Published in econo.philica.com
A STRATEGIC PERSPECTIVE
Mr. Piyush marthak
T.N.Rao college of management studies, Rajkot
Globalization is the catchword of the day. People around the globe wish to be connected to each other than ever before as the information and money flow more quickly than ever Goods and Services produced in one part of the world are increasingly available in all parts of the world. It is expected that the mega trends of global economic integration would be clearly payable over the next years the benefits may not be evenly distributed but in real terms world shall be richer than before. There has been categorical belief that most of such growth will be seen in Asia, especially in China and India.
Indian economy stands today at very crucial turning point, form where it sees many ways to take leadership role to represent developing countries as super economy. A resent survey of over 1000 top international companies showed that the two major attraction in India.
1) The potentially huge size of Indian market.
2) Availability of educated human resource at very cheap cost.
We are now in process of restructuring our economy at rapid pace. Globalization and competitiveness is not merely a choice before business and industry, it is more necessity in today’s world, and competitiveness is the keys for success. We should prepare our selves to meet out the challenges of new era.
Higher capacity utilization raises global competitiveness of India – up two ranks in 2006 over the previous year. It is now placed 11th ranks above China its immediate competitors. (ET – Sept 27th). The success has largely due to better performance of industrial sectors.
The primary focus on the competitive strategies in India and also on the areas needing attention include India to be ever conscious of the 7 C’s – change, complexity, challenges, competition, competitiveness, customer and communication, which are interlinked. The Indian industry was under going a tremendous transformation, thanks to the winds of change blowing across the landscape.
- INDUSTRY GLOBALIZATION DRIVERS
There are four broad groups of industry globalization drivers – market, cost, Government and competition (Table-1 below). Together, these four sets of drivers cover all the major critical industry conditions that affect the potential for globalization. Drivers are primarily uncontrollable by the worldwide business. Each industry has a level of
globalization potential that is determined by these external drivers.
INDUSTRY GLOBALIZATION DRIVERS
Cost/ Economic drivers
Convergence of lifestyles & taste
Increased travel creating global consumer
Growth of global and regional channels
Establishment of world brands
Push to develop global advertising
Shortening product life cycle
Continuing push for economies of scale.
Accelerating technological innovation
Advances in transportation
Emergence of NIC
Increasing cost of product development
Reduction of tariff barriers
Creation of trading blocs
Decline in role of government
Reduction in non-tariff barriers
Shift in open market economies
Increase in level of world trade
Increase in foreign acquires of corporation
Companies becoming globally centered
Increased formation of global strategic alliances
Globalization of financial markets
However, as mentioned earlier, every industry cannot be a global industry, and some have to adopt ‘multi domestic strategy’. Table-2 lists five dimensions and their respective positions under pure multi-domestic strategy and a pure global strategy. For each dimension, a multi-domestic strategy seeks to improve worldwide performance by maximizing local competitive advantage, revenue or profits. On the other hand, a global strategy seeks to maximize worldwide performance through sharing and integration.
INTERNATIONAL MARKETING STRATEGIES
Setting for Pure Multi-domestic
Setting for Pure Global Strategy
No particular pattern
Significant share in major markets
Fully customized in each country
Fully standardized world wide
Location of Value-added Activities
All activities in each country
Concentrated one activity in each (different) country
Stand-alone by country
Integrated across country
STRATEGIC IMPLICATIONS OF GLOBALIZATION
As pattern of international competition shifts towards globalization, there are many implications for strategy formulation. In a global industry, functions of finance, marketing, business and Government relationship change according to global configuration and co-ordination.
(a) International Alliances:
International alliance is another implication of globalization. International coalition, linking firms of the same industry based in different countries have become an even more important part of global strategy.
(b) Organizational Challenges :
The need to configure and co-ordinate globally in complex ways creates some obvious organizational challenges such as organizational structure, reporting hierarchies, communication linkages and reward mechanisms.
(c) Government Relations:
In the globalized era, the selection of foreign market to enter and the mode of entry will, by and large, depends on the negotiations with the foreign Government, and the ‘muscle power’ of the global firm can be crucial in deciding the shift of power equilibrium. A global firm must ‘manage’ its relationship with the foreign Government to its advantage. A shining example of what happens if it fails to do so is Enron in
A global firm may be in a better position to compete with its global rival as it can augment its resources globally. These implications of globalization will lead companies to take care of these issues forcing them to formulate an appropriate strategy to handle them.
STRATEGY FOR GLOBAL COMPETITIVENESS
The research carried out in the past reveals that competitiveness depends upon internal as well as external factors. It also depends on the macro-environmental factors such as the policies of the home country Government (whether favoring competition, support offered to the industries in terms of taxation, rebates and incentives, fiscal and credit policies, etc.), the degree of consumerism in the home country, the nature of competition. However, there is lack of a single model for measuring global competitiveness.
