MGT510 Southeastern Multinational Corporation & Strategic implementation Paper

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nja2222

Business Finance

MGT510

Southeastern University

Description

Consider yourself a management consultant. You have been commissioned by a domestic Saudi company to elaborate a report on the conditions necessary to successfully enter a ‘new’ market in foreign country.

The senior management responsible asks you to assess the current strategy of the company, to produce realistic strategy and develop a plan for entering the new market (you have to select a particular foreign market on where your company will operate)

Questions:

To accomplish your tasks you have to:

  • Identify the pros and cons of the actual strategy of this company (choose a Saudi company from the real market).
  • Present the key challenges you are likely to face when internationalizing the business?
  • Describe the optimum and realistic strategy to a successful entry in the new market. Justify your choice of this strategy.
  • Develop the steps for entering this new market
  • Present recommendations to the senior management team to gain market share and improve the competitive advantage on the new market.

Note: the chosen strategy should be supported by your findings from research of relevant theories and models.

The assessment of the answers will be highly based on the usage of terminology, models and theories developed in your course.

My Instructor request us to use below direction to complete above task:

1. Choose one of the three points:

A. Leadership cost

B. diversificationion

C.Concentration/focused strategy.

And explain it with details with pros and cons; also ensure adding examples for below requirements,

- use the steps for entering this new market (as attached in pics file)

- use the key challenges faced when internationalizing the business (as attached in pics file)

- Explain with details, with adding some facts and examples for all (minimum 4)

- Cite them and link it to the case study.

- Support all documents with facts.

- use the strategies to successful entry in the new market (as attached in pics file).

Book of course:

Foundations of Strategy 2nd Edition by ROBERT GRANT & JUDITH JORDAN

  • Student must apply APA style guidelines.
  • Support your submission with course material concepts, principles, and theories from the textbook along with at least 4 scholarly, peer-reviewed journal articles.
  • A mark of zero will be given for any submission that includes copying from other resource without referencing it.
  • Write at least 6 pages in length, excluding the title page, abstract and required reference page, which are never a part of the minimum content requirements.

