capabilities strategy

8/2/2019 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

capabilities strategy

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