Converting Global Presence Into Global Competitive Advantage

Global Competitive Advantage

Adapting to Local Market Differences Economies of Global Scale Economies of Global Scope Tapping the optimal sources for activities and resources Maximizing Knowledge transfer across locations

Adapting to Local Market Differences

Increased Market Share Improved Prize realization Neutralizing local competitors

However, it poses certain challenges like; increasing cost structures, can turn out to be misguided, the necessary degree of local adaptation may shift over time as more and more global standardization emerges scenario.

Economies Of Scale
Spreading Fixed costs over larger volume Reducing capital and operating costs per unit Pooling global purchasing power over suppliers Creating Requisite critical mass in selected activities Major challenges being faced include; concentration in one location can have a number of drawbacks.

Economies Of Scope
Refers to multiplicity of regions and countries in which a country markets its products and services. Will be a source of competitive advantage if and the customers despite being global need the delivery of products and services across many markets. Competitive advantage lies in providing coordinated services to global customers and also more market power compared with the competitors through better understanding of its global customer. A mutilocation global vendor serving the need of a global customer can be challenging, conflict between the need for maintaining the centralized control over the product and service and yet the need for local autonomy in the actual delivery of products.

Tapping the optimum Locations for activities and Resources

A firm that can exploit inter country differences (in terms of cost structures and skill levels) better than its competitors will have a competitive advantage. Performance Enhancement Cost Reduction Risk Reduction Challenges: the optimality of location might change, robust coordination is the key as optimal locations will be different for different resources and activities.

Maximizing Knowledge Transfer Across Locations

Faster Product and process innovation Lower costs of Innovation Reduced risk of Competitive Preemption
Challenges it entails; ensuring knowledge sharing, tacit knowledge transfer, not invented here syndrome

Creating Global Competitive Advantage

Designing an optimal architecture Building World Class Competencies Ensuring Frictionless Coordination

Worldwide Strategic Orientations

These organizations can have 4 Strategic orientations: International Strategic Orientation: Global Strategic Orientation Multinational Strategic Orientation The transnational strategic Orientation

3/22/2014

International Strategic Orientation

The goal of this orientation is to increase the total sales by adding revenues from non domestic markets, the existing products and services are extended to non domestic markets. An international division is given the responsibility of marketing, sales and distribution Roles in the international division are staffed with volunteers from the parent company.

3/22/2014

11

Global Strategic Orientation

This is a strategy for marketing standardized products in different countries. Example, office equipment, consumer goods etc. The goal of efficiency dominates the strategy; production efficiency is achieved by sales volumes and a small number of large manufacturing plants and managerial efficiency is achieved by centralizing the product design, manufacturing and marketing decisions. Employee selection is ethnocentric.
3/22/2014

12

Multinational Strategic Orientation

This is the kind of strategy that is characterized by a product line that is tailored to local conditions and is best suited to markets that vary from country to country. Goal is local responsiveness through specialization. Operations are decentralized, planning is centralized. Employee selection is Polycentric.

3/22/2014

13

The transnational strategic Orientation

Most complex; reflects the belief that any product or service can be made anywhere and sold everywhere. They organize themselves in network structures. These are decentralized and robust worldwide coordination. Employee selection is geocentric.

3/22/2014

14