- to increase market share- to survive- to find a position in the industry- to be able to defend yourself
2.2.2 pressures to companies in the industry
Key forces:
2.2.2.1 Threats of entrantso market shareo increase of profit margino price can be bid downo new resourceso
innovations production processo new capacities
reduce profitability
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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Barriers of Market Entry:
1) Economy of Scale2) Product Differentiation
a. startup lossesb. takes a long time
3) Capital requirements4) Suitable cost5) Access to distribution channels
6) cost disadvantages independent of scalea. patentsb. favourable locations
7) Governmenta. pollution controlb. licensing
2.2.2.2 Internal Rivalry among existing competitors
1) numerous firms balanced competitors2) Slow industry growth firms seeing expansion= market share competition
3) High fixed or storage cost
4) Lack of differentiation
2.2.2.3 Pressure from substitute products
Innovations
product changes
product functions for the customer
2.2.2.4 Power of buyers
- forces low prices
- forces better quality & better services
2.2.2.5 Power of suppliers
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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2004-04-14
2.3 Differences on competition internationally
cost differences among countries different circumstances in foreign markets
different roles of government
differences in goals & resources
structural factors
foreign competitors
wider pool of potential entrants
broader scope of possible substitutes
3 Generic Strategies to deal with competitive forces
1) over all cost leadershipo cost reductiono tight costo overhead controlo buy not make
RISKS OPPORTUNITIES
2) Differentiationo Imageo designo technologyo customer serveo dealer network make, not buy!
3) Focuso better meeting the needs
Strategic advantageuniqueness Low cost position
Industrywide
DIFFERENTIATIONOVERALL COST
LEADERSHIPStrategic
targetParticularsegment
onlyFOCUS
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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Required Skills &Resources
Common organizationalRequirement
Generic Strategy1) Overall cost leadership - product easy to
manufacture- process
engineering skills- international
supervision oflabour
- low cost distributionsystem
- tight cost control- frequently report- structural
organization & clearresponsibilities
- process orientation- quantitive ?
2) Differentiation - strong capability in
R+D- strong marketingabilities
- creative flair- experiences unique
to the industry- product engineering
- coordination
between R&D,marketing- person+product
orientation
3)Focus - -- -
3.1 Global competitive advantage
(The next parts are copied from JohnThanks!)
3.1.1 Sources
Production economy of scale (centralization)
Global experience (selling similar products in other countries)
Global knowledge management
Logistic economy of scale
Marketing economy of scale (use knowledge from other markets)
Purchasing economy of scale
Product differentiation
Mobility of production (consultants, ABB, etc.)
3.1.2 Barriers for reach global competitive advantages
Economicbarriers
Transportation and storage costs Different product needs in different markets
8/6/2019 International Company Strategies
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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Establish distribution channels
Sales requirements (if product requires direct sale service)
Sensitivity to trends (fashion, high-tech)
Lack of global demand
Managementbarriers
Distribution channels
Marketing media
Cost effective way to reach consumers
Rapidly changing technology
InstitutionalBarriers Governmental barriers (tariffs and duties, quotas, etc.) Preferential procurement
Instance for R&D
Tax laws
Resource limitations
Labor market policy
Culture
8/6/2019 International Company Strategies
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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Thanks to Andrea! - 2004-04-21
4 Techniques of Analysis I: objectives of competitor analysis
1) profile of nature and success of comp. strategy2) probable responses3) reaction to industry changes + environmental events
4 diagnostic components of competitor analysisWhat drives the competitor? What is the competitor doing or can do?
1) FUTURE GOALS 3) CURRENT STRATEGY
2) ASSUMPTIONS 4) CAPABILITY
COMPETITORRESPONSE
PROFILE
Satisfaction with position? likely strategy shifts or moves provocation to ratalation
First step: Which competitors all existing significant competitors potential competitors that probably will be in your industry
o firms easily overcome entry barrierso firms with obvious synergieso obvious extension of corporate strategy
Second step
4.1 Future Goalssatisfaction with market position + financial results -> change?
Diagnostic questionsA: Business goals
1. Financial goals2. Attitude to risks3. organizational values
4. organizational structure- allocation of power and responsibility- status of functional areas
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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5. control + incentives6. Accounting-system7. Kind of managers
- CEO- younger managers (come from outside or "internal school"?)
8. Fractions9. Composition of board10. Formal restrictions
B: Corporation1. Overall result of the corporation-units2. strategic importance (of the unit for the corporation)3. Why the business unit causes?4. relationship between the business unit and the corporation
5. recruiting policy6. emotional attachment
C: Portfolio Analysis and competitors goalsThree by three Matrix
Company /Industry AttractivnessProbable Strategies
Industry Attractiveness
high middle lowhigh 1 1 2
middle 1 2 3
Business
unit
posttion
low 2 3 3
Criteria [Business unit position] Criteria [Industry Attractiveness]1. size2. growth3. market position4. image
5. employees..
