bus state exam - strategic management

7/23/2019 BUS State Exam - Strategic Management

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Strategic Management

1. Internal Analysis (value chain concept and core competence)

Value chain analysis - Michael Porter in 1985 introduced in his book ‘The Competitive

Advantage the concept o! the "alue Chain# $e suggested that activities %ithin the organi&ationadd value to the service and products that the organi&ation produces' and all these activities

should be run at optimum level i! the organi&ation is to gain an( real competitive advantage# )!the( are run e!!icientl( the value obtained should e*ceed the costs o! running them i#e# customers

should return to the organi&ation and transact !reel( and %illingl(# Michael Porter suggested that

the organi&ation is split into ‘primar( activities and ‘support activities#

Primary activities

Inbound logistics+ ,e!ers to goods being obtained !rom the organi&ations suppliers read( to be

used !or producing the end product# -materials handling' %arehousing' inventor( control'

transportation.

Operations: The ra% materials and goods obtained are manu!actured into the !inal product#"alue is added to the product at this stage as it moves through the production line# -machine

operating' assembl(' packaging' testing and maintenance.

Outbound logistics: /nce the products have been manu!actured the( are read( to be distributed

to distribution centers' %holesalers' retailers or customers# -order processing' %arehousing'transportation and distribution.



ar!eting and "ales: Marketing must make sure that the product is targeted to%ards the correct

customer group# The marketing mi* is used to establish an e!!ective strateg(0 an( competitive

advantage is clearl( communicated to the target group b( the use o! the promotional mi*#-advertising' promotion' selling' pricing' channel management.

"ervices+ A!ter the productservice has been sold %hat support services does the organi&ationhave to o!!er# This ma( come in the !orm o! a!ter sales training' guarantees and %arranties#

-installation' servicing' spare part management.

2ith the above activities' an( or a combination o! them' ma(be essential !or the !irm to develop

the competitive advantage %hich Porter talks about in his book#

"upport Activities

The support activities assist the primar( activities in helping the organi&ation achieve itscompetitive advantage# The( include+

Procurement+ This department must source ra% materials !or the organi&ation and obtain the

best price !or doing so# 3or the price the( must obtain the best possible 4ualit( -purchasing ra%

materials' lease properties' supplier contract negotiations.

#echnology development: The use o! technolog( to obtain a competitive advantage %ithin the

organi&ation# This is ver( important in toda(s technological driven environment# Technolog(

can be used in production to reduce cost thus add value' or in research and development to

develop ne% products' or via the use o! the internet so customers have access to online !acilities#-,esearch development' )T' product and process development.

$uman resource management: The organi&ation %ill have to recruit' train and develop thecorrect people !or the organi&ation i! the( are to succeed in their ob6ectives# Sta!! %ill have to be

motivated and paid the ‘market rate i! the( are to sta( %ith the organi&ation and add value to itover their duration o! emplo(ment# 2ithin the service sector e#g# airlines it is the ‘sta!! %ho ma(

o!!er the competitive advantage that is needed %ithin the !ield# -recruitment' education'

promotion' re%ard s(stems.

%irm in&rastructure+ 7ver( organi&ation needs to ensure that their !inances' legal structure and

management structure %orks e!!icientl( and helps drive the organi&ation !or%ard# -general

management' planning' !inance' legal' investor relations.

As (ou can see the value chain encompasses the %hole organi&ation and looks at ho% primar(and support activities can %ork together e!!ectivel( and e!!icientl( to help gain the organi&ation a

superior competitive advantage#

pros+

"alue Chain Anal(sis provides a generic !rame%ork to anal(&e both the behavior o! costs as %ell

as the e*isting and potential sources o! di!!erentiation#



Porter emphasi&ed the importance o! -re.grouping !unctions into activities to produce' market'

deliver and support products' to think about relationships bet%een activities and to link the valuechain to the understanding o! an organi&ations competitive position#