Unformatted Attachment Preview

Industry Analysis Exploring the external environment of the firm to identify the sources of profit in the external environment (especially the firm’s proximate environment which is its industry environment). ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 1 Learning Objectives By the time you have completed this topic you will: •be familiar with a number of frameworks used to analyse an organization’s external environment and understand how the structural features of an industry influence competition and profitability; •be able to use evidence on structural trends within industries to forecast changes in competition and profitability and to develop appropriate strategies for the future; •be able to define the boundaries of the industry within which a firm is located; •be able to recognize the limits of Porter’s five forces of competition framework and extend the framework to include the role of complements ; •be able to segment an industry into its constituent markets and appraise the relative attractiveness of different segments; •be able to analyse competition and customer requirements in order to identify opportunities for competitive advantage within an industry (key success factors). ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 2 The profitability of US industries, 2000-2010 Industry Median ROE 2000-10(%) Leading companies Tobacco 33.5 Philip Morris Int., Altria, Reynolds American Household and personal products 27.8 Procter & Gamble, Kimberly-Clark, Colgate-Palmolive Motor vehicles and parts 4.4 GM, Ford, Johnson Controls Entertainment 3.9 Time Warner, Walt Disney, News Corporation Airlines ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com -11.3 Some industries (such as tobacco..) consistently earn high rates of profit; others (motor vehicles and parts, entertainment) earn much lower rates of profit or fail to cover their cost of capital (airlines). AMR, UAL, Delta Airlines Source: Data from Fortune 1000 by industry. See Grant & Jordan 2e Table 2.1 for a more detailed list of US industries. 3 How can we account for these differences in industry profitability? • It is all down to luck? • Some industries are in decline, others are growing fast? • The basic premise that underlies industry analysis is that the level of industry profitability is neither random nor entirely the result of industry-specific influences, it is determined by the industry’s underlying economic characteristics INDUSTRY STRUCTURE ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 4 EXAMPLE The pharmaceutical industry and the personal-computer have very different structures, which make one highly profitable and the other a nightmare of price competition and weak margins. • The pharmaceutical : – highly differentiated – price sensitive consumers and – new products receive monopoly privileges in the form of patents. • The personal-computer industry – many firms, – commoditized products and – is squeezed by powerful suppliers (e.g. Intel and Microsoft). – Small markets can often support much higher profitability (small markets can more easily be dominated by a single firm: niche markets ) 5 • The profits earned by the firms in an industry are thus determined by three factors: • the value of the product to customers; • the intensity of competition; • the bargaining power of the producers relative to their suppliers. 6 Analysing the business environment • The business environment of the firm consists of the external influences that affect its decisions and performance • How can managers monitor the vast array of possible influences? – Need to distinguish the ‘vital’ from the ‘merely important – Classification schemes like PEST can help ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 7 PEST Analysis How macro-environmental factors might impact a business organization: Political Economic Changes in government economic policy, e.g. taxation, government spending, monetary policy Changes in legal requirements e.g. employment law, health and safety legislation, licensing practices, environmental regulations, competition policy Changes in the government ownership e.g. nationalization, privatization, de-regulation Changes in the level of economic activity, e.g. growth rates, rates of unemployment, inflation Changes in wage rates and income distribution Changes in exchange rates Social Technological Changes in demographics e.g. the size of the population, the age distribution with the population Changing attitudes e.g. work/life balance, concern for the environment, ethical standards Changes in social structure e.g. socio-economic groupings, social mobility Development of new products and processes Automation Developments in information and communication technologies Developments in the natural sciences Some are clearly more important than others. Changes in legislation will have a more direct and immediate impact than changes in the level of economic activity ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 8 From environmental analysis to industry analysis for a firm to make a profit : -it must create value for customers. -it must acquire goods and services from suppliers. - depends on the intensity of competition among firms Thus, the core of the firm’s business environment is formed by its relationships with three sets of players ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 9 Porter’s Five Forces of Competition Framework ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 10 Structural determinants of the competitive forces ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 11 Competition from substitutes • The price customers are willing to pay for a product depends, in part, on the availability of substitute products. • petrol or cigarettes: ……consumers are comparatively insensitive to price (i.e. demand is inelastic with respect to price). • The existence of close substitutes : customers will switch to substitutes in response to price increases for the product (i.e. demand is elastic with respect to price):The Internet has provided a new source of substitute competition :Travel agencies, newspapers and telecommunication providers • Rare earth example 12 The threat of entry • If an industry earns a return on capital in excess of its cost of capital, it will act as a magnet to firms outside the industry. • If the entry of new firms is unrestricted, the rate of profit will fall towards its competitive level. • Contestability depends on the absence of sunk costs – investments whose value cannot be recovered on exit. 13 • Examples: • Increased health awareness in the US has encouraged increasing demand for fruit juice and smoothies. Low barriers to entry have resulted in about 4000 new juice and smoothie bars being established since 2000, resulting in market saturation and a high rate of business failures. • entry restrictions in many professions: orthodontists • Eurostar is currently the only company offering a high-speed, passenger rail service through the Channel Tunnel that links Britain and France. Yet, Eurostar may be unwilling to exploit its monopoly power to the full given that European liberalization legislation means that other rail operators will soon be able to extend their operations to this route. 14 • A barrier to entry is any advantage that established firms have over entrants. • See previous figure 15 Rivalry between established competitors • In some industries, firms compete aggressively – sometimes to the extent that prices are pushed below the level of costs and industrywide losses are incurred. • In other industries, rivalry focuses on advertising, innovation and other non-price dimensions. 