Restricted National Restricted National Market ScopeMarket Scope (a) (a)

- national market development over - national market development over timetime

- sustainability of national strategies - sustainability of national strategies

- measuring competitive advantage- measuring competitive advantage

- inter-market comparison- inter-market comparison

- benchmarking*- benchmarking*

Károly Barakonyi - 5 2

LowHigh

Market Share ObjectiveMarket Share Objective

Global

National

S c

o p

eS

c o

p e

Global High Share Strategy

Global Niche Strategy

National High National High Share StrategyShare Strategy

National National Niche StrategyNiche Strategy

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(2)

•the link the link between competitive advantage and

business performance

•what measurewhat measure

to use in assessing competitive advantage, in what market and over which competitors?

•the importancethe importance

of undertaking inter-market comparisons

•the role of benchmarkingthe role of benchmarking

in assessing and developing performance improvement*

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Restricted national Restricted national market scopemarket scope

•focused on a single national market

•do not seek to leverage competencies, interdependencies across different national markets

•critical: long term viability!

What are the conditions for developing and What are the conditions for developing and sustaining a competitive advantage?*sustaining a competitive advantage?*

7Károly Barakonyi - 5

Worldwide

International regional

Int’l market entry & development

Restricted national Restricted national market scopemarket scope

Figure 5.1 The phase model of international business development

InternationalisationInternationalisation RetrenchmentRetrenchment

Phase 1

Phase 2

Phase 3

Phase 4

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•Int’l competitor: able to leverage greater Int’l competitor: able to leverage greater competencies =>competencies =>

national forced to become internationalnational forced to become international

•When is current national competitive When is current national competitive strategy is sustainable?strategy is sustainable?

Both external and internal contexts are Both external and internal contexts are supportive!supportive!

Unstable, if one of them is Unstable, if one of them is unsupportive: unsupportive: reorientatereorientate itself => itself => move*move*

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Nat’l focusNat’l focus Int’l focusInt’l focus

Nat’l focusNat’l focus Stable

Stable

Unstable

UnstableInt’l focusInt’l focus

External External context context seekingseeking

Figure 5.2 International business development matrix

Internal context seeking

Analyze current strategic posture as well as dynamics of competitive environment*

Károly Barakonyi - 5 10

Necessary conditions for nat’l Necessary conditions for nat’l strategy:strategy:–product-market demand: national tastes product-market demand: national tastes and preferencesand preferences

–competitive interdependencies: ability competitive interdependencies: ability to supply market competitivelyto supply market competitively

Sub-dividing nat’l strategy:Sub-dividing nat’l strategy:– local:local: highly localized, small local area highly localized, small local area–national regionnational regionalal:: number of local number of local marketsmarkets

–national:national: cover nat’l market cover nat’l market comprehensivelycomprehensively

– Size:Size: show marked variation by individual show marked variation by individual nations (UK, US, Hungary)*nations (UK, US, Hungary)*

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Local: family owned boulangerieLocal: family owned boulangerie

46,000 bread bakery in France (1-2 in a village)

1 bakery/1200 people, no change over the last century

So far: resisted to regional bakeries

Cultural differences:Cultural differences:

- bread brought twice a day

- Napoleon: regulated opening hours, purity, price

Position less secure when:Position less secure when:

new kinds of bread accepted

changes in cultural habits (promoted by larger retailers)

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National regional newspaperNational regional newspaper

Local newspaper: provide local news

Nordwest Zeitung: WW-IIStrategic recipe:Strategic recipe:

tailor common format to meet special needs of local marketsfront section exclusively devoted to local communityother three: the same in all edition

Further areal extensionFurther areal extension•local newspapers joined•NZ concentrates on nonlocal section, production, sales, advertisement •Partners: on local news, distribution (competed on quality of local content)

NZ: advertising brokerNZ: advertising broker: saving in overhead, direct costs

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The national company: The national company: South African Breweries LtdSouth African Breweries Ltd

Virtual monopolyVirtual monopoly:

98% lager beer, 10th largest in the world

Series of regional markets, served by a

regional breweryregional brewery

- centralization too expensive

- homogenous national brand is supplied

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National market National market development over timedevelopment over time

•Why Why do companies move from do companies move from being local to national over time?being local to national over time?