The value chain made clear that an organi&ation is multi!aceted and that its underl(ing activitiesneed to be anal(&ed to understand its overall competitive position# An organi&ations strengths

and %eaknesses can onl( be identi!ied in relation to the pro!iles o! its direct competitors#

Competitive advantage is derived !rom an integrated set o! decisions on these ke( activities#

The "alue Chain model %as intended as a 4uantitative anal(sis# )t can also be used as a 4uick

scan to describe the strengths and %eaknesses o! an organi&ation in 4ualitative terms#

2ith the "alue Chain Anal(sis' Porter tried to overcome the limitations o! port!olio planning in

multidivisional organi&ations# The concept o! Strategic usiness nits stated that businesses

%ithin a conglomerate should act independentl( %hile head4uarters should be responsible onl(

!or budgetar( decisions to be based on a business unit:s position in the overall port!olio# Porter used his "alue Chain Anal(sis to identi!( s(nergies or shared activities bet%een Strategic

usiness nits and to provide a tool to !ocus on the %hole rather than on the parts#

cons+

The 4uantitative anal(sis is time consuming since it o!ten re4uires recalibrating the accounting

s(stem to allocate costs to individual activities# Porter provided 4ualitative guidance !or a

4uantitative e*ercise# $is anal(sis began %ith identi!(ing the relevant activities that lead tocompetitive di!!erences and are signi!icant enough to in!luence the organi&ations overall cost

base# The "alue Chain Anal(sis should be accompanied %ith a customer segmentation anal(sis to mi*

the internal and e*ternal vie%# A !eature or product provides the !irm %ith a di!!erentiating

competitive advantage onl( i! customers are %illing to pa( !or it# Customer value chains need to be anal(&ed to determine %here value is created#

The "alue Chain is used to anal(&e a !irm:s position in relation to its direct competitors %ith theassumption that rivalr( drives pro!itabilit(# This e*cludes other assumptions such as customer

bonding in Ale*ander $a*:s delta model#

The "alue Chain Anal(sis %as developed to anal(&e ph(sical assets in product environments#/ther authors amended the model to accommodate intangible assets and service organi&ations#

'ore 'ompetence - 'ollective earning in the Organiation is a techni4ue that enables better

strategic planning in business#

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Core competencies are the collective learning in the organi&ation# nlike ph(sical assets' %hich

do deteriorate over time' competencies are enhanced as the( are applied and shared# 3irst

companies must identi!( core competencies' %hich provide potential access to a %ide variet( o!

markets' make a contribution to the customer bene!its o! the product' and are di!!icult !or

competitors to imitate# ;e*t companies must reorgani&e to learn !rom alliances and !ocus on

internal development#

Core competencies can be determined %ith the !ollo%ing three tests+

• A core competence provides potential access to a %ide variet( o! markets#

• A core competence makes a signi!icant contribution to the perceived customer bene!its o!

the end product#

• A core competence is di!!icult !or competitors to imitate because it is a comple*

harmoni&ation o! individual technologies and production skills#

The core competence idea %as use!ul to managers not onl( !or !ocusing them on the

essentials' but also !or identi!(ing those things that %ere not at the core# 2h('

management might ask' %ere these non<essential things being allo%ed to consume

valuable resources=

The drive to identi!( core competencies moved in line %ith the gro%ing popularit( o!

outsourcing# 2hen companies %ere suddenl( able to outsource almost an( process thatcame under their corporate umbrella' the( needed to kno% %hat la( in the hard core o!

activities that the( %ere uni4uel( %ell 4uali!ied to carr( out' the activities that it made no

sense !or them to hand over to a third part(# )n some cases the ans%er %as ver( !e%#

*. +eneric "trategies (di&&erentiation and lo, cost) advantages and

disadvantages

Porters generic strategies !rame%ork constitutes a ma6or contribution to the development o! the

strategic management literature# >eneric strategies %ere !irst presented in t%o books b(Pro!essor Michael Porter o! the $arvard usiness School -Porter' 198?' 1985.# Porter -198?'