16 • The intensity of competition between established firms is the result of interactions between five factors: 1- CONCENTRATION: the number and size distribution of firms competing within a market, commonly measured by the concentration ratio (the combined market share of the leading firms). • For example, the fourfirm concentration ratio (CR4) is the market share of the four largest producers. In markets dominated by a single firm (e.g. P&G’s Gillette in razor blades, Altria in the US smokeless tobacco market), the dominant firm can exercise considerable discretion over the prices it charges. – As the number of firms supplying a market increases, coordination of prices becomes more difficult and the likelihood that one firm will initiate price-cutting increases. 17 • 2- DIVERSITY OF COMPETITORS • avoiding price competition in favour of collusive pricing practices depends on how similar or different they are in their origins, objectives, costs and strategies. • Exp. • The intense competition that affects the car markets of Europe and North America today is partly due to the different national origins, costs, strategies and management styles of the competing firms. • The key challenge faced by OPEC is agreeing and enforcing output quotas among member countries that are sharply different in terms of objectives, production costs, politics and religion. 18 3- PRODUCT DIFFERENTIATION • The more similar the offerings among rival firms, the more willing customers are to switch between them and the greater the inducement for firms to cut prices to boost sales. • When the products of rival firms are virtually indistinguishable (agriculture, mining and petrochemicals), the product is a commodity and price is the sole basis for competition. • in industries where products are highly differentiated (perfumes, pharmaceuticals, restaurants, management consulting services), price competition tends to be weak, even though there may be many firms competing. 19 4- EXCESS CAPACITY AND EXIT BARRIERS - Unused capacity encourages firms to offer price cuts to attract new business. Excess capacity may be cyclical - it may also be part of a structural problem resulting from overinvestment and declining demand - Barriers to exit are costs associated with capacity leaving an industry. Where resources are durable and specialized and where employees are entitled to job protection, barriers to exit may be 20 5 - COST CONDITIONS: SCALE ECONOMIES AND THE RATIO OF FIXED TO VARIABLE COSTS When excess capacity causes price competition, how low will prices go? The key factor is cost structure. Where fixed costs are high relative to variable costs, firms will take on marginal business at any price that covers variable costs 21 Bargaining power of buyers • The firms in an industry compete in two types of markets: – input markets firms purchase raw materials, components and financial and labour services. – In the markets for outputs firms sell their goods and services to customers (who may be distributors, consumers or other manufacturers). – In both markets the transactions create value for both buyers and sellers. How this value is shared between them in terms of profitability depends on their relative economic power. 22 • The strength of buying power that firms face from their customers depends on two sets of factors: – buyers’ price sensitivity and – relative bargaining power. 23 24 25 Bargaining power of suppliers • The key issues are the ease with which the firms in the industry can switch between different input suppliers and the relative bargaining power of each party. • Because raw materials, semi-finished products and components are often commodities supplied by small companies to large manufacturing companies, their suppliers usually lack bargaining power. • Hence, commodity suppliers often seek to boost their bargaining power through cartelization (e.g. OPEC, the International Coffee Organization and farmers’ marketing cooperatives). • Conversely, the suppliers of complex, technically sophisticated components may be able to exert considerable bargaining power. 26 Applying industry analysis Industry analysis can be used to: • Explain differences in profitability between industries and changes in the profitability of a given industry over time • Assist managers in positioning the firm advantageously • Predict possible changes in competition and profitability in the near future • Identify opportunities for changing industry structures and alleviating competitive pressures. ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 27 The challenges of applying the five forces framework • Defining the industry • Dealing with missing factors • Choosing the appropriate level of analysis • Dealing with uncertainty and rapid structural change ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 28 Defining the industry • Industries versus markets. • Substitutability on the supply side versus substitutability on the demand side. • Boundaries are seldom clear-cut. • In practice the way boundaries are drawn depends on the purpose and context of the analysis. ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 29 Dealing with missing factors ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 30 Choosing the appropriate level of analysis The difficulty in drawing industry boundaries and the need to define industries more broadly or more narrowly depending on the kinds of questions we are seeking to answer means that it is sometimes helpful to undertake more detailed, disaggregated analysis. Segmentation Analysis ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 31 Segmentation analysis Identify possible segmentation variables Construct a segmentation matrix Analyze segment attractiveness Identify key success factors in each segment Select segment scope ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 32 Illustrative segmentation variables Demographic Gender Age Ethnicity Socio-economic Income Education Occupation Psychographic Personality Lifestyle Geographic Region Urban/suburban/rural Behavioural Purchase occasion Loyalty Use rate ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 33 Dealing with uncertainty and rapid structural change • At what rate is structural change occurring? • Some argue that the pace of change is accelerating – Intensifying international competition – Rapid technological change – Industries becoming hypercompetitive But • Systematic evidence of this trend is elusive. ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 34 Identifying key success factors ©2015 Robert M. Grant & Judith Jordan www.foundationsofstrategy.com 35 to gain market share and improve the competitive advantage on the new market 1- Prepare well : good definition of target market; study of consumers' behaviors, needs and desires; study of the competition & environment . 2- Define well the objectives 3- Choose the effective strategy 4- Elaborate a communication strategy to attract and keep clients Develop the steps for entering this new market Identify the target market Perform market research • Define marketing strategy • Establish a plan • Risk mitigation strategy • Ramping up Exit strategy strategies to a successful entry in the new market. • • Exporting (spot sales; foreign agent; long-term contract...) Licensing (franchising; licensing patents...) • Joint venture (marketing and distribution only) • Fully integrated • Wholly owned subsidiary ē key challenges faceed when internationalizing the business? . . Adapt the product and price to the new market; Understand the consumers' needs and desire on new markets Understand the consumer behavior on new market Study of competition on new market: number of competitors; their positions; products; concentration... Study of social, political, technological environment...
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Explanation & Answer

