In terms of critical evaluation, there are several considerations any global organisation using real world examples should make when formulating a strategic plan. The research focuses on discussing the international strategy of competitive advantage. The research focuses on Porter’s four factors and Porter’s five factors. The research includes some real world examples to comprehensively clarify an organization’s global marketing strategies. Any organisation dealing internationally should implement several innovative global strategies to ensure grabbing and continuing its dominance of the global market segment. The organization must immediately implement the PEST and Porter theories to successfully penetrate, accomplish, and increase its presence in any local and international market segment.
International Strategy of Competitive Advantage
The company must take into consideration its competitive advantages of entering on a foreign country as part of its international business and economic strategy. First, the organization can use its use its high differentiation advantage by focusing on marketing products that will fill the clients’ needs, wants, and caprices. In this instance, organisation may produce one global marketing copy or advertisement, irrespective of which country sees the organisation’s advertisements or promotions (Miller, 1998). On the other hand, some organizations produce uniquely different advertisements for each country destination to fit the culture and other factors uniquely describing each foreign direct investment destination (Thompson, 2007). The company can use the better advertising strategy fit each diverse country market segment. The organisation take into consideration the implementation of lower production and marketing costs. The decrease in its production and marketing costs will translate to higher net profits. To comply with this prerogative, the entity can produce its goods and services under one centralized production facility to enhance its economies of scale prerogatives. Further, the company can also introduce faster and better service and product quality to its current and prospective local and international clients; such activity will increase revenues. To achieve such goals, the company can implement joint technologies from the entity’s global operations to ensure faster innovative production and marketing programs. Lastly, the organization can take into consideration the improvement of its government relations to ensure higher revenues and profits. To accomplish this objective, the entity can avoid trade barriers to export its products and services to the foreign country.
Porter’s four factors model
The entity can also implement the Porter’s four factors model to increase its foreign country revenues and profits (Griffin, 2006). First, the company can implement its differentiation strategy. Hitt, Ireland & Hoskisson (2001) as well as Thompson (2007) emphasized the importance of offering products and services that are unique or different from the products and services of the competitors. The entity can offer higher store shelf prices if its products and services are far better than the products and services offered by the competitors. Likewise, the entity can offer similarly higher prices for its services and goods if the competitors cannot offer similar products and services in terms of quality and use (Griffin, 2006). The company can sell the differentiated products and services if the entity invests in research and developments processes to keep abreast of or ahead of the competitors in the same market segment.
Second, the organization can implement an overall cost leadership. Cost leadership focuses on reducing production and marketing costs to allowable levels. By reducing its production and marketing costs, the organization can establish its production facilities in countries where the production costs are lower compared to setting up its facilities in countries where its cost of production and marketing are higher than the cost of production of the organization’s competitors. For example, the organization can transfer its production facilities in China’s export processing zones. The transfer will reduce the organization’s production costs because the production expenses would be lower than the production expenses of setting up the organization’s production facilities in New York or London. The reduction in the costs and expenses includes the hiring of Chinese factory workers. Likewise, the lower production costs will be successful with the purchasing of local Chinese raw materials instead of purchasing raw materials from suppliers coming from the United States in its local market strategy (Stoner, Freeman & Gilbert, 2006). In turn, the lower production costs can trigger a reduction in the organization’s store shelf prices. The organization can afford to lower its sales prices because of its lower production costs. The decline in the organization’s selling prices will persuade the organization’s current and prospective clients to buy the organization’s products and services (Pearce & Robinson, 2006).
Further, David Gillooley (2001) insists “Most retail businesses do not manufacture the goods that are sold through their outlets. Even though there are some notable exceptions to this statement, such as Benetton (fashion) and Thorntons (chocolates), outside supply sources, as the producers of the product range, are the mainstay of most retailers’ success. Access to a wide supply base that delivers products at an acceptable level of quality, on time and in the right quantities goes a long way towards achieving a retailer’s product management objectives, and stocking products from sources of supply which have particular meaningfulness for the final consumer, in terms of brand recognition or product expertise, can be a source of competitive advantage. If the product range at one retailer is perceived by customers to be better than that of a rival, it might be because a retail buyer has chosen the products with more skill and understanding of customers’ needs; but it might also be the result of the buyer having better product ranges to choose from because the suppliers were more proficient at their jobs too”.
