Global Competitive Analysis
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International Strategic Business Strategies/ Compete or Cooperate
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Global Competitive Analysis
- 2. TABLE OF CONTENTS • INTRODUCTION • COMPETITOR ANALYSIS • COMPETITOR RIVALRY • HOW LOCAL FIRMS IN EMERGING ECONOMIES RESPOND TO MULTINATIONALS • DEBEERS COMPETITOR ANALYSIS • DEFENDERS MARKET STRATEGY • FIGHTING LOW COST RIVALS • GLOBAL COMPETITIVENESS • COMPETE OR COOPERATE • CONCLUSION • REFERENCES
- 3. INTRODUCTION CORPORATIONS MUST EVALUATE THE INTERNATIONAL BUSINESS ENVIRONMENT FOR POTENTIAL COMPETITORS TO EFFECTIVELY MOVE INTO THE INTERNATIONAL REALM. THE PHILOSOPHY UTILIZED HEREIN BELONGS TO SUN TZU: NOT ONLY KNOW “YOURSELF” BUT ALSO “YOUR OPPONENTS” (PENG, 2014)
- 4. COMPETITOR ANALYSIS •ANALYSIS BETWEEN A PAIR OF RIVALS •FRAMEWORK •MARKET COMMONALITY •RESOURCE SIMILARITY •EXAMPLE: THE BIG THREE NEW CHANNELS AND CNN
- 5. COMPETITOR RIVALRY EXAMPLE •THE COMPETITION THE BIG THREE & CNN •CUSTOMER ACQUISITION COSTS •TIME WARNER’S REJECTION •CHANGE IN NORMS AND THE BEGINNING OF INTENSE COMPETITION
- 6. HOW LOCAL FIRMS IN EMERGING ECONOMIES RESPOND TO MULTINATIONALS •INDUSTRY PRESSURES TO GLOBALIZE •COMPETITIVE ANALYSIS •DEFENDER •EXTENDER •DODGER •CONTENDER
- 7. DEBEERS COMPETITOR ANALYSIS •WORLD’S LEADING SUPPLIER OF DIAMONDS •SCARCITY CONCEPT •CONTENDER STRATEGY (WELDON, 2014)
- 8. DEFENDER MARKET STRATEGY •INCREASED REGULATIONS •GOVERNMENTAL REGULATORY AGENCY INVOLVEMENT •PRICE VOLATILITY •TENDER SALES ARE OPENED TO SMALLER DIAMOND MANUFACTURERS (SHOR, 2014)
- 9. GLOBAL COMPETITIVENESS •ECONOMIC PERFORMANCE •GLOBAL INNOVATION •GLOBAL FINANCIAL PERFORMANCE •RESEARCH AND DEVELOPMENT SPENDING •PATENT AND FILING STATISTICS •EDUCATION TRENDS •SCHOLARLY RESEARCH BIBLIOMETRICS (CAMLEK, 2012)
- 10. LOW COST RIVALS •ESTABLISHED BUSINESS CHALLENGE •AVOID LOW COST PRICE MATCH •FOCUS ON HIGHLY DIFFERENTIATED GOODS •DEVELOP ON BRAND LOYALTY (BERMAN, 2015)
- 11. COMPETE OR COOPERATE •COMPETITIVE STRATEGIES •LOW-COST PRICE STRATEGIES •LONG-TERM WAIT AND WATCH TIME PERIOD •PRICE PREMIUM BASED •COOPERATE •SOUTHWEST AIRLINES •WAL-MART
- 12. DIFFERENTIATING STRATEGY •MULTINATIONAL ENTERPRISE SELECTION FOR ANALYSIS •TARGET CORPORATION •DIFFERENTIATING TACTIC •PREMIUM PRICING
- 13. SIGNALING •SIGNALING COOPERATION •“WINKING” •EFFECTIVENESS OF SIGNALS •INDIRECT TALK •LEGALITY
- 14. CONCLUSION • TABLE OF CONTENTS • INTRODUCTION • COMPETITOR ANALYSIS • COMPETITOR RIVALRY • HOW LOCAL FIRMS IN EMERGING ECONOMIES RESPOND TO MULTINATIONALS • DEBEERS COMPETITOR ANALYSIS • DEFENDERS MARKET STRATEGY • FIGHTING LOW COST RIVALS • GLOBAL COMPETITIVENESS • COMPETE OR COOPERATE
- 15. REFERENCES Berman, B. (2015). How to compete effectively against low-cost competitors. Business Horizons, 5887-97. doi:10.1016/ j.bushor.2014.09.002 Camlek, V. (2012). Measuring global competition. Information Services & Use, 32(1/2), 25-42 Peng, M. W. (2014). Global Strategy (3rd ed.). Mason, OH: South-Western Sagiv, L., Sverdlik, N., & Schwarz, N. (2011). To compete or to cooperate? Values' impact on perception and action in social dilemma games. European Journal of Social Psychology, 41(1), 64-77 14p.doi:10.1002/ejsp.729 Shor, R. (2014). Rough diamond auctions: sweeping changes in pricing and distribution. Gems & Gemology, 50(4), 252-267 Weldon R., Shor R. (2014) Botswana’s scintillating moment. G&G, Vol. 50, No. 2, pp. 96–113, doi.org/10.5741/ GEMS.50.2.96
Editor's Notes
