Question

After offering an overview of the challenges facing multinational corporations operating in emerging markets; examine the manner in which a companies can use resources to combat supplier failure to develop a competitive advantage

Answer 1

--- Competitive advantage in either cost or differentiation is a function of a company’s value chain. A company’s cost position reflects the collective cost of performing all its value activities relative to rivals. Each value activity has cost drivers that determine the potential sources of a cost advantage. Similarly, a company’s ability to differentiate itself reflects the contribution of each value activity toward fulfillment of buyer needs. Many of a company’s activities—not just its physical product or service—contribute to differentiation. Buyer needs, in turn, depend not only on the impact of the company’s product on the buyer but also on the company’s other activities (for example, logistics or after-sale services).

In the search for competitive advantage, companies often differ in competitive scope—or the breadth of their activities. Competitive scope has four key dimensions: segment scope, vertical scope (degree of vertical integration), geographic scope, and industry scope (or the range of related industries in which the company competes).

Competitive scope is a powerful tool for creating competitive advantage. Broad scope can allow the company to exploit interrelationships between the value chains serving different industry segments, geographic areas, or related industries. For example, two business units may share one sales force to sell their products, or the units may coordinate the procurement of common components. Competing nationally or globally with a coordinated strategy can yield a competitive advantage over local or domestic rivals. By employing a broad vertical scope, a company can exploit the potential benefits of performing more activities internally rather than use outside suppliers.

By selecting a narrow scope, on the other hand, a company may be able to tailor the value chain to a particular target segment to achieve lower cost or differentiation. The competitive advantage of a narrow scope comes from customizing the value chain to best serve particular product varieties, buyers, or geographic regions. If the target segment has unusual needs, broad-scope competitors will not serve it well.