Running head: Competitive Advantage and International Business

Competitive Advantage and International Business David Podel ECN 415 April 9, 2012 Ed

Competitive Advantage and International Business

Competitive Advantage and International Business Good afternoon everyone!! Thank you for joining me on this beautiful Saturday morning. I know that most of us would rather be out at that pool rather than inside with me attending this seminar. Your employer is footing the bill so enjoy the complementary bar and buffet, relax and keep in mind that you are going be able to share the knowledge you will gain here todaybesides the pool will be there in a few hours right? I am happy to see so many of you here eager to learn about two of the most important business topics: competitive advantage and international business. For those who do not know me, my name is Mai Biz and I am the author of the New York Times Best Seller, Keep Your Attitude Outta Mia Biz, about my life as a mentor, owner, writer, and motivational speaker. I have been asked to speak to you today by the United States Association for Small Business and Entrepreneurship or USASBE The information I am going to present today will discuss importance of both competitive advantage and international business in the global economy of today. I have about an hour before my tee time so lets get started. If you have any questions, please raise your hand so we can discuss it! I will also be asking questions throughout this seminar so be ready with a response and stay awake So, to begin with, let me start by asking you a question about a product from the 1980s. Does everyone understand why a better technology, i.e. Betamax lost out to VHS in the product battle over the VCR? (Only 1/5 of the room raises their hand) OK. Now, how many of you are familiar with the term competitive advantage? (About of the audience raises his/her hand.) Alright. (Pointing at man at first table) Now you raised your hand indicating that you knew about both the Betamax and competitive advantage. Can you explain the correlation between the two? The man begins stating that the reason the VHS had success was the competitive advantage of distribution and lower price that Betamax could not match. Since VHS was used by many

Competitive Advantage and International Business manufactures the number of machines available brought the price down to affordable levels quickly allowing everyone to own a VCR leaving the higher quality Betamax with few customers and little distribution. Very good!!! I am glad to see some of you are familiar with competitive advantage as it is essential to the success of any organization. Now, how many of you know how and why competitive advantage is so important in todays markets? About 25% of the audience raises his/her hand. Ok so thats why you are attending this assembly, and I thought it was for the free food and drinks! Competitive Advantage> Competitive advantage is An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers than its competition (Investopedia, 2011). Corporations that are able to create a competitive advantage over competitors will make greater profits and

find the business environment easier to operate as their cost of doing business has now decreased relative to the competition. There are many different forms of competitive advantage including a firm holding a patent and effectively being the only one to manufacturer that product without consent, a firms reputation and customer service provided to customers, an organizations ability to separate from similar firms by product differentiation, being a low cost leader or the distribution chain and access to products, i.e. close location. Now wouldnt everyone like the opportunity to run your businesses with any of those advantages? The other topic that I am going to discuss today can be related to having a competitive advantages and that is international business. How many of you conduct business in more than one country? If you have a customer, vendor, supplier, stakeholder, or office in another country you are most likely conducting international business. Does everyone fit into one or more of the situations mentioned? All of the audience raises his/her hand. Excellent! So all of you are experts in international business we can call it a day and head out to the pool, right? Everyone laughs.

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Just making sure you are all still awake. International business is the operation of the firm in multiple countries and is viewed as a route for profit maximization and the sustainability of corporations. Creating strategic alliances with firms in new markets allow capital resources to flow between countries and firms allowing the corporation to grow. International business is the end result of years of building relationships allowing the firm to have a mixture of competitive advantages they incorporate into its management strategy. I recommend that all of you should read my book which will give you an outstanding panoramic view at the world of competitive strategies. I do discuss the three generic strategies: overall cost leadership, differentiation, and focus on a particular market niche. The first strategy regards being a low-cost leader which means using marketing strategies, management, and pressure into a low-cost leader of the market. The low-cost leader strategy is exemplified by the retail giant, Wal-Mart, Inc. Wal-Mart is globally known for its low prices yet can earn equivalent profit margins with its competitors by saving on costs using bulk purchasing, effective marketing and supply chain management. This allows Wal-Mart to sell the goods at a lower price than its competitors but achieve equal profits per product sold. The second generic strategy is differentiation where one firms product has perceived uniqueness from a competitor leading to consumer preference. A firm with little or no product differentiation will have a weak competitive advantage. All companies that advertise individually use product differentiation such as Apple, Coke, McDonalds, etc. Other industries such as milk, cheese, chicken, pork and beef compete against each other and use industry wide advertising Apple faces competition from upstarts and longtime rivals, who borrowed the IPod idea, stole the iPad design and want the iPhone market. Has anyone ever seen the price of the newest