- Understanding global competitiveness is vital for any company that is making the move into the multinational environment. Sun Tzu’s philosophy applies to not war but to competing companies, “Not only know “yourself” but also “your opponents”” (Peng, 2014). To conduct business in the international realm, an analysis of competitor rivalry should be conducted. A multinational company must review how local firms compete in the home market to acquire market share. The same is to be said about local companies as multinational firms enter the home market. This can be done by conducting a competitor analysis. This presentation will review the diamond market, the airline market, as well as low cost product suppliers. DeBeers, Target, and Southwest will be analyzed against the market for the low cost rival, global competitiveness, and make the decision to compete or cooperate. In addition, there will be an evaluation on it’s strategy to fight a low cost rival as well as on compete or cooperate decisions. This presentation’s analysis will provide a broad overview on how a competitor analysis can influence a company’s strategy.
- Developing a competitor analysis of products in comparison to other competitors will allow for an analysis of strategy or strategies utilized in a particular market. A framework providing for analyzing competitors is Peng’s (2014) Figure 8.4. The framework showed how a pair of rivals and market commonality compared to resource similarity. An example of this when Peng (2014) referred to the utilizing this figure to understand resource similarity in TV programming in the U.S. market. The Big Three and CNN were each directed upon the same market, and determining the best way to compete is done so by utilizing a competitor analysis chart.
- This chart can help a firm understand the level of competition or threat that another may present, also indicated the level of rivalry between Big Three and CNN. The findings showed a high market commonality and high resource similarity which focused upon the U.S. market. When Fox entered the market the competition level rose quickly. The rankings on the chart moved and now Fox was a contender in the world market by first paying its cable operators per subscribers to switch and second acquiring CNN. The move went against norms and certainly made the other players adjust their strategy. The chart allowed each company to tell how much of an impact each one could have on the other. Upon a rejection by Time Warner of Fox, the rivalries between the companies no longer were highly competitive but highly intense.
- Peng (2014) discussed four strategies in Figure 8.10 of how local firms in emerging economies can respond to entrance of multinational corporations. Each of the strategies are focused on leveraging the company in a unique manner to ensure continued success. The four strategies are defined as follows: Defender A strategy that leverages local assets in areas in which MNEs are weak. Extender A strategy that centers on leveraging homegrown competencies abroad by expanding into similar markets. Dodger A strategy that centers on cooperating through joint ventures with MNEs and/or sell-offs to MNE Contender A strategy that centers on rapid learning and then expanding overseas. Firms must respond to incoming multinational companies by selecting one of the above strategies to defend against the competitor or push into new and foreign markets.
- De Beers is the leading supplier of diamonds worldwide. Conducing a competitor analysis on DeBeers, the primary diamond source around the world will allow for an understanding of a ever-changing market. DeBeers determined how to become the premier supplier of the diamond industry. DeBeers diamonds were expensive due to the perception of scarcity of the resource. The owner of DeBeers mines understood the concept of supply and demand. If the supply was coveted and controlled in South Africa, and the demand steady, the prices would remain high. The owner, Rhodes, was able to develop an agreement between a single producer and one buyer. This strategy allowed DeBeers to control and corner the diamond market. DeBeers was known for utilizing its contender strategy and is now moving into a defender market strategy.
