Question

Firms face the crucial question of competing on costs or differentiation. Explain the four strategic approaches taken by firms when competing in overseas markets depending on whether their product is a standardized industrial good or one that needs significant adaptations to serve local needs.

Answer 1

The four strategic approach used by different companies are as follows.

Growth Strategy - This involves introduction of new products or adding new features to the product. This strategy is adopted by the firm to sell more, increase customer base, and overcome competition. Finding a new market for the existing products also comes under the growth strategy. Growth strategy works in both existing as well as new market through market penetration, market development, product development and entering a new market with new product. Example British Grocery firms Tesco & Sainsbury.

Product Differentiation Strategy - In this strategy firms use their unique selling proposition (USP)…i.e competitive advantage such as quality or service or any other tangible or non tangible benefit which gives them an edge over the competitors. Under this strategy companies want to be seen as superior to competitors which can help them to build a strong consumer base. Product differentiation means that some feature, physical attribute, or substantive difference exists between a product and all other alternatives available in the market. Example T-MOBILE - www.tmobile.com whose competitors are AT&T, Verizon Wireless

Price-Skimming Strategy - This strategy involves charging high price for a product or service which is in the introduction phase and then lowering the price during the later phases of the product cycle. In this strategy the pre requisite is that product or service should be unique and must have something to attract customer. This strategy is used to recover the technological, operating and related cost which are generally associated with newer products or version. Price skimming strategy has advantage of perceived quality, attracting status conscious customers and easy penetration into early adopter customer base.

Acquisition Strategy – Under this strategy a company purchase another company or one or more products of a company and sell them as its own brand. Acquisition strategy helps in finding new customer base in shorter duration of time. However this strategy requires financial strength to buy another company or a product. Example Shell acquisition of BG group.

ALTERNATIVELY,

As being a multinational organization it is very important for the organization to keep making changes in their planning and process in such a way that all the activities held in the organization are done effectively and efficiently and gain the maximum profit the market they are dealing with and before that they need to follow some strategies in order to ensure that they are considering all the aspects of the market and their organization before making any changes.

Now let us discuss the strategies that MNCs use for planning and updating their operations

• The first and most important strategy that need to be considered and that the organization uses is to identify the system they actually require. This can be only done by finding the process which is best suitable for the organization which can be flexible and easily adaptable in any kind of market in the globe in which the organization is dealing.
• They need to take into consideration growth strategies in which they need to find new markets in which they can run their business and increase their profit earning and achieve all the organizational goals and according to that they will plan and update operations.
• To understanding the working style of that particular country in which the organization is running or wants to expand their business they need to learn what is the working style of their employees and for that the organization can outsource the organizational process in their country and then estimate the working quality before establishing any operations center in that particular country.
• Market situation estimation and learning is also a very crucial strategy a multinational organization chooses for planning and updating operations. This helps the organization to make necessary changes in its process which can be beneficial for the organization in that particular market.