Strategic Alternatives in Global Industries

There are a number of basic strategic alternatives in a global in-dustry. The most fundamental choice a firm must make is whether it must compete globally or whether it can find niches where it can build a defensible strategy for competing in one or a few national markets.

The alternatives are the following.

Broad Line Global Competition. This strategy is directed at competing worldwide in the full product line of the industry, taking advantage of the sources of global competitive advantage to achieve differentiation or an overall low cost position. Implementing this strategy requires substantial resources and a long time horizon. To maximize competitive advantage the emphasis in the firm’s relation-ships with governments is to reduce impediments to competing glo-bally.

Global Focus. This strategy targets a particular segment of the industry in which the firm competes on a worldwide basis. A seg-ment is chosen where the impediments to global competition are low and the firm’s position in the segment can be defended from incur-sion by broad line global competitors. The strategy yields either low cost or differentiation in its segment.

National Focus. This strategy takes advantage of national market differences to create a focused approach to a particular na-tional market that allows the firm to outcompete global firms. This variation of the focus strategy aims at either differentiation or low cost in serving the particular needs of a national market, or the seg-ments of it most subject to economic impediments to global competi-tion.

Protected Niche. This strategy seeks out countries where gov-ernmental restraints exclude global competitors by requiring a high proportion of local content in the product, high tariffs, and so on. The firm builds its strategy to deal effectively with the particular na-tional markets with such restrictions, and places extreme attention on the host government in order to insure that protection remains in force.

In some global industries, strategies of national focus or seeking a protected niche are unavailable because there are no impediments to global competition, while in other industries these strategies are défendable against global competitors. An increasingly prevalent ap-proach to implementing the more ambitious strategies in global in-dustries is transnational coalitions, or cooperative agreements be-tween firms in the industry of different home countries. Coalitions allow competitors to team up to surmount the difficulties of imple-menting a global strategy in areas like technology, market access, and the like. Aircraft (GE-Snecma), automobiles (Chrysler-Mitsubi-shi; Volvo-Renault) and electrical products (Siemens-Allis-Chal– mers; Gould-Brown-Boveri) are just a few global or near-global in-dustries in which coalitions have become prevalent.

Source: Porter Michael E. (1998), Competitive Strategy_ Techniques for Analyzing Industries and Competitors, Free Press; Illustrated edition.

Leave a Reply

Your email address will not be published. Required fields are marked *