Understanding Global Competition and Strategies Moves

Understand the structure of Global Competition and resulting strategic options.

The Globalization of Competition

An inevitable consequence of globalization of markets is the growth of intense competition on a global scale.

Liberalization, deregulation and privatization are the three forces that are transforming the global business environment and lead to a greater number of competitors and more intensive competition.

If, when expanding abroad, a company encounters the same rival in market after market, then it engages in truly global competition.

Lets take a look at the Structure of Competition and Resulting Strategic Options.

Global Firm versus Global Firm

Some industries are becoming increasingly global. In these industries, the same global competitors hold significant global market shares and face each other in virtually every key market.

This can develop to an extent that the global companies have excluded all other companies from their markets.

Major global competitors watch each other’s moves in various markets around the world in order to respond to any action that will give the competitor a market advantage.

Key battleground markets are the emerging markets of Russia, China and India.

Examples: Airbus vs Boeing, Unilever vs Procter & Gamble, Cocal Cola vs Pepsi, Nike vs Reebok

Strategic Moves in ‘Truly’ Global Competition

Cross-Country Subsidization

Using profits from one country in which a business operates to subsidize competitive actions in another country (e.g. Bic and Scripto).

Counterparry

Defending against a competitive attack in one country by counteracting in another country (Fuji and Kodak).

Globally Coordinated Moves

Coordinating an attack in which competitive moves are made in different countries (e.g. global roll-outs).

Targeting of Global Competitors

Identifying actual and potential global competitors and selecting an overall posture: attack, avoidance or acquisition.

Global Firm versus Local Firm

Global companies can also have local competitors.

Examples: Mac Donalds vs Ristorante Italiano, Louis Vuitton vs Guido Maria Kretschmer

Strengths of Global Firms (MNCs)

• Larger
• Better access to resources
• More experience worldwide in product development and marketing

Strenghts of Local Firms

• Better understand the local culture
• Operate more effectively in addressing consumer needs
• Dealing effectively with local distributors and governments
• More flexible (no standard approaches)

Strategic Moves for Local Companies

Defender Strategy

Focuses on leveraging local assets in market segments where MNC’s may have weaknesses.

Local assets often include knowledge of local tastes and customs and good relationships with local distributors and suppliers. (e.g. Tatlises’ fast food in Turkey).

Extender Strategy

Focusing on expanding into foreign markets similar to their own using successful practices that they have already developed in their own market (e.g. SABs in Eastern Europe)