Current problems in international business management

1. Paneuropean University
January 6, 2014
Competitive Advantages of Internationally Operating Companies
Current Problems in International Business Management
Antonia FICOVA
Doctoral Student at Faculty of Economics and Business
Paneuropean University, Bratislava
antonia.ficova@yahoo.com
Abstract
This paper focuses on examining the role of Competitive advantages of
internationally operating firms. Therefore, this paper analyzes mainly business
strategies as a competitive advantages of firms. It has been done by summarizing the
main ideas from researchers on this topic. Second, we analyze the case of US textil
and apparel industry, and another case of Finland and China as well. Third, we
evaluate ISO 9000 and ISO 14000 standards, on the other hand corporation’s ethics in
its business operations and finally we summarize capable leaders in top
internationally firms.
Keywords: Competitive Advantage, Business Strategy, Porter.

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Introduction
o be competitive on both a national and a global basis, organizations must
adopt a forward-thinking approach in developing their management
strategies. More to the point, businesses are always looking for a competitive
advantage, a way to stand apart from the masses and to offer something that's just
right for a specific target audience. Therein lies the secret. Competitive advantage
requires identifying a specific target audience with a clearly defined need,
developing and delivering a high-quality and appropriately priced product or
service and doing it better than anybody else.
Business Strategies
First of all, i will describe business strategies for a competitive advantage
according to Leight R. First, Target Audience With Clearly Defined Need, it means
businesses that are able to identify an audience and meet their needs better than their
competitors will find themselves with a clear competitive advantage. Second,
Delivering a High-Quality Service, in other words "Successful strategic advantage falls
to those who can deliver a product or service that is better in some way and that is more
meaningful to the target audience", says Lin Grensing-Pophal, a marketing consultant
and the author of "Marketing With the End in Mind." Third, An Appropriate Price,
determining an appropriate price depends on the market and the competitive
strategy. For example is a Starbucks coffee worth $4 to $5? It is if Starbucks
customers are willing to pay that much. Starbucks caters to a different audience than
McDonald's, for instance, which sells coffee for much less. Appropriate price will be
determined by the competitive position that a company hopes to achieve relative to
its competitors and the weight of its brand image. And lastly, Being the Best, is the
key to achieving competitive advantage for a business. Whether that means the best
price, the easiest access, the best quality or the best service, successful companies find
a way to differentiate themselves from the masses.
It´s necessary to note, that Porter argues that strategy is a race to one ideal
position, the creation of a unique and valuable position, where a firm can
differentiate itself for the targeted customer and add value by an asset of activities
T

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different than those of rivals. Additionally, Porter defines strategy as “a combination of
the ends for which the firm is striving and the means by which it is striving to get there.”
Thus, the author seems to advocate a concept of strategy that mixes some
planning (means to get there) with a dominant position. With the rise of
multinational corporations over the past few decades, Porter’s model has taken on a
greater importance and applicability to business strategy formulation.
The Case of US textil and apparel industry
Berdine et al. (2008) examined how the US textile and apparel industry can
remain competitive in the face of global competition. Specifically, what are the US’s
current competitive advantages and how they can be leveraged to enhance the
performance of US textile and apparel companies. Their research methodology were
quantitative and qualitative data and interviews that were conducted with 20
executives from 13 companies. More to the point, key findings of their research
included evidence that US textile companies drive the majority of the innovation in
the supply chain to both suppliers and customers. Also, the three competitive
strategies that differentiate the products of US firms from other regions of the world
are research and development, marketing, and customer service.
Results coming out from their research showed certain business strategies that
create competitive advantages as follows:
1. Customer service includes: First, align the supply chain for apparel
companies & retailers in terms of the various nodes of supply chain, second
relationship based selling – providing service beyond the initial sale, third customer
service web-site for customers to check status of orders, order sample yardage, etc.
2. Research & Development includes: First, create value throughout the product
supply chain; not just by applying a finish after the product is made, second develop
exclusive product for select high volume customers and third front-end collaboration
with up-stream companies in terms of developing product for their needs
3. Marketing includes: First, create identifiable brands, second compete in mul-
tiple markets with product at different quality/cost levels, third market research &

