Competitive Position in the Market - Case Study Example

number Global business and management. Whenever a manager is involved in a business that is run in two or more countries,then he qualifies to be a global manager. Global managers face a lot of challenges and barriers and sometimes a simple decision is what determines the future of the organization. The managers and owners have to make sure that each branch of their organization runs efficiently. This is despite the trade sanctions, taxations and duties, deferent laws and policies of conducting business. They have to overcome the geographical barrier between them and the respective branches. Capabilities. The competitive advantage brought about by capabilities; part of a manager’s job is to cultivate the capabilities of a firm he manages. These capabilities will later on come in handy in the face of competition. When a company has capabilities that are unique, it can meet competitions and still manage to secure or even enlarge its competitive position in the market. When such a company opens up new branches in other nations of the globe, it is likely to build a name for itself in the new location and manage to thrive because of its unique capabilities that make it possible to overcome the new competition. One such company is Apple. The company started in California but was able to expand and make an impression in the global market because of its unique capabilities to combine esthetic design and functionality. Apple can produce electronic products, which operate in their version. Another popular company is IKEA, which is a furniture company. IKEA had the unique qualities of manufacturing furniture and household items and transported them to the customer at cheap prices. With these capabilities, the firm could be internationally recognized. Another Company that was able to grow tremendously due to the unique qualities is the telecommunication company Telefonica. It entered Chile and Argentina and learned new ways of amassing wealth. They then used this knowledge on how to revamp state-owned companies and make them theirs. Telefonica is now the 5th largest telecommunication company in the world in terms of revenue. However, some business managers have tried to incorporate new cultures into their organizations that proved futile and led to significant losses. The same managers who have made a name for themselves also made such mistakes. In short, what one can deduce is that in order for a global manager to secure and maintain the market he has to exploit, renew and enhance the capabilities of their organizations. Exploitation of current capabilities; one of the easiest ways in which a company can gain international dominance is by exploiting the capabilities that they developed at home. This is so because the company has already practiced and used the capabilities, hence, they are familiar with them. An example of a firm that made use of this fact is IKEA. IKEA used its capacity to produce cheap furniture with Nordic designs and cheap transportation and sell it in the international market. This enabled IKEA to grow tremendously and attain international recognition. Acquisition of companies in other countries can also be an exploitation of a company’s existing capabilities. This is certainly an easier option than to start building a business from scratch (INVESTOPEDIA p13). An example of an industry that can make good use of this is the hotel industry. A notable case is that of NH hotels. NH hotel initially started in Spain, as many hotels back in the 90s were mainly involved in the “sun and tourism” type of market. The hotel steadily grew in Spain by the acquisition of other hotels that did not do well financially. The executive managers of the hotel later realized that by using the same technique in the international market the hotel could grow and acquire a high dominance in the regions that it ventured to. At around 1999 and 2003, the hotel started growing and expanding into other European countries. It later gained dominance in Europe’s hotel industry. This became possible by the acquisition of other hotels that were not faring well. Another notable case is that of CEMEX. CEMEX is a cement company in South America that realized a new technique that could propel it into the international cement industry. The company cloned this technique and used it in other regions in the world, and it is because of this that the cement company was able to claim international dominance. However, it is worth noting that not every venture into the international market will make a company gain international dominance or be successful. For this reason, most potential business manager asks himself or herself “are my company’s capabilities going to be valuable and stand the new business environment?” In order for them to find the answer to this question, they have to perform what most refer to as a “RAT” test. The RAT test stands for relevant, appropriable and transferable (Lessard p4). This helps to know which qualities will be of importance and which qualities would be rendered useless. Acquisition of new capabilities; accompanies ventures to the global market mainly to access new capabilities or get assets that are of importance to the firm. Developing new skills can involve a simple move of acquiring another company that has assets with new capabilities or new technology. First, the global manager needs to know whether the newly acquired capabilities will be of importance to the firms peformance and even improve its competitive position. At other times, developing new capabilities may involve the hard task of coping with the international competition hence increasing the competitive position of the overall firm (Lawson & Samson p382). The job of the global manager is to determine whether the newly acquired capabilities are complementary to the initial sets of capabilities. The global manager needs to know whether the new skills will play a pivotal role in the overall improvement of the firm’s performance (Functions of the international manager). The manager also needs to tell whether it is possible to transfer the new technology or assets from the place where they were formed or made to other regions of the organization. Another technique that is popularly used and has been known to acquire new capabilities is setting up a shop at the leads market. A typical example is of Shimamo Company. This company was involved in the production of sportswear. Immediately the company decided to tap new technology of cold forging from the United States; this was early in the company’s initialization stage. This new technology significantly increased the company’s production capabilities. It began to realize enormous profits because of this cheap