Chapter 16&17 international marketing

competitive innovation

art of containing competitive risks within manageable proportions

country factor conditions physical resources

: The availability, quantity, quality, and cost of land, water, minerals, and other natural resources determine a country's physical resources. A country's size and location are also included in this category, because proximity to markets and sources of supply, as well as transportation costs, are strategic considerations. These factors are obviously important advantages or disadvantages to industries dependent on natural resources.

layers of advantage

A company faces less risk if it has a wide portfolio of advantages Successful companies build portfolios by establishing layers of advantage on top of one another Illustrates how a company can move along the value chain to strengthen competitive advantage Cost of production, quality, innovation, talent, capital, locations, relationships

searching for loose bricks

A second approach takes advantage of the "loose bricks" left in the defensive walls of competitors whose attention is narrowly focused on a market segment or a geographic area to the exclusion of others. For example, Caterpillar's attention was focused elsewhere when Komatsu made its first entry into the Eastern Europe market. Similarly, Taiwan's Acer Inc. prospered by following founder Stan Shih's strategy of approaching the world computer market from the periphery. Shih's inspiration was the Asian board game Go, in which the winning player successfully surrounds opponents. Shih gained experience and built market share in countries overlooked by competitors such as IBM and Compaq. By the time Acer was ready to target the United States in earnest, it was already the number one PC brand in key countries in Latin America, Southeast Asia, and the Middle East.

competitive advantage

Achieved when there is a match between a firm's distinctive competencies and the factors critical for success within its industry Two ways to achieve competitive advantage Generic strategies—four types Strategic intent—also four types

demand conditions

Composition of Home Demand Size and Pattern of Growth of Home Demand Rapid Home Market Growth Products being pushed or pulled - do a nation's people and businesses go abroad and then demand the nation's products and services in those second countries?

generic narrow strategy *focused differentiation*

Example-world of high end audio equipment......

international division structure

Four factors that lead to this structure Top management's commitment to global operations has increased enough to justify the position Complexity of international operations requires a single organizational unity The firm has recognized the need for internal specialists to deal with the demands of global operations Management recognizes the importance of proactively scanning the global horizon for opportunities and threats

4 competencies of matrix

Geographic knowledge-understanding of economic, social, political, and governmental market and competitive dimensions Product knowledge and know-how-product managers that have a worldwide responsibility can achieve new levels of product competency Functional competence in areas like finance, production, and marketing KNOWLEDGE IN Customer, industry and needs

global competition

Global competition occurs when a firm takes a global view of competition and sets about maximizing profits worldwide The effect is beneficial to consumers because prices generally fall as a result of global competition While creating value for consumers, it can destroy the potential for jobs and profits

country factor conditions human resources

Human Resources: Countries with a plentiful supply of low-wage workers have an obvious advantage in the production of labor-intensive products. On the other hand, such countries may be at a disadvantage when it comes to the production of sophisticated products requiring highly skilled workers capable of working without extensive supervision.

Generic narrow market strategies for creating competitive advantage (target narrowly defined market or customer

Narrow-- based on ability to create more customer value for narrowly targeted segments

Threats of new entrants

New entrants to an industry bring new capacity, a desire to gain market share and position, and, quite often, new approaches to serving customer needs. The decision to become a new entrant in an industry is often accompanied by a major commitment of resources. New players mean prices will be pushed downward and margins squeezed, resulting in reduced industry profitability in the long run. Porter describes eight major sources of barriers to entry, the presence or absence of which determines the extent of threat of new industry entrants. These barriers will be discussed in the next two slides.

Rivalry Among competitors

Price competition Advertising battles Product positioning Differentiation To the extent that rivalry among firms forces companies to rationalize costs, it is a positive force. To the extent that it drives down prices, and therefore profitability, and creates instability in the industry, it is a negative factor. Several factors can create intense rivalry. Once an industry becomes mature, firms focus on market share and how it can be gained at the expense of others. Second, industries characterized by high fixed costs are always under pressure to keep production at full capacity to cover the fixed costs. Once the industry accumulates excess capacity, the drive to fill capacity will push prices—and profitability— down. A third factor affecting rivalry is lack of differentiation or an absence of switching costs, which encourages buyers to treat the products or services as commodities and shop for the best prices. Again, there is downward pressure on prices and profitability. Fourth, firms with high strategic stakes in achieving success in an industry generally are destabilizing because they may be willing to accept below-average profit margins to establish themselves, hold position, or expand.

