Global Strategy Overview

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Questions and Answers

How does the VRIO framework help firms identify their competitive advantages?

The VRIO framework helps firms identify competitive advantages by assessing if resources are Valuable, Rare, Inimitable, and Organized, ensuring the firm can effectively exploit them.

What role does value chain analysis play in improving a firm's competitive position?

Value chain analysis identifies which activities contribute to customer value, allowing firms to enhance efficiency and differentiation in their competitive strategy.

What is the significance of the 'Rarity' aspect in the VRIO framework?

'Rarity' indicates whether a resource is unique among competitors, as rare resources can provide a firm an edge in the market.

Define dynamic capabilities and explain how they differ from static capabilities.

<p>Dynamic capabilities refer to a firm's ability to adapt and integrate resources in response to changing environments, unlike static capabilities which are fixed and inflexible.</p> Signup and view all the answers

In what way do support activities in the value chain contribute to a firm's success?

<p>Support activities enhance the efficiency and effectiveness of primary activities, improving overall operational performance and customer satisfaction.</p> Signup and view all the answers

How can cultural dimensions impact a firm's global resource management strategy?

<p>Cultural dimensions influence communication, management styles, and employee behavior, which are crucial for effectively managing resources across different global markets.</p> Signup and view all the answers

Describe the importance of technology development in the value chain.

<p>Technology development is vital as it drives innovation in processes and products, contributing to differentiation and potentially lowering costs.</p> Signup and view all the answers

What does the 'Organization' component of the VRIO framework entail?

<p>'Organization' refers to a firm's capacity to leverage its resources effectively, through appropriate structure and processes, to maximize value creation.</p> Signup and view all the answers

How does VRIO extend the analysis provided by SWOT in strategic management?

<p>VRIO provides a deeper evaluation of internal resources to identify sustainable competitive advantages, while SWOT focuses on identifying strengths, weaknesses, opportunities, and threats.</p> Signup and view all the answers

What is the difference between static and dynamic capabilities in a firm?

<p>Static capabilities are fixed assets that establish baseline competitiveness, whereas dynamic capabilities enable firms to adapt and renew resources in response to changing environments.</p> Signup and view all the answers

In the context of an institutional framework, what is the main function of formal institutions?

<p>Formal institutions shape behavior through laws, regulations, and official rules that govern organizational conduct.</p> Signup and view all the answers

What role do firm-specific advantages (FSAs) play in a firm's strategy compared to industry-specific factors?

<p>Firm-specific advantages often provide a more significant competitive edge than industry-level factors, emphasizing unique strengths like innovation and brand loyalty.</p> Signup and view all the answers

Why is it important for firms to balance domestic and international resources?

<p>Firms must balance domestic strengths with the need for adaptability in cross-border operations to effectively navigate global challenges.</p> Signup and view all the answers

What are the implications of being 'stuck in the middle' for a firm's competitive positioning?

<p>A firm that is 'stuck in the middle' lacks clear competitive positioning, leading to poor performance as it fails to commit to either cost leadership or differentiation.</p> Signup and view all the answers

How does differentiation in strategy justify premium pricing for a product?

<p>Differentiation provides unique products or services that create added value, allowing firms to charge higher prices.</p> Signup and view all the answers

In the context of competitive advantage, what role does strategic positioning play?

<p>Strategic positioning helps a firm understand its standing relative to competitors and decide how to effectively position itself.</p> Signup and view all the answers

What is the primary difference between integration and outsourcing in a firm's strategic decision-making?

<p>Integration involves internalizing stages of the value chain, while outsourcing involves contracting external suppliers to perform certain activities.</p> Signup and view all the answers

Describe how a hybrid strategy can benefit a firm in today's competitive landscape.

<p>A hybrid strategy allows a firm to combine cost leadership and differentiation, appealing to a broader market while maintaining efficiency.</p> Signup and view all the answers

What challenges might a firm face when operating within blurred industry boundaries?

<p>Firms may struggle to define their competitive space and anticipate competitive threats due to evolving market dynamics.</p> Signup and view all the answers

How can Porter’s Five Forces framework help a firm analyze competitive dynamics?

<p>Porter's Five Forces framework enables firms to assess competitive forces in their industry, helping anticipate changes and strategize accordingly.</p> Signup and view all the answers

What is meant by the term 'focus strategy' in competitive advantage?

<p>'Focus strategy' refers to targeting a specific market niche with tailored products or services to meet particular segment needs.</p> Signup and view all the answers

Flashcards

VRIO Framework

A framework that builds on SWOT analysis to analyze internal resources for sustainable competitive advantage.

Static Resources

Fixed assets or capabilities that provide a foundation for a firm's competitive position.

Dynamic Capabilities

The ability of a firm to adapt and renew its resources in response to changing environments.

Formal Institutions

Institutions represented by laws, regulations, and rules that govern behavior.

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Informal Institutions

Institutions represented by norms, cultures, and ethics that govern behavior.

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Resource-Based View (RBV)

Competitive advantage comes from valuable, rare, inimitable, and organized resources.