1985. suggested that some o! the most basic choices !aced b( companies are essentiall( the

scope o! the markets that the compan( %ould serve and ho% the compan( %ould compete in the

selected markets# Competitive strategies !ocus on %a(s in %hich a compan( can achieve themost advantageous position that it possibl( can in its industr( -Pearson' 1999.# The pro!it o! a

compan( is essentiall( the di!!erence bet%een its revenues and costs# There!ore high pro!itabilit(can be achieved through achieving the lo%est costs or the highest prices vis<@<vis the

competition# Porter used the terms ‘cost leadership and ‘di!!erentiation' %herein the latter is the

%a( in %hich companies can earn a price premium#

ain aspects o& Porters +eneric "trategies Analysis

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Companies can achieve competitive advantages essentiall( b( di!!erentiating their products and

services !rom those o! competitors and through lo% costs# 3irms can target their products b( a

broad target' thereb( covering most o! the marketplace' or the( can !ocus on a narro% target inthe market -(nch' B??. -3igure 1.# According to Porter' there are three generic strategies that a

compan( can undertake to attain competitive advantage+ cost leadership' di!!erentiation' and

!ocus#

'ost leadership - The companies that attempt to become the lo%est<cost producers in an

industr( can be re!erred to as those !ollo%ing a cost leadership strateg(# The compan( %ith the

lo%est costs %ould earn the highest pro!its in the event %hen the competing products areessentiall( undi!!erentiated' and selling at a standard market price# Companies !ollo%ing this

strateg( place emphasis on cost reduction in ever( activit( in the value chain# )t is important tonote that a compan( might be a cost leader but that does not necessaril( impl( that the

compan(s products %ould have a lo% price# )n certain instances' the compan( can !or instance

charge an average price %hile !ollo%ing the lo% cost leadership strateg( and reinvest the e*tra pro!its into the business -(nch' B??.# 7*amples o! companies !ollo%ing a cost leadership

strateg( include ,(anAir ' and eas(Det' in airlines' and ASEA and Tesco' in superstores#

Eisadvantage < The risk o! !ollo%ing the cost leadership strateg( is that the compan(s !ocus on

reducing costs' even sometimes at the e*pense o! other vital !actors' ma( become so dominant

that the compan( loses vision o! %h( it embarked on one such strateg( in the !irst place#

/i&&erentiation < 2hen a compan( di!!erentiates its products' it is o!ten able to charge a

premium price !or its products or services in the market# Some general e*amples o!

di!!erentiation include better service levels to customers' better product per!ormance etc# incomparison %ith the e*isting competitors# Porter -198?. has argued that !or a compan(

emplo(ing a di!!erentiation strateg(' there %ould be e*tra costs that the compan( %ould have to

incur# Such e*tra costs ma( include high advertising spending to promote a di!!erentiated brand

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image !or the product' %hich in !act can be considered as a cost and an investment# McEonalds '

!or e*ample' is di!!erentiated b( its ver( brand name and brand images o! ig Mac and ,onald

McEonald#

Eisadvantage < Ei!!erentiation has man( advantages !or the !irm %hich makes use o! the

strateg(# Some problematic areas include the di!!icult( on part o! the !irm to estimate i! the e*tracosts entailed in di!!erentiation can actuall( be recovered !rom the customer through premium

pricing# Moreover' success!ul di!!erentiation strateg( o! a !irm ma( attract competitors to enter the compan(s market segment and cop( the di!!erentiated product -(nch' B??.#

%ocus < Porter initiall( presented !ocus as one o! the three generic strategies' but later identi!ied

!ocus as a moderator o! the t%o strategies# Companies emplo( this strateg( b( !ocusing on theareas in a market %here there is the least amount o! competition -Pearson' 1999.# /rganisations

can make use o! the !ocus strateg( b( !ocusing on a speci!ic niche in the market and o!!ering

specialised products !or that niche# This is %h( the !ocus strateg( is also sometimes re!erred to as

the niche strateg( -(nch' B??.# There!ore' competitive advantage can be achieved onl( in the

compan(s target segments b( emplo(ing the !ocus strateg(# The compan( can make use o! thecost leadership or di!!erentiation approach %ith regard to the !ocus strateg(# )n that' a compan(

using the cost !ocus approach %ould aim !or a cost advantage in its target segment onl(# )! acompan( is using the di!!erentiation !ocus approach' it %ould aim !or di!!erentiation in its target

segment onl(' and not the overall market#

This strateg( provides the compan( the possibilit( to charge a premium price !or superior 4ualit(