bargaining power of suppliers

Supplier power in an industry is the converse of buyer power. Microsoft and Intel are two excellent examples of companies with substantial supplier power. Because about 90 percent of the world's nearly 1 billion plus PCs use Microsoft's operating systems and 80% use Intel's microprocessors, the two companies enjoy a great deal of leverage relative to Dell, Compaq, and other computer manufacturers. In fact, it was precisely because Microsoft became so powerful that the U.S. government and the European Union launched separate antitrust investigations. As the trend toward tablets, smartphones, and netbooks continue, Apple and Android or Linux OS will diminish the market share of MS.

global competition and national examples

The automobile industry has also become fiercely competitive on a global basis. Part of the reason for the initial success of foreign automakers in the United States was the reluctance—or inability—of U.S. manufacturers to design and manufacture high-quality, inexpensive small cars. For U.S. manufacturers, small cars meant smaller unit profits. Therefore, U.S. manufacturers resisted the increasing preference in the U.S. market for smaller cars, a classic case of ethnocentrism and management myopia. European and Japanese manufacturers' product lines have always included cars smaller than those made in the United States. In Europe and Japan, market conditions were much different: less space, high taxes on engine displacement and on fuel, and greater market interest in functional design and engineering innovations. First Volkswagen, then Japanese automakers such as Nissan and Toyota discovered a growing demand for their cars in the U.S. market. It is noteworthy that many significant innovations and technical advances—including radial tires, anti-lock brakes, and fuel injection—also came from Europe and Japan. Airbags are a notable exception. In the United States, foreign companies have provided consumers with the automobile products, performance, and price characteristics they wanted. If smaller, lower-priced imported cars had not been available, it is unlikely that Detroit manufacturers would have provided a comparable product as quickly. What is true for automobiles in the United States is true for every product class around the world. Global competition expands the range of products and increases the likelihood that consumers will get what they want. The downside of global competition is its impact on the producers of goods and services. Global competition creates value for consumers, but it also has the potential to destroy jobs and profits. When a company offers consumers in other countries a better product at a lower price, this company takes customers away from domestic suppliers. Unless the domestic supplier can create new values and find new customers, the jobs and livelihoods of the domestic supplier's employees are threatened.

threat of subsitute products

The availability of substitute products places limits on the prices market leaders can charge in an industry; high prices may induce buyers to switch to the substitute. Once again, the digital revolution is dramatically altering industry structures. In addition to lowering entry barriers, the digital era means that certain types of products can be converted to bits and distributed in pure digital form. For example, the development of the MP3 file format for music was accompanied by the increased popularity of peer-to-peer (p-to-p) file swapping among music fans.

flagship firm :business network with 5 partners

The flagship firm is at the center of a collection of five partners; together, they form a business system that consists of two types of relationships. The flagship firm provides the leadership, vision, and resources to "lead the network in a successful global strategy." Key suppliers are those that perform some value-creating activities, such as manufacturing of critical components, better than the flagship. The double-headed arrows that penetrate the flagship and key suppliers in the figure indicate that this is a network relationship, with a sharing of strategies, resources, and responsibility for the success of the network. Other suppliers are kept at "arm's length"; these traditional commercial relationships are depicted diagrammatically by arrows that stop at the border of the flagship. Likewise, the flagship has network relationships with key customers and more traditional, arm's length commercial relationships with key consumers. Key competitors are companies with which the flagship develops alliances such as those described at the end of Chapter 9. The fifth partner is the nonbusiness infrastructure (NBI), comprised of universities, governments, trade unions, and other entities that can supply the network with intangible inputs such as intellectual property and technology. In the flagship model, flagship firms often play a role in the development of a country's industrial policy

country factor conditions technology resources

The presence of this factor is usually a function of the number of research facilities and universities—both government and private—operating in the country. This factor is important to success in sophisticated products and services, and to doing business in sophisticated markets. This factor relates directly to Germany's leadership in chemicals; for some 150 years, Germany has been home to top university chemistry programs, advanced scientific journals, and apprenticeship programs.

