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A Third Leg In The Strategy Tripod Commerce Essay

Paper Type: Free Essay Subject: Commerce
Wordcount: 1473 words Published: 1st Jan 2015

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In recent times strategy has become a major and significant part of international businesses (IB). A strategy is there to help the organisation to achieve its objectives and goals. There are various factors in the industry that multinationals can take to make investment decisions, nevertheless in the international business environment, it has been dominated by both industry and resource base views. A resource base view lies within the company and not on the outside, it also tells us how the company or organisation will deliver a sustainable competitive advantage and how these resources will be controlled and managed in a way that its end results can’t be copied by its competitors and would create a competitive barrier and generate a competitive advantage at a sustainable level Porter 1980).An industry base view is based on a clear understanding of the organisation’s competitive and economic structure, the challenge here is to position the company in a way that it could gain a bigger portion of the profits in the market that the company is operating in and even with new entrants coming into the market place , the organisation should turn its core competencies in an advantage.

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According to the journal the authors (M.W.Peng, D.Y.L. Wang and Y. Jiang) state that the view of international business strategy emerged through and institution base. They also state that this one of the legs that support and uphold the tripod strategy, and the other two part of the tripod strategy is based on a resource base view and an industry base view. In the journal the authors did a review of four distinct characteristic s or qualities of important research , these four characteristics are :(1)antidumping as entry barriers;(2)competing in and out of India;(3)growing the firm in China and the fourth being governing the corporation in emerging economies. According to the authors they state that there were questions confronting the international business raised by (Peng 2004a), where he identified emerging nations in Asia to indicate a realistic and intermediate phase during the early and late stages of institution transitions. In the article the authors’ stats two arguments that is based on network strengths and network content. To determine strategy and performance the authors cite (Porters 1980) competitive strategy, which a frame works for industry analysis (Porters Five Force analysis).

A third leg in the strategy tripod

In the third leg of the strategy tripod the authors state that the industry-base view is rooted in a way the MNE’s strategy is based on certain conditions within the nature of the industry that the company has a focus on. They (authors) also state that with a resource – based view IB concentrate more internally that externally, as most of the value lies within the organisation. With both industry and resource-based views, it still brings up questions to investment locations. In the tripod strategy the authors cite (Scot 1995:33) where he define institutions as concrete structures , e.g. buildings and as human capital , including political and social aspects which they state , e.g.corruption,economic liberations and ethical norms , these are a few examples from the article that also affect the stability of markets that MNE’s operate in. Research by (Lawrence & Lorsch , 1969) clearly shows that the dominate part of research is a “task environment” view , where economic variables were looked at and what the market demand are and a change in technology.(Peng 2008) states that shaping strategies and performance have an impact on both formal and informal institutions.

Antidumping as entry barriers

Peng citing (Porter 1980) states one of the five forces that govern competitiveness within an industry is entry barriers. Within the IB environment entry barriers give rise to a new term known as “liability of foreignness”. Dumping is legally defined as an exporter selling goods below price abroad. Mexico is an active user of anti-dumping policy and they have initiated investigations against China. Anti-dumping is a contingent protection and is permitted by the WTO, the law is there to protect market price and minimum pricing protection is inconsistent with regards to anti-dumping legislation. The law was primarily used by four nations, USA, EU, Canada and Australia. During the period 1995-2000 South Africa had 173 anti-dumping investigations and 113 anti-dumping measures imposed, compared to USA with 354 and 219 and India with 400 and 302. In Australia, Customs is responsible for anti-dumping and the Department of Commercial Defence in Brazil and discrimination is also evident, whereby cases are filled by local companies.

Competing in and out of India

(Dacin, Goodstein & Scot, 2002) state that institutional logic is what shapes a company’s strategy. Peng cites (Kapur & Ramaurti, 2001) that Indian and non-Indian company strategies are affected by politics, societal and legal changes, also documented in the article is the rise of India’s information technology (IT) and there emergence as the 2nd largest player in the IT field behind the USA. The reason for the growth in India is due to government investing in higher education. Since 1991 India made major changes to its legal and regulatory reforms and this has liberalized the economy and made it a competitive market for IB’s. Indian companies abroad are having issues with the local or host countries, where the western countries are passing laws to protect jobs and a ban on contracts to the Indian companies.(Lewin & Peeters 2006) state that a lot of MNE’s have invested in India because of the quality of work and the value created by the IT industry .MNE’s that invested in India are Cisco , IBM , SAP and GE to mention a few , these MNE’s also tap into the talent pool and with the arrival of so many MNE’s in India , it has forced the local IT companies to be more competitive.

Growing the firm in China

China’s growth started in 1978, it embarked on economic reform and prior to that everything was state controlled. The government liberalised foreign investment and trade and relaxed on prices. They invested by educating their workforce and industrial production. IMF research shows increase worker efficiencies are the major factors behind the growing economy, together with new factories , machinery for manufacturing and communications. (Peng & Heath , 1996 ) did research that shows the local managers in China and the interpersonal networks has helped informal substitutes and has translated micro into macro , thus linking alliances to grow the company. According to (North, 1990) strategic choices are formed through networks of formal and informal structures, where he states the weakness come from formal institutions and informal institutions with governing relations play a bigger role in organisation strategies and performance.

Governing the Corporate in Emerging Economies

According to (Jensen & Meckling 1976) the system used to govern developed economies is known as the Anglo-America system, they also state that conflicts by both the shareholder and managers are the key conflict issues’.(Morck,2000:11)states that concentrated ownership is how most companies throughout the world is controlled. In emerging nations the authors raise issues where key conflicts are based on two principles and this is controlling and minority shareholders. Emerging nations that do not understand the nature of conflict policies in corporate governance becomes disastrous and irrelevant. In South Africa which is an emerging nation, directors are appointed from outside to assist the company in improving its performance. , e.g. Pick n Pay a south African company employed its CEO from the UK (Tesco) , Pick n Pay is a family owned company (90%) with a smaller interest from outside shareholders.

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IB in emerging economies have to focus on various things other than the companies capabilities and the nature of the business .IB’s have to focus on the political aspect , as well as cultural and language. In South Africa they have to understand the country’s diverse race groups, religions and languages as the country has eleven official languages, as for China MNE’s are operating on their door step via Hong Kong and with India now a leader in the IT field, the west must work together with both China and India so that capitalise on their resources. Industry-base view and resource-based view are there to maintain a tripod strategy, thus giving the opportunity to IB’s to invest in foreign countries and to gain market share


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