1. size2. market growth3. competitive structure4. technological role
5. social role
1: Build strategy2: Hold Strategy3: Harvest Strategy
4.2 Assumptions
o identify "blind spots"o perception of itself
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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o perception of environmento Perception of future demand of the products ?o Perception of strength and weakness themselves and their competitors analysing the current strategy
o History of .o Financial performance past + present comparisono market position past and presento major events (energy shortage, currency fluctuation, )
4.3 Current Strategies
identify the strategy as the key operation policy
4.4 Capabilities
Analysis of the competitors strength and weaknesses- R&D- Technology Strength- Financial Strength- cash flow- human resources- Products, Brand, Product line- Customer Relation- Sources
- Supplier-Relationship- Resources- Overall costs- Marketing skills- Dealer Distribution channels
1) CORE capabilities2) Ability to grow3) Quick response capability4) adapt to change
4.5 Response Profile
1) offensive move forward2) defensive capabilities3) the best "battle field"
= market segment
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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2004-04-28
4.6 Defensive Capability
1) Vulnerability(Verletzbarkeit,Schwachstelle)2) Provocation3) Effectiveness/Retaliation(Vergeltung)
Event Vulnerability Provocation EffectivenessRetaliation
Strategic Moves by thefirm
cost reduction
increase productcapacity
Environmental Changes
5 Techniques of Analysis II: Market Signals
5.1 Recognize Market Signals
new distribution channels
budget disposition for advertisement
sales values ROI
no. of subsidiaries/ new subsidiaries
market presence / target groups / key market
pricing policy
new products / product line(s)
Promotion
5.2 Understand the market signals
5.2.1 Prior Announcement of moves
We are going to / We plan to
- what- timing
can also be fake, but also in this case there is a strategic interest behind it!
possible strategic interests;
preempting other competitors (to be the first one)
threats of a counter action (to competitors) test of competitor reactions/feelings
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
17/22
minimize provocation (e.g. to avoid battles)
communicate with financial community (e.g. pre-announcingfalling shares because of certain necessary activities)
5.2.2 Announcement of results or actions after occurring
intention to surprise
more reliable than Prior Announcement of moves
5.2.3 Public discussions of their industry in general
Comments on industry / market situation (e.g. influence of unemployment toChristmas business)
possible intention: implicate certain views/assumption also to competitors/customers to evaluate environment (e.g. to politics)
5.2.4 Competitors dismiss & explains of their own moves
5.2.5 Competitors tactics relative to what they could have done
5.2.6 Manner in which strategic changes are initially implemented
5.2.7 Divergence between past goals and strategic & tactics
6 Techniques of Analysis III: Competitive Moves
6.1 Prisoners Dilemma
cooperate self interest
Blamethe
other 1)
P1 will be
free & gets abonusP2 will hang
2)Both will
hang
Prisoner1
Cooperate
3)Both will befree
4)P2 will befree & gets abonusP1 will hang
Cooperate Blame the otherPrisoner 2
3) Coorperating profit for 2
2) Self-interest strategy loosing allprofit
1) & 4) Win & Bonus, but only for one
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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6.2 Structural criteria for intensive competition
- equal power- limitation of resources- standardization of products- estimated high profit- market saturation- high fixed cost- slow growing industry
6.3 Structural criteria for less competition
- new potential market (no clear segments)- companies with diverse goals- no clear market segments- particular diverse and asymmetric business- niche market with no competitors
6.4 competitive moves
fights cost lots of resourcesbrutal way
1. game of finesse
2. cooperative or non-threatening moves
3. threatening moves
Questions
How likely is a counter strike?
How soon are competitors ready for a counter strike
How effective are they?
How though are they?
How can I influence their counter strike?
6.5 Defensive moves
Prevent a battle
Keeping discipline
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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Show no weak spots
See before things occuring
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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2004-05-05
7 Enter new markets
7.1 Strategic Alternatives of global market entry
1. Broad line global competition++ resources++ relations to governments
2. Global focus3. National focus4. Niche protected
7.2 Time to enter new markets
1. one or manya. Sprinkling strategy
b. Waterfall strategy
2. at what timea. Pioneer good market position but lot of work
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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b. Follower
2004-05-12
8 Business Level Strategies3 phases
1940 -1969 distribution
orientation
1969 -1992 productorientation
1992 - global orientation
Corporategovernance andthe profile strategy
distribution centers centralization globalized
Product structureMarket strategy
equal to national equal to national globalized platformsregional adaptations
Product systems equal to national world wideproduction
global learningtransfer ofproduction principles
8.1 business level strategies:
1) most simply strategy EXPORT
2) simple strategyadvantages:
a. rising distributionb. servicesc. big constant productiond. big sales volume
example: SWATCH
3) multinational strategy (multi-domestic) value chain in different countries more or less independent daughters (no corporate culture)advantages:
a. adaptation to local conditions
example: UNILEVER
4) International strategy strong mother company wide standards corporate cultureadvantages:
a. local adaptation
example:
5) real global strategy value chain completely spread over all daughters
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International TechnologyTransfer Management
Int. Company StrategiesDr. Charlotta Flodell
Summersemester 2004 Lecture Notes by Phillip Kern
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effectiveness plays the main roleadvantages:
a. concentration on economy of scaledisadvantage:
b. no adaptation
example: future of VW, GM6) transnational strategy
advantage:a. adaptation
example: ABB
8.2 Corporate Level Strategies
(Porter)
1. Portfolio Management Marketing
2. Restruction StrategyTypical for Companies identifying other, buying them by acquisitions, findingout why they are not performing very wellTo by companies cheap, restrict and sell them for much money
3. Transfer of resources of business units generic strategy
Build companies up, give them more potential increase the value4. to provide corporate activities for different business units generic strategy
typical for real global companies
8.3 Issue
Industrial Policy:- Key player, power they have, identify them- Relationship to governments in the countries you are playing
key to success
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