Competitive advantage of Firms in Global Industry

Competitive advantage of Firms in Global IndustryTHE belligerent ADVANTAGE OF FIRMS IN GLOBAL INDUSTRYIntroductionFirst and foremost, the essential aspect to note and to discuss is the creation and sustainability of competitory advantage of transnational try in the Global world and how strategies radiation patterned by distri notwithstandingively degraded contri merelyes to competitive advantage.Strategic argumentAn patience regardless is a combination of group of competing companies providing services or products that compete conductly with individually other. Products be encircled by strategically oriented industries especially if they strike similarities in competitive advantage. The industries who sh atomic number 18 the same consumers, technologies, end product channels, and etc. have their distinct focussing of competitive advantage requirements.Multinational initiative competition is either won or lost depending on how winnerful their strategic competitive ad vantage favors them. The manufacture is an open avenue where multinational enterprise screw compete with severally other. Firms use competitive advantages to sustain and maximize boodle for themselves although, there is no best competitive advantage but only the strategic means that is in favor of the firm succeeds.thither argon two major aspects to be considered while choosing a firms competitive advantage.The structure of the industry where the firm competes. The industrial competitiveness differs to each other, so for sustain commensurate profits, not all industries offer same opportunities.Positioning at bottom an industry competitive positioning is very important but rough multinational enterprise in a highly irresistible industry may still be in uncontrollable situation and dexterity not have earned satisfactory profits if it has not chosen the right competitive positioning.Changes in the structure or accession barrier of industry can trance the attractiveness of the industry.Analytical structure of industryThere are five competitive forces that explain what multinational enterprises allow in order to compete with each other in the industry. They are as followsThe threat of new entrants into the industryThe threat of substitute products or services of another firmSuppliers bar advanceing designerBuyers bargaining powerRivalry among the existing competitorsThe performance and the profitableness of each multinational enterprise are determined by the strength of the above mentioned five forces. many a(prenominal) industries where by the five forces favors them performs profitably well with great invested capital returns much(prenominal) as soft drinks, database publishing, pharmaceuticals etc. Whereas, industries which experiences pressure from one or more(prenominal) of those five forces tends to struggle and few among the firms in the industry realize profitability for a languish term.The five forces are the basic tools used in determi ning the profitability of the industry because the charges firms charge are controlled by these forces and as well the court they have to bear and above all the investment demand to competing in the industry. for instance, when a new entrants surfaces, there would be limits to the everyplaceall profit potential in the industry callable to the fact that new entrants would put up fresh capacity and would look for market share pulling trim back margins.Higher hail of competitiveness brings about more profits for example, advertising, gross revenue expense or passing on profits to customers in form of lower prices. Competitors tend to lower the price they charge on of products due to the presence of close substitute products. The structure of the industrys function is determined by the strength of each competitive factor for instance, the extent at which an enterprises gross revenue is at risk to any one buyer and the issue of price sensitivity. This is regarded as buying powe r.Multinational enterprise can use their system influence the five forces to raise barriers of entry for instance the introduction of figurer information to airline industry has raised the entry barrier as any new enterprise would require investment in hundreds of millions of pounds.industrial structure varies and are different to each other depending on the instance of industry it is such as the pharmaceuticals where barriers of entry is very high and uncontrollable to penetrate due to the need of huge fixed research and organic evolution speak tos and economies of scale in selling to physicians. Getting and developing a substitutes and effective to drugs is not an easy task.The structure of the industry creates differing requirement for success such as differing skills and resources in different industries. Furthermore, multinational enterprise essential be structurally attractive in the industry with sustainable entry barriers such as technology, skills, channels access an d reputation of brand/product. cipher that might affect competitive advantage of multinational enterprise is the example of living which would depend of the capacity of the firm to penetrate structurally attractive industries. Structural multifariousness fosters competitiveness and creates opportunities for competitors to penetrate new industries. Structural change creates avenue for competitors to penetrate industries.A proficient example is the American assurance of IBM and Xerox, the firm was challenged successfully by a Japanese copier beau monde due to underserved product segment such as small copier, apply a new approach to the consumers by using dealers instead of direct sales, mass production of goods and pricing approach was modified.This strategic approach decreased the entry barriers and had a negative implication on the previous leading (American firm) advantages.Positioning within industries fit to Porter, at the heart of positioning is competitive advantage th erefore for multinational enterprise to achieve success, they must experience a sustainable competitive advantage the two types of competitive advantages by Porter are as followsLower cost this means creation able to design, produce and market similar product more expeditiously than other competitors. For example the Korean nerve and semiconductor firm was able to produce at a very low cost, using low-wage but highly productive labor force and a modernized process.specialization the ability to