Capabilities Strategy
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Transcript of Capabilities Strategy
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Develop competitive advantage
Global-scale efficiency
Ability to develop innovations andleverage knowledge
building global-scale efficiency
Manage specific risk and opportunities
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Increase in value of output(revenue),decrease the value of input
(cost) Efficiency improvemenr lead to revenue
enhancement
Focus on objective of global efficiency
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Theodore Levitt effective globalstrategy was not a bag of many tricks
but the succesful practice of just oneproduct standirzation. According to him,the core of a global strategy lay indeveloping standardized product to be
produced and sold the same waythrougout the world
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Efficiency benefits from global integration
Differentiation benefits from national
responsiveness
Consumerelectronic
Telecom
Automobiles
CementPackaged
foods
Toyota
Ford
Fiat
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TNC engage in diversified activities Consumer goods and serivesGM,
Toyota,Fordrevenue excess than $100b
Fiat pursuit classical strategy helpingestablishing national auto industry through
joint venture partnership and hostgovernment support in Spain, Yugoslavia
and Poland. Carrefour has more than 300 stores in 18
countries Globally integrated activity-in the form of
strategic alliances,joint venture and merging National responsivenesscater domestic
market tastes,distribution system andgovernment regulation
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Operating diversified and volatileenvironment
Manage risk and opportunity arise fromdiversity and volatility
Macroeconomicoutside control
Price, wages,ex-rate, national calamities Resource risk
availability of new material, capital or
management talent
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TNC configure each activity that hasleast cost
R&D, production, marketing use differentcost advantage
R&D-Uk. Production plant-Taiwan
TNC configure each activity that has
least cost Government regulation
Promotion strategy
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Provide cost reduction
Higher volume provide firm exploit scale
benefits as experience of learning higher Accumulation of lerning lead to cost
reduction
Korean electronic firms able to matchscale of experience of Japanesecompetition
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Cost of joining more than 2 products lessthan producing them separately
Diversified firms ability to shareinvestment and cost across the same ordifferent value chain
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Different mean use to achieve best costand quality positions for their products.
Approach used by Japanese company Concentrate on manufacturing to
capture global scaleinter country
product shipment Difficult in leverage R&D
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Firm goes abroad to extract additionalrevenues from internalized capabilities
Exploit its technology, brand name andmanagement capabilities in differentcountries
Exploit profits through exposure tomultiple stimuli
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Manage cost and revenue
Exploit efficiency, flexibility and learning
Global company tends to concentrateall its resources either in home country orin low cost location
Configuration-excentralization Worl scale production plants built in low-
wage country
Advance state- technologyR&D located indeveloped country
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GEMS- GE Medical System
Reconfigure its worlwide resources in
1997 Basic research remained in US
development and engineering activities-concentrated
Ain- reduce material cost and labor cost Developed COE (Centre of Excellence)
Outsource supplier from low cost country
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China- global source for CT scanner
Korean COE- x-ray machines
US- high end equipments GEMS can leverage more of the ways to
build competitive advantage through
complex configurations
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Emerge from small national player tomajor competitive worlwide
Dell, Elextrolux, cemex Dell
cost advantage and logistic
capibilitiesdirect selling business model
customer responsive
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Second strategic option
lobby government assistancetariff
protectiongovernment funding- R&D, export,financing capital investment
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Third strategy
linking up coalition /alliance with global
economyshare the risk and cost of operating higrisk global environmnt
pooling resourcesdefense against
global giantsSiemens-agreement and joint projectswith Fujitsu in 1980,against dominantcompetitor
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Prelimanary report showedthe worldlargest manufacturer of EME
Best financial result in 1981 Sales in 1981- $9.2 billion
70% sales come from construction
equipment
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The market
Worlwide demand between 1973 and1980
Profit margins derived from parts ofmachines
User
1980- Us accounted for word newconstruction
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Distribution-EME
Sales through dealers who provide direct
and after sales service Rule of thumb-60 years economic life
Require service and parts equal to initial
cost Dealer relationship is important
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Suppliers
Rather than high tech breakthrough-
focus on constant improvement ofexisting product
Spent 4.9% sales on R&D
Competition 7 major competitorKomatsu, John
deere, Cat
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Quality control
Quality circle- assembly line workers to
form group analyse problem andrecommended solution
1979 Union went throug strike
Lad to walkout by 40,00 worker 1980-company laid off 5,600 worker- soaring
management-worker r/s