Company Resources and Capabilities

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Company Resources and Capabilities
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Session Outline

• Recap
• Organisational characteristics
• Resources
• Capabilities
• International experience
• Management characteristics
• Global Orientation
• Learning Orientation
• Case
• PG Japan The SK-II Globalization Project

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Recap - Motives

• Proactive
• Profit and growth
• Managerial urge
• Unique product/service
• Foreign market opportunity/information
• Economies of scale
• Tax benefits

• Reactive
• Saturated/small domestic market
• Competitive pressures
• Overproduction/excess capacity
• Unsolicited foreign orders
• Extend sales of seasonal products
• Proximity to international customers

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Understanding Motives and Barriers

• Important when establishing objectives
• Helps determine research and planning
  requirements
• Influences choice of entry strategy
• Assist in the development and implementation of
  international marketing strategies
• Important when measuring and evaluating
  performance

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Organisational Characteristics
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Course Structure
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Organisational Characteristics
Objectives
Size
Resources
Capabilities
Organisational Factors
Ownership
Centralisation
Country of origin
Product/Service
Culture
Experience
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Resources and Capabilities

• Assumptions
• The desired outcome of managerial effort within
  the firm is a sustainable competitive advantage
  (SCA)
• Achieving a SCA allows the firm to earn economic
  rents or above-average returns
• Poses the question
• How do firms achieve and sustain advantages?
• RBV response
• An inside-out approach to successful strategy
• Companies with superior combinations of resources
  can out-perform their competitors

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Resources and Capabilities

• Firms that are able to accumulate resources and
  capabilities that are
• Rare
• Valuable
• Non-substitutable
• Difficult to imitate
• Will achieve a competitive advantage over
  competing firms
• International business theories are based on the
  principle that
• Firms enter international markets to exploit
  competitive advantages that they have developed

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Resources and Capabilities

• 1. Tangible assets
• The fixed and current assets of the firm

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Resources and Capabilities

• 2. Intangible assets
• Account for the differences that are observed
  between the balance sheet valuation and stock
  market valuation of publicly listed companies

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Resources and Capabilities

• 3. Capabilities
• The organisations ability to combine, develop
  and use its resources to achieve new and
  innovative forms of competitive advantage (Grant,
  1991)
• i.e. new product development capabilities,
  distribution capabilities, service capabilities
• Business orientations set the firms direction
  and activities to ensure resources are fully
  exploited

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Hotel Industry (Dev, Erramilli and Agarwal, 2002)

• 5 core capabilities
• Organisational competence
• i.e. company culture, operating policies and
  procedures
• Quality competence
• i.e. teamwork among employees, provision of
  services
• Customer competence
• i.e. brand reputation, customer loyalty
• Entry competence
• i.e. finding good locations, timing of market
  entry
• Physical competence
• i.e. décor and design, atmosphere, physical
  facilities

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Hotel Industry

• International expansion decisions
• Stage 1
• Ascertain the firms strength in each of the five
  capabilities relative to competitors
• Does the firms competitive advantage depend on
  capabilities that are
• irreproducible (organisation/quality) or
• reproducible (entry/physical/customer)?
• Stage 2
• What is the feasibility of their transfer to
  foreign markets?
• How will they be transferred (i.e. entry
  strategy)?
• Do they provide the same competitive advantage
  given the foreign market environment?

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Hotel Industry

• Effect on entry strategy decision
• Irreproducible capabilities
• Preference for foreign direct investment
• Management needs to be heavily involved in order
  to transfer the capabilities to the foreign
  market
• Reproducible capabilities
• Preference for franchising
• The size, design, layout and decoration of the
  hotel can be standardised and replicated with
  little difficulty

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International Experience

• How do firms acquire experience related to
  international marketing activities?

• Alliances with international companies
• Acquisition of foreign companies
• Operating in foreign markets
• Exporting, licensing, franchising, manufacturing
  etc.

• Foreign sourcing of products
• Providing management with training in
  international business
• Participation in international trade and study
  tours
• Employment of internationally experienced staff

• Competing with international firms in the
  domestic market

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International Experience

• Jollibee
• Philippine-based fast-food chain
• 11 stores in 1981 when McDonalds entered
• Viewed competition with McDonalds as an
  opportunity
• Benchmarked operating systems
• Used gaps in McDonalds business model as a
  source of innovation
• No.1 fast-food chain in the Philippines
• Developed the capabilities to survive in more
  competitive foreign markets
• United States, Hong Kong, Indonesia, Vietnam,
  Brunei, Us Territories - Guam, Saipan

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International Experience

• Influence on entry strategy (Agarwal, 1994
  Anderson and Gatignon, 1986 Caves and Mehra,
  1986 Cicic et al., 1999 Evans, 2000)
• Influence on marketing strategy (Douglas and
  Wind, 1987 Cavusgil and Zou, 1994 Evans, 2000)
• Influence on performance (Evans, 2000 Katsikeas
  et al., 1996 Nakos et al., 1998)

International Experience
Reduced Uncertainty
High Cost/Control Entry Strategies
International Experience
Greater Understanding
Adaptation of Marketing Strategies
International Experience
Better Strategies
Superior Financial Strategic Performance
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ManagementCharacteristics
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Management Characteristics
Age
Education
Experience
Management Factors
Personality
Global Orientation
Country of Origin
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Global Orientation

• Ethnocentric
• Sees only similarities in markets
• Assumes the products and practices that succeed
  in the home market will be successful anywhere
• Attributed to demonstrated superiority
• Foreign operations are viewed as being secondary
  or subordinate to domestic ones
• Example
• Wal-Mart entry into Mexico and Germany
• Ethnocentrism is now one of the biggest internal
  threats for international companies

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Global Orientation

• Polycentric
• Management believes each market is unique
• Believes that each subsidiary should develop its
  own unique business and marketing strategies
• Example
• Citicorp financial services
• Financial services industry is globalising
• Moving to instill a regiocentric/geocentric
  orientation

We were like a medieval sate. There was the King
and his court and they were in charge, right? No.
It was the land barons who were in charge. The
King and his court might declare this or that,
but the land barons went and did their own thing
(James Bailey, Citicorp)
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Global Orientation

• Regiocentric
• Management views regions as unique
• Example
• Whirlpool and the development of pan-European
  brands
• Geocentric
• Management views the entire world as a potential
  market
• Sees similarities and differences in markets
• Seeks to create a global strategy
• Example
• Philips and the development of global strategies
  for RD, manufacturing and marketing

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Case PG Japan
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Summary Key Points

• Can the firms distinctive capabilities be
  transferred across national boundaries?
• Entry strategy refers to the manner in which the
  capabilities are transferred to the foreign
  market
• Marketing strategy refers to the manner in which
  the capabilities are delivered/communicated to
  the market
• Do the capabilities provide the same competitive
  advantage in foreign markets, given the different
  environment?
• Culture, business practices, legislation,
  politics, economy, technology