-di!!erentiation !ocus. or b( o!!ering a lo% price product to a small and specialised group o! bu(ers -cost !ocus.# 3errari and ,olls<,o(ce are classic e*amples o! niche pla(ers in the

automobile industr(# oth these companies have a niche o! premium products available at a

premium price# Moreover' the( have a small percentage o! the %orld%ide market' %hich is a trait

characteristic o! niche pla(ers# The do%nside o! the !ocus strateg(' ho%ever' is that the nichecharacteristicall( is small and ma( not be signi!icant or large enough to 6usti!( a compan(s

attention# The !ocus on costs can be di!!icult in industries %here economies o! scale pla( animportant role# There is the evident danger that the niche ma( disappear over time' as the

business environment and customer pre!erences change over time#

"tuc! in the middle - According to Porter -198?.' a compan(s !ailure to make a choice bet%een

cost leadership and di!!erentiation essentiall( implies that the compan( is stuck in the middle#There is no competitive advantage !or a compan( that is stuck in the middle and the result is

o!ten poor !inancial per!ormance -Porter' 198?.# $o%ever' there is disagreement bet%een

scholars on this aspect o! the anal(sis# Fa( -199. and Miller -199B. have cited empirical

e*amples o! success!ul companies like To(ota and enetton' %hich have adopted more than onegeneric strateg(# oth these companies used the generic strategies o! di!!erentiation and lo% cost

simultaneousl(' %hich led to the success o! the companies#

imitations o& Porter0s +eneric "trategies Analysis

Euring the 198?s' the generic strategies %ere regarded as !undamental to strateg( and the ideas

suggested b( Porter %ere used e*tensivel(# )t became clear over time that in realit( there %ere

some shades o! gre( in the distinction bet%een di!!erentiation and cost' compared to the black





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and %hite that is pro6ected in theor(# )t is ver( di!!icult !or most companies to completel(

ignore cost' no matter ho% di!!erent their product o!!ering is# Similarl(' most companies %ill

not admit that their product is essentiall( the same as that o! others -Macmillan et al' B???.#

)t is important !or anal(sts to bear in mind that Porter:s generic strategies should be considered

as a part o! a broader strategic anal(sis# The generic strategies onl( provide a good starting point !or e*ploring the concepts o! cost leadership and di!!erentiation# Perhaps a ma6or

limitation o! the generic strategies is that the( ma( not provide relevant strategic routes in thecase o! !ast gro%ing markets -(nch' B??.# )t is important to conduct other anal(ses like

P7ST7 anal(sis to anal(&e ho% the generic strateg( being emplo(ed b( a compan( should

change in accordance %ith e*ternal !actors# /ther use!ul anal(ses %ould include S2/Tanal(sis' anal(sis o! the ke( success !actors etc#

. 2elated and 3nrelated /iversi&ication

2elated diversi&ication comes about %hen the organi&ation moves or diversi!ies into a ne% product and ne% market %hich are considered as related business activities# 3or e*ample a paper

producing compan( ma( diversi!( into book publishing kno%n also as concentric diversi!ication'

it is sometimes argued as to %hether this is a true !orm o! diversi!ication# The spate o! companiesusing diversi!ication as a !orm o! e*pansion cannot be over emphasi&ed due to the advantages

and the likelihood that similar customers in similar markets might be reached# Some o! the

reasons !or related diversi!ication are discussed here#

The compan( spreads the risk b( engaging into a related product and market using in mostinstances the same e*perience# To ensure continuit( o! suppl(' a manu!acturer ma( tr( to o%n its

o%n suppl( outlets0 sa( a car manu!acturer produces its o%n components# The aircra!t

manu!acturer' oeing:s )ntegrated Ee!ense s(stems' !or e*ample is a subsidiar( established to

integrate and provide instantaneous' accurate and protected in!ormation to decision makers andsoldiers in the !ield %hen the( need it' an(time' an(%here#

