key concepts in competitive strategy mkt 7460 international business dr. attila yaprak

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Key Concepts in Competitive Key Concepts in Competitive Strategy Strategy MKT 7460 International Business Dr. Attila Yaprak

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Key Concepts in Competitive StrategyKey Concepts in Competitive Strategy

MKT 7460

International Business

Dr. Attila Yaprak

Dr. Attila Yaprak 2

Value ChainValue Chain

Configuration of key company functions that are designed to add value for customers. The way a company organized key processes determines its competitive advantage.

Strategy should guide the firm in value-chain configuration

Enhancing core activities, externalizing others can create value (including partnerships and outsourcing)

Dr. Attila Yaprak 3

Core CompetenceCore Competence

Organizational skills, knowledge, and capabilities that account for past success and can ensure future growth.

These areas of strength need to be constantly cultivated/nurtured, as part of deliberate strategy.

Management must select core competencies selectively and engage the entire organization in continuous embellishment.

Dr. Attila Yaprak 4

CompetitivenessCompetitiveness

1.Key challenge of any business is to achieve and sustain competitiveness. Other goals are secondary.

What is Competitiveness?Superior and consistent performance in terms of the measures that matter--customer loyalty, good flow of new products, profitability, share of market...all relative to principal competitors.

Dr. Attila Yaprak 5

CompetitivenessCompetitiveness

2.Competitiveness is most meaningful in the context of an industry and the global market.

– Key success factors vary according to industry

– More industries are becoming subject to global competition.

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CompetitivenessCompetitiveness

3.Over time, different perspectives on managing become popularized: JIT, TQM, BPR (Business Process Reengineering), Teams, Learning Organization, Empowerment...Management emphasis shifts over time. Nevertheless, the fundamental management process has not changed.Access Define what Seek and Manage Your

Market the Customer Cultivate Value Adding

Opportunity Values Core Process

Competence

Dr. Attila Yaprak 7

CompetitivenessCompetitiveness

4. There is not a single determinant of competitive advantage/marketplace success:– Design

– Cost leadership

– Getting close to customer: Intimacy

– Time to market: Speed

– Ability to recruit best management talent

– Market intelligence and customer research

– Quick to respond to challenges/opportunities

– Maintaining entrepreneurial spirit and fighting stifling bureaucracy

– Ongoing configuration of firm’s value chain

– Partnerships

– Intangibles like vision, leadership

– Luck?

Dr. Attila Yaprak 8

CompetitivenessCompetitiveness

5. Don’t always look for big, radical solutions. Hundreds of little improvements, implemented daily, will add up.

6. The environment of business enterprise (technology, customer, regulation, competitive, etc.) is constantly posing new challenges and opportunities. Ongoing reexaminations and change are unavoidable.

Dr. Attila Yaprak 9

CompetitivenessCompetitiveness

7. Senior leadership has the ultimate responsibility in assessing the need for change, facilitating, and providing directions for it. Ability to rally the entire organization behind change is exceptional.

8. Ongoing benchmarking is essential and valuable.– Systematic and comprehensive audit of company

capabilities can be accomplished through a tool like COMPASS, developed by Michigan State University.

Dr. Attila Yaprak 10

CompetitivenessCompetitiveness

9. Knowledge essential for decision making in global business in multidimensional--too daunting for any one individual in the organization to possess.

10. Internalization, retention, and dissemination of knowledge throughout the organization is just as important as acquiring it.– Decision Support Systems (DSSs) can help; knowledge

does not have to slip away as people leave the organization; it can be institutionalized.

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Phase Key Management Challenge

1. Product OrientationHow to enhance price and performance features

Innovation design

Consumer research

Brand management

Time to market

2. Productivity OrientationHow to achieve higher standards for product cost and quality

Manufacturing technology quality enhancement

3. Process OrientationHow to re-engineer the corporation

Organizing activities not around products

Or divisions but by key processes that create customer value (new product development, customer service, etc.)

Cultivating knowledge, skills, capabilities (core competence) that set the firm apart from competition.

Dr. Attila Yaprak 12

Illustrations of Internationalizing the Value ChainIllustrations of Internationalizing the Value Chain

Stage in Value Chain Types of Collaboration Company Examples

Research & Development International strategic alliancesLicensing/cross licensing

Product Design Design contracting

Manufacturing Global procurementContract manufacturingEquity joint ventures (FDI)Agency agreementsLicensing

Marketing Exporting to distributors/agentsFranchising

Distribution Exporting to end-usersBusiness format franchising

Sales & Service Agency/representative relationships

Dr. Attila Yaprak 13

Consideration in the Choice of Internalizing vs. Externalizing Selected Consideration in the Choice of Internalizing vs. Externalizing Selected Value Adding Activities such as Manufacturing, R&D, & DistributionValue Adding Activities such as Manufacturing, R&D, & Distribution

in the Global Marketplacein the Global Marketplace

Arguments for:Internalization

(Vertical Integration)

Externalization

(Partnering)