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awareness of market trends, fourth licensing agreements with well known brands,
fifth introduce organic product lines.
4. Strategic partnerships icludes: First, leverage proximity to cut-&-sew facilities
in terms of speed-to-market advantages, second vertical strategic partnerships with
cut & sew operations in East Asia and third partner with other members of the
supply chain to bring research and development efforts to the consumer.
In short, what i mentioned above, this means that the competitive advantage
can come from within the company such as the work ethic of the employees and by
the way the industry/company is operated. Also, strong domestic rivalry forces
companies to innovate and continuously improve their products, which also makes
the industry more competitive internationally.
In other words, that factor that might affect competitive advantage of
multinational enterprise is the standard of living which would depend of the
capacity of the firm to penetrate structurally attractive industries. In other words,
structural change helps competitiveness and creates opportunities for competitors to
penetrate new industries.
Business Ethics
Azmi, R. A., (2006) explored the growing issue of business ethics particularly
as a competitive advantage. He argued that is important for companies to deal with
ethics as a corporate strategy that, if uniquely implemented, that could achieve
competitive advantage for the company rather than waiting to react to possible
ethical issues. It means that is the necessity of being ethically proactive company
rather than being ethically reactive company. His results showed that there is
another face of business ethics that could be managed also to gain a competitive
advantage, which is corporate ethics. On the one hand, business ethics has an
external emphasis. Business ethics considers the gap between the corporation’s
ethical behaviour and the market place’s perception of the corporation’s ethics in its
business operations. Corporate ethics, on the other hand, has an internal emphasis
and this could be well managed toward a unique competitive advantage as anything

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related to people (corporate ethics through people) is very difficult to imitate and this
raises the chances of achieving a sustainable competitive advantage.
ISO 9000 and ISO 14000
In this section i will focus on Hutchens S. and his paper named The
competitive advantage of international standards presented that ISO 9000 and ISO
14000. He suggests how these standards may be used to move an organization
toward that paradigm and thus enable it to compete more effectively in today's
global marketplace.
In short, the main strength of the ISO 9000 standards, is that they assure
customers who do business with registered firms that fundamental quality systems
are in place within those organizations. Viewed in this light, for many international
companies, ISO 9000 is seen as a key to doing business in global markets and in EU
registration of this standard is requirement.
If we look at survey conducted by the newsletter Quality Systems Update,
approximately 85% of companies claimed they had experienced external benefits as a
result of registration to ISO 9000, and 95% noted internal benefits. As a results, the
most significant external benefits reported in the survey were: Higher perceived
quality (83.3%); Competitive advantage (70%); Reduced customer quality audits
(56%); Improved customer demand (29%). As a internal benefits of registration
included folowing factors: Better documentation (88%); Greater employee quality
awareness (83%); Enhanced internal communication (53%); Increased operational
efficiency and productivity (40%).
More to the point, whereas ISO 9000 deals with quality management, ISO
14000 is designed to provide a structure for the management of environmental
compliance following six categories: Environmental Management Systems (EMSs),
Auditing, Labeling, Performance Evaluations, Life Cycle Assessment, and
Environmental Aspects of Product Standards. By implementing ISO 14000, any
company can become truly competitive by factors such as: Decreasing costs through
increased efficiencies, Creating and maintaining new market opportunities,

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Demonstrating environmental leadership, Improving both its own corporate image
and community goodwill.
The Case of Finland
Hämäläinen, T. described competitive advantages of Finland. The most
important competitive factors of a national economy are information and
competence, new technologies, innovative organisations, highly evolved demand
and competition factors, international business operations, a functional regulatory
environment, and a reliable public administration with the ability to change and
adapt. On the other hand, he pointed out that long-term success of finish companies
cannot be based on low costs, if they wish to maintain high standard of living.
Finland's competitive advantage must be based on the production of goods and
services with superior added value.
The Case of China
In short, to avoid the middle-income trap, China must transition from
a lowcost to a high-value economy. On the other hand, the challenge is neatly
summarized in the “smiling curve” proposed by Acer founder Stan Shih to describe
how companies can avoid stagnation as their low-cost advantages erode as can be
seen on Figure 1.
Figure 1 Ways around the middle income trap: Innovation, Go-to-Market, Operational
Excellence

