Competitive Advantage and International Business Essay

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[. . .] A good example of the clusers is the movie industry in Hollywood, the automotive industry in Detroit and biotechnology in Boston. This means that the company needs to find the right geographical area to invest in order to benefit. There are many reasons why these clusters arise such as availability of resources such as minerals, soil, port facilities, favorable weather, cheap labor, etc. Michael Porter, 1987(; M.E. Porter, 1998)

Strategies that can be used by a multinational corporation to mitigate the risks described

Governments are concerned with economic stability and that their local businesses are doing well. They therefore do their best to make sure that the monetary and fiscal policies in place favor local investment. To beat this, there are several strategies that can be put in place. First is a constant analysis of political risk. This ensures that the company is well aware of the political environment. Secondly is negotiation with local businesses. By engaging in such negotiations, the company can form international joint ventures or other business relationships that promote the position of the multinational corporation Weitzel & Berns, 2006()

Differences of achieving competitive advantage at international and domestic level

These differences arise majorly as a result of the risks and opportunities that multinationals experience. As a result of local competition which was already in existence, the chances of success of the multinationals are greatly impacted. The multinational thus needs to have a corporate strategy which is dynamic in nature and responds to the local market environment both internally and externally. The table below shows the differences between domestic and international conditions. These bring about the different strategies of achieving competitive advantage at the domestic and international level.

Factors

Domestic conditions

International conditions

Culture

Homogeneous

Heterogeneous

Currency

Uniform

Different currencies and exchange rates

Economy

Stable and uniform

May be variable and unpredictable

Government

Stable

May be unstable

Labor

Skilled workers available

Skilled workers may be hard to find

Language

Generally a single language

Different languages and dialects

Marketing

Many media, few restrictions

May be fewer media and more restrictions

Transport

Several competitive modes

May be inadequate

Source: World Bank

The best way of achieving competitive advantage in the international level is achieving greater economies of scale. This is the strategy that has been used by the successful multinational corporations such as Coca-Cola. By becoming cost leaders, the companies have managed to gain sustained competitive advantage which has helped them gain significant market share. Another way of gaining competitive advantage is ensuring standardization of products. This is done by ensuring that the product in one country is exactly similar to that in a foreign country. This helps the company build a strong brand image that is related to their quality.

References

Arend, R.J. (2009). Defending against Rival Innovation. Small Business Economics, 33(2), 189-206.

Chen, A.N.K., & Edgington, T.M. (2005). Assessing Value in Organizational Knowledge Creation: Considerations for Knowledge Workers. MIS Quarterly, 29(2), 279-309.

Collins, C.J., & Clark, K.D. (2003). Strategic Human Resource Practices, Top Management Team Social Networks, and Firm Performance: The Role of Human Resource Practices in Creating Organizational Competitive Advantage. The Academy of Management Journal, 46(6), 740-751.

Doukas, J.A., & Lang, L.H.P. (2003). Foreign Direct Investment, Diversification and Firm Performance. Journal of International Business Studies, 34(2), 153-172.

Ferligoj, A., Prasnikar, J., & Jordan, V. (1997). Competitive Advantage and Human Resource Management in SMEs in a Transitional Economy. Small Business Economics, 9(6), 503-514.

Grant, R.M. (1996). Prospering in Dynamically-Competitive Environments: Organizational Capability as Knowledge Integration. Organization Science, 7(4), 375-387.

Porter, M. (1980). Competitive strategy. New York: Free Press.

Porter, M. (1987). From Competitive Advantage to Corporate Strategy. Harvard Business Review, May-June (3), 43 -- 59.

Porter, M.E. (1998). Competitive advantage: creating and sustaining superior performance: with a new introduction. New York: Free Press.

Saeed, K.A., Grover, V., & Hwang, Y. (2005). The Relationship of E-Commerce Competence to Customer Value and Firm Performance: An Empirical Investigation. Journal of Management Information Systems, 22(1), 223-256.

Weitzel, U., & Berns, S. (2006). Cross-Border Takeovers, Corruption, and Related Aspects of Governance. Journal of International Business Studies, 37(6), 786-806.

Wiggins, R.R., & Ruefli, T.W. (2002). Sustained Competitive Advantage: Temporal Dynamics and the Incidence and Persistence of Superior Economic Performance.… [END OF PREVIEW]

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