Strategic Management Exam Practice

Lecture 3 (13/1)

Globalization

The World is becoming more connected – labor market, product market

Firms compete in global market

Value-chain

Outsource different parts of production (primary activities / supporting activities) to other regions – easy communication across the globe

e.g.

Apple has a sustainable competitive advantage→ not depends solely on single product, but a chain of products and innovation

Generating strategies for Toyota:

1. Identify the competitors of Toyota (competitive rivalry)

e.g. FORD, GM, HONDA

-look at sales data, multimarket contact, elasticity of sales, whether it affects each other’s or not

-Based on strategic group (narrower)

Going out into the world:

• Access to new market
• Access to new factor market e.g. labor market, capital market, market for raw materials, market for management / entrepreneurial resources

*Developing international strategy is pretty much about deciding (i) where to go, (ii) how to go, (iii) how to proceed

1. WHERE TO GO

Diamond model – determines where to go, location decision of company

Goal: market seeking internationalization? Resource seeking internalization?

*What is the reason of going abroad?? Look for cheaper production cost?? Higher demand??

1. Factor condition→ raw materials, production costs e.g. developing chips→ look for places with corn field (natural resources)
2. Related and Supported Industries→ e.g. well educated / professional manpower, the software services in the Netherland is not well-developed
3. Demand Condition
4. Firm Strategy, Structure and Rivalry→ how competitors lead the industry, learn from competitors

Independent reports – determines where to go

Factual data, e.g. FDI (foreign direct investment) confidence index, Global services location index, country attractiveness report

1. HOW TO GO

Weighing alternative: International entry strategies -

1. Exporting→ e.g. sell cheese to India, test the market’s responses, trial→ no refrigerators / electricity (external factors) in India, cheese melt

-Direct

-Indirect: sell products to middlemen who will sell cheese to India

1. Contracts

-Franchising: most applicable to fast food industry, franchiser maintains a considerable degree of control over the operations and processes used by the franchisee, franchiser helps with things like branding and marketing support

e.g. McDonalds, Subway, 7-11, Dunkin Donuts

-Licensing: individual, keep the brand image consistent, licensing company may exercise control over how its intellectual property is used but does not control the business operations of the licensee