2. OBJECTIVES :
AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO
1. Evaluate industry structure, firm strategy, and value creation
2. Profile the features, functions, configuration, and coordination of the value chain
3. Describe how and why companies choose to cluster in close geographic proximity
4. Describe how robots in specific and automation in general change how managers
interpret the value chain
5. Discuss the industry change affects the effectiveness of a value chain
6. Compare and contrast the strengths and drawbacks of a reality versus virtuality in
designing the value chain
7. Explain the ideas of global integration and local responsiveness
8. Profile the types of strategies used by MNEs
4. INDUSTRY STRUCTURE
An industry is composed of those companies engaged in
a particular type of enterprise.
Interpretation often relies on the concepts and
tools represented in the five-forces model:
•Suppliers of inputs,
• Buyers of outputs,
• Substitute products,
• Potential new entrants,
• Rivalry among competing firms.
5. Generally, industry structure naturally
evolves. Disruptive innovations accelerate
the rate of change.
Often, big changes involve
• Product Disruptions
• Process Disruptions
• Political Disruptions
INDUSTRY CHANGE
6. Telltale Signals
The nature of disruptive innovations varies. Past precedents include the following:
• Significant change in the long-term growth rate
• Breakthrough technologies that realign efficiency frontiers, like containerization, wireless
communications, or smart phones
• New consumer purchase and usage patterns, such as streaming movies online or replac?ing
landlines with VoIP systems
• Manufacturing innovations, like Six Sigma or Lean Production, which revolutionize productivity
potentials
• Rapid diffusion of business, executive, and technical expertise across countries, such as the
transfer of Eastern management approaches to Western companies, which intensifies rivalry
• Abrupt change in government regulation, such as escalating government involvement in capital
markets that resets economic freedom
• New forms of rivalry, such as the emergence of state-owned companies altering competi?tive
dynamics
• Improbable black swan events, such as the Internet or the global financial crisis, which radically
reset business principles
7. Industry structure changes
because of events like:
• Competitors’ moves,
• Government policies,
• Shifting consumer preferences,
• Technological developments.
8. PERPECTIVES ON STRATEGY
• Two prominent models, can help managers make the transition from
confusion to clarity :
1. The Industry
Organization (IO)
Paradigm
2. Great by Choice
9. APPROACHES TO VALUE CREATION
COST -
LEADERSHIP
DIFFENTIATION
- aims to make a
product at a given
level of quality for a
cost below those of
competitors
-Differentiation
champions developing
products that
customers value and
that rivals find hard, if
not impossible, to
match or copy.
10. THE FIRM AS VALUE CHAIN
The value chain is the set of linked activities the company performs to design,
produce, market, distribute, and support a product.
11. Figure 12.4 Specifying
the Value Chain
The generic primary
and support activities
of the value chain
identify the steps an
MNE takes to create
value.
By disaggregating
activities into discrete
responsibilities, as we
see here, the value
chain provides
managers a powerful
tool to plan
strategically
12. Managing the
Value Chain
• CONFIGURATION • COORDINATION
• the competitiveness of a Multinational Enterprise (MNE) relies heavily on its
ability to strategically distribute and link value activities across its global
operations. This process involves two key elements:
13. CONFIGURATION
two different approaches in organizing the locations of a
multinational enterprise's (MNE) value chain activities:
1.Concentrated : In a concentrated configuration, the MNE performs the
majority or all of its value chain activities in one primary location. This
means that most or all stages of production, distribution, and other
functions are concentrated in a single country or region. Concentrated
configurations are often chosen when there are significant cost
advantages, economies of scale, or strategic reasons for centralizing
operations.
For example, a company might choose to concentrate its manufacturing,
research and development, and administrative functions in its home
country to benefit from existing infrastructure, skilled workforce, and
logistical advantages.
14. CONFIGURATION
two different approaches in organizing the locations of a
multinational enterprise's (MNE) value chain activities:
2.Dispersed : In contrast, a dispersed configuration involves spreading out
the various value chain activities across multiple locations around the
world. Different stages of production, sourcing, research and development,
marketing, and other functions are performed in different countries or
regions based on factors such as cost efficiencies, access to markets,
availability of resources, and strategic considerations. Dispersed
configurations allow MNEs to leverage location-specific advantages and
mitigate risks associated with over-reliance on a single location.
For example, a company might choose to manufacture its products in one
country, conduct research and development in another, and set up sales
and marketing operations in yet another country to optimize costs, access
local talent, and better serve diverse markets.
15. FACTORS THAT INFLUENCE THE
CONFIGURATION OF A VALUE-CHAIN
INCLUDE
• Business environment,
• Innovation context,
• Scale efficiencies,
• Resource costs,
• Robotics,
• Logistics,
• Digitization.
16.
17. COORDINATION
-Coordination specifies how value activities interact with
each other.
Factors that influence the coordination of a value-
chain include
• Operational obstacles,
• Core competency,
• Subsidiary networks
18. COORDINATION
A core competency can emerge from various
activities, including
• Product development,
• Employee productivity,
• Manufacturing expertise,
• Marketing imagination,
• Executive leadership.
19. Global Integration Versus Local Responsiveness
GLOBAL
INTEGRATION
LOCAL
RESPONSIIVENESS
Global integration is the
process of combining
differentiated parts into a
standardized whole.
Local responsiveness is the
process of disaggregating
a standardized whole into
differentiated parts
20. Pressures for Global Integration
• Globalization of markets
• Efficiency Gains of Standardization
Pressures for Local Responsiveness
• Divergent Consumer Behaviors:
• Host-Government Policies
21.
22. • The IR Grid relates
the global and local
pressures that
influence an MNE’s
strategy
Figure 12.6
The Integration-
Responsiveness
Grid
