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Learning objectives
Svend Hollensen

GLOBAL MARKETING
5th Edition

D e f i n e t h e c o n c e p t international competitiveness in a broader perspective from a macro level to a micro level Discuss the factors influencing the firm s international competitiveness

4 Development of the firm s international competitiveness

Explain Porter s traditional competitive-based five forces model.

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Learning objectives (2)

Explore the idea behind the competitive triangle Analyse the basic sources of competitive advantage E x p l a i n t h e s t e p s i n c o m p e t i t i v e benchmarking
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Development of a firm s international competitiveness

M a c r o l e v e l : A n a l y s i s o f n a t i o n a l competitiveness Meso level: Competition analysis in an industry Micro level: Value chain analysis

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Analysis of national competitiveness (Porter diamond,1990)

Chance Firm strategy, structure, and rivalry Demand conditions

Factor conditions

Related and supporting industries

Figure 4.1

Government

Development of a firm s international competitiveness

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Factor conditions in Porter s diamond

Climate Physical infrastructure Natural resources Educational system Human resources Technological infrastructure Capital
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Demand conditions in Porter s diamond

Nature of home demand Size of home demand Economies of scale Transportation costs Buyer sophistication

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Porter s (1980), five forces model

New entrants Industry level

Determinants of market competitiveness

Concentration of industry Rate of market growth Structure of costs Degree of differentiation Switching costs Exit barriers

Market Competitors
Suppliers

Market level

Buyers

Intensity of rivalry

Substitutes

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Bargaining power of suppliers will be high if:

Supply is dominated by a few companies Products are unique High switching costs Forward integration is possible Backward integration is unlikely

Bargaining power of buyers is high if:

Buyers are concentrated and/or purchase in large volumes Backward integration is likely Products are standardized Many suppliers exist Buyers earn low profits Industry product is unimportant to quality of buyer s products, but price is important

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Threat of substitutes
Buyer s willingness to substitute Relative price and performance of substitutes Costs of switching

New Entrants: Barriers to entry

Economies of scale Product differentiation and brand identity Capital requirements in production Switching costs Access to distribution channels

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Hollensen, Global Marketing 5e, Pearson Education 2010

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Value chain analysis (Porter, 2001)

Customer

What is this?
The ______ consists of a customer, the firm, and a competitor. The winning of the customer s favour depends upon the perceived value offered compared to the relative costs between the firm and the competitor.

Perceived value/ price A

Perceived value/ price B

Firm A

Relative cost
Sales & services

Firm B
Sales & services

R&D

Production

Marketing

R&D

Production

Marketing

Hollensen, Global Marketing 5e, Pearson Education 2010

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Hollensen, Global Marketing 5e, Pearson Education 2010

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What is this?
What term refers to a firm s cost position as it relates the configuration of the activities in its value chain versus that of the competitors?

What is this?
What term refers to value chain activities in which the firm is regarded as better than its competitors?

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Hollensen, Global Marketing 5e, Pearson Education 2010

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What is this?
What term refers to a technique for assessing relative marketplace performance compared with main competitors?

Competitive Benchmarking profile

Hollensen, Global Marketing 5e, Pearson Education 2010

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Hollensen, Global Marketing 5e, Pearson Education 2010

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Blue Ocean Strategy: Kim and Mauborgne (2005)

R e d O c e a n s : T o u g h h e a d - t o - h e a d competition in mature industries often results in bloody red oceans of rivals fighting over a shrinking profit pool. Blue Oceans: The unserved market, where competitors are not yet structured and market is relatively unknown. Here it is about avoiding head-to-head competition.
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What is this?
What term refers to tough head-to-head competition in mature industries which often results in nothing but fighting over a shrinking profit pool?

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What is this?
What term refers to unserved markets, where competitors are not yet structured and the market is relatively unknown?