technique that lead to the production of more sportswear at a lower cost. In the 1970s, Shimamo Company opened up marketing and technological research center in Europe. This was in order to learn from the worlds most popular and sophisticated bicycle competitors and consumers. In the 1980s, the company then repeated the move in the west coast of the United States of American. This was in order to understand the requirements of the mounting biking pioneers what their producers did not have that the pioneers wanted. In all the above three instances, Shimamo was able to acquire either market or technological knowledge that was a complement to the already existing deep knowledge of the sportswear requirements. This experience not only helped Shimamo Company in the area of context where the new technology originated but also in other branches of the company that was global. New capabilities and assets can be gained through joint ventures. This enables the firm to gain access to the capabilities and assets of the newly acquired companies (Beamish & Lupton, p75). Notable cases include those of; TATA company and LENOVO company. Lenovo is a Chinese company that deals with the production of electronic gadgets. It is mainly involved in the manufacturing of laptops and computers, their devices are known to be of superb performance, durability, and high quality. The company recently [2005] acquired IBM’s PC division. This enabled LENOVO Company to access new technologies, assets and both technical and market knowledge. LENOVO Company later combined the knowledge and capabilities acquired and improved its position in the global competition of the electronic industry. AXA Company has learned to keep a keen eye on changes in its consumer trait. AXA was able to exploit new knowledge and capabilities of the newly acquired companies entirely. TATA an automobile company based in India has significantly increased its source of knowledge, technology, and capabilities. It could be because of its recent acquisition of Jaguar Automobile Company and Land Rover Automobile Company both of which are based in Europe or United Kingdom to be more specific. TATA also acquired a bus marker that is popular in Europe known by as Hispano Carrocera. Truly, it is correct to say that mergers and joint ventures has earned TATA a great deal knowledge and capabilities that have contributed significantly to what the company is currently. In order for global managers and strategists to tell whether the newly acquired assets and strategies should be used to advance the currently existing assets and capabilities, they have to carry out an operation known as a CAT test (Leddy). This test helps one to tell whether the new capabilities will complement, be appropriate and can be transferred. CAT test answers the following questions; 1) Are the new capabilities and assets acquired by the company complement the existing assets and capabilities that form the company’s core and competitive edge? 2) Will the company be able to appropriate the new assets and capabilities fully or will other companies be able to assimilate the capabilities and do it better? 3) Can the company be able to transfer the newly acquired capabilities and bring them from the source location, integrate them with existing capabilities without sacrificing the company’s values? Just like RAT test, the CAT test is intended to assist a global strategist in making decisions about capabilities and assets acquired and whether they will be of any importance in the overall performance of the firm (Leddy). A good example of the effectiveness of the CAT test is when CEMEX, the cement company in South America, believed that attaining the capabilities of Rinker Group [a company that deals with production and distribution of cement products in Australia]. However, this was not possible because of the wide gap in terms of structure and culture between the two companies. The Virtuous Cycle. When CAT and RAT are taken together, they end up being a cycle of exploiting and enhancing capabilities. For many global managers and strategists, the globalization process starts when they begin to know or consider which of their assets or capabilities can be used in the global market and possess the potential of being appropriable, transferable and relevant. As the organization begins to operate in the new foreign market, it is bound to come across some capabilities that are going to be of great importance and advantage in the local productions processes. Thus, there is a need to adapt the new model into the local context to improve the competitive nature of the company both global and locally. The global managers are thus burdened with the decision to determine which are relevant, appropriate and can be transferred to the new market. It becomes a cycle of exploitation, adaptation, enhancing and exploration finally. A suitable example for this is the Wal-Mat company. Wal-Mat Company did not pass the RAT test in Germany but passed the other tests. Wal-Mat Company recently realized new capabilities from South America and is now trying to emulate it in rural and urban areas in its local market. This is evident from the words of its chief executive Bill Simon, who claims that the group located in Latin America and parts of Mexico generate a lot of profits despite operating small formats. For a company like Microsoft, it can make use of its existing capabilities of overrunning existing other software companies to acquire shares or even buy them. This will not only make the business grow but also gain more capabilities. The company can also use the newly acquired capabilities to obtain more shares in the market. The company is located in the leads market, but there are other markets to open up branches. It includes places like Apple’s stronghold and China in general. The company can also be involved in joint ventures with other company’s or even buy them. Another way that Microsoft can become better is by developing new capabilities mainly by adapting to the new environment of the leads market where there is stiff competition. Works Cited Beamish Paul W., Nathaniel C. Lupton. Managing Joint Ventures. New York, 2009. Print. Lawson, Benn & Danny, Samson. Developing Innovation Capability in Organizations: a Dynamic Capabilities Approach. Victoria, August 2001. Print. Functions of the international manager. 2014. Web. 30 April 2015. . INVESTOPEDIA. The Basics Of Mergers And Acquisitions. New York, 2010. Print. Leddy, Chuck. International Business: MITs Prof. Donald Lessard on Best Practices for Expanding Your Business Abroad. 4 April 2014. Web. 30 April 2015. . Lessard, Donald. Global Strategy for the 21st Century - THE RAT/CAT Capabilities Perspective. New York, 16 February 2012. Print. Read More