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C89ST + C89IM - Solutions - J14 - Timezone 1
C89ST + C89IM - Solutions - J14 - Timezone 1
Semester 2 2013/14
SOLUTIONS
(a) Construct a strategic group map using service quality and pricing policy as axes to
illustrate the competitive position of the various retailers discussed in the retail
industry for eyeglasses in the Kingdom of Val Verde.
Figure 1
Strategic group map for the Kingdom of Val Verdes eyeglass retail industry by service
quality and pricing policy
(b) Construct another strategic group map of the retail industry for eyeglasses in the
Kingdom of Val Verde using frame range and retail stores as axes.
Figure 2
Strategic group map for the Kingdom of Val Verdes eyeglass retail industry by number of
stores and Breadth of Range
(c) Evaluate what the two strategic group maps show about the competitive conditions
confronting Optimeyes within the retail industry for eyeglasses in the Kingdom of Val
Verde.
It is clear from the case study that Optimeyes is deliberately trading-off pure performance in
favour of simplicity, convenience and affordability. They offer products that are
acceptable solutions to customers at a reduced price. In terms of personal service and
advice, and choice of designer frames Optimeyes offers an inferior service than a physical
retail outlet, so are unlikely to immediately satisfy the requirements of mainstream
customers. Even so the performance dimensions offered by Optimeyes are likely to appeal
to price sensitive customers who have previously curtailed or avoided eye tests for either
new or replacement glasses, because it has been too expensive. Therefore, Optimeyes is
probably appealing to a new set of price sensitive customers over and above existing low-
end price sensitive customers who have gone to traditional retail outlets. In contrast
traditional incumbents have largely used a differentiation strategy with some modest price
discounting (i.e. relative to the prices offered by Optimeyes). Specifically, this differentiation
strategy has relied on eye testing as an entry point for sales. Once mainstream customers
have had their eye test they are then offered advice about optical issues from a qualified
optician. Next a sales consultant will offer advice about the selection of an appropriate style
of spectacle frame; this decision is enhanced if the retail outlet supports a variety of well-
known designer brands. These activities attempt to encourage customer loyalty toward an
individual retail outlet. These differentiating factors are further enhanced by a price
discount (i.e. a two for one offer), because it suggests to the customer that he or she is
getting value for money as well. Optimeyes competitors have a large network of stores
with convenient locations that enables them to service the requirements of the majority
eyeglass customers, who are in the main still willing to pay a bit more for service quality.
(d) Use Porters Five Forces model to analyse the competitive conditions for Optimeyes
within the retail industry for eyeglasses in the Kingdom of Val Verde. Base your Five
Forces analysis on the pricing policy and service quality strategic group map featured
in Question A1(a).
The case study highlights that Optimeyes inferior service and low prices is attracting new
and existing low-end price sensitive customers. The low-cost sector and the Big four
occupy different competitive spaces in the service quality and pricing policy. Mainstream
customers of the Big four are liable to stay loyal due to the superior service and choice
available. However, in the future due to improving technology, wider customer acceptance
and confidence with the Internet-based model, and a wider choice of designer frames that
more mainstream customers will be attracted to purchase from Optimeyes or other similar
Internet-based firms. With these issues in mind the following analysis using Porters five
forces was constructed for the Low-cost sector.
(f) Evaluate the strategic options available to Optimeyess competitors to ensure their
future success in the in the Kingdom of Val Verde.
Currently there are more than sufficient numbers of consumers willing to pay more for the
benefits offered by the incumbent retailers. This means Optimeyess competitors should
intensify their differentiation efforts by offering more benefits (Kumar, 2006). Over time,
they should restructure their companies to reduce the price of the benefits they offer as
well. If possible some of Optimeyess competitors might consider merging with or taking
over rivals to gain additional market power. Merging or acquiring a rival may lower
operational costs through combining operations, i.e. economies of scale.
Section C
Question C1
Grading:
(70% above)
See Chapter 7 International Strategic Management
Candidates will show a wide ranging knowledge and understanding of socio-cultural
differences between countries and use examples to demonstrate their answer.