Third, the organization can focus on selling its products and services to a very salable market segment. Stoner, Freeman & Gilbert (2006) and Johnson, Seholes & Whittington (2008) reiterated can focus marketing and producing products to fit a particular market segment. For example, the company can sell eyeglasses that fit the facial features of prospective clients in China, Korea, and other Asian localities. Another company can focus selling its shoe products to fit the feet sizes of Russians, Londoners, and New Zealanders. A third company can sell raincoats to people living in the tropical rain forests. In the same manner, a fourth company should not sell raincoats to people living in the Sahara desert because rain rarely occurs.
Fourth, Stoner, Freeman, and Gilbert (2006) theorized the organization can implement its cost leadership/ differentiation programs. In this process, the organization inputs the same differentiation strategy discussed above. However, the new process includes the incorporation of lower production and marketing costs. The lower costs include the implementation of flexible production as well as sophisticated data channels of the organization’s total quality management process. The process focuses on the inclusion of both internal and external linkages that will make the cost reduction very profitable.
Environmental and Competitive Analysis
Griffin (2006) insists the firm must incorporate environmental and competitive analysis to ensure the success of its global strategic marketing program. The organization must include the PEST analysis in its global strategic activities. First, the PEST analysis should focus on improving its foreign political strategy. The organization must take into consideration all the political factors in crafting its production and global marketing activities. Definitely, setting up a production facility in China will entail complying with the communist political environment within China’s export processing zone. Likewise, setting up a branch in Japan will entail compliance with the political laws and cultures of the Japanese community. Setting up a marketing office in Saudi Arabia will entail complying with the local Islamic laws prevailing within the Saudi territory. Further, the organization must adhere to the political terms of trade organizations that include the NAFTA, ASEAN, EU, and SAFTA (Griffin, 2006).
Second, the PEST analysis focuses on the legal aspect of setting up a business in another country. The organization must comply with all laws of each unique country destination. The organization should ensure that labor laws as well as environmental laws are eagerly implemented at all times (Kotler & Armstrong, 2006).
Third, Kotler and Keller (2006) opined that the organization must focus on improving its socio-cultural factors. The organization leaders assigned each foreign country must learn to incorporate the socio economic factors with many of the foreign country’s religious and cultural temperaments. For example, a community in Utah United States is composed of people with religious upbringing on the Mormon faith. In addition, the organization must take into consideration the Islamic tenets in setting up its production and marketing facilities. In addition, the organization must take into account the economies of scale when setting up its production as well as marketing activities. The company will do better if it sells its products and services within the United States territory because there are more prospective United States clients compared to selling the company’s products and services to clients within the city of Taipei, Taiwan. In addition, the organization must study the diverse public attitudes towards entities, especially foreign companies. In addition, the organization must include the prospective foreign market segment’s preferences in terms of the average age of a prospective foreign market segment. In addition, the organization will include the ethical standards of people living within the community. The people living in Alaska would have no need for summer outfits like basketball uniforms being. The reason is very clear, the organization must sell its products and services to clients that need the organization’s products and services.
Fourth, the organization must focus on incorporating technological changes to the current practices and processes of the entity. The new technology must center on reducing the organization’s production and marketing expenses. Likewise, the same technology should be designed to increase the organization’s revenues from each foreign direct investment options (Stanley, 2011).
In addition, Roger Calantone (1990) theorized “An important early study of successful industrial innovations was carried out. They studied 560 commercially successful innovations, from over 100 firms in five different industry segments. Product innovations, innovations in the production process, and innovations in product components were investigated. Data such as costs, changes in the production process, and source of basic information used were obtained for each innovation. Although not many differences were found among the industry segments, this study spurred much follow-up work: for example, the re-examination of the same data with more powerful statistical techniques. Earlier, the research had examined factors that limit and determine an organization’s effectiveness in the innovative process. As a result of in-depth analysis of several industries, he determined that strategies for growth and competition in an industry differ across industries: for example, in the automotive industry, sales maximization may be predominant, while in transportation and communications, cost minimization may be more important. In the chemical industry, performance maximization may dominate both of the above”.
