International Strategic Management
Question 3.1 under what environmental conditions are price wars most likely to occur in an industry
Price wars can occur under various environmental conditions. For example, they can occur under production differentiation or when a product is viewed as a commodity. When a given product is distinguished from others to make it more attractive to the target market, it is viewed as a commodity and since there is little to choose between brands, price becomes the only competing factor. Price wars can also occur when a new entrant or a merchant is attempting to enter the industry through penetration pricing. The new industry entrant might offer its products at extremely lower prices than the existing brands.
Question 3.2 what are the implications of price wars for a company. How should a company try to deal with the threat of a price war?
Question 3.3 Assess the impact of macro-environmental factors on the likely level of enrolment at your university over the next decade. What are the implications of these factors for the job security and salary levels of your professors?
Examples of demographic factors that might affect the enrolment at my university include economic, demographic, technological, ecological, and social-cultural forces. Due to the current economic downturns caused by the COVID19 pandemic, Holmes Institute may experience decreased enrolment levels over the next 10 years. According to the demographic statistics, Australia’s population is projected to increase sharply with the number of females exceeding that of males. This implies that Holmes’ enrolment might be relatively higher with the largest number of joiners being females. Technology, on the other hand, is eradicating the barriers imposed by time and space and significantly expanding students’ access to lifelong learning. Thus, technology is bound to increase the numbers of students who will be joining Holmes in the next decade. Ecological aspects such adverse climatic changes in some parts of the globe might inhibit access to learning thus lowering the enrolments in the coming years. Social-cultural forces also might play a role in lowering the number of joiners at Holmes as some communities hold strong beliefs that are against modern education. If these macro-environmental factors will generally decrease the number of students joining Holmes, then the demand for teaching services will decrease and as result, our professors’ job security will be at threat. Their salary levels might be cut as a result of the decline in demand of their services.
Question 4.1 When is a company’s competitive advantage most likely to endure over time?
Question 4.1 A company’s competitive advantage is most likely to endure over time when it sets up barriers to product imitation, making it extremely difficult for rivals to mimic its unique competences. It is also likely to endure if a company is responsive to customers’ changing needs and wants – if it constantly adds value to its goods or services to outsmart its competitors in the market.
Question 4.2 Is it possible for a company to be the lowest cost producer in its industry and simultaneously have an output that is most valued by customers? Discuss this statement.
This is certainly attainable. In fact every business in existence tries to produce products at the lowest cost possible but meet the customer needs (Porter & Kramer, 2019). When a company makes an efficient use of its limited yet invaluable resources to produce products that customers most prefer to those offered by competitors, it might first incur huge costs. However, in the long run, the company will realize comparatively higher sales and profitability, gain a completive advantage, start relishing economies of scale, and as a result, use its now adequate resources to offset the initial cost of production. Due to the constantly increasing demand for its products, the company is able to charge relatively higher prices than its rivals who might be struggling to make sales. Multinationals like Apple, Walmart, and Volkswagen perfectly illustrate these dynamics.
Question 4.3 why is it important to understand the drivers of profitability, as measured by the return on invested capital?
Question 5.1 How are the four generic building blocks of competitive advantage related to each other?
The four generic building blocks of competitive advantage are:
- Responsiveness to consumers
These four building blocks related to each other. Superior efficiency enables a company to produce high-quality products at relatively lower costs. Due to quality, these products attract a considerable customer base thus, an increase in disposable income that can be used to innovate and look for new ways of enhancing the product value. Innovation allows a company to devise more sophisticated mechanisms of figuring out trendy issues that affect consumer behavior. Therefore, through innovation, the company becomes more empowered to respond to consumer-related issues.
Question 5.2 what role can top management play in helping a company achieve superior efficiency, quality, innovation, and responsiveness to customers?
Top management can help a company achieve efficiency by automating whatever task it can (Bortolotti & Romano, 2012). Business automation is no longer a luxury rather a necessity in the present day competitive environment. Besides, executives can define the quality characteristic of the company’s product and set quality standards that each product must meet before deemed as acceptable. Top managers can jumpstart innovation within the firm by making innovation the new normal, bringing people together, simplifying approval process, cutting down on the workload. They can enhance customers’ responsiveness by asking customers what they want, managing their expectations, and developing procedures to maintain a close contact with the existing customers.
Read the case study on Amazon.com (see Appendix_Week_5_Tutorial_Amazon.com_Case) and answer question 5.3
Question 5.3 Do you think that Amazon has any rare and valuable resources? In what value creation activities are these resources located? How sustainable is Amazon’s competitive position in the online retail business /Selected for Assessment/
Question 6.1 why is market segmentation such an important step in the process of formulating a business-level strategy?
In the process of formulating a business-level strategy, the importance of market segmentation cannot be underestimated. Market segmentation involves apportioning a huge standardized market of prospective consumers into recognizable segments. Consumers are separated based on having similar characteristics or meeting particular criteria that lead to them having similar product needs or wants. When formulating a business level strategy, marketers use market segmentation to make the planning campaigns easier. It assists them to focus the corporation on particular consumer subgroups rather than targeting the whole market. Segmentation enables marketers to be more efficient in terms of resources such as money and time whenever formulating a business-level strategy.
Question 6.2 what do we mean by the term value innovation? Can you identify a company not discussed in the text that has established a strong competitive position through value innovation?
Read the case study on Nordstrom (see Appendix_Week_6_Tutorial_Nordstrom_Case) and answer question 6.3
- What actions taken at the functional level have enabled Nordstrom to successfully implement its strategy?
- What is the source of Nordstrom’s long-term competitive advantage? What valuable and rare resources does Nordstrom have that its rivals find difficult to imitate?
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