Candidates will discuss, rather than simply describe, how an understanding of socio-
cultural differences directly impact on international business success. Socio-cultural
differences should include most of the following, with examples and discussion, to gain
70%+:
(60-70%)
A second class answer will evaluate the importance of socio-cultural differences and
show a good understanding of the issues outlined above, but generally the level of
discussion will be less broad. Some explanations may require further elaboration and/or
examples may be limited.
(50-60%)
Lower second class answers will provide satisfactory coverage of socio-cultural
differences but they will lack detailed insight and be more descriptive than analytical.
Examples may be scarce, weak or occasionally missing. However, the question is broadly
answered.
(40-50%)
A third class answer will largely describe the importance of socio-cultural understanding,
but have limited context to the question, there may be few or no examples and limited
knowledge.
Below 40%
A failure will possibly identify or list some key ideas, but little else of substance will be
discussed, no examples will be used or attempt at a structured answer given.
(b) Evaluate how one of the following impacts multi-national business: legal systems, tax
laws, OR accounting approaches across nations.
70+
See Chapter 6 International Strategic Management
Candidates will evaluate the differences across nations of ONE of the above in detail,
using examples to make the point. Candidates will discuss, rather than simply describe,
how an understanding of ONE of the systems outlined below directly impact on multi-
national business:
Tax variations MNEs come under jurisdiction of more than one tax authority, different
rules and regulations, tax incentives versus higher taxes to encourage/discourage
business entry. Variations depend on:
location of operation
form of operation
transfer pricing
tax havens
double taxation
Legal practices - MNEs subject to laws at home and laws of host country as well as
international laws, laws vary dependent on country dependent on:
Wanting control of foreign business interests
Suspicious of foreign investment
International laws
regional organisation influence
(60-70%)
A second class answer will evaluate one of the above systems and show a good
understanding of the issues outlined, but generally the level of discussion will be less
broad. Some explanations may require further elaboration and/or examples may be
limited.
(50-60%)
Lower second class answers will provide satisfactory coverage of one of the systems
above but they will lack detailed insight and be more descriptive than analytical.
Examples may be scarce, weak or occasionally missing. However, the question is broadly
answered.
(40-50%)
A third class answer will largely describe the system, but have limited context to the
question, there may be few or no examples and limited knowledge.
Below 40%
A failure will possibly identify or list some key ideas, but little else of substance will be
discussed, no examples will be used or attempt at a structured answer given.
Question C2
(a) Discuss how political risks can influence a companys decision to set up in a country.
Grading
(70% +)
See Chapter 4 International Strategic Management
Candidates will show a wide ranging knowledge and understanding of political risks for
a company setting up abroad and use examples to demonstrate their answer.
Candidates will discuss, rather than simply describe, how an understanding of political
risks directly impacts on an organisation abroad. Political risk considerations should
include most of the following, with examples and discussion, to gain 70%+:
Definition: political risk can be defined as the probability of domestic or foreign firms
activities being adversely affected by the actions taken by the state (p70 International
Strategic Management).
- Political risk:
National (related to government) govt shift in emphasis on foreign trade, change of
leadership and direction, elections, coup detats, revolutions, (related to country)
internal climate in a country eg admin competence, corruption, domestic tensions,
embargos, Govt legitimacy and stability, Labour union power, National finance and
resentments, attitudes to foreign investment, terrorism, war...
Industry level risk greater for strategic industries like oil, power, arms, level of
development of a country lack of knowhow, fear of nationalisation.
Company level if company produces large amount of GNP of host too powerful,
using natural resources eg minerals and oil,
Ability to forecast risk in a country check lists, grand tours, lobbying, mathematical
models
Reducing risks working with locals, borrow locally, aid local interests, international
law, negotiate with govts
(60-70%)
A second class answer will evaluate the political risk and show a good understanding of
the issues outlined above, but generally the level of discussion will be less broad. Some
explanations may require further elaboration and/or examples may be limited.
(50-60%)
Lower second class answers will provide satisfactory coverage of political risk but they
will lack detailed insight and be more descriptive than analytical. Examples may be
scarce, weak or occasionally missing. However, the question is broadly answered.
(40-50%)
A third