Porter’s Five Forces
The organization must also take into consideration Porter’s five forces in strategically setting up a successful production and marketing facility in any foreign direct investment destination. First, the organization should exert extra efforts to prevent the successful invasion of new entrants into the organization’s market segment. For example, a new competitor may charge the same service at lower selling prices. To counter such threats, the organization can lower its current selling prices to an amount that is equal to or lower than the competitor’s current selling prices. To accomplish this feat, the organization has to research on the new entrants’ production and marketing activities inside the organization’s new market segment. The organization must seek to determine the new entrants’ selling prices. Upon discovering that the new competitors have arrived and set up its sales and production counters, the organization may institute counter measures to prevent the new entrants from carrying away the organization’s current and prospective clients and services (Johansson, 2008).
The organization must prevent the new entrants from completely sweeping the organization’s current and future clients from under the organization’s very business noses. The organization’s counter measures include incorporating the economies of scale in the organization’s counter measures against the new entrants’ threats. The term economies-of-scale includes selling high value products and services. However, such high value products and services are produced using the lowest allowable production and services costs and expenses (Johansson, 2008). In addition, the organization can increase its quality output as the company produces more of the same goods and services. The quality increase translates to lower production and marketing expenses and costs.
Another counter measure includes applying for copyrights for its new product and service inventions. The competitors can be sued for violation of the copyright law if the new entrants copy the same services and product designs with the express permission of the copyright owners. The organization can also make sure that the competitors can not use the same sources being used by the organization to compete with the organization’s current preoccupation of serving the needs and wants of its current and prospective clients.
Further, the organization can use its product differentiation strategy to completely outmaneuver the company’s new entrant competitors. For example, the company will sell a unique product or service which the new entrant is not capable of offering. If the new entrant is capable of producing the same type of product or service, the organization must counter attack by applying for a patent to record the organization’s new products and services offered to the company’s current and prospective clients.
The company can apply for patents for its new technologically innovative products and services. David Methe (1991) states “American companies have been challenged by Japanese companies in a number of industries. Also as noted, these industries range from steel and automobiles to finance and electronics. Of particular interest in this book is the rise of Japanese companies in high technology industries. Technology, it will be remembered, is a crucial engine of growth, not only for companies, but for a country’s economy as well. Technology has been defined as a process composed of a stock of tools and a stock of the knowledge to use them. These two stocks provide a company with the capability to compete in a market by producing products that meet the needs of customers. Improvements in technology occur through inventions which yield innovations in products. The discussion in chapter two focused on recent scholarly thinking concerning the effects of technological change, through innovation, on competition in industries. Competition based on innovation in products creates a technological imperative. Firms must continually improve their technological capabilities in order to successfully remain in the industry. This type of competition confronts the firm with a number of strategic decisions to make”.
In addition, the organization can infuse more capital investments to counter the new entrants’ threats. To prevent the new entrants from grabbing and keeping the organization’s current and prospective clients, the organization can fund the increase of its production capacity as well as install new production and marketing facilities. The new production facilities will include the installation of modern technologies that would reduce the organization’s production and marketing expenses.
In addition, Norton Paley (2005) opined “You cannot expect to boost your company’s marketing effort without a workable marketing intelligence system. Action without information leaves results to chance, as opposed to planning your course and controlling the outcome. Strategic marketing planning and the development of tactics require an effective and efficient information system. Marketing and sales executives are discovering that market and competitive intelligence systems represent potent strategic and tactical weapons. By using information in a variety of new ways, you can better support your core products, offer new value-added services that distinguish them from competitors and create new products and businesses that extend your markets. As management guru Peter Drucker points out, “In the next 10 to 15 years, collecting outside information is going to be the next frontier.”
Second, the organization can focus on enhancing its supplier element of the Porter’s Five Forces analysis. Johansson (2008) insists the organization acquire the products and services from more suppliers as a basis for ordering from the best suppliers available. The organization must ensure that the company’s current production and marketing output will not be reduced. Suppliers are often very important to the organizations. This occurs when the organization has no other alternative suppliers to turn to for producing the organization’s current products and services.