Competitiveness depends upon internal as well as external factors. However, there is a lack of a single model for measuring global competitiveness. Various scholars have done research on global competitiveness either on one or only on a few functional based competitiveness parameters.
(a) Global Competitiveness:
To achieve global competitive advantage, cost and revenue have to be managed simultaneously; efficiency and innovation are both important, since innovations can take place in different parts of the organization, selective decisions have to be made instead of centralizing or decentralizing assets.
Certain resources and capabilities are best centralized within the home country operation, not only to realise scale of economies, but also to protect certain core competencies and to provide necessary supervision of corporate management, such as R&D activities.
Some resources may be decentralized, on a local basis, either because of small potential economies of scale compared to the benefits of differentiation or because of the need to create flexibility and to avoid exclusive dependence on a single facility.
(b) Multinational Flexibility:
The real challenge today is not only to be responsive, but also to build the capability to remain responsive as tastes, technologies, regulations, exchange rates, and relative prices change. Flexibility in sourcing, pricing, product design, and overall strategies is now the key to maintaining differentiation.
The pressure of competition has led companies to develop an ability to sense emerging trends, to develop creative responses, and to diffuse their innovations worldwide. This has certainly been the case in the telecommunications industry. Learning is also rapidly becoming the central game in consumer electronics and is emerging as a key competitive capability in branded package goods. Centrally designed products and processes still play an important global role, but innovations are created by the subsidiaries as well.
PORTER’S GLOBAL STRATEGY: CONFIGURATION AND CO-ORDINATION OF ORGANIZATIONAL RESOURCES
According to Porter (1986), “Competitive advantage is a function of either providing comparable buyer value more efficiently than competitors (low cost), or performing activities at comparable cost but in unique ways that create more buyer value than competitors and, hence, command a premium price”.
A global strategy can be defined as one in “which a firm seeks to gain competitive advantage from its international presence through either a concentrated configuration, co-ordinating among dispersed activities or both”.
In the above definition, configuration refers to firm’s activities worldwide, where each activity in the value chain is performed in different places; whereas co-ordination refers to the way similar or linked activities performed in different countries, are co-ordinated with each other.
A firm has a choice of options in both configuration and co-ordination. Configuration options range from concentrated performing of an activity in one location and serving the world from it, for example, one R&D lab, one large plant – to dispersed, that is performing the activity in every country. In the extreme case, each country would have a complete value chain.
Co-ordination potentially allows the sharing and accumulation of know-how and expertise among dispersed activities. A firm co-ordinating internationally may also receive early warning of industry changes by spotting them in one or two leading countries before they become broadly apparent in other countries. So, they can transfer the knowledge to guide other activities elsewhere. Co-ordination may also allow a firm to respond to shifting comparative advantage, where movements in exchange rates and factor costs are significant and hard to forecast.
MANAGING TIME AS A COMPETITIVE ADVANTAGE
According to George Stalk Jr. (1991), time is the next source of competitive advantage. He argues that like competition itself, competitive advantage is a constantly moving target. The key is not to get stuck with a single simple notion of its source of advantage. The best competitors know how to keep moving and always stay on the cutting edge. He states that time is the determinant factor to become competitive. The way companies manage time – in the area of production, development and marketing –represent the most powerful new sources of competitive advantage. In fact, as a strategic weapon, time is equivalent of money, productivity, quality even innovation. For example, in 1980s, managing time has enabled top Japanese companies not only to reduce their cost but also to offer broad product lines, cover more market segments, and upgrade the technological sophistication of their products. These companies were time-based competitors.
GAINING GLOBAL COMPETITIVENESS THROUGH COLLABORATIVE MANUFACTURING STRATEGIES
The Flat World creates extraordinary opportunities for manufacturers to expand their markets. With an expanding economy and growing prosperity of the country’s middle class, India’s manufacturing industry is expected to experience explosive growth over the next decade. To succeed, manufacturers must gain global competitiveness. Manufacturing companies in the country need to leverage enabling technologies such as automation and information technologies. They have to enhance productivity through Collaborative Manufacturing Systems, ensure better deployment of resources, gain time-to-market advantages, and supply chain visibility. Synchronization of production and business decisions are all critical to achieving global competitiveness. Join industry leaders as they share their vision and experiences for achieving global competitiveness through Collaborative Manufacturing Strategies.
HIGHER CAPACITY UTILISATION RAISES GLOBAL COMPETITIVENESS
New Delhi is happy that India has finally succeeded in improving its global competitiveness - up two ranks in '06 over the previous year. It is now placed 11 ranks above China, its immediate competitor (ET September 27). The success has come largely due to better performance of the industrial sector.
That higher industrial growth has improved India’s global competitiveness, which is a good news, but what is more important is that a steady rise in industrial production, of late, has improved the prospect of a sustained GDP growth back home. This is reflected in the rise in the contribution of industrial sector to GDP growth.