Sometimes it is di!!icult to distinguish %hen a strateg( is a generic di!!erentiation or a related

diversi!ication# The rationale !or related diversi!ication is strategic# This is to sa( that !irmsdiversi!( into businesses %ith strategic<!it thereb( sharing opportunities that ma( e*ist in the

businesses: value chains# ( strategic<!it is meant %hen the business identi!ies the opportunities

arising !rom the environment < shared technolog(' common labor skills' common distribution

channels' similar operating methods < and adapting resources so as to take advantage o! them%hich invariabl( leads into gaining a competitive advantage to achieve the desired goal#

Another reason !or related diversi!ication is that it helps the !irm achieve economies o! scope#These economies o! scope arise !rom abilit( to eliminate or reduce cost signi!icantl( b(

operating t%o or more business under one corporate head4uarters0 or %hen cost<savingopportunities can stem !rom interrelationships an(%here along business value chains# S(nerg( is

another reason !or related diversi!ication# This occurs %hen the combined e!!ect o! the t%o is

greater than the sum o! the parts# This is a claim b( enetton in 1995 that there %ere s(nergiesresulting !rom its diversi!ication#

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3nrelated diversi&ication is based on the dominant concept that an( compan( that can be

ac4uired on good !inancial terms and o!!ers good prospects !or pro!itabilit( is a good business to

diversi!( into# )t is basicall( a !inancial approach# This is to sa( that the strategic position o! the business gives it the advantage to diversit( into an unrelated business e*pecting !inancial gains

compared to strategic<!it as in related diversi!ication# 3irms usuall( pursuing unrelated

diversi!ication as a strateg( are re!erred to as conglomerates %ith no uni!(ing strategic theme#ntil recentl( the literature on diversi!ication has onl( been on environment<led perspective thus

portra(ing a narro% bene!it be(ond the current product and market base o! the !irm and outside

their value chains# The introduction o! resource<led perspective broadens the degree o!relatedness and its attendant opportunities# nrelated diversi!ication can be approached b( an( o!

the !ollo%ing methods#

• 7*ploitation o! the current core competences o! the organi&ation b( e*tending e*isting

markets into ne% markets and ne% products# )t could also come about b( the creation o!completel( ne% markets# This is usuall( seen as opportunities coming as a result o! the

core business' !or e*ample F%ik 3it o!!ering insurance services#

•The other approach is developing ne% competences !or ne% market opportunities# Someo! the advantages %hich come %ith unrelated diversi!ication ma( include spreading o! business risks over a variet( o! industries0 providing opportunities !or 4uick !inancial

gain i! bargain<priced !irms %ith big pro!it potential are spotted thereb( enhancing

shareholder:s %ealth# Again' pro!it or earnings are greatl( stabili&ed as one industr(:s hard

times is o!!set b( good times in others#

;evertheless' certain dra%backs are prevalent in going that path# Achieving these

a!orementioned advantages' places big demand on corporate management# The( had to be

e*tremel( small to spot problems# More businesses in a conglomerate' the harder it is !ormanagement to 6udge the strategic plans o! business manager in an( subsidiar( or business unit#

)t is !inall( argued that consolidated per!ormance o! unrelated businesses tends to be no betterthan sum o! individual businesses or their o%n or ma( be %orse0 unless managers are ver(

talented and !ocused' unrelated diversi!ication cannot be used to increase shareholder %ealthcompared to related diversi!ication# )t must be noted here that development into ne% related or

unrelated businesses can take an( o! three !orms+ internal development < %here strategies are

developed b( building up the organi&ation:s developed resources and competences b( taking over another one0 and 6oint developments or strategic alliances %here t%o or more organisations share

resources and activities to pursue a strateg(#

)t is %orth commenting that diversi!ication s one o! the most !re4uentl( researched areas o!