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Most Chinese companies still operate near the nadir of Shih’s smiling curve,
they compete primarily in labor-intensive industries to manufacture low-value items
such as textiles or to assemble electronics. More to the point, they must climb the
smile’s right or left side to migrate up the value chain. This would involve investing
in R&D to become real innovators such as Apple and 3M or investing in marketing to
develop iconic brands such as Procter & Gamble and Ikea. A third option involves
rising straight up the center of the chart to achieve distinction through operational
excellence, as Toyota did via its famous production system according to the
informations from report presented by Jullens, Suonio, Tang from Booz & Company
Inc. in 2013.
In comparison of Japan and American firms, it has been argued that Japan is
not in support of entrepreneur whereas the Americans are which has made it
possible for the American firms to dominate companies that are in support of
entrepreneurial activities such as biotechnology and computer software.
Another view from N. J. Gupta, Ch. C. Benson (2011, p. 4) argued that
sustainable supply chain management not only reduces adverse environmental and
social impacts, but also improves operational effectiveness in relation to one or more
of the following indicators:
First, Green design: Systematic consideration of design issues associated with
minimizing environmental impacts and health risks over the full life cycle of a
product, starting with earliest stages of developing new products and production
processes. Second, Green operations: All aspects of greening the product
manufacture/remanufacture, usage, handling, logistics and waste management once
the design phase has been finalized. Third, Green manufacturing: Seeks to reduce the
ecological burden by using appropriate material and processes (e.g., recycled
content, or refurbishing/remanufacturing processes). Fourth, Waste minimization:
includes the reduction of hazardous waste which is generated during production and
operations, or subsequently treated, stored or disposed. Fifth, Reverse logistics:
processes involved in planning, implementing, and controlling the efficient, cost-
effective flow of raw materials, in-process inventory, finished goods and related

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information from the point of consumption back to the point of origin for the
purpose of recapturing value or proper disposal at the end of useful life.
A results coming from this indicators we can say that a supply chain involve
many different sustainability related disciplines, including environmental risk
management, product safety, occupational health and safety, pollution prevention,
cradle-to-cradle product lifecycle management, resource conservation, and waste
management.
Report presented by KMPG and his survey based on 335 senior executives,
conducted in November 2012 in following 5 industries: Aerospace and Defense,
Automotive, Conglomerates, Engineering and Industrial Products, and Metals
showed that companies see value in both breakthrough and incremental innovation
to stay competitive. Viewed in this light, nearly a third of respondents whose firms
are stepping up R&D say their company will invest in breakthrough innovation. The
remaining two-thirds of respondents who see a resurgence of R&D activity are
focused on incremental innovation, more to the point enhancing existing product
lines and services. This number rises to 78 percent among larger companies
(revenues of US $ 5bn or more), compared to 64 percent of smaller companies. The
focus on both breakthrough and incremental innovation suggests companies are
revisiting R&D strategies according to what´s most effective for their operations.
Capable Leaders
George B. in his article in Harvard Business Review pointed out that as global
companies focus their strategies on developed and emerging markets, they require
substantial cadres of leaders capable of operating effectively anywhere in the world.
More to the point, American companies and academic institutions possess unique
competitive advantages in developing these global leaders.
It´s important to note, that U.S. companies actively promote executive officers
with diverse geographic and cultural backgrounds. For example, Coca-Cola has been
a pioneer in developing global leaders. It started 30 years ago with the progressive
and unusual step (for that time) of shifting from local nationals as country managers