- The company’s owner once accelerated in learning and pushed the stones, both high and low quality into the hands of one buyer, dominating the market. Although, in recent years, DeBeers is now moving into more of a defender market strategy as the market is now changing. This change is due to increased regulations, governmental regulatory agency involvement, price volatility, and tender sales are opened to smaller diamond manufacturers. In the years to come, diamond tenders and auctions how these goods are priced and traded in the years to come. Stricter banking policies will also determine how the world’s economy impacts the diamond market (Shor, 2014).
- To understand the market and the level of competition, one must review and understand how the level of global competitiveness is defined. There are a variety of ways to assess the the performance of countries and regions. The methods are as follows: a) economic performance, b) global innovation, c) global financial performance, d) research and development spending, e) patent and filing statistics, f) education trends, and g) scholarly research bibliometrics (Camlek, 2012). Developing countries, such as China are showing a significant level of growth and are projected to take a leading role in the world economy in the years to come. The ranking from each of the indicators help investors to review trends to be able to make appropriate decisions about marketing and distributing a product to a particular country. Emerging countries, such as China, may be the perfect target market for diamonds, creating a level of diversification to an existing portfolio (Camlek, 2012).
- A significant challenge for established companies is to hold onto market share as new and aggressive businesses move into the market. Low-cost rivals have a tendency to maintain a culture that is deeply seated in frugality and efficiency. Firms which are established in a market must be cognizant of new firms moving into the same product at a significantly decreased price. When dealing with a low-cost rival, established companies should avoid trying to price match but rather should focus a variety of other strategies. The established company should focus on highly differentiated goods and services or developing a strong brand name. By developing value within a product or service, customers develop brand loyalty alleviating the need to compete with low-cost similar product (Berman, 2015).
- There are four competitive response strategies, low-cost price strategies, long-term wait and watch time period, determine an appropriate price premium based on its competitive advantages (Sagiv, Sverdlik, & Schwarz, 2011). Low-cost strategies have been utilized effectively by companies such as Southwest Airlines and Wal-Mart. Both companies have found ways to eliminate unnecessary extras, which subsequently impacts the bottom line. For other competitors such as American Airlines and K-Mart, competition was a failed strategy. In both cases, a cooperative strategy would have been much more effective that challenging two large industry leaders (Peng, 2014). Both Southwest and Wal-Mart identified successful low-cost strategies and competing against them would require use of one of discussed competitive strategies.
- A multinational enterprise that is known for being a rival of low cost competitors is Target. Target is in competition with Wal-Mart as a provider of a wide variety of goods. Instead of focusing on providing the lowest costs in a similar market, Target rather pushed towards providing a quality experience. Target’s customer service, the higher level of cleanliness of the store, a fresher product, and organized product shelves is how Target differentiates itself amongst its competition. Utilizing Peng’s (2014) model, the differentiation tactic that Target employs is to utilize a combination of tactics that customers are willing to pay for within their shopping experience. Target has a niche with a specific type of customer that is wiling to pay a premium price for the higher level of service for the same type of products.
- Firms signal cooperation in order to reduce competitive intensity among a firms within a similar market. While companies are not authorized to talk directly to competitors about bidding or pricing, as this would result in collusion; a firm may signal cooperation to another company by “winking”. Winking is a workaround for the business world to get around the rules. This can be done successfully by sending an open signal for a truce. According to Peng (2014), Toyota’s chairman broadcasted to the media that it would help GM by raising its prices. While Toyota’s chairman walked a fine line, he did not directly address the company, making the discussion illegal. Corporations can also request the assistance of governments to hold discussions with competitors to determine fair pricing of a good or service. While direct conversation between companies is illegal, having a discussion with government supervision is legal.
- Multinational enterprises must understand global competitiveness prior to moving into a new environment. The risk of entering a new market requires knowing the attributes of one’s competition. Prior to moving into a new market, an entering company must conduct a competitor rivalry to understand how rivals compete. This is done to identify the best possible mode of entry. In addition, companies can use the same method to identify areas of weakness to ensure the loss of market share is limited. The next step a firm will need to look at is whether to compete or cooperate. If a firm intends to cooperate, there are steps a company can take to alleviate potential competition. While direct discussions with firms are illegal, companies can communicate intentions in a variety of ways. Within this presentation, DeBeers, Target, and Southwest Airlines were analyzed for competitiveness.