Hi, kindly find attached

Running head: MULTINATIONAL CORPOARATIONNAND STRATEGIC IMPLEMENTATION

Multinational Corporation and Strategic Implementation
Student’s Name
Institution
Date

1

MULTINATIONAL CORPORATION STRATEGIC IMPLIMENTATION

2

Abstract
In the field of research, most people have realized the importance of leadership cost in all
firms. Most firms have borrowed the idea of exercising cost leadership due to its importance in the
entire firm for it fosters competitive advantage. For this paper, being a company leader, I would
examine the strategy of leadership cost. I would then discuss the pros and cons of leadership cost,
examine the steps that can be applied when entering this new market, the key challenges faced in
the process and provide facts and examples in each case. I would then discuss a few strategies that
can result in a successful entry in a foreign market one of them being exporting. Finally, I would
then provide my recommendation to the senior management team of this company.

MULTINATIONAL CORPORATION STRATEGIC IMPLIMENTATION

3

Leadership cost
Leadership cost is one of the best and the most crucial business strategies that a firm or a
business should embrace due to its nature of establishing a competitive advantage by offering the
lowest cost of operation in a given firm or industry. Therefore, this business strategy is led by the
efficiency of a company, its size, the range of its scale and other factors like its scope and the
learning curve. This cost is designed in a manner that it enables the production of goods and
offering services at a cost that is affordable to the consumers or the customers. The cost is usually
relative to that of the firm’s competitors since all the features are acceptable to the customers. This
cost of leadership is embracing in most cases so that the firm may attain a competitive advantage.
This strategy is one of the best operation strategies that I would advise people to embrace for their
own benefit.
One of the best ways in which a firm may become a cost leader is by means of economies
of scales. This can be attained by lowering the costs in the entire chain of supply. Moreover, the
product should not of low quality but it should be of the same quality to that of the competitor is
that company is for making the sales increase in either same rate or a higher rate compared to that
o...


Anonymous
This is great! Exactly what I wanted.

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