MNE Organizational Strategies for Global Competitive Advantage

Introduction

Today's business world is characterized by rapid change, and the multinational enterprise (MNE) must keep pace with these changes in order to maintain a competitive advantage. There are five sets of environmental forces that every MNE must take into consideration:

1) Industry Structure; 2) Macroeconomic variables; 3) Political variables; 4) Societal variables; and 5) Technological variables.

Industry structure is related to the responses to strategies of customers, suppliers, and competitors, as well as dependence of profitability on unique value-added activities.

Macroeconomic variables are related to "income levels and growth rates, foreign exchange rates, inflation rates, interest rates, and unemployment rates" (Conklin, 2003).

Political variables encompass the factors of "regulations, financial incentives, taxation, foreign investment restrictions, and international trade and investment agreements" (Conklin, 2003).

Societal variables include "labor and environmental practices, ethics, corporate social responsibility, boards of directors, and demographics" (Conklin, 2003).

Technological variables include "technological infrastructure and the pace and direction of technological changes, including in particular the Internet and e-business" (Conklin, 2003).

Conceptual Frameworks for Industry Analysis

An examination of the conceptual frameworks used in the analysis of industry structure reveals several distinct existing models. The first is Porter's Five Forces, which analyzes an industry from the perspective of existing competition, the threat of new entrants, the buyer's bargaining power, the threat posed by substitutes, and the supplier's bargaining power. A sixth force that can be added to this model is the "impact of complementors" (Conklin, 2003). The structure of an industry in one country may be quite different from that in another, and this difference "may provide a rationale for international investment" — empowering a firm to realize increased profit by moving from one market to another to take advantage of unique activity provision.

Critical differences in industry structure from country to country arise from environmental forces such as levels of economic development, political regulations, consumer preferences, and technological elements. Conklin (2003) points to the work of Douglass North, who argues that the institutions within a country are able to shape the international competitiveness of an industry. Brandenburger and Nalebuff have proposed a complementary analytical tool that adds a further dimension to industry analysis.

Brandenburger and Nalebuff state that each corporation should utilize PARTS as "a comprehensive, theory-based set of levers" that help generate strategies. PARTS stands for: the number of Players that might change upon a corporation's entrance into an industry; the Added Values that may shift by lowering others' added value while increasing one's own; the Rules that a corporation may change by developing new pricing policies; the Tactics that alter the perceptions of others and their resulting decisions; and the Scope of the game, which may change through breaking old alliances and building new ones (Conklin, 2003).

The industry may also be viewed as a "value chain," which frames analysis in terms of the value added to products or services through alternative business activities. In evaluating international competitiveness, Michael Porter has proposed a "diamond framework." Differential opportunities for investment between countries depend specifically on "factor conditions, demand conditions, rivalry among competitors, and related and supporting industries" (Conklin, 2003). When the role of government is added to these factors, a combination emerges that can create competitive advantage and foster the development of industry "clusters." As Conklin notes, "Trade and investment agreements, together with an industry structure of a value chain or a creative web, can facilitate the location of separable activities in different countries, with each country offering a competitive advantage for a specific type of activity, leading to the concept of an activity/country competitive advantage."

Different government structures throughout the world also shape the political environment of business. These range from dictatorships to democratically elected governments to parliamentary systems. What were once considered purely "domestic" policies have, in the era of free trade, become potential barriers to trade and restrictions on foreign investment. Other factors restricting international trade in services include immigration and travel regulations. Intellectual property has become a primary concern in today's high-technology business market, with issues such as dumping, competition policy, environmental standards, and labor standards all requiring consideration. Additional factors include tax harmonization and differences in technical standards. Societal forces — differences in culture, values, and ethics — also vary greatly from one country or industry to another. Technological gaps throughout the world significantly affect a firm's ability to operate effectively, particularly where infrastructure deficiencies exist, as was demonstrated in the early development of e-commerce. International agreements such as the Kyoto Protocol further shape the technological landscape through their focus on pollution-reducing technological change.

Technology and Emerging Organizational Forms

Zornoza and Alcami, in their work "The Enabling Role of Information Technologies on the Emergence of New Organizational Forms," argue that if an organization is going to survive in a competitive environment characterized by turbulence, firms will need to "pinpoint innovative practices rapidly, communicate them to their suppliers, and stimulate further innovation." They cite a broad range of scholars — including Thorelli (1986), Miles (1989), Szarka (1990), Larson (1991), Easton (1992), and Hinterhuber and Levin (1994) — who are convinced that network structures are the organizational forms of the future.

The network theory examines in depth the types of relationships that exist among enterprises. As defined by Knoke and Kuklinski (1983), a network is "a specific kind of relationship joining a particular group of people, objects, or events." Johan Lembke's work "Global Competition and Strategies in the Information and Communications Technology Industry: A Liberal Strategic Approach" (2002) examines the roles that multinational corporations and the European Union play in structuring competition globally around wireless standardization. Lembke analyzes the "realities of global competition in information and communications technology (ICT) markets from a more liberal-strategic viewpoint than the subsidy-based industry-supported approach," arguing that both the EU and multinational corporations have adopted an "aggressive outward-oriented strategy."

