Competition in Global

Industries
By Michael E. Porter
Karan Mathur - 242007
International Competition
Industry is the unit of analysis in setting International strategy

Industry is the arena in which competitive advantage is won or lost

Multidomestic Competition in each country(or small group of

countries) is essentially independent of competition in other
countries

Global Competitive position in one country is significantly affected

by its position in other countries or vice-versa
Factors of Strategy Determination
Market drivers like degree of homogeneity of customer needs,
global distribution networks, opportunities for shared marketing

Cost drivers like potential for economies of scale, transportation

cost, and product development costs

Government/political drivers like trade policies, compatible

technical standards and common marketing regulations, ownership
rules

Competitive drivers the more competitors and customers following

a global market strategy, the greater the tendency for firms in
industry to follow a differentiated globalization strategy
Multidomestic and Global Industries
Why are some industries multidomestic?
Customized products are needed in
some countries
Countries have unique distribution
channels
There are no or few economies of scale
National competitors are common
Local/national firms have some
inherent advantages in the host country
over global competitors
Multidomestic industries include
personal care, railroads, furniture
Why are some industries global?
Homogenized products needs across
markets
Customers are global firms
High R&D expenditures require more
than one market to recover
development costs
There are many economies of scale in
production, marketing, etc.
Firm has global product differentiation
Global industries include Aircraft,
Entertainment, Energy
Value Chain and Globalization
An industry is Global if there is some competitive advantage to
integrating activities on a worldwide basis

A firm may possess two types of competitive advantages:

Low Cost
Differentiation
Configuration and Coordination of
Activities
Downstream value activities create competitive advantage that
are largely country specific

Upstream value activities create competitive advantage that often

grows out of the entire system of countries in which a firm competes

Configuration Location where each activity in the value chain is

performed, including in how many places

Coordination How like or linked activities performed in different

countries are coordinated with each other
Configuration of Activities
Configuration ranges from Activities US UK France Japan
concentrated to dispersed Inbound logistics X X
Factors favoring concentrating Outbound logistics X
an activity in one or few Marketing X X X X
locations: Sales X X X X
Economies of scale in the activity Service
A propriety learning curve Procurement X X
Comparative advantage of one or Tech X
few locations Development
Coordination advantages of co- Firm Infrastructure X X X X
locating linked activities such as HR management X X X X
R&D
Coordination of Activities
Coordination allows the sharing and accumulation of know-how
and expertise among dispersed activities

Coordination of dispersed activities involves costs that differ by form

of coordination and by industry

Coordination and a global approach to configuration enhances

leverage with local governments if the firm is able to grow or shrink
activities in one country at the expense of others
Types of International Strategy
High
High foreign Simple Global
investment Strategy
Coordination of Activities

with extensive
coordination

Country-centered strategy Export-based

by multinationals or strategy with
domestic firms operating decentralized
in only one country marketing
Low

Dispersed Concentrated
Configuration of Activities
Strategic Alternatives in a Global Industry

Geographic Scope
Global Strategy Country-Centered Strategy

Global Cost
Many Protected
Leadership or
Segments Markets
Differentiation
Segment Scope

Few
Segments
Global National
Segmentation Responsiveness
Future Trends in International Competition
High
Concentration
less necessary
Coordination of Activities

or possible

Coordination more
important and feasible
Low

Dispersed Concentrated
Configuration of Activities
Thank You