University of Applied Sciences Schmalkalden
Faculty Business

Management Accounting & Management Control

Global Competition and Strategic Management

by

Erik Wintzer

Date of delivery: November 23, 2001

CONTENTS

1 Introduction 1

2 Fundamentals of Strategic Management 2
2.1 The Concept of Strategy in Business Life 3
2.2 Strategic Planning and Strategy Formulation 4
2.3 Strategic Analysis, Strategic Choice and Strategy Implementation 6
2.4 Managing by Strategy 7

3 Analyzing the Environment 8
3.1 The Internal Environment 9
3.2 The Analysis of Industry and Competition 11
3.3 The Macroenvironment 13

4 International Management Strategy 16
4.1 Corporate Strategies for Multinational Corporations 17
4.2 Market Share Goals 19
4.3 Global Competitive Advantage 21

5 Concluding Remarks 22

6 Acknowledgements 23

References 24

1 Introduction

D. Ricardo published in 1817 his theory of comparative advantage of nations. This theory declares that every country will gain from international trade if it concentrates in those products that it can generate more efficiently than other products. Certainly, to bring this advantage to work a country must be able to do business with any other country in the world. Today, this global competition has become reality.¹
Globalization of business that began in the 1970s and matured in the 1990s, has replaced the concept of national exchanges with global transactions. Technology is the prime mover of globalization and globalization is a major mover of competition.² This paper is set out to examine the effect global competition has on the process of strategic management.

A key question in strategy research is why business corporations diverge in their conduct and profitability. Researchers have determined to view firms as autonomous entities, striving for competitive advantage from either external sources, or from internal resources and capabilities.³
Certainly, the objective of a corporation′s strategy is achieving competitive advantage, but additionally, the strategy itself is a source of competitive advantage.⁴ "When competition accelerates, so do the strategies of players."⁵ The intensifying competition on the "world marketplace"⁶ is a great challenge for strategic management. Understanding of how technology and globalization affect a firm′s competitive positioning and creating global competitive advantage are the most important determinants of strategic management today.

It is the objective of this paper to employ some overall fundamentals of strategic management, to take a closer look at the globalized business environment, and to regard some significant aspects of international strategic management. It is explored how strategic management and globalization are linked.

2 Fundamentals of Strategic Management

Strategic management applies to managerial decisions that fuse the organization to its environment, guide internal activities, and concern organizational long-term performance. The strategy determines markets and products or services, it is about selecting where and how to compete, which organizational structure has to be established, how can employees be motivated, and how to allocate resources to create the greatest overall success.⁷ The intensifying competition in global markets causes a further need of understanding the strategic management process. This increase in competition influences the strategies of competing organizations decisively.⁸

2.1 The Concept of Strategy in Business Life

The point of implementing strategy is to fulfill stakeholder expectations in the long term, that means to handle the uncertain future. To accomplish this purpose, the strategy has to give consistency and direction to the individual decisions of an organization and should continually be adapted according to environmental change. However, there are no concrete rules to perform this assignment, formulating and implementing strategies base on special techniques, frameworks, concepts and, more or less, on intuition and experience.⁹

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1 Wheelen/Hunger (1998), p. 311.

2 Johnson/Scholes (1999), pp. 104-107.

3 Gulati/Nohria/Zaheer (2000), p. 203.

4 Luffman/Lea/Sanderson/Kenny (1996), p. 102.

5 Parayre/Hurry (2001), p. 281.

6 Wright/Kroll/Parnell (1998), p. 281.

7 Houlden (1996), p. 13; Stahl/Grigsby (1997), p. 21.

8 Johnson/Scholes (1999), p. 107; Parayre/Hurry (2001), pp. 281-282; Wright/Kroll/Parnell (1998), p. 6.

9 Grant (1996), p. 3; Johnson/Scholes (1999), pp. 10-11; Maciariello/Kirby (1994), p. 317. The term “stakeholder” is outlined, for example, in: Luffman/Lea/Sanderson/Kenny (1996), p. 27.