Current Issues in Competitive Advantage

Today's business environment, market stability is undermined by: Short product life cycles/Short product design cycles/New technologies/Globalization Escalation and acceleration of competition Innovation/ staying on top/obsolete Hyper-competition - no action or advantage can be sustained for long Competition & strategic interactions: cost quality, timing and know-how, and barriers to entry

collaberating

Use the know-how developed by other companies Licensing agreements, joint ventures, or partnerships one of the legendary licensing agreements of modern business history is Sony's licensing of transistor technology from AT&T's Western Electric subsidiary in the 1950s for $25,000. This agreement gave Sony access to the transistor and allowed the company to become a world leader. Building on its initial successes in the manufacturing and marketing of portable radios, Sony has grown into a superb global marketer whose name is synonymous with a wide assortment of high-quality consumer electronics products. More recent examples of Japanese collaboration are found in the aircraft industry. Today, Mitsubishi Heavy Industries Ltd. and other Japanese companies manufacture airplanes under license to U.S. firms and also work as subcontractors for aircraft parts and systems. Many observers fear that the future of the American aircraft industry may be jeopardized as the Japanese gain technological expertise.

stakeholders

any group of individual that is affected by or takes an interest in polices and practives adopted by an organization

generic narrow strategy cost focus

a firms lower-cost position enables it to focus on a narrow market and offer lower prices than competitors

matrix organization

achieve a balance that brings together diff perspectives and skills to accomplish objectives

strategic intent

catepillar vs komatsu.... catepillar=differentiation...(fanatical about quality and service)(product durability,global spare parts service,, strong netowrk of dealers_ komatsus-lower level of quality at first but later KOMATSU BEAT CATEPILLAR TAKING ADV OF LOW LABOR AND POWER OF DOLLAR... BEAT CATEPILLAR BY HAVING LOWER PRICE AND ETC MANY FIRMS HAVE GAINED COMPETITIVE ADVANTAGE BY disadvantaging rivals through (competitive innovation)

corporate social responsibility

companies obligation to pursue goals and policies that are in societies best interest

Generic*broad market strategies for creating competitive advantage

cost leadership=low price, THE low cost producer, ********(only if barriers exist that prevent competitors from achieving that same low cost

lean production vs US mass producers

mass producers follow basic industry model of arm's length relationship with dealers and often has lack of cooperation and open hostility. no sharing of info between manufacturers and dealers linkage between marketing elements and product pallners i s broken.. LEan=== dealers employees are true proudct specialist,,(financing,service,insurance,amaintenacnce) LINkages between dealers,marketing divisions, and product development teams are optimized

bargaining power or buyers

n Porter's model, "buyers" refers to manufacturers (e.g., GM) and retailers (e.g., Wal-Mart), rather than consumers. The ultimate aim of such buyers is to pay the lowest possible price to obtain the products or services that they require. Usually, if they can, buyers drive down profitability in the supplier industry. To accomplish this, the buyers have to gain leverage over their vendors. One way they can do this is to purchase in such large quantities that supplier firms are highly dependent on the buyers' business. Second, when the suppliers' products are viewed as commodities—that is, as standard or undifferentiated—buyers are likely to bargain hard for low prices, because many firms can meet their needs. Buyers will also bargain hard when the supplier industry's products or services represent a significant portion of the buying firm's costs. A fourth source of buyer power is the willingness and ability to achieve backward integration.

generic broad market strategies for creating competitive advantage

product differentiation-when a firms product has an actual or perceived uniqueness in a broad market... Effective for defending market position

changing the rules of engagement

refuse to play by rules of industry leaders Canon introduced the first full-color copiers and the first copiers with "connectivity"— the ability to print images from such sources as video camcorders and computers. The Canon example shows how an innovative marketing strategy—with fresh approaches to the product, pricing, distribution, and selling—can lead to overall competitive advantage in the marketplace

competitive advantage via strategic intent

strategic intent, growing out of ambition and obsession with winning, as the means for achieving competitive advantage. This approach is founded on the principles of W.E. Deming, who stressed that a company must commit itself to continuing improvement in order to be a winner in a competitive struggle. The essence of strategy lies in creating tomorrow's competitive advantages faster than competitors mimic the ones you possess today. An organization's capacity to improve existing skills and learn new ones is the most defensible competitive advantage of all."

Porter identifies four determinants of national competitive advantage

• Factor conditions • Demand conditions • Related and supporting industries • Firm strategy, structure, and rivalry