Competitive Advantage and International Business

IPhone 32 bit 4 G on eBay? No? I happened to be on EBay today and saw the newest IPhone on sale for a mere $550.00. For a phone. I agree that people are nuts but you cant deny the demand when Apple releases new phones into the market. Even a slight change in speed or design with the same layout, a product like the iPhone 4S was a huge success. Other companies in the market are releasing touch phones that run Android or Blackberry Software. However, the IPhone has product differentiation which neither Blackberry nor Android devices can match. The final strategy is focusing on narrowing the target market by directing attention on the demographic that use your service or concentrating on that one service and excelling at it. The smart car is an example of a niche that was found and the market has few if any competitors for that type of economical vehicle. If Smart would has attempted to join other corporations and simply focused on developing as cost leader without finding their niche the competitive strategy would have failed and its primary market would be much more competitive. Each corporation has needs and wants which need to be analyzed to create the personalized strategy that will create value and lead to a competitive advantage. Corporations with competitive advantages hold a value-creating strategy that no other rival company possesses. Does anyone know how companies create value? One woman raises her hand. OK. Go ahead? The woman explained that a company creates value through value chains such as higher quality products, lower cost products, or any other product or service that is unique from its competitors. Great answer and you are dead on!! How about in International Business? The woman continued in international business value is created by creating partnerships that allow for production outside both companies production possibilities frontiers. This is a situation that occurs when each firm specializes in producing the product in which they hold a competitive advantage and share that product with the other firm. Yes, that is true but its

Competitive Advantage and International Business

not always that simple. Risks become apparent when companies engage in international trade which could lead to a loss of stakeholder capital. These risks include an unfavorable change in political landscape, changes in the exchange rate, bottlenecks causing supply chain issues, communication or cultural breakdowns. All of these risks should be considered while developing the strategy to create a competitive advantage through international business. A company must be willing to risk the loss to profit from the opportunities if the potential reward outweighs the potential risks or challenges. Firms expand globally through outsource jobs into foreign countries which reduce labor expenses but what suffers? Everyone raises their hands. Alright, so it seems as though we all have experienced poor customer service offered at times. Do you think the poor customer service is poor in the mind of the person providing it or is it a cultural difference that we perceive it as rude and the person providing the service thought that they were helpful? Perhaps we should all try and think if we could possibly understand the cultures of China, India, Mexico or any other country simply based upon some classes and phone calls? Some companies are investing more on their ethics and cultural training in foreign markets that stress the mission, values, and vision of the corporation in hopes the added education will lead to better rapport between the customer and service representative in the near future. Competitive advantages differ at the international level from the domestic level in those oceans fewer strategic alliances, partnerships, or joint ventures exist on an international level. However, when they are successful at employing specialization and producing outside their production possibilities frontiers, which is not done domestically with competitor, the alliance is mutually beneficial. Additional methods to gain completive advantage in a foreign market include a merger or acquisitions, joint ventures, foreign capital mines, or the purchase of foreign

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governments bonds. It is essential to know the market before making decisions relating to expanding into foreign markets. Complete small transactions first allowing the firms to learn the requirements, expectations and needs of the potential partner while minimizing the risks to longterm financial health. In conclusion, environmental and market research along with understanding the intricacies of a foreign culture are essential for a company to gain a competitive advantage and succeed in international business today. Thank you for joining me!! I had a great time but that pool is calling my name. I had a great time explaining competitive advantage and international business. If you have any questions, feel free to come up and ask as I will be around for a couple of hours. Thank you all for being a part of this seminar and I hope you are taking away knowledge that you previously did not have.

Competitive Advantage and International Business

References
Besanko, D., Dranove, D., Shanley, M., & Schaefer, S. (2007). Economics of strategy (4th ed.). Hoboken, NJ: John Wiley & Sons.

Cringely, J. The Pulpit. The Once and Future King: Now the Only Way Microsoft Can Die is by Suicide. Retrieved March 30, 2012 http://www.webcitation.org/query?id=1298667420478042) Investopedia. (2011). Competitive Advantage. Retrieved from http://www.investopedia.com/ terms/c/competitive_advantage.asp#axzz1eNlYHJ3K Investopedia. (2011). Price Elasticity of Demand. Retrieved from http://www.investopedia.com/ terms/p/priceelasticity.asp#axzz1eOS6W6lt
Keat, P., & Young, P. (2009). Managerial economics: Economic tools for todays decision makers (6th ed.). Upper Saddle River, NJ: Prentice Hall. Savitz, A., & Weber, K. (2006). The triple bottom line (1st ed.). Hoboken, NJ: John Wiley & Sons.