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Capabilities

The ability to use resources to perform activities, enhancing value.

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Value Chain Analysis

Tool to understand how a firm crafts customer value.

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Primary Activities

Core operations in creating and delivering a product or service.

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Inbound Logistics

Receiving, storing, and distributing raw materials.

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Operations

Transforming inputs into finished products.

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Outsourcing

Using external providers for tasks based on firm-specific conditions.

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Cost Leadership

Competing by offering products at the lowest cost while maintaining acceptable quality. Focuses on efficiency and minimizing expenses.

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Differentiation

Providing unique products or services that justify premium pricing. Emphasizes value creation and unique features.

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Focus Strategy

Targeting a specific market niche with tailored products or services. Serves a specific group with specific needs.

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Industry Boundaries

The lines that define the scope of an industry, determining which companies and products are part of it.

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Strategic Groups

Groups of firms within an industry that share similar strategies and compete directly with each other.

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Backward Integration

Acquiring and owning upstream suppliers, such as raw material suppliers. Owning the source of your inputs.

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Stuck in the Middle

A firm fails to commit to either cost leadership or differentiation, resulting in poor competitive positioning. Neither here nor there.

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Study Notes

Global Strategy

  • Global strategy is a firm's theory for successful competition.
  • Three perspectives: rooted in military strategy, blending planning and execution, and tested hypothesis.
  • Global strategy encompasses multinational enterprises and local competitors
  • Four fundamental questions:
    • Why firms differ: exploring organizational, resource, and institutional differences.
    • How firms behave: examining competitive and cooperative strategies.
    • What determines the scope of the firm: deciding operational boundaries.
    • What determines success and failure: balancing internal (resource-based) and external (institutional) factors.
  • Globalization: increasing interconnectedness of economies, reducing costs, and barriers.
  • Semi-Globalization: acknowledgment of persistent national divides, creating uneven integration.
  • Black Swan events: rare, unpredictable events with significant consequences, requiring resilience and adaptation (e.g., COVID-19).

Managing Industry Competition

  • Industry competition: ongoing rivalry among firms for market share, profitability, or dominance.
  • Shaped by various strategic choices.
  • Tactics include price wars, marketing campaigns, and product launches.
  • Intensity of competition is influenced by the number of competitors and industry growth rates, product differentiation, and exit barriers.
  • Strategic groups: subsets of firms within an industry that compete directly.
  • Differentiated by pricing strategies (e.g., premium vs. low-cost), product differentiation (e.g. luxury vs. mass market), and distribution channels (e.g. ecommerce vs physical retail).

Leveraging Resources and Capabilities

  • Resources: tangible and intangible assets (financial, physical, technological, and organizational).
  • Capabilities: the ability to deploy resources effectively to enhance value.
  • Resource-based view (RBV): competitive advantage stems from valuable, rare, inimitable, and organized (VRIO) resources.
  • Value chain analysis: dissecting a firm's activities to identify areas adding value for customers.

Emphasizing Institutions, Cultures, and Ethics

  • Institutions: human-created constraints structuring human interaction (formal and informal).
  • Culture dimensions: power distance, individualism-collectivism, masculinity-femininity, uncertainty avoidance, and long-term orientation.
  • Ethics in strategy: firms are influenced by norms, laws, and standards regarding conduct.
  • Strategic responses: reactive, defensive, accommodative, and proactive.
  • Ethical decision making is important for long term success

Entering Foreign Markets

  • Liability of foreignness: disadvantages faced by foreign firms due to being outsiders.
  • Liability of outsidership: lacking network ties in a foreign market.
  • Strategic considerations for entry choices include:
    • Entry timing
    • Market selection
    • Market entry modes
    • Degree of adaptation/standardization
  • Frameworks used for analysis: industry-based, resource-based, and institutional views.

Making Strategic Alliances and Networks

  • Strategic alliances: voluntary cooperation agreements between firms, including contractual and equity-based arrangements.
  • Strategic networks: alliances among multiple firms, competing together.
  • Factors to consider include costs, control, and required commitment, aligning strategic goals, and establishing trust.
  • Evaluation of alliance performance: alignment of goals, learning opportunities, and partner compatibility.
  • Comparing acquisition vs alliance: both have advantages depending on the conditions.

Diversifying and Managing Acquisitions

  • Corporate-level strategy: how firms create value across multiple businesses.
  • Diversification: expanding into new products, services, or geographic markets.
  • Types of diversification: product-related and product-unrelated.
  • Considerations: industry attractiveness, resource capabilities, institutional environments, and potential synergies.
  • Evaluating acquisition performance: synergies, cultural fit, and management capabilities.

Making Global Strategic Alliances and Networks Work

  • Critical steps include evaluating potential synergies and risks.
  • Choosing the best contractual or equity model.
  • Position the relationship to align strategic goals and build trust.
  • Developing ways to combat opportunism during the alliance lifetime.
  • Shifting from strong to weak ties to enhance operational flexibility.

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