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Date Created: 03/05/16
Chapter 6: Global Competitors The Globalization of Competition o Global Firm vs. Global Firm Ex. Procter & Gamble (US-based) vs. Unilever (European- based) Ex. Aerospace industry – global buyers and costly R&D Airbus and Boeing George Yip – competition strategies Cross-country subsidization o Use profits from one country to subsidize competitive actions in another country o Ex. Bic used profits from France to attack competitor (Scripto) in Britain, and then in US Scripto had no idea b/c subsidiaries were largely independent of one and other Counterparry o Defending against a competitive attack in one country by counterattacking in another country o Ex. Fuji entered US – Kodak counterattacked in Japan Globally coordinated moves o Mounting a coordinated assault in which competitive moves are made in different countries o Ex. Global rollouts Competing MNCs don’t have time to learn from one market in order to respond in another Targeting of global competitors o Identifying actual and potential global competitors and selecting an overall posture Coke vs. Pepsi Coke leads Pepsi 2:1 Key battlegrounds: o Russia Pepsi entered 30 yrs before Coke Coke still prevailed o China Close in China Coke paid for sponsorship rights in the Olympics Some bottlers handed out Pepsi shirts along the torch route -> 10% of Chinese consumers though Pepsi was an Olympic sponsor o India Coke left when India passed a law requiring the company to share its formula with local partners When the law was repealed Coke delayed coming back Pepsi made the market a priority o Pepsi was established when Coke returned Coke purchased local company with strong market share – but still trails Pepsi Competition remains fierce o Coke accused of hoarding recycled Pepsi bottles o Dunkin’ Donuts and Starbucks Entering India within months of each other o Both firms apply Kip’s strategies Coordinate strategies across markets Leverage knowledge and experience from many national markets Employ vast global resources o Global Firm vs. Local Firm Strategies for Local Firms Global firms often become inflexible o They don’t want to change the strategies that have been successful elsewhere Strong local firms watch global firms’ strategies in other countries o Prepare for global firms’ entry Niraj Dawar and Tony Frost: 4 Strategies for Small Local Firms o Defender Leveraging local assets in market segments where MNCs may be weak Knowledge of local tastes and customs Relationships with local distributors and suppliers Ex. Restaurants in Turkey bring back local dishes to compete with multinational fast-food chains o Extender Expanding into foreign markets similar to their own, using successful practices and competencies that they have already developed in their home market Ex. SAB (South African Breweries, now SAB Miler PLC) used its experience with primitive distribution channels and antiquated production facilities when entering Eastern Europe o Contender Upgrading capabilities to take on MNCs Expanding resources to invest in necessary R&D expenditures and larger scale production that the industries demand Seek out niches that are underserved by competitors Ex. Arcelik o Dodger Local firm “dodges” competition by finding a way to cooperate with its more powerful competitors Many local firms sell out to a multinational firm that wishes to acquire them Abruptly changes the competitive dynamics of the market Ex. Heinz in Indonesia Unilever bought local Bango brand Improved distribution system Surpassed Heinz in the market o Success depends on the type of industry Customization to local markets = competitive asset -> defender & extender Buyer needs vary relatively little among markets & both economies of scale in production and high R&D costs favor enterprises with global strategies and vast resources -> contender & dodger Cultural Attitudes Toward Competition Competition in Europe o Major source of MNCs o Family-owned businesses play a greater role o Suspicious of the stock markets Push companies to focus on short-term goals o Anti-trust laws imported from US Different goal – ensure fairness among competitors in the unified market US favors the consumer Europe favors the firm o European governments intervene to save failing companies more than the US Might be changing Ex. Airlines post-9/11 – European governments didn’t bail them out as much as US governments did Competition in Japan o More intense than in US and Europe o Horizontal keiretsus Keiretsus = “order or system” Six large industrial groups Group companies Technically independent Publicly owned Loosely coordinated by minority cross-shareholdings Keiretsus banks Helps members out in times of trouble Ex. Mazda and the Sumitomo Bank Shares of ownership in group companies o despite low returns o prevent takeovers by competitors o Weak companies are never forced out of the market o Gov’t made it clear that it would allow banks to fail -> Banks became more weary about propping up group companies o US companies are now buying into Japanese firms Competition in Emerging Markets o Traditionally wary of competition o Competitors from emerging markets are beginning to enter international markets Experience working successfully in adverse conditions Ultra low-cost production Frugal innovation Ability to develop new products quickly and cheaply o Major firms in emerging markets State-owned enterprises th Second half of 20 century – governments wanted to decrease their dependence on commodity exports o Rapidly industrialized Private sector couldn’t meet expectations -> state-owned enterprises Advantages o Priority access to financing o May be protected from bankruptcy o May be granted monopoly positions o Possible trade protection Disadvantages o Forced to accept agendas o Large global impact on the oil industry despite trend towards privatization Business groups Different from large corporations o Exclusively or almost exclusively concentrated in their home markets o Participate in many industries Group businesses are often interlinked – hold partial shares of each other Aim to work for the good of the whole Managers move between businesses within the company o Builds trust Core centered around a bank or an insurance company o Became a competitive advantage when financing was scarce Began as family owned enterprises o Families still play a large role today MNCs are more threatening to business groups than they were before o Lifting of protectionist policies -> business groups are more vulnerable o New technology o Quality products at competitive prices o Global brands o Strong financial resources o Compete for the best management o Business groups’ competitive advantage in managing government relations is becoming less significant In response to new threats – groups are rethinking strategies that have worked well in the past Some say groups should become more like MNCs New Global Players Firms from developing countries have become major regional and global competitors Home Country Actions and Global Competitiveness o The Country-of-Origin Advantage Consumers usually favor products from developed countries over those from less developed countries Not limited to products or consumer markets Exists for services and in industrial buyers Complicated by the fact that MNCs produce products in multiple countries Managing Country of Origin Perceptions Move production to a country with positive country-of-origin effect Use a channel that distributes already accepted complementary products Communication and persistence Beyond Quality o Consumer Ethnocentrism Some consumers are disinclined to purchase foreign products completely Believe that they result in job loss and hardship at home Retailers may tend to stock more domestic products Responses to ethnocentrism will likely be limited b/c of the interdependency of the world economy o Consumer Animosity Political objections to purchasing products from a specific country Stable Results from historical relations between countries Situational In response to current economic or political event Social media can further contribute to this animosity Sometimes proves short-lived Disruptions from consumer animosity can linger