Value Innovation at Formule 1

Which of the factors that the budget hotel industry took for granted should be eliminated? Which factors should be reduced well below the industry standard? Which factors should be raised well above the industry standard Which new factors (that the industry had nevered offered) should be developed? Read Kim and Mauborgne (2005)
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Video Case Study: NIKE

http://wps.pearsoned.co.uk/ ema_uk_he_hollensen_globmark_5/170/43 546/11147796.cw/index.html

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Hollensen, Global Marketing 5e, Pearson Education 2010

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References
Hollensen, S, (2011), Global marketing, Pearson Education Limited, Essex, UK Doyle, P. (2008), Value-Based Marketing: Marketing Strategies for Corporate Growth and Shareholder Value, 2nd Edition. John Wiley & Sons. Kim, Chan. W., Mauborgne, R. (2005), Blue Ocean Strategy. Harvard Business School Press, Boston, Mass Porter, M.E. (1980) Competitive Strategy, Free Press, New York.

References
Porter, M.E. (1990, 1998) The Competitive Advantage of Nations, Free Press, New York.

Porter, M.E. (2001), Strategy and the Internet, Harvard Business Review, March 2001, pp. 62-78.

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Hollensen, Global Marketing 5e, Pearson Education 2010

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Learning objectives (1)

Svend Hollensen

GLOBAL MARKETING
5th Edition

Discuss how the political/legal environment will affect the attractiveness of a potential foreign market. Distinguish between political factors in the home country environment and the host country environment.

6 The Political and Economic Environment

Describe the major trading blocs.

Hollensen, Global Marketing 5e, Pearson Education 2010

Learning objectives (2)

Define regional economic integration and identify different levels of integration. D iscuss the benefits and drawbacks associated with regional economic integration.

Aspects of the political/ legal environment

Home country environment Host country environment General international environment

Hollensen, Global Marketing 5e, Pearson Education 2010

Hollensen, Global Marketing 5e, Pearson Education 2010

The home country environment

Promotional activities (sponsored by governmental organizations) Financial activities Information services Export-facilitating activities Promotion by private organizations State trading
Hollensen, Global Marketing 5e, Pearson Education 2010

Kinds of information typically available

Economic, social, political data on individual countries Summary and detailed information on aggregate global market transactions Individual reports on foreign firms Specific export opportunities Lists of potential overseas buyers, distributors and agents for various products in different countries Information on relevant government regulations Foreign credit information

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Major types of political risk in the host country environment

Effects of political risk

Import restrictions Local-content laws Exchange controls Market control Price controls Tax controls Labour restrictions Change of government party Nationalization Domestication

Ownership risk

Operating risk

Transfer risk

Hollensen, Global Marketing 5e, Pearson Education 2010

Hollensen, Global Marketing 5e, Pearson Education 2010

Economic Environment
Market size & Market growth: 2 milestones They depend on many factors such as economy, politics, culture, history, etc. But all of these are closely related to a country s main economic activity.

Types of economic activity

Primary

Secondary

Tertiary

Hollensen, Global Marketing 5e, Pearson Education 2010

Hollensen, Global Marketing 5e, Pearson Education 2010

Regional Economic Integration

Free Trade Area e.g. NAFTA 1994 (US, Canada and Mexico)
- No barrier between members - Each member maintains its own policies to non-members

Customs Union e.g. Benelux Countries 1921

- Free Trade Area + - Common trade policy with respect to non-members

Common Market e.g. EEC 1958-1993

- Customs Union + - Mobile labour, capital, and technology

Economic Union (27 states as of 02/10/12!)

Figure 6.3
Source: from Czinkota/Ronkainen. Global Marketing, 1E. 1996 South-Western, a part of Cengage Learning, Inc. Reproduced by permission. www.cengage.com/permissions

Forms of economic integration in regional markets

Hollensen, Global Marketing 5e, Pearson Education 2010

- Common Market + - Harmonisation of monetary policies, taxation, & gov. spending Hollensen, Global Marketing 5e, Pearson Education 2010

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Major trading blocs

European Union Association of South East Asian Nations (ASEAN) North American Free Trade Area (NAFTA)

Asia Pacific Economic Cooperation (APEC)

Hollensen, Global Marketing 5e, Pearson Education 2010

Hollensen, Global Marketing 5e, Pearson Education 2010

Video Case Study: Globalization

http://wps.pearsoned.co.uk/ ema_uk_he_hollensen_globmark_5/170/43 546/11147838.cw/index.html

References
Hollensen, S, (2011), Global marketing, Pearson Education Limited, Essex, UK

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