take note gauge and unique and superior value to consumers.From http//tutor2u.net/ billet/images/competitive_strategies.gifCompetitive Advantage CreationCompetitive advantage would be shifted by innovation if multinational enterprise fails to perceive a new way of competing or are not able to respond to competition. For e.g. the Swiss interpret producers were unable to identify the competitive advantage of Timex an American company due to the fear of low quality production whereas the A merican Timex mass produced cheesy disposable watch. Causes of competitive advantages areNew technologies about multinational enterprises steeped in an old technological paradigm cannot cope with thisNew and shifting consumer ask in order to meet the needs of consumers firms might need to get a new value chain which might be difficult for some(prenominal) firms. For example the American fast food firms were able to gain competitive advantage over local restaurants due to this.Shifting cost firms may find it difficult to compete as cost of production changes.New entrant /new industry segmentGovernment edict changes government may change her regulation such as the threadbare required for each products. This might be a barrier for some firms to compete.Highlights of factors alter multinational enterprisesThere are two major types of factors affecting multinational enterprise.Internal factorsExternal factorsInternal factors includePolitical partiesSuppliersBuyersCompetitorsConsu mer of various(prenominal) countryExternal factors includePolitical environment,Legal environment,Socio-cultural environmentdemographic conditions of respective countryFURTHER EXPLANATION ON THE PROBLEMS FACING international ENTERPRISEThe supply chain of multinational companies can be do richer and promising, the cost of work force which is high could be changed or transform and potential markets can be expanded. Furthermore, the advantage of multinational enterprise competition can be made stronger in a global market. Otherwise, some problems are met in the changed environments in foreign countries at the same time. The changed environments can be divided into four main parts, such as the interestDifference in cultureFactors occurring in the environmentLegal issues in environmentEconomic environmentPolitical system issuesAll the changed environments get along problems to multinational companies. In particular, problems which are caused by changed culture environment are the mo st serious aspect of running a multinational work. pagan Competitive AdvantageThe norms and values of a country contribute to the cost and influence the cost of doing vexation in that country and likewise, the cost of doing business in a country enhances the strength of firms competitive advantage in an international market. For instance, the Hindu does not take for capitalism as the ethical motive embedded in the Protestantism and the Confucianism furthermore, the Islamic laws disallowing interest payments mat raise the cost of doing business by constraining a countrys banking system.The example of Japans cultural influence of competitive advantage on international business cannot be over emphasized due to its ability to lower the cost of doing business such as group affiliation, loyalty, reciprocal obligations, honesty, and education which has contributed to the success of the countrys competitive advantage.In comparison of Japan and American firms, it has been argued that Japa n is not in support of entrepreneur whereas the Americans are which has made it possible for the American firms to dominate companies that are in support of entrepreneurial activities such as biotechnology and computing device software.Maintaining Economic CompetitivenessFactor bestowal/benefactionAs argued by Michael Porter, according to Heckscher-Ohlin theory, governments investment in education would go a long way to help the country by giving a good and proper education and skills to a larger population in the country. A good example is Japan, the secrete behind her success is the provision of quality education to a larger number of her population, which has tremendously maintained, contributed and helped her competitive advantage. view of demandThe status of home demand has a major share to play in the production of domestic products which enables firms to be innovative and purpose for quality. Japaneses quality camera production is due to the need for consumers demand.Compl ementing industriesThe existence of complementing industries would help the strength of its competitive advantage such as the Swedish steel industrys strong competitive advantage due to the production of fabricated steel like ball bearing and cutting tools.Adopted strategy, structure and firms rivalsAccording to Michael Porter argument, the idea developed or employed by each country varies which might or might not help them maintain national economic competition. According to him, the Japanese and the German firms are macrocosm prevail by top engineers whereas in the USA, that with good financial stage setting dominates the firms. He further argues that the USAs loss of power in the engineering dominated firms was due their adopted idea.Furthermore, rivals into the industry al slipway bring about ways of improving production quality, cost reduction and innovative ideas which helps firms to compete internationally. polishMichael Porter has very good competitive ideas which could h elp a firm to compete internationally.ReferencesRichard M.S Wilson and Collingilligan A. (2007) Strategic marketing management, planning, implementation and control 3rd edition. Elsevier limited.Helen Deresky (2006) worldwide Management, Managing Across Borders and Cultures. 5th Edition, USA Pearson prentice hall.Jan Aart scholte (2000) Globalization, A Critical Introduction, second Edition. Palgrave Macmillan.McGraw-Hill/, (2005) international business competing in the Global marketplace 5th Edition. The McGraw-Hill/Irwin companies Inc.http//tutor2u.net/business/strategy/global-business-global-strategy.html 4th Jan 2010http//i.investopedia.com/inv/articles/site/IndustryHandbook1x.gif 5th Jan 2010http//www.oecd.org/dataoecd/56/36/1922428.pdf 9th Feb 2010http//www.oppapers.com/essays/Discuss-Management-Problems-Facing-Multinational-Companies/120224 tenth Feb 2010http//tutor2u.net/business/images/competitive_strategies.gif 11th Feb 2010http//www.articlealley.com/article_183485_22.htm l 13th Feb 2010