According to the Central Statistical Organisation (CSO), the real GDP growth originating from the industrial sector increased from 7.4% in ‘04-05 to 7.6% last year, driven mainly by strong manufacturing activity. The index of industrial production has grown by above 8% for the second year in running in ‘05-06. The index of manufacturing production has increased by over 9% during the last two years.
However, the most important breakthrough has probably come through higher capacity utilisation of the industries. Indian industries have added capacity since the beginning of the reforms, but now for the first time they are able to utilise it. The overall capacity utilisation rate of industries was estimated at 82.7% in ‘05-06 — up from 82.2% in ‘04-05. And the rise, albeit marginal, in utilisation rate has been achieved despite new capacity added to by various industries during the year.
- ACHIEVING GLOBAL COMPETITIVENESS
Many companies today are struggling to achieve a global competitiveness and a globally integrated organization retains the capability for local flexibility and responsiveness. Organization provides the vehicle by which strategy can be formulated and implemented. The nature of organization also affects the kind of strategy that can be developed. This is particularly true of global strategy. Building the kind of company capable of formulating and implementing total global strategy is not easy. The task is achievable if managers break it down into digestible pieces and if they relate changes in organization to the specific changes needed in global strategy. The following four factors affect a company's ability to formulate and implement global strategy
- Organization structure comprises the reporting relationships in a business - the 'boxes and lines'.
- Management process comprises the activities such as planning and budgeting that make the business run.
- People comprise the human resources of the worldwide business and include both managers and all other employees.
- Culture comprises the values and unwritten rules that guide behavior in a corporation.
Besides these, to become globally competitive, the company needs to focus on the following:
- Developing a marketing plan with universal appeal.
- Help employees understand the company's global vision.
- Benchmark off mistakes that other have made in the past.
- Select the right partners for joint ventures overseas.
Figure below illustrates these points
SOME REVIEWS IN THE WORDS OF DIFFERENT STRATEGISTS
Source:-> The strategist – A TOOL KIT FOR BUSINESS – 2005 – 06.
- By KENICHI OHMAE – An Author 140 books on Management and Social Political Issue.
Indians are not good at manufacturing. India is capable excelling in the service sector. The Chinese are good at manufacturing but they have not even begun to compete in the service sector. India in services will have a larger share of the world market, be it Hotel Management, I.T. System Development, Medical Tourism, Medical Research Design, Games or Back Rooms. There is an endless list of things that India could do. Therefore, it can get a larger share of The Global Economy. India’s biggest competitor is going to be the U.S.
- By KISHORE BIYANI – The Managing Director of Pantaloon Retail (India) Ltd.
Retailing is like riding a bicycle you can’t stop the pedalling. And even if the first generation businessman pedals at Olympic speeds, the TATA’s have stuck to their softly, softly strategy, be it setting up the new stores or entering new locations. The organized retail industry in India is worth Rs. 900 Crore and counting. Who will win the race to be the No. 1.
- By RAVINDER ZUTSHI – The Deputy Managing Director (Samsung India).
Good design and innovative technology will be the biggest differentiators for Samsung from its competition. Adopting the lifestyle products platform, Samsung is aiming for the high and premium market.
- P. D. NARANG – The Group Director (DABAR INDIA).
On the Event of DABAR India’s acquisition of the BALSARA GROUP’s Hygiene and Home Products.
You worry about the skills and experience they are taking away, but aren’t sure you can retain them in a new, integrated structure. There were no surprises, we knew what was wrong ? and how to set it right.
Global competitors must have the capacity to think an act in complex ways. They must understand and accept the fact that this is an era of competition and only those who are competitive will remain in the race. They must, therefore, design their strategies such that they manage the cost and revenue simultaneously. The credit must be given to efficiency and innovation.
The key to success is careful analysis of the obstacles to this approach. However with the requisite amount of confidence their adversities can certainly be converted into opportunity so that country India positions itself as a niche segment way ahead of others in terms of competitive advantage.
 Agnihotri Prafulla (1997), “Achieving Global Competitiveness
Through Flexibility in Management: A Conceptual Analysis”. A
research paper presented at and published by IIT, New Delhi at an
International Conference on Management of Technology.
 Hax, A C and Majluf, N S. Strategic Management. Englewood Cliffs,
New jersey, Prentice Hall Inc., 1984.
 Economic Times October 3,2006
 Arc Advisory Group-1986-2006 – Guiding industry for 20 years
 India Brand Equity Foundation www.ibef.in
An initiative of the Ministry of Commerce & Industry, Government
of India C/o Confederation of Indian Industry [CII]
 The strategist – A Business standard Publication 2005-06.
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Marthak, P. (2015). GLOBAL COMPETITIVENESS: A STRATEGIC PERSPECTIVE. PHILICA.COM Article number 477.