Marks & Spencer: Structure, Supply Chain, and Competitive Advantage

The competitive advantage of Marks & Spencer rests squarely on the structure of its relationships with suppliers and employees, and on its brand and reputation. Marks & Spencer demonstrates the importance of key internal and external relationships to competitive advantage through its long-term productive relationships with both its workforce and its suppliers. Another area in which Marks & Spencer creates competitive advantage is through its purchasing methods. The company does not "buy its products 'off-the-shelf' from suppliers. Instead, technologists, designers, buyers, and merchandisers from both sides — along with the raw material producers — work together to identify new products and designs" (Buyer Behavior and Relationship Development, 2001). While most manufacturers view the end consumer as the retail company's customer alone, Marks & Spencer pursues integration at all levels of production, distribution, logistics, and information technology. The company also manages a complex fresh food supply chain, including perishables such as salads and vegetables, which requires accurate and rapid delivery to its UK food stores.

The Head of Supply Chain Logistics at Marks & Spencer has stated that, in order to stay ahead of competitors, management has been proactive and efficient in identifying the potential benefits of RFID (radio frequency identification) for improving the supply chain in fresh food. According to Gary Pile, General Manager of Melrow Salads: "Once Marks & Spencer decided to move ahead with RFID, we took the opportunity to work with them. RFID brings real benefits in improving our operational efficiency, giving us constant detailed feedback on our performance. That enables us to optimize the supply chain and move even closer to our target of 100% compliance" (Case Study Marks & Spencer, 2005).

Marks & Spencer is one of the largest retailers in the UK, with 65,000 employees in over 450 stores and a network of 198 franchised stores in 30 territories worldwide. Total sales for the Marks & Spencer group in 2005 were £7.8 billion. RFID technology is used by the company to track the movement of its products. A mobile tag transmits data that is read by an RFID reader, and the data is then processed according to the specific application's requirements. The technology solution deployed by Marks & Spencer is the "Half Portal Writing Solution," which comprises a Controller Station (housing the portal electronics), a touch screen, and a choice between tethered readers or handhelds. The configuration can be completed with just a few keystrokes and can program multiple tags simultaneously (Case Study Marks & Spencer, 2005).

Conclusion

Competitive advantage may be realized through many different methods and areas relating to a company's products and services, and generally stems from what specifically makes the company, its products, or its services unique or different from those offered by similar competitors. In the case of Johnson & Johnson, the trust of consumers represents an overwhelming competitive advantage — particularly given the long-established strength of the Johnson & Johnson name. In the case of Marks & Spencer, the company has remained customer-centric and focused on consumer preferences across all divisions of its product range. The competitive advantage of Marks & Spencer has been realized through its unique integration of manufacturing and retailing in addressing customer needs.

The only certainty in the global business environment is change. Like Johnson & Johnson, companies must learn to preserve what is valuable while recreating whatever will deliver new competitive advantage in the globalized economy of today's marketplace.

Bibliography

Couto, Vinay; O'Toole, James; and Levenson, Alec (2002). Leading in (and out of) Adversity. Center for Effective Organizations.

Robert, Michael (2006). Product Innovation Strategy, Pure and Simple: How Winning Companies Outpace Their Competitors. Available at: http://books.google.com/books?id=t0BfAyjHeo8C

Porter, M. "The Competitive Advantage of Nations." Harvard Business Review, March–April 1990: 73–91.

Porter, M. "How Competitive Forces Shape Strategy." Harvard Business Review, March–April 1979.

North, D. Institutions, Institutional Change and Economic Performance. Cambridge University Press, 1990.

Brandenburger, A.M. and Nalebuff, B.J. "The Right Game: Use Game Theory to Shape Strategy." Harvard Business Review (July/August 1995): 57–71.

Johnson & Johnson (2006). Wharton Business Plan Competition. Available at: http://bpc.wharton.upenn.edu/about/sponsors.html

Conklin, David W. (2003). "Designing a New Course: The Global Environment of Business." Journal of International Business Education 1(1). Senate Hall Academic Publishing.

Chapter 03: Buyer Behavior and Relationship Development (2001). Additional Case Study: Relationships Don't Always Help Marks and Spencer to Sparkle. Available at: http://www.oup.com/uk/orc/bin/9780199266272/01student/case_qs/csch03.doc

Case Study: Marks and Spencer (2005). "Keeping Real Time Tabs on Fresh Food Supply Helps Guarantee the Quality of Perishable Products." Available at: http://www.auto-id.bt.com/docs/pdf/M-S_fresh_food.pdf