N: Competitive Strategy for International Business Flashcards
1) Threat of New Entrants, Threat of Substitutes, Competitive Rivalry, Buyer Power, Supplier Power
Five Forces Framework by Michael Porter- represent the key factors that shape the competitive environment of an industry.
- Threat of New Entrants
(Five Forces Framework ) assesses how easily new competitors can enter the market.
- Threat of Substitutes
(Five Forces Framework ) evaluates the potential for alternative products or services to meet customers’ needs.
- Competitive Rivalry
(Five Forces Framework ) examines the intensity of competition among existing firms.
- Buyer Power
(Five Forces Framework ) measures the influence buyers have on prices and terms
- Supplier Power
(Five Forces Framework ) gauges the influence suppliers have on the industry.
2) The Five Forces Framework Analysis (Michael POrter)
- It is a strategic tool for analysing an industry’s attractiveness and potential profitability,
enabling companies to understand competitive dynamics, identify threats and opportunities, and develop effective strategies.
3) Generic Strategies of Cost Leadership, Differentiation, and Focus:
These are three fundamental strategies proposed by Michael Porter to achieve competitive advantage.
- Cost Leadership
Offering lower prices for products or services than competitors.
(One of Michael Porter’s three fundamental strategies proposed to achieve a competitive advantage)
- Differentiation
Focuses on creating distinctive, market-specific products.
(One of Michael Porter’s three fundamental strategies proposed to achieve a competitive advantage)
- Focus (niche)
Targeting specific market segment, niche, or audience, serving their needs exceptionally well.
(One of Michael Porter’s three fundamental strategies proposed to achieve a competitive advantage)
4) Resource-Based Perspective and Tangible and Intangible Resources:
The resource-based perspective emphasizes a company’s internal resources and capabilities as sources of competitive advantage.
“Tangible Resources”
are observable and quantifiable assets like financial resources, physical assets, and technological resources.
(Resource-Based Perspective )
“Intangible Resources”
are harder to quantify but include assets like reputation, brand, human capital, and knowledge.
(Resource-Based Perspective )
(VRIO) Framework:
The Value, Rarity, Imitability, Organization
5) The Value, Rarity, Imitability, Organization (VRIO) Framework:
The VRIO framework evaluates a company’s competitive potential by assessing valuable, rare, hard-to-imitate, and organized resources, aiming to provide a sustainable competitive advantage.
6) Institution-Based Approach to Competitiveness:
This approach considers the influence of formal and informal institutions (rules, regulations, norms, etc.) on a company’s competitive strategy.
It recognizes that institutional factors in different countries can significantly shape the strategies that are feasible and effective.
7) Position, Leverage, and Opportunity Strategies:
These strategies, proposed by Bingham, Eisenhardt, and Furr, offer adaptive approaches to developing business strategies.
- “Position Strategy”
focuses on choosing a valuable and unoccupied strategic position in a stable environment.
- “Leverage Strategy”
uses important resources in existing and new industries in moderately dynamic environments.
- “Opportunity Strategy”
emphasizes learning and deploying simple rules in highly dynamic environments to exploit unexpected opportunities.
8) Contemporary Strategy and Competitiveness Debate:
This debate explores the evolving nature of strategy in today’s uncertain and dynamic business environment. Newer perspectives challenge traditional approaches and propose strategies that focus on longer-term customer relationships, leveraging technology, and adapting to rapidly changing conditions.
1) Threat of New Entrants:
- Evaluates ease of new competitors entering the market.
- Barriers to entry, economies of scale, and distribution access affect threat level.
2) Threat of Substitutes:
- Considers availability of alternatives fulfilling same need.
- Presence of close substitutes impacts industry profitability.
3) Competitive Rivalry:
- Assesses competition intensity among existing competitors.
- Market concentration, growth rate, and differentiation strategies contribute.
4) Buyer Power:
- Evaluates buyers’ bargaining power in the industry.
- Strong buyer power affects pricing, product quality, and terms.
5) Supplier Power:* Examines suppliers’ bargaining power towards the industry.
* Strong supplier power affects input costs, quality, and availability.
Strengths
five forces framework
1) Comprehensive Analysis: of industry dynamics by considering five essential forces in the competitive landscape.
2) Structural understanding: aids businesses in comprehending competition’s underlying factors, including entry barriers, buyer-supplier power, and rivalry.
3) Strategy insights: Framework aids businesses in identifying industry factors, making informed decisions, and crafting effective strategies.
4) Predictive power: by evaluating forces like new entrants and substitutes, predicting industry disruptions and shifts.
c) Apply . Let’s have an example of how the 5 Forces Framework can be applied for industry analysis:
Industry Example: E-commerce Retail
9) Articulate the generic strategies of cost leadership, differentiation, and focus:
Resource-Based Approach to Competition:
Tangible Resources
Intangible Resources Capabilities
Tangible Resources:
physical assets owned by a company, such as financial capital, infrastructure, machinery, and inventory. They are easily measurable and observable, forming the foundation of a company’s operations.
Intangible Resources:
non-physical assets contributing to competitive advantage but not easily measurable. These include intellectual property, brand reputation, company culture, knowledge, and relationships with stakeholders.
Capabilities:
a company’s ability to efficiently use its resources to achieve strategic goals. They encompass skills, expertise, knowledge, and processes that enable superior performance compared to competitors.
b) How tangible and intangible resources and capabilities can be utilized to achieve competitiveness:
Utilizing Tangible Resources and Capabilities for Competitiveness
Cost Efficiency:
Efficient production processes and cost-effective operations enable companies like Walmart to offer products or services at lower prices than competitors.
Operational Excellence:
Toyota’s lean manufacturing system exemplifies how efficient use of tangible resources, such as machinery and equipment, can provide a competitive edge.
Utilizing Intangible Resources and Capabilities for Competitiveness
Brand Reputation:
Apple’s innovative and quality brand image has helped differentiate its products and maintain customer loyalty, demonstrating the power of a strong brand reputation.
Innovation and Research: Companies that foster innovation and invest in research and development can consistently introduce new products and technologies, thereby maintaining a competitive edge. Like Google
Customer Relationships: Exceptional service and support can foster strong customer relationships, resulting in increased loyalty and repeat business. like Amazon
11) Apply the VRIO framework to organizational examples to assess the strengths and weaknesses of a business:
The VRIO framework evaluates whether a company’s resources are valuable, rare, inimitable, and organized to exploit opportunities. Apply this framework to evaluate a company’s sustainable competitive advantage through analysis of real-world examples.
Example 1: Apple Inc.
5) Understand the institution-based view on international competitiveness:
The institution-based view examines how formal and informal institutions within a country influence a country’s competitiveness, shaping strategies in specific markets and influencing international business strategies, creating competitive advantages or disadvantages.
Synergy and Hybrid Approaches:
Synergy and Hybrid Approaches:
In some cases, a hybrid approach that combines elements of different strategies may be appropriate. to choose a business strategy
For instance,
a company might aim to establish a unique market position (Position Strategy) while also being agile enough to seize unexpected opportunities (Opportunity Strategy). The choice of strategy should reflect the company’s strengths, the market context, and the desired outcomes.
- Globalization vs. Localization:
