Keegan 16

		Updated on 05/05/2015
	BusAd 177: Introduction to International Marketing
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Chapter 16:

Strategic Elements of Competitive Advantage


	with your questions

	Overview
	Lecture Outline

	Discussion Questions
	Test Your Knowledge

Summary

In this chapter we focus on factors that help industries and countries achieve competitive advantage. According to Porter's five forces model, industry competition is a function of the threat of new entrants, the threat of substitutes, the bargaining power of suppliers and buyers, and rivalry among existing competitors. Porter's generic strategies model can be used by managers to conceptualize possible sources of competitive advantage. A company can pursue broad market strategies of low cost and differentiation or the more targeted approaches of cost focus and focused differentiation. Rugman and D'Cruz have developed a framework known as the flagship model to explain how networked business systems have achieved success in global industries. Hamel and Prahalad have proposed an alternative framework for pursuing competitive advantage, growing out of a firm's strategic intent and use of competitive innovation. A firm can build layers of advantage, search for loose bricks in a competitor's defensive walls, change the rules of engagement, or collaborate with competitors and utilize their technology and know-how.

Chapter Overviews, Outlines, Sample Questions

Today, global competition is a reality in many industry sectors. Thus, competitive analysis must also be carried out on a global scale. Global marketers must also have an understanding of national sources of competitive advantage. Porter has described four determinants of national advantage. Factor conditions include human, physical, knowledge, capital, and infrastructure resources. Demand conditions include the composition, size, and growth pattern of home demand. The rate of home market growth and the means by which a nation's products are pulled into foreign markets also affect demand conditions. The final two determinants are the presence of related and supporting industries and the nature of firm strategy, structure, and rivalry. Porter notes that chance and government also influence a nation's competitive advantage. Porter's work has been the catalyst for promising new research into strategy issues, including D'Aveni's work on hypercompetition and Rugman's recent double-diamond framework for national competitive advantage.

Overview

The first few years of the twenty-first century were difficult for IKEA, the $ 31 billion global furniture powerhouse based in Sweden. The euro's strength dampened financial results, as did an economic downturn in Central Europe. The company faces increasing competition from hypermarkets, "do-it-yourself" retailers such as Wal-Mart, and supermarkets that are expanding into home furnishings. Looking to the future, CEO Anders Dahlvig stresses three areas for improvement: product assortment, customer service, and product availability. With stores in 38 countries, the company's success reflects founder Ingvar Kamprad's "social ambition" of selling a wide range of stylish, functional home furnishings at prices so low that the majority of people can afford to buy them.

The essence of marketing strategy is successfully relating the strengths of an organization to its environment. As the horizons of marketers have expanded from domestic to regional and global, so too have the horizons of competitors. The reality in almost every industry today—including home furnishings—is global competition. This fact of life puts an organization under increasing pressure to master techniques for conducting industry analysis and competitor analysis, and understanding competitive advantage at both the industry and national levels. These topics are covered in detail in this chapter.

Lecture Outline

Discussion Questions

1.	How can a company measure its competitive advantage? How does a firm know if it is gaining or losing competitive advantage? Cite a global company and its source of competitive advantage?	Click here for hint.
2.	Outline Porter's five forces model of industry competition. How are the various barriers to entry relevant to global marketing?	Click here for hint.
3.	How does the five partners or flagship model developed by Rugman and D'Cruz differ from Porter's five forces model?	Click here for hint.
4.	Give an example of a company that illustrates each of the four generic strategies that can lead to competitive advantage: overall cost leadership, cost focus, differentiation, and differentiation focus.	Click here for hint.
5.	Briefly describe Hamel and Prahalad's framework for competitive advantage.	Click here for hint.

6.	How can a nation achieve competitive advantage?	Click here for hint.
7.	According to current research on competitive advantage, what are some of the shortcomings of Porter's models?	Click here for hint.
8.	What is the connection, if any, between national competitive advantage and company competitive advantage? Explain and discuss.	Click here for hint.

Test your knowledge

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	5.	automobiles.	True	False
	6.	soft drinks	True	False

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False

	8.		True	False
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False