example low cost Chinese car producers seeking to export into Western markets

Example low cost chinese car producers seeking to

This preview shows page 37 - 38 out of 120 pages.

example, low-cost Chinese car producers seeking to export into Western markets need to offer not only cars that are cheap, but cars that meet acceptable norms in terms of style, service network, reliability, resale value and other important characteristics. Cost-leaders ha ve two options here: ● Parity (in other words, equivalence) with competitors in product or service features valued by customers. Parity allows the cost-leader to charge the same prices as the average competitor in the marketplace, while translating its cost advantage wholly into extra profit. The Brazilian steel producer CSN, with its cheap iron ore sources, is able to charge the average price for its steel, and take the cost difference in greater profit. ● Proximity (closeness) to competitors in terms of features. Where a competitor is sufficiently close to competitors in terms of product or service features, customers may only require small cuts in prices to compensate for the slightly lower quality. The proximate cost-leader still earns better profits than the average competitor because its lower price eats up only a part of its cost advantage. This proximate cost leadership strategy might be the option chosen initially by Chinese car manufacturers in export markets, for example. SESSION 9 Strategic Capability It is not only the external environment that matters for strategy; there are also differences between organisations that need to be taken into account. For example, manufacturers of saloon cars compete within the same industry and within the same technological environment, but with markedly different success. BMW has been relatively successful consistently; Ford and Chrysler have found it more difficult to maintain their competitive position. And others, such as Rover in the UK and SAAB in Sweden, have gone out of business (even though the brands as such have been acquired by others). It is not so much the characteristics of the environment which explain these differences in performance, but the differences in their company-specific strategic capabilities in terms of the resources and competences they have. This puts the focus on variations between companies within the same environment and industry and how they vary in their strategic capabilities and arrangements. It is the strategic importance of such capabilities that is the focus of this chapter. Underlying these are two key concepts. The first is that organisations are not identical, but have different capabilities; they are ‘heterogeneous’ in this respect. The second is that it can be difficult for one organisation to obtain or copy the capabilities of another. The implication for managers is that they need to understand how their organisations are different from their rivals in ways that may be the basis of achieving competitive advantage and superior performance. These concepts underlie what has become known as the resource- based view (RBV) of strategy (sometimes labelled the ‘capabilities view’) pioneered by Jay Barney at
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