Avoid transaction costs (searching, negotiating, communicating, monitoring)

Internal transaction costs may be lower Retain proprietary knowledge Reap the benefits of internal discovery,

organizational learning, strong organizational culture

Avoid dependence on partners (e.g., suppliers, distributions)

Achieve greater efficiency Concentrate on what you do best (enhance

core competences) Achieve flexibility in sourcing Gain speed in getting products to market Free scarce capital to employ where you

have competitive advantage Establish long-term relationships with a

global network of suppliers, distributors and other partners

Exploit national and/or differential advantages of partners

Dr. Attila Yaprak 14

Value Chain for a Pharmaceutical CompanyValue Chain for a Pharmaceutical Company

BasicResearch &Discovery

ProductDevelopment,Testing, andApprovals

InputSourcing &

Manufacturing

Marketing &Distribution

Sales

• Knowledge and capital intensive

• Highly regulated (FDA)

• Typically 18% of sales revenues

• Centralized in a few locations

• Balance across product lines (e.g., cancer,

anti-infectives, CV, CNS)

• Business planning

• Gaining influence

• Speed if critical; market directly at home

and across TRIAD, license in other

markets

• Decentralized/alliances

• Regulated

Dr. Attila Yaprak 15

Value Chain for GMValue Chain for GM

MaterialsSourcing

Parts Production(remain in-house)

• Batteries• Catalytic Converters• Lighting• Electrical and wiring• Ignition• Suspension and steering

Partner or Outsource

• Bearings• Bumpers• Stampings• Axles• Horns

CompleteProduction

FinalAssembly

Marketing

IndependentParts Suppliers

Sales andService

Outsourced toDealers

Joint Venturewith Toyota

Dr. Attila Yaprak 16

Value Chain for Sample Medical Device CompanyValue Chain for Sample Medical Device Company

Design Engineering Production Logistics Marketing

R & D Partnershipwith University

Subcontracted toSpecialty

Manufacturer

PerformedMostly by

FreightForwarder

Joint Venturewith large

Medical DeviceMultinational

Dr. Attila Yaprak 17

Value Chain for Little Caesars’ Enterprises, Inc.Value Chain for Little Caesars’ Enterprises, Inc.

ProductDevelopment

Development andRefinement ofLittle Caesars’

Business Format(Systems)

ProductSourcing andDistribution

FranchiseePartnering

FieldSupport

• By Little Caesars’ food technologists at Farmington Hills

• Unique competitive positioning• Quality assurance

• Blue Line Distributing• Food, equipment, packaging• National and international suppliers• Considerable economies of scale

• Selection, training, developing• Real estate• Architecture/ design• Supplier selection

• Promotion• Training• Managerial

Dr. Attila Yaprak 18

Questions to Ask in Value Chain AnalysisQuestions to Ask in Value Chain Analysis

How, where, and for whom value adding takes place? What are key success factors (speed, efficiency, unique

design, etc.)? What are points of vulnerability? How can the process be made more efficient, streamlined,

or rationalized? What opportunities exist for outsourcing? How can we ensure maximum coordination between

functions? Which activities contribute to gross margins/profitability?

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Why Organizations are Vulnerable?Why Organizations are Vulnerable?

Complacency/inertia Management blinders: ignoring early warning signals Aura of invincibility/arrogance Past strategy becomes ingrained in organizational routines Mixed motives of leadership/desire for status quo Resistance to change from the rest of the organization Organizational bureaucracy Missing leadership and creative vision

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Attributes of Tomorrow’s ManagersAttributes of Tomorrow’s Managers

Motivators, advisers, facilitatorsBe able to rally others in desired directions

Instrumental in setting strategic directionVision for the future of the organization

Managing trade-offsChoices to make re: tech., customers, markets,…

Good negotiators in diverse cultural areasAlso with regulators and government bodies

Intuitive; able to detect weak signals“Sixth” sense; more and readily available information, but reliable?

Bridge knowledge gaps

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Attributes of Tomorrow’s ManagersAttributes of Tomorrow’s Managers

Possessed with a sense of the productGood knowledge of the industry; global architecture

Changing market applications

Not obsessed with the management processNot locked into one mental frame; flatter orp’s?

Flexible and adaptable. Many will change careers…

Willing to gambleTrader/Merchant mentality

Confident to take risks

Entrepreneurial; less like administrators

Good in managing small companies

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National CompetitivenessNational Competitiveness

Why does a nation become a homebase for successful international competitors in an industry?

Possible Answers

Macroeconomic policyCheap and abundant laborBountiful natural resourcesGovernment policyManagement practices… Workforce attitudes…

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Industry CompetitivenessIndustry Competitiveness

A group of competitors that are able to achieve and sustain world-class standards

Key Success Factors

ProductivityInnovation and R&DManufacturing costsEntrepreneurship/Long-term orientationIndustry structure and environment…

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Firm/Enterprise CompetitivenessFirm/Enterprise Competitiveness

Results from how the firm positions itself with respect to choice of markets, products, and competitors.