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to global leaders from other countries. This has enabled the company to develop
exceptional global leaders. As a consequence, five of its CEOs have been non-
American-born, including today’s CEO, Turkish-born Muhtar Kent. In addition,
eight of its top nine line executives are from outside the U.S. Many global companies
have followed Coke’s lead by appointing foreign-born CEOs and executives. For
example, PepsiCo CEO Indra Nooyi was born in India, Avon’s Andrea Jung is
Chinese-Canadian, and Medtronic CEO Omar Ishrak grew up in Bangladesh. UK-
born George Buckley, CEO of 3M, will be succeeded by Swedish-born Inge Thulin.
Half of 3M’s executive committee comes from outside America.
On the other hand, the CEOs and executives of leading companies in
Germany, India, Korea, Japan and China are almost all natives of their home
countries. In short, Swiss companies like Nestle, Novartis, and Credit Suisse are
notable exceptions, as they have non-Swiss CEOs and a majority of non-Swiss
executives.
Conclusion
First and foremost, the important aspect to note is the creation and
sustainability of competitive advantage of multinational enterprise in the Global
world and how strategies formed by each firm contributes to competitive advantage.
It´s necessary to note, that with the globalization the scenario in which
companies operate has become even more complex, given the emergence of global
groups of stakeholders. Furthermore, globalization has also increased the levels of
competition among firms, which look for new a creative ways to create a competitive
edge (Friedman, 2000).
These surveys results and academic papers suggest a few of the ways in which
international standards, business ethics can help a company gain a competitive
advantage. In encouraging companies to focus on continuous improvement and to
develop a forward-thinking operating paradigm, the standards could have a
revolutionary impact on the world's business community.
In sum, i would like to use following quote: “Companies that adhere to a strong
ethics policy are likely to enjoy a long -term competitive advantage.”
Fortune Business leaders Council Survey, Jan. 2006

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References
1. Azmi, Rania A., Business Ethics as Competitive Advantage for Companies in
the Globalization Era (July 2006). Available at SSRN:
<http://ssrn.com/abstract=1010073 or
http://dx.doi.org/10.2139/ssrn.1010073˃, 02.01.2014
2. Friedman, D. (2000). “Ethics needed to be Part of the Cutting Edge”, Erlanger,
Vol. 104, pp. 2-14.
3. George, B.: Developing global leaders is america´s competitive advantage,
Harvard Business Review Blog Network, available at:
<http://blogs.hbr.org/2012/03/developing-global-leaders-is-a/ ˃, 02.01.2014
4. Global Manufacturing Outlook 2013: Competitive advantage, KPMG,
available at:<
http://www.kpmg.com/global/en/issuesandinsights/articlespublications/g
lobal-manufacturing-outlook/pages/competitive-advantage.aspx˃, 02.01.2014
5. Gupta, Neeraj J. and Benson, Christina C., Sustainability and Competitive
Advantage: An Empirical Study of Value Creation (November 30, 2011).
Competition Forum, Vol. 9, No. 1, 2011. Available at SSRN:
<http://ssrn.com/abstract=2037493˃, 02.01.2014
6. Hämäläinen, T.: Keys to sustainable competitive advantage, Sitra, available
at:< www.sitra.fi/en/blog/economy/keys-sustainable-competitive-
advantage˃, 02.01.2014
7. Hutchens, S.: The competitive advantage of international standards,
Compliance Engineering, available at: <http://www.ce-
mag.com/99ARG/Hutchens251.html˃, 02.01.2014
8. Jullens, J.; Suonio, H.; Tang, T.: Sino-Finnish Paths to International
Competitive Advantage, Booz & Company Inc., 2013.
9. Leight, R.: Business strategies for a competitive adavntages, Demand Media,
available at: <http://smallbusiness.chron.com/business-strategies-
competitive-advantage-4633.html˃, 02.01.2014
10. Parrish, Erin and Berdine, Matt and Cassill, Nancy and Oxenham, William,
Measuring the Competitive Advantage of the US Textile and Apparel Industry

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(2008). 2008 Industry Studies Conference Paper. Available at SSRN:
<http://ssrn.com/abstract=1134985 or
http://dx.doi.org/10.2139/ssrn.1134985˃, 02.01.2014
11. Porter, M.: Competitive Advantage, HDBM, February 2003