Global Strategy Mike W. Peng c h a p t e r 88 Copyright © 2009 Cengage.PowerPoint Presentation by John Bowen, Columbus State Community College All rights

Global StrategyGlobal StrategyMike W. PengMike W. Peng

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Copyright © 2009 Cengage. PowerPoint Presentation by John Bowen, Columbus State Community CollegeAll rights reserved. Copyright © 2009 Cengage. PowerPoint Presentation by John Bowen, Columbus State Community CollegeAll rights reserved.

Managing Global Competitive Dynamics

Managing Global Competitive Dynamics

Part II: Business-Level Strategies

Global StrategyGlobal StrategyMike W. PengMike W. Peng

chapter

chapter

88

Copyright © 2009 Cengage. All rights reserved. 8–2

Outline

• Strategy as action

• Industry-based considerations

• Resource-based considerations

• Institution-based considerations

• Attack and counterattack

• Cooperation and signaling

• Local firms versus multinational enterprises

• Debates and extensions

• The savvy strategist


Strategy as Action

Figure 8.1Source: C. M. Grimm & K. G. Smith, 1997, Strategy as Action: Industry Rivalry and Coordination (p. 62), Cincinnati: Thomson South-Western.


A Comprehensive Model of Global Competitive Dynamics

Figure 8.2

Industry-based considerations Resource-based considerations

• Concentration • Valuable capabilities to attack, deter and retaliate

• Product homogeneity

• Stability of demand and supply

• Rarity of certain assets• Industry leader

• Imitability of competitive actions• Entry barriers • Organizational skills for actions

• Market commonality with rivals • Resource similarity with rivals

Institution-based considerations

• Domestic competition: Primarily competition/antitrust policy

• International competition: Primarily trade/antidumping policy

Competitive

dynamics

Attack/CounterattackCooperation


Strategy as Action

• Strategy is interaction

• Firms, like militaries, often compete aggressively

• Military principles cannot be completely applied in business

• Militaries fight over geography, firms compete in markets

• Markets involve products and geography

• Multimarket competition: Firms engaging the same rivals in multiple markets

• Multimarket competition may result in mutual forbearance


Industry-Based Considerations

• Collusion and “prisoners’ dilemma”

• Industry characteristics and collusion vis-à-vis competition Concentration ratio Industry price leader Homogeneous products Stability of demand, supply, and technology High-frequency, low-value orders Friendly social relationships among rival managers

High entry barriers High market commonality (mutual forbearance)


A Prisoners’ Dilemma for Airlines and Payoff Structure (assuming a total of 200 passengers)

Figure 8.3


Industry Characteristics and Possibility of Collusion vis-à-vis Competition

Table 8.2

COLLUSION POSSIBLE COLLUSION DIFFICULT (COMPETITION LIKELY)

Few firms (high concentration) Many firms (low concentration)

Existence of an industry price leader No industry price leader

Homogeneous products Heterogeneous products

High entry barriers Low entry barriers

High market commonality (mutual forbearance) Lack of market commonality (no mutual forbearance)


Resource-Based Considerations: VRIO

• Value

• Rarity

• Imitability

• Organization

• Resource Similarity

• Fighting low cost rivals


A Framework for Competitor Analysis Between a Pair of Rivals

Figure 8.4

Sources: Adapted from (1) M. Chen, 1996, Competitor analysis and interfirm rivalry: Toward a theoretical integration (p. 108), Academy of Management Review, 21: 100–134 and (2) J. Gimeno & C. Y. Woo, 1996, Hypercompetition in a multimarket environment: The role of strategic similarity and multimarket contact in competitive de-escalation (p. 338), Organization Science, 7: 322–341.


Institution-based Considerations

• Formal institutions governing domestic competition: a focus on antitrust

Competition policy

Antitrust policy

Competition/antitrust policy focuses on: collusive price setting, predatory pricing and extraterritoriality

• Formal institutions governing international competition: a focus on dumping


Major US Antitrust Laws and Landmark Cases

Table 8.3

Sherman Act (1890)

Clayton Act (1914)

Hart-Scott-Rodino Act (HSR) (1976)

Standard Oil (1911)

ALCOA (1945)

IBM (1976-82)

AT&T (1974-82)

Microsoft (1990-2001) • Final settlement with the US government in 2001 but found guilty by the EU in 2004


Three Main Types of Attack

GambitGambitGambitGambit

ThrustThrustThrustThrust FeintFeintFeintFeint

AttacksAttacksAttacksAttacks


Thrust

Figure 8.6Source: Adapted from R. G. McGrath, M. Chen, & I. C. MacMillan, 1998, Multimarket maneuvering in uncertain spheres of influence: Resource diversion strategies (p. 729), Academy of Management Review, 23: 724–740.


Feint

Figure 8.7Source: Adapted from R. G. McGrath, M. Chen, & I. C. MacMillan, 1998, Multimarket maneuvering in uncertain spheres of influence: Resource diversion strategies (p. 731), Academy of Management Review, 23: 724–740.


Gambit

Figure 8.8

Source: Adapted from R. G. McGrath, M. Chen, & I. C. MacMillan, 1998, Multimarket maneuvering in uncertain spheres of influence: Resource diversion strategies (p. 733), from Academy of Management Review, 23: 724–740. Copyright © 1998. Reprinted by permission of Academy of Management Review via Copyright Clearance Center.


Attack and Counterattack

• Three main types of attackThrustFeintGambit

• Awareness, motivation, and capabilitiesIs the attack so subtle that rivals are not aware of it?

Is the attacked market of marginal value?Strong capabilities required for counterattacks


Cooperation and Signaling

• SignalingNonaggressionMarket entryTruce seekingCommunication via governments

• Thomas Schelling: Using a protracted series of successful bargainsBargaining often takes place through signals and actions

Three issues emerge on certain collaborations emerge: secrecy, exclusivity, and informality


Local Firms versus Multinational Enterprises

• Dodger

• Contender

• Defender

• Extender


How Local Firms in Emerging Economies

Respond to MNE Actions

Figure 8.9Source: Adapted from N. Dawar & T. Frost, 1999, Competing with giants: Survival strategies for local companies in emerging markets (p. 122), Harvard Business Review, March-April: 119–129.


Two Most Significant Debates

• Strategy versus IO economics and Antitrust Policy Antitrust laws were created to deal with old realities

In global competition, when foreign antitrust laws are more permissive, US antitrust laws hurt US firms

Anticompetitive or hypercompetitive? US antitrust laws create strategic confusion US antitrust laws, which combat “unfair” practice, may be unfair, especially to large US firms

Competition versus Antidumping “Fair trade laws” (such as antidumping laws) in one country - regarded as “unfair” trade laws elsewhere


The Savvy Strategist

• “Strategy as action” highlights the power of creative destruction

• To thoroughly understand the nature of your industry

• To strengthen capabilities that more effectively compete and/or cooperate

• To understand the rules of the game governing competition

• Apply the four fundamental questions

• “Look ahead, reason back”

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Global Strategy Mike W. Peng c h a p t e r 88 Copyright © 2009 Cengage.PowerPoint Presentation by John Bowen, Columbus State Community College All rights