Introduction
This paper will identify challenges firms meet in the hyper competitive conditions being international corporations, discuss different cooperative strategies that can minimize difficulties and maximize potentials, and finally, explain the role of strategic management leadership in the implementation of these strategies.
The Challenges in the Global Market and International Competition
In the desire of companies to obtain advantages by operating to other countries, it enters a different environment that puts its resources and core competencies at high risks. There are many challenges a firm will encounter in the highly competitive market from the pre-operation until it is already magnetized by the market.
Price and Quality Positioning
In the global market, domestic and foreign companies will be the fierce competitors of a firm. They can usually fight and gain the market in terms of price or quality. They can use price strategy that is a result of improved primary and secondary activities that ultimately minimize cost, and therefore, provides more price control. On the other hand, differentiation strategy relates to the ability of the company to transform their product with added value that customers can see a premium in it, and therefore, the latter are willing to pay also at a premium price. Basically, the target market of price strategy is low-to medium- end customers that are price sensitive while differentiation is high end and customers who are after luxury goods or services.
The challenge of a firm is to develop a strategy that can fit into its culture and system. The difficulty arises as there are also available focused strategies for products which target a specific market segment. In addition, price and quality positioning can also be combined to exploit both the underlying advantages. In the case of Southwest Airlines, it integrates four important areas for a business: price, customers, service and employees. It offered point-to-point and less traffic service flights, kept price of almost 20% less than other competitors, provided free-overnight stay in the firm’s agents homes and maintained employee motivation.
The inability of the firm to pinpoint the best strategy that can stimulate competitive advantage for its resources, capabilities and core competencies can undermine its value, reduce efficiency and loose profitability. The decision to select certain strategy is not an easy task. The initial phase is to scan the specific foreign market’s background in its important aspects through PEST and SWOT analysis, competitors and available support intermediaries. Then, such factors will be subjected to a firm’s internal features. One wrong consideration may take away potential or aggravate problems and difficulties. At the time of operation, contingency plans and its implementation is necessary that can even call for a change in the strategy already identified.
The difficulty converges on the question of flexibility of the strategy. Since global companies are situated in a complex environment, to be able to be successful and maintain it, a firm should be flexible enough to counter the effects of competitor sudden moves, legal restrictions and economic recessions. Not to mention that it should also its own undetermined internal problems that could originate instantaneously.
Establish First Mover Advantage and Create New Know How
Aspects of price and quality are only one-half of the strategy available to the firm. For the biggest technological breakthrough of the inception of information technology and computer age, innovation and speed-to-market are the two most crucial strategies for a firm. They can create core competencies from the capability of a firm to create and develop innovative products to satisfy the fast and ever-changing customer needs and tastes. eBay’s delayed response to Yahoo! Japan’s enter to online auction market service in the country resulted for only a tiny 3% market share against Yahoo’s 95%.
Although can serve a dramatic positive turn-over for a firm, first mover advantage and ability to create new know how set drawbacks and constraints that a firm cannot sustain, if not, survive of its implementation. It requires huge financial budget to build facilities for research and development and customer awareness through advertising. A successful technology does not dictate success in this strategy. It will be less appreciated by the market if other companies have substitute products at competitive price. Almost as expensive as the individual firm’s net worth, strategies dedicated for hi-tech product innovation are high risk. This is the reason why multi-national companies are not encouraged to deal with the complexity and cost of producing hi-tech products.
The challenge is not only stemmed on cost factors, it also asks the question of corporate willingness to continuously operate in a dynamic way and invest in ventures that success are not eminent. Creating and upgrading a certain product through extensive research every now and then establishes continued learning of the human capital, systems improvement and technological change. The company culture may not hold such characteristics that hinder its participation in the industry even if it has financial capability to do so.
Protection/ Invasion of Established Products and Geographical Markets
Creating a product and successfully situating it in a specific market completes the duty of manufacturing and sales departments. However, protecting the added value found on the product and interested market segment is a corporate consideration. Being a first-mover and earning profits from it in a sustainable manner is a result of a firm’s conviction to patent its product design and continuously improving its usability for the appreciation of the customers. It also needs some advertising to remain active in the competitive landscape.
In the contrary, a firm can exploit the competitor’s advantages that can be seen in its products and market through invasion of some aspects of them. It can range from simple counter-advertising to a more aggressive product imitation. The latter is defined as adoption of a competitor’s innovation that oftentimes can be priced relatively cheaper but limited in product features and durability. It is effective to offer in a low-end, non-critical market. Sometimes, product and market invasion can be achieved by attracting and importing employees from competitor’s workforce. The process is generally prohibited when caught, but if successful, it not only entails imitation but the true formula, process and technique of creating the competitor’s product.
Thus, the challenge is a two-way process: offensive and defensive, that oftentimes overlaps each other. A firm may admit it invade product features to protect its market share. In one way or the other, the processes involve financing for official patent or trademark, advertisement and promotions, research and development, and possibly employee importation. More importantly, a firm should also possess loyal and dedicated employees to ensure zero knowledge-spill which is not easy to generate because of individual goals and monetary drives.
Credit:ivythesis.typepad.com
0 comments:
Post a Comment