•WhatWhat are the implications for are the implications for key business functions and key business functions and processes?processes?

•HowHow do companies grow and do companies grow and develop over time?*develop over time?*

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External External context context seekingseeking

Internal context Internal context seekingseeking

LocalLocal National National regionalregional

NationalNational

LocalLocal Stable Unstable Unstable

National National regionalregional

Unstable Stable Unstable

NationalNational Unstable Unstable Stable

Figure 5.3 Local/national strategy matrix

FocusFocus

Why?Why?

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ExternalExternal– Product-market demand:Product-market demand: greater greater

homogenuity in tast, preferences => acceptance homogenuity in tast, preferences => acceptance of national brandsof national brands

– Competitive interdependenceCompetitive interdependence: supply local : supply local market more competitively becoming a national market more competitively becoming a national supplier (economies of scale)supplier (economies of scale)

InternalInternal– innovative vision of key managersinnovative vision of key managers: :

combined with succession events results in a combined with succession events results in a dramatic change to the strategic intentdramatic change to the strategic intent

– development of knowledge, competenciesdevelopment of knowledge, competencies: : able to exploit itable to exploit it

National regions: offer an intermediate National regions: offer an intermediate stage*stage*

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Current phase Next phaseDiscontinuity:Discontinuity:new strategic

thrust

External triggersExternal triggers

Internal triggersInternal triggers

Figure 5.4: Internal and external triggers to a discontinuity in business development

Károly Barakonyi - 5 18

ImplicationsImplications

Extending busExtending busiiness scope: ness scope: significant challengessignificant challenges• traditional ways: no longer be traditional ways: no longer be

appropriateappropriate

• managing important discontinuities managing important discontinuities in key functions, processesin key functions, processes

• managerial needs will changemanagerial needs will change

Specific needs will vary according to Specific needs will vary according to a number of factors*a number of factors*

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CharacteristicsCharacteristics LocalLocal NationalNational =================================================Market coverageMarket coverage local national

ProductsProducts local brand nat’l brand

MarketingMarketing unsophisticated highly dev.

Human resourcesHuman resources few employees increases

OperationsOperations very simple managerial needs

LogisticsLogistics uncomplicated complexity

FinanceFinance capital need low substantial

Nr. of competitorsNr. of competitors many, few, fragmented concentrated

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How?How?

How companies move from having local How companies move from having local strategy to a national?strategy to a national?

• Organic Organic (internal growth): in matured (internal growth): in matured market can be difficultmarket can be difficult

• AcquisitionAcquisition (external growth): (external growth): purchasing an established operation; purchasing an established operation; greater risk *greater risk *

Károly Barakonyi - 5 21

Internal growthInternal growthContextContext

industry is still growingfragmented, not dominated by larger companies

Resources requirementsResources requirementsdevelop its own resource basisdifficultneeds managerial and financial resources

Relative benefits and disadvantagesRelative benefits and disadvantagesincremental growth (“learn from doing”)risk: easier to managestrategy can be abandonslowinitially low level of market penetration (many years)

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External growthExternal growthContextContext

enter a mature markethighly concentratedsmall number of sellers

Resources requirementsResources requirementsmay be good managementmay require drastic actions make viablenecessary management and financial resources (?)

Relative benefits and disadvantagesRelative benefits and disadvantagesimmediate presence in the marketrisk: no guarantees of qualityafter entering not easily reversed (extra costs!)successful integration: management is crucial

Károly Barakonyi - 5 23

US microbreweriesUS microbreweries

Early 80’Early 80’: American beers dull, uninteresting

produced by major national producers

indistinguishable in taste

Early 90’Early 90’: 400 new small local breweries

uniquely flavored products

variety of local beers

market niche

market share in the region: 1%

Larger breweriesLarger breweries: start producing distinctive beers, too

Concentration new entries!!Concentration new entries!!