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Competitive Advantage of Nations and Trans-national Management Mikkeli 2005 Compiled by Rulzion Rattray.

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Presentation on theme: "Competitive Advantage of Nations and Trans-national Management Mikkeli 2005 Compiled by Rulzion Rattray."— Presentation transcript:

1 Competitive Advantage of Nations and Trans-national Management Mikkeli 2005 Compiled by Rulzion Rattray

2 The Macro Environment POLITICAL ECONOMIC SOCIETAL ENVIRONMENTAL TECHNOLOGICAL VALUES/LIFE-STYLE UNCERTAINTIES INEVITABLES TRENDS Details and focus of analysis will depend on the industry that is being investigated & should be linked to forces that drive competition in that industry

3 Structural Analysis of Industries Michael Porter SuppliersBuyers Substitutes Potential Entrants Industry competitors Rivalry Threat of entry Threat of substitutes Bargaining Power Bargaining Power Political Economic Societal Technological Environmenta l

4 The Resource Environment The Value Chain Michael Porter (1985) Margin Firm’s Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Marketing & Sales Outbound Logistics Service Primary Activities Secondary Activities

5 Resource Environment The Value Chain Michael Porter (1985) Firm’s Value chain Supplier value chains Channel value chains Customer value chains

6 21/10/973Compiled by Rulzion Rattray Generic Competitive Strategies Michael Porter 1985 Cost Leadership Differentiation Cost Focus Differentiation Focus Competitive Advantage Competitive Scope Broad Narrow Adapted from M.E. Porter Competitive Advantage, Free Press, Cited in Thompson, J L, (2002), Strategic Management. 4 th Ed, Thomson Learning. Pp 305. ?

7 Porter’s Diamond Structure & Rivalry of Firms Related and Support Industry Factor Conditions Demand Conditions Adapted From: Porter, M.E., (1990), The Competitive Advantage of Nations, Free Press, Cited in de Wit, B & Meyer, R, (1998), “Strategy Process, Content Context, an International Perspective” 2nd Ed, West.p, pp 775. Porter Contends that a nation's characteristics have a major impact on its firms performance. Government Chance

8 Home Diamond (Porter, M.E. 1990) Firm Strategy Structure, & Rivalry Do management & organisational structures in nation match industry needs? Does industry attract outstanding talent? Do investors goals meet industry needs? Are there capable domestic rivals? Factor conditions: Does the nation have advanced factors of production? Are there advanced factor creating mechanisms? E.g. 1 st rate University research, Top grade Universities. Are selective factor conditions indicators of foreign circumstances? Demand conditions: Are the nations buyers sophisticated & demanding? Does the nation have unusual needs? Do home \customer needs emulate those elsewhere? Does the nation have sophisticated distribution channels Demand conditions: Does the nation have world-class supply industries Are there strong related industries Adapted From: Porter, M.E., (1990), The Competitive Advantage of Nations, Free Press, Cited in de Wit, B & Meyer, R, (1998), “Strategy Process, Content Context, an International Perspective” 2nd Ed, West.p, pp 775.

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10 Trans-national Management Trans-national MNE’s: Degree tested by trans-national index, ratio of: –Foreign assets to total assets –Foreign sales to total sales –Foreign employment to total employment. Highest ranked: –Nestle; no US firms in top 10 Largest MNE General Electric, but this only 75 th on TNI index.

11 Competitive Advantage of MNE’s Pepsi profitable in Soviet Union; despite lack of foreign exchange. Took Russian Vodka in payment. Proctor & Gamble entered China in 1980’s but only became profitable in mid 1990’s. Key Issue of Learning, (Hamel, G. Prahalad, C.K., 1993). –MNE’s Choose to compete in difficult markets in order o upgrade and develop competence and capabilities, i.e. to learn?

12 References de Wit, B & Meyer, R, (1998), “Strategy Process, Content & Context, an International Perspective” 2nd Ed. Ginter P & Duncan 1990, Macroenvironmental Analysis, Long Range Planning, December Hamel, G. Prahalad, C.K., (1993), Strategy as Stretch & Leverage, Harvard Business Review, vol. 71 no. 2. Porter ME 1979, “How Competitive Forces Shape Strategy”, Harvard. Business Review March/April Porter ME 1985, Creating & Sustaining Superior Performance, Free Press. Porter, M.E., (1990), The Competitive Advantage of Nations, Free Press, Cited in de Wit, B & Meyer, R, (1998), “Strategy Process, Content & Context, an International Perspective” 2nd Ed. Stacey, R, 1996, Strategic Management & Organisational Dynamics, Pitman, London. Whittington R., (1993), What is Strategy & does it matter?, Routledge.


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