In terms of the economic aspects, the company must focus on maximising the organization’s economic factors of the organization’s production and marketing operations around the world. The entity should comply with the communist market culture of China. Another entity can offer its goods and services located in South Korea by incorporating the local marketing culture of each street where the organization’s production and marketing facilities are located. The economic factors include economic inputs like the divers inflation rates hovering above each foreign country production and marketing destination. The economic factors include the diverse gross domestic production of each country where the organization plans to set up its production and marketing operations. The economic factors include the prevailing rate of interest placed on each country where the organization’s marketing and production facilities are deeply entrenched. The organization must also take into consideration the foreign country’s local market economy. The Chinese government is geared towards implementing a free market economy within the framework of its communist ideology (Kotler &Keller, 2006).
Third, the company should focus on the bargaining power of the customers. The customers may prefer to buy from the supplier with the lowest possible selling prices. In turn, the customers are capable of choosing the supplier with the best quality items being sold to the current and prospective clients. The organization is at the mercy of the clients in some occasions. However, a few clients are prefer one or more clients based on reasons that does not include the clients’ preferences in terms of selling price ranges, product quality, and product differentiation. For example, David Gillooley (2001) emphasized “getting the right product, in terms of type and quality, might seem an easy task to the outsider, and for some products the powers of the individual may not be stretched too far in order to do so. For example, a product such as Kellogg’s Cornflakes has been around for a number of decades, it has a steady demand from a loyal customer base, the recipe does not change significantly, and so the decision to buy more of this product is much more concerned with the quantity required and the time of delivery than with what the actual product is. On the other hand, it only takes a short walk around a European shopping centre in the last week of January to see examples of products that are the result of poor decision-making regarding type and quality, sitting in large quantities on shelves for the world to pick up and put down; products that will not shift, no matter how much the price has been reduced”.
Fourth, the organization must focus its scarce resources on overcoming the threat of substitute products. Substitute products are lesser in price than the organization’s current selling price offerings. To counter such substitute threats, the organization must engage in new product processes that will ensure a study supply of items that are of better quality and price compared to the substitute products and services. Elko Kleinsmidt (1998) insists “Numerous companies have undertaken internal audits only to conclude that their new product process isn’t working: projects take too long; key activities and tasks are missing; and Go/Kill decisions are problematic. As a result, they have overhauled their new product process using a Stage-Gate approach. Numerous benchmarking studies and investigations into winners versus losers have pointed to the following goals for a successful new product process.
In terms of goal 1, quality of execution, a quality-of-execution crisis exists in the product innovation process. This deficiency is evident in many benchmarking studies, including our own: key activities are poorly done or not done at all; too many projects omit too many vital actions; and both quality of execution and thoroughness of the process are lacking. There is also clear evidence that the activities of the new product process — the quality of execution and whether these activities are carried out at all — have a dramatic impact on performance. This quality-of-execution crisis provides strong evidence in support of the need for a more systematic and quality strategies to the way firms conceive, develop, and launch new products. The way to deal with the quality problem is to visualize product innovation as a process, and to apply process management and quality management techniques to this process. Note that any process in business can be managed with a view to quality”.
Fifth, the organization must focus on coming out having the highest share in the same market segment by focusing on getting the advantage in the area of rivalry among the competitors. Rivalry basically crops up when competitors sell the same product types and service types. For example, Coke and Pepsi are selling beverages. The organization must ensure that it has the upper hand in the continuing competition among the different players in the same market segment. The organization must offer the best product and services in terms of quality, quantity, and other relevant and valid factors that will sway the current and prospective clients to choose the organization’s products and services over the products and services of the competitors in the same market segment.
Real World Considerations of Strategic Plans
Product differentiation – Tesco Plc
Under the production differentiation strategy, Tesco (2011)was successful in penetrating the China market segment. The company set up its China branch during March of 2008. The company introduced its products as a different product from the products sold by its China market segment competitors. The China competitors are Wal-Mart and Carrefour. On the other hand, both Wal-Mart and Carreflour offered discount products to its discriminatingly choosy China clients. Tesco used its successful global marketing motto to easily be popular among the current and prospective clients in the China market segment. As proof, Tesco (2008) has grown from its original one China branch to reach 56 branches across the China territory. Tesco offers more than 500 product alternatives to the China market segment. The Tesco products include convenience, pre- packed foods, noodles, tissue, and biscuit products. The company has also incorporated the Chinese culture in its marketing and production activities. Chinese residents are hired in many of the Tesco branches in cropping up in China. The Tesco branches located in China have trained its employees to glaringly implement the Chinese culture and temperament in all its stores. Consequently, Tesco generated 20 percent of the total $756 billion market segment revenues from China during 2006 (ICMR, 2011).
Applying Innovative Technology in the global Market Segment – APPLE Computers
Apple was instrumental in the starting the people’s love for computers. The company used innovative technology to regain its former market share from its arch rivals in the computer software industry in satisfying customer wants and caprices (David, 2008). Apple started the computer age during the 1970s and 1980s (Apple, 2009). However, the competitors literally grabbed a large chunk of the computer industry from Apple. In response, Apple was able to innovatively create be computer products that have literally grabbed the computer market share from its major rivals. For example, Apple introduced the iPad. The iPad has replaced the laptop in many markets, globally. Specifically, Apple introduced the new computer operating system that works on an OSX operating system. With the new operating system, Apple has literally swept the computer market segment by storm. Apple’s computer sales have skyrocketed to unprecedented levels. The Apple global marketing strategy has caught the competitors off their guard. Specifically, the new Apple innovative technologies include the iPod. The iPod computer can play music and videos. The technological advanced introduced by Apple have created a strong line of customers eagerly awaiting their turn to buy the company’s new innovative Apple products at reasonable prices. The Apple global marketing strategy focuses on offering major advantages to the users of its computer-based products. The advantages include the brand name (Apple), the user-friendly touchpad and Ipod screen, and state of the art technology (Agarwal, Gunavel, & Mahindra, 2009).
Person to Person Marketing – Amway
The USA –headquartered Amway company focused on entering the China market segment with as a part of the organisation’s international expansion over 80 nations with general guidelines of innovative corporate scope and reliance on person- to- person marketing. After taking into account the integral environmental analysis, Amway started to produce standard goods for complying with the discriminating tastes of its current and prospective clients in the Philippines, Japan, Singapore and Japan and China while its product alternatives may be imperfect for the last one. The China market segment is different from the other market segments. Further, the Amway marketing strategy involves direct selling of the company’s products to friends, relatives, neighbours, office mates, classmates, and other acquaintances. The Amway brand of direct selling or person to person or door to door selling has been very successful in many countries, especially the Philippines. This is understandable because the Philippines had been a former colony of the United States. The United States granted independence to the Philippines on July 4, 1946 in simple ceremonies. Being trained in the American culture during the American occupation, direct selling is a popularly accepted marketing strategy in the Philippines (Brands, 1992).
However, the China market segment is not too keen on the American direct selling global marketing strategy. Direct selling strategy may not be perfect for this country all the time, rather than, it would lack legitimacy and could become subject of government banning. Here, the Amway marketing and production firm must implement alternative marketing strategies to its strategic business plan by reformulating the distribution route coupled with the implementation of the retail selling strategy. The Amway company must find ways to incorporate the China culture into its marketing plan. At present the China culture is a high obstacle that prevents the complete dominance of the China market segment. (Niant, 2006).
It is highly recommended that a strong global marketing study be put into place. The global marketing strategy focuses on the PEST, Porter’s four factors, and Porter’s five forces and other global marketing strategies and tools to enter and retain its global market segment share. The organization must not exert extra efforts to ensure all new entry threats, competitor threats, and substitute threats are not successful in reducing the organisation’s global marketing sales output.
BASED ON THE ABOVE DISCUSSION, In terms of critical evaluation, there are many factors any global organisation, using real world examples, must make when formulating a strategic plan. The company must ensure its international business strategies must be implemented to ensure the organisation’s competitive advantage over its competitors and substitutes. The company must implement the Porter’s four factors, PEST, and Porter’s five factors strategies to ensure its convincing domination of any local and foreign market segment. Indeed, the organization must immediately harnesh the PEST and Porter theories to successfully enter, generate, and increase its presence in any local and international market segment
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