business %ith some research studies speci!icall( attempting to investigate the relationship

bet%een diversi!ication as a business strateg( and the organi&ations !inancial per!ormance# 3or4uite sometimes researchers suggested that unrelated diversi!ication %ere deemed unpro!itable in

comparison %ith related diversi!ication# Such as car makers: diversi!ication into car rental# These

earl( research !inding %ere later 4uestioned as to the linkage o! diversi!ication to an

organi&ations !inancial per!ormance' $o%ever' the main problem has been the !ailure o!organi&ations to determine the nature or degree o! relatedness#

;ag(ar -199B. identi!ied t%o areas o! potential relatedness+



• opportunities !or resource leveraging+ $e argued that t%o businesses are related i! all

t(pes o! tangible and intangible resources can be achieved b( ph(sicall( trans!erring

resources !rom one business unit to another0 b( cop(ing resources !rom each other andusing resources simultaneousl( e#g# using same brand name#

• /pportunities !or strateg( alignment+ $e argued that t%o businesses are related i! thealignment o! their market strategies creates bene!it# )n other %ords' coordinated behavior

bet%een businesses gives them the needed competitive advantage# 3or e*amplehori&ontall( related businesses team up to multipl( their e!!ective market po%er on

competitors as %ell as verticall( related businesses units ma( be pre!erable to

independent bu(ers and suppliers#

Though' diversi!ication ma( be di!!icult to achieve !ull( in practice' diversi!ication ma( simpl( be necessar( to achieve continuing gro%th %hen the current markets become saturated#

Fe( issues to be considered %hen deciding upon diversi!ication strateg(+

G S(nerg( -usuall( is best %ith related diversi!ication.

G 7merging markets are much more open to diversi!ication# The( are !aster to adopt and

adapt' learn !rom others# 2hile 7uropeans and Americans are slo% to adapt#

G essential tests be!ore diversi!ication %ill create shareholder value+

G Attractiveness test H the industries chosen !or diversi!ication must be

structurall( attractive or capable o! being made attractive

G Cost<o!<entr( test H the cost o! entr( must not capitali&e all the !uture

pro!its

G The better<o!! test H either the ne% unit must gain competitive advantage

!rom its link %ith the corporation or vice versa

G 3our t(pes o! management

G Port!olio management -most common. H through ac4uisition

G ,estructuring H more e!!ective than port!olio management H seeks outundeveloped' sick' or threatened organi&ations# Can be success!ul but o!ten hard

to dispose o! these businesses

G Trans!erring skills H can be success!ul but di!!icult H s(nerg( is ver( elusive

!ails to materiali&e# ;eed to utili&e the value chain H can trans!er skills ore*pertise among similar value chains or share activities -same sales !orce. H the

businesses need to be similar



G Sharing activities H e#g# common distribution s(stem sales !orce H can be ver(

use!ul but are pit!alls

4. 5ational 'ompetitive Advantage (Porters theory6 diamond)

)n the mid<198?s' Pro!essor Michael Porter o! $arvard usiness School developed a !rame%orkto assess the competitiveness o! regions' states and nations#

)n the earl( 198?s' #S# industr( sa% its economic competitiveness eroded b( Dapanese and

7uropean competitors# Porter concluded that classical international trade theories' %hich mainl(!ocused on slo%l( changing' IinheritedJ variables such as natural resources' climate' si&e o!

%orking population' etc#' could onl( partiall( e*plain %h( nations gain competitive advantage in

a given industr(# This observation initiated a !our (ear stud( o! ten ma6or trading nations and 1??industries that covered 5?K o! total %orld e*ports in 1985#

Success!ul international industries tend to be located %ithin particular cities and regions#

>eographic concentration is vital !or !irms to e!!icientl( dra% on each others resources and

capabilities and to bene!it !rom a shared culture and learning e*perience' suppl( capabilities andlocal in!rastructure# )ndustr( clusters are geographical concentrations o! interconnected

businesses' suppliers' and associated institutions in a particular !ield# Clusters lead to productivit( increases' higher innovation rates and !aster ne% business developments# Porter

argued that productivit( is the main !actor !or international competitiveness and that the standard

o! living o! a countr(s population can be improved as a direct result o! increases in that !actor#Clusters ma( take di!!erent !orms bet%een !irms producing di!!erent products across value<added

chains or bet%een !irms producing similar products at di!!erent stages o! the same chain#

7*amples are banking in ondon and ;e% Lork' chemical transport in ,otterdam' $ouston andSingapore' !ilm in Mumbai and $oll(%ood and )nternetSo!t%are in Silicon "alle( and

angalore#

Porters Eiamond o! competitive advantage model o! nations consists o! !our main attributes thatshape the national environment in %hich local' connected !irms compete+



1# 3ACT/, C/;E)T)/;SThe nations relative position in vital industrial production !actors such as skilled labor or

in!rastructure' are important determinants o! national competiveness# oth the level o! individual!actors and the overall composition o! the resource mi* must be considered# 3actors can be

countr( speci!ic or industr( speci!ic# 3or e*ample' Dapans large pool o! engineers << re!lected b(

a much higher number o! engineering graduates per capita than almost an( other nation << has

been vital to Dapans success in man( manu!acturing industries#

B# E7MA;E C/;E)T)/;S

The nature o! home demand !or an industr(s products and services re4uires considering both the4uantit( and 4ualit( o! the demand# 3or e*ample' Dapans sophisticated and kno%ledgeable

bu(ers o! cameras helped stimulate the Dapanese camera industr( to improve product 4ualit( andto launch ne%' innovative models#

# ,7AT7E A;E SPP/,T);> );EST,)7S

The presence or absence in the nation o! internationall( competitive supplier and related

industries is a ke( !actor# ntil the mid<198?s !or e*ample' the technological leadership in the#S# semiconductor industr( provided the basis !or #S# success in personal computers and

several other technicall( advanced electronic products# Adoption o! the automobile took o!! in

the SA a!ter the construction o! a national s(stem o! high%a(s and gas stations#

# 3),M ST,AT7>L' ST,CT,7' A;E ,)"A,L

The national conditions that determine ho% companies are created' organi&ed and managed' as%ell as the nature and e*tent o! domestic rivalr(# 3or e*ample' the predominance o! engineers on

the top<management teams o! >erman and Dapanese !irms results in emphasi&ing the

improvement o! the manu!acturing processes and product design# 3urthermore' domestic rivalr(creates pressure to launch ne% products' to improve 4ualit(' to reduce costs and to invest in ne%'

more advanced technologies#

Porter stated t%o additional variables that indirectl( in!luence the diamond+



5# C$A;C7 7"7;TS

Eisruptive developments outside the control o! !irms and governments that allo% in ne% pla(ers%ho e*ploit opportunities arising !rom a reshaped industr( structure# 3or e*ample' radical

innovations' une*pected oil price rises' revolutions' %ars' etc#

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>overnment choice o! policies can in!luence each o! the !our determinants# Success!ul

government policies %ork in those industries %here underl(ing determinants o! nationaladvantage are present and rein!orced b( government actions# >overnment can raise the odds o!

gaining competitive advantage but lacks the po%er to create advantages on its o%n#

These si* attributes promote or impede the creation o! competitive advantages o! !irms' clusters'and nations# All conditions need to be present and !avorable !or an industr(compan( %ithin a

countr( to attain global supremac(#

Managers can use the diamond model during their internationali&ation e!!orts to determine i! thehome market can support and sustain a success!ul internationali&ation e!!ort or to asses in %hich

countr( to invest ne*t# The model helps entrepreneurs decide %here to start their ne*t venture#>overnment o!!icials can use the model !or guidance on ho% to best build a supporting polic(

!rame%ork !or a given industr(

bus state exam - strategic management

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