Global Competitive Advantage

Global Competitive Advantage - Global Competitive Advantage...

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Unformatted text preview: Global Competitive Advantage Creating Global Competitive Advantage Building Multinational Competencies Global Strategy 1 Strategies for Globalization Exploit similarities across countries Aggregation Global Competitive Advantage Local Customization Adaptation Global Standardization Arbitrage Global Strategy Exploit differences across countries Globalization 2 Localization Global Competitive Advantage Creating Global Advantages from AAA Arbitrage x Exploiting persistent differences Collecting similar demand (or supply) across markets Efficiently replicating a business strategy/model to a new market Adapting an existing business model to a new market Aggregation x Adaptation x x Global Strategy 3 Global Competitive Advantage Bases for Creating Global Advantage Economies of Replication National Differences Non-Market Strategies Global Learning Voigt, Mayer & Liebeskind, 2006 Global Leverage & Flexibility Economies of Scope 4 Global Strategy Economies of Scale Global Competitive Advantage Location Drivers National Differences Non-Market Strategies Global Learning Voigt, Mayer & Liebeskind, 2006 Global Flexibility Global Strategy 5 Global Competitive Advantage Cost and Volume Drivers Economies of Replication Economies of Scale Global Strategy Voigt, Mayer & Liebeskind, 2006 Economies of Scope 6 Global Competitive Advantage Bases for Creating Global Advantage Economies of Replication National Differences Non-Market Strategies Global Learning Voigt, Mayer & Liebeskind, 2006 Global Leverage & Flexibility Economies of Scope 7 Global Strategy Economies of Scale Global Competitive Advantage Bases for Creating Global Advantage National Differences Arbitrage Voigt, Mayer & Liebeskind, 2006 Global Strategy 8 Global Competitive Advantage National differences offer arbitrage opportunities Comparative advantage x Natural factor endowments and Societal endowments Scarce or abundant resources Cost differences in factors of production x Lower labor costs, lower cost of capital, tax advantages, availability of land, etc. "Relatively " high willingness-to-pay Lower transportation costs, etc. 9 Differences in consumer demand x Location advantages x Global Strategy Global Competitive Advantage CAGE-based Arbitrage Opportunities Cultural Arbitrage x French wine Tax regimes, RTAs Flowers from distant locations Low wage schedules 10 Administrative Arbitrage x Geographic Arbitrage x Economic Arbitrage x Global Strategy Global Competitive Advantage Arbitrage Taking advantage of supply and demand mismatches Taking advantage of national differences x x x Factor endowments Industry clusters, etc. Unique consumer demand Consolidated and coordinated global operations Global Strategy 11 Global Competitive Advantage Three Kinds of Arbitrage Classic Trading Arbitrage Relocation Arbitrage Production Integration Arbitrage Global Strategy 12 Global Competitive Advantage Classic Trading Arbitrage Taking advantage of supply and demand mismatches through trading Taking advantage of national differences in supply and demand prices and qualities x x x Factor endowments: Raw materials, Labor Unique consumer demand: US Surfboards in Japan, Unique production capability: Japanese textiles, French and Belgian goldsmithing Global Strategy 13 Global Competitive Advantage Relocation Arbitrage Taking advantage of differences in endowments through activity relocation Activity location depends on country differences: Cost and quality of inputs and processes Porter's Diamond Factors Risks and Uncertainties Transport costs Tariffs 14 Global Strategy Global Competitive Advantage Production Integration as Arbitrage Economies of scale or scope across countries/regions/globe Where integrating and trading outperforms replication TENSION between scale/scope economies on the one hand and commitment, tariffs, and transport costs on the other 15 Global Strategy Global Competitive Advantage Integration and the Value Chain REMEMBER: Integration can take place at any point in the value chain: Local selling, global sourcing Global selling, local sourcing Global selling, global sourcing Global Strategy 16 Global Competitive Advantage Bases for Creating Global Advantage Global Learning Voigt, Mayer & Liebeskind, 2006 Global Strategy 17 Global Competitive Advantage Global Learning & Innovation Transfer of learning & innovations across markets From the center to the subsidiaries From the periphery to the center Throughout the network of locations Organizational challenges x Putting the right incentives and processes in place Decentralize collection of knowledge Centralize processes for sharing knowledge across markets and divisions Local loyalties, turf protections, NIH (not-invented here) Intelligence gathering & Sensing Identification of market opportunities 18 Global Strategy Global Competitive Advantage Creating Worldwide Innovations Capture external diversity x x Worldwide stimuli as potential source of competitive information advantage Need to convert "delivery pipelines" into "sensory feelers" Worldwide human resources and capabilities as potential sources of competitive advantage Opportunity to leverage central and local innovations Create true global innovations by linking sensing, response and implementation capabilities Leverage internal variety x x x Global Strategy 19 Global Competitive Advantage Bases for Creating Global Advantage Global Leverage & Flexibility Voigt, Mayer & Liebeskind, 2006 Global Strategy 20 Global Competitive Advantage Global Flexibility and Leverage Managing diversity and volatility across markets manage the risk/exploit the opportunities x Portfolio of national and product markets x Minimize impact of adverse conditions (political or economic) in a single market x Hedging currency fluctuations Competitive actions x x Cross-parrying, multi-market retaliation, etc. Cross-market subsidization (e.g. cross-market cash-flows) Labor, capital, etc. 21 Internal markets for resources x Acquiring undervalued assets Global Strategy Global Competitive Advantage Global Flexibility Macroeconomic Risks Shocks and major trends in macro-environment Political Risks Risks Actions of national governments Uncertainties of competitors actions & reactions Competitive Resource Risks Scarcity of strategic resources 22 Global Strategy Global Competitive Advantage Bases for Creating Global Advantage Non-Market Strategies Voigt, Mayer & Liebeskind, 2006 Global Strategy 23 Global Competitive Advantage Non-Market Strategies Taking advantage of government protection, subsidies, tax holidays, interest-free loans, etc. Taking advantage of government rulemaking that creates barriers for new competitors Global Strategy 24 Global Competitive Advantage Non Market Use of market power to influence industry profitability Collusion implicit or explicit Global Strategy 25 Global Competitive Advantage Bases for Creating Global Advantage Aggregation Voigt, Mayer & Liebeskind, 2006 Global Strategy Economies of Scale 26 Global Competitive Advantage Economies of Scale Economies of scale Expand output in order to achieve lower production costs Lowering costs by expanding in one area Value-added Chain Selecting components of chain to specialize in, and exploiting coordination benefits across activities Global Strategy 27 Global Competitive Advantage Bases for Creating Global Advantage Aggregation Voigt, Mayer & Liebeskind, 2006 Global Strategy Economies of Scope 28 Global Competitive Advantage Economies of Scope Economies of scope Expand into different activities in order to maximize utilization of resources and lower total costs Lowering costs by expanding into different areas Sharing investments and costs across the same or different value chains Sources Shared physical activities Shared external relations Shared learning Global Strategy 29 Global Competitive Advantage Examples of Scope Economies Multi-Product Scope Advantages Shared Physical Assets A factory that can produce several different products or product variations (e.g., Ford) Multi-Market Scope Advantages Global brand name (Coca-Cola) Servicing multinational customers worldwide (e.g., Citibank) Pooling knowledge developed in different markets (e.g., P&G) From Bartlett and Ghoshal, "Transnational Management" Using common distribution Shared External channels for multiple products (e.g., Matsushita) Relations Shared Learning Global Strategy Shared R&D across multiple products (e.g., NEC computer & communications LOBs) 30 Global Competitive Advantage Bases for Creating Global Advantage Economies of Replication Aggregation Voigt, Mayer & Liebeskind, 2006 Global Strategy 31 Global Competitive Advantage Economies of Replication Duplicating successful profit-making activities in new locations May also involve learning advantages costing of replicating a business may fall with cumulative experience Traditional producer or consumer learning advantages Global Strategy 32 ...
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