Research in Global Strategic Management: Volume 4

Michael Porter's three generic strategies of cost, differentiation and focus are transformed into five generics in his 1986 paper on global strategy. Unfortunately, the resulting strategies are neither global nor generic. This paper demonstrates why. The key problem is Porter's peculiar use of the concept of “national responsiveness.” An alternative framework is developed in which location bound and nonlocation bound firm specific advantages are related to the number of home bases to generate truly generic global strategies.

Porter's generic strategies are true almost by definition. Yet they do not allow us an understanding of the means by which low cost or differentiation can be achieved. This paper deals with the various ways of achieving sustainable competitive advantage or creating firm specific advantages (FSA) by a multinational enterprise (MNE). The paper shows that the means of achieving sustainable competitive advantage are based on different factors in different firms, because of such variables as size, degree of rivalry in the market, and the importance of technology. It analyzes the components of strategy of firms operating in what is termed Heckscher-Ohlin industries, using mining as an example; differentiated industries competing on the basis of achieving brand advantages and Schumpeterian industries, in which competitive advantage is based on innovation. Moreover, the paper distinguishes between external factors impinging on strategy, such as the industry, and internal factors or resources. It argues that one major characteristics of Schumpeterian firms is the creation of the environment and that of the industry in which they operate. The unique abilities, to innovate and to learn, allow major and often sustainable advantages. The paper recognizes the importance of government in creating and sustaining competitive advantage in each one of the three industries—be it by closing markets or by subsidies to R&D. Despite this recognition, the role of government in creating and sustaining competitive advantage is considered beyond the scope of the paper.

Porter's generic strategies' framework is characterized by serious limitations from the perspective of both research methodology and managerial relevance. It is not suitable for an empirical description of multinational or diversified firms' strategies. Its usefulness for the description of other firms' strategies is unclear. Furthermore, it is now generally accepted that Porter's “stuck in the middle” proposition does not hold. Both the theoretical and empirical arguments related to this proposition are discussed.

Porter has proposed a useful framework of generic strategies. However, a major problem with his framework is that the generics are viewed as being mutually exclusive. In addition, his framework does not show how to shift strategies from one to another. This paper suggests some extensions to Porter's idea and shows the dynamics of Porter's generics and other international strategies. This new framework is useful in better understanding the different, strategic directions of multinational firms.

This study addresses an international data set with a model of strategy that attempts to bridge the gap between generic and situational models of strategy by assessing relative commitment to quality and to cost control. It opens with a discussion of generic models and situational models of strategy and their relationship to manufacturing strategies. Then, a proposed model which would permit interaction of quality and cost concerns is developed and tested.

The study of international business strategy has tended to ignore or underplay the development and exercise of political resources as well as their availability and use in political markets. This paper analyzes the political dimensions of international business as well as the international characteristics of political behavior.

The purpose of this paper is to develop a new analytic perspective on the strategic use of trade policy. It argues that a firm level of analysis utilizing the value chain concept provides new insights into business-government relations on trade and protection. The paper identifies three patterns in which product market competition and positioning spill over into the political “market” for protection. It discusses how, when industry conditions permit, both U.S. and foreign firms attempt to use the technical track of import protection in the United States not simply to gain shelter from foreign exporters, but also as an extension of their overall business strategy. The incentive for making strategic use of protection arises when firms adopt different configurations in arranging their operating activities along the larger domestic and international value-added chain of production and distribution. These circumstances make it unlikely that protection will have an equivalent impact on all producers, and seeking protection therefore can be an effective competitive tactic.

Over a span of twenty years, Airbus has evolved to the point where it has become a serious competitor to Boeing in the global market for commercial aircraft, obtaining a 30 percent market share in 1992. European subsidies totaling over $12 billion have helped Airbus continue launching new aircraft despite losses. Yet, subsidies are not the sole reasonfor Airbus's success with customers. Airbus has been astute in product development, meeting customer needs along dimensions such as range and passenger capacity while matching and sometimes exeeding Boeing in technological features. Airbus' use of subsidies together with competitive product matching represents an interesting example of a firm preparing itself strategically for moving beyond government shelter.

The present study investigates the relationship between technology strategy and competitive strategy in an international context. Adding an international dimension to the technology strategy construct suggests the study of variations in the locational distribution of R&D activities, that is, “where” R&D activities are performed. Observing that different international technology strategies may be used to pursue a particular generic competitive strategy, an attempt is made to explain the differential location of R&D activities in terms of the characteristics of the technology development process. Specifically, four propositions are developed relating the type of innovation uncertainty to variations in the locational distribution of R&D activities. Innovation uncertainty is reduced via the information processing activities of individuals. Following this observation, it is investigated which human resource and organizational structural arrangements contribute to a maximum reduction of innovation uncertainty. Such arrangements are found to differ between the various stages of the innovation process. Selected factors mediating the information processing perspective are introduced.

In this paper, four ways are presented in which corporate headquarters of diversified, multinational corporations with a multidivisional structure can add value to divisions. These roles for the headquarters are the supporter, coordinator, intervenor, and financier. They are derived from both theory and a number of case studies of large Dutch firms. In this context, limitations are identified of Porter's basic types of competitive advantage and concepts of corporate strategy.

An important stage in the process of strategy formation is the choice of entry mode. Multinational enterprises can choose among many entry modes when entering a new product or geographical market. This choice has major consequences for other stages in the process of strategy formation, and should therefore be considered very carefully. The object of analysis of this paper is the entry mode choice of multinational enterprises between an international joint venture and a greenfield investment. Six theories are reviewed and compared; they all explain greenfield investments, and four of them also explain international joint ventures. Three theoretical concepts appear to be relevant in the choice between a greenfield investment and an international joint venture (IJV): the strategic behavior approach, transaction cost theory, and internalization theory. These theories must be combined to prevent one-sided outcomes (i.e., eclectic approach). A comprehensive set of firm-specific variables and country-specific variables is provided, based on both this eclectic theoretical framework and a number important empirical studies. For each variable one or two (opposite) hypotheses are formulated.