Porter notes that “Firms, not individual nations, compete in international markets.”
How does this statement help to explain some of the major challenges facing MNEs?
How do the determinants of national competitive advantage help explain how
Companies can maintain their economic competitiveness?
The industry-based view posits that the degree of competitiveness in an industry largely determines firm performance. The strategic options facing management are numerous - what markets to operate in, what resources to deploy, how to organize procurement, production and distribution, how to compete, etc. In all these respects, management faces not only the problem of identifying options, but also evaluating each of them and then implementing the chosen ones.
As will become apparent from our discussion, the range of possible competitive strategies is wide. This is evident from the different routes to success we observe in different markets. Different companies make different offers to their customers, with different product specifications or service levels, while having different cost implications for themselves and the prices they can command. For the fortunate few, it is their particular offer and mode of business operation that allow them to gain long-term superior performance. There is no magic formula to this, available to all. For, if there were, then all would seek to follow it and in the process the resulting offer would cease to be distinct, being copied by all, thus offering no firm any differential advantage.
NISSAN, Japan's third-largest automaker, returned to quarterly profit and lifted its outlook for the second time, as brisk global sales signal the worst may be over for the auto industry.
Nissan joins Toyota and Honda in raising annual forecasts, underscoring the impact of government stimulus and the improvement in the global economy following the worst downturn in decades.
Nissan initially projected a second straight year of losses, but changed its outlook in November as Chinese government incentives helped sales in that fast-growing market.
Continued success in China, the world's third-largest economy, is vital for the company, some industry analysts say. Nissan's positive results come as Toyota struggles with the worst recall in its history, involving more than 8m vehicles and tarnishing its reputation for industry-leading quality.
Nissan's share price has risen 8 per cent in the past week, while Honda's has risen by 6 per cent. Any further announcements of faults with Toyota's cars could put more upward pressure on its regional rivals and Nissan and Honda could be the chief beneficiaries of Toyota's woes. For spread betters who want to make a short term gain, this could be a profitable trade.
The message behind Porter's conceptualization of competitive strategies is that firms should select and commit to just one basis for competing and devote resources and standardize the organization to this end.
This section takes a critical look at Porter's prescription, examining the practical use of his concepts, the problems associated with putting theory into practice, and the ways in which it appears that many firms have managed to have the best of both worlds - differentiation advantages combined with low-cost positions. First, though, we begin with some observations on the undeniable economic logic behind Porter's concepts of competitive strategies, explaining why respectively cost leadership and differentiation can lead to superior performance.
Economic logic behind competitive strategies
In the case of being a successful cost leader, the firm is endowed with having lower operating costs than its rivals. Then as long as the firm is not at a demand disadvantage relative to its rivals it will always earn more profit than its rivals no matter how intense competition becomes. We can see this through considering two cases. First, consider the situation where the firms compete under mild competitive conditions which lead to the establishment of a market price that allows most firms to earn positive profits. In that case, whatever the market price is, the cost leader will earn a higher profit margin than its rivals. Then, so long as the demand it receives is broadly-equal to each of its rivals, it will earn greater overall profits.
Second, the cost leader has the ability to win a price war in intensely competitive conditions. No matter how low a rival can price, the cost leader can still undercut the rival and make a profit. Indeed, it may even be a profitable strategy for it to drive competitors from the market and capture all their sales. This strategy becomes more profitable the greater the relative cost advantage.
The message from this economic logic is that you cannot lose as a cost leader as long as you are not demand-disadvantaged, and you cannot lose from being a successful differentiator as long as you are not cost-disadvantaged. Clearly, though, these are important caveats to bear in mind if superior performance is to be guaranteed.
Analysis and discussion
Summarise key data and discuss how these findings impact. How might they relate to
Theory and what are the implications for the company and or good practice in the area of
So both strategies can offer superior performance compared with rivals, but which competitive strategy is the right one for you? There are no strict rules to follow here, as much depends on the firm's current position, the specifics of the market and existing competition within it, and the nature of products and services it provides. For instance, the current position is important because reorienting and consequendy repositioning the firm may be no easy task and may involve substantial costs. For example, to pursue more rigorously a focused differentiation strategy may mean giving up existing customers if a move out of a market segment is required. Similarly, shifting emphasis towards low-cost leadership may mean giving up fairly successful differentiation advantages as the frills are dropped. But, more important, repositioning the firm towards a particular competitive strategy is likely to be very expensive if it involves major internal adjustment and there may be a long time lag before the firm is able to operate both efficiently and effectively.
The nature of the product, in terms of how easily consumers can evaluate quality, is likely to be a further important influence on the choice of strategy. 'Search' products, where consumers, and rivals, can easily evaluate the quality attributes of the product, are typically best marketed by following a cost leadership strategy, unless the firm's product has a unique search attribute that rivals cannot immediately emulate (e.g. Coca-cola), in which case a differentiation strategy is appropriate. On the other hand, 'experience' goods, where the product attributes are evaluated after purchase (e.g. food and modes of travel), offer more opportunities to pursue a successful differentiation strategy, since the attributes are less easily emulated by rivals. The same applies to 'credence' goods, where the attributes are only imperfectly evaluated even after purchase, in which case the credibility of the seller, the brand name and the firm's reputation become very important. In this latter case differentiation strategies emphasize 'perceived' quality, rather than actual quality.
The main aim of the company is to achieve its goal and global competitiveness, which is communicated through the vision of the company. After that spread the vision and mission of the organisation and implement the strategy in the company, here the strategy is very important than rearranging the strategy. According to the company vision they are giving more importance to rearrange the strategic positioning and "Writers representing this strategic emphasis are: theirs is an emphasis on content, direction and repositioning rather than process. Yet, a critical factor in the successful repositioning is the internal capability of the organization, generated appropriately chosen change and human resource strategies".
Many companies will compete with global strategies in international marketing not only in the trade or currency exchange, but mainly involved in foreign investment. Every country provides a favourable platform for the company to perform or compete internationally.
From Capabilities to Competitive Advantages
Competitive advantage has a unique capability only when it is exist in the market or applied in the industry.
Both the market and industry has variety of choices that depends on product and geographic dimensions and the choice of market can be decided on the term unique capability. A market can suggest by them if they are more innovative
Based on the structure or architecture the organisation may have unique capabilities and same structure business advantage can often organised in a wide range of markets and company's.
The main concept in the distinct capability is reputations, which play an important role in the market and it is well defined and bounded with in a geographically. Reputation relates to product or a group of products in the market.
Any organisation will have a competitive advantage only if they have a similar organisation in the same market field. The features of a competitive advantage are strength of the company, unique capability, size and structure of the organisation and also the overall profitability of the industry. For example if there is a excessive capacitive in automobiles then even last competitive advantage may not be earn generous profits. Profits mainly depend on the strategy implementations in the firm and give little importance to the unique capabilities. Competitive advantage is mainly evolved from the structure of the market rather than from the different aspects going with in the firm or organisation
Achieving Global Competitiveness
Now a day's most of the companies are hard working to achieve the global competitiveness and a globally generated organisation only have a certain unique capability, retains the flexibility and responsiveness. Each organisation is driven by certain strategies that is processed and developed in the organisation; each organisation will affect that kind of strategy that has been developed. This is particularly true for certain global strategy. It is not a easy task for building up and formulating a global strategy in the market, It will be achieved only if the managers takes a good decision and break down limits when a change is needed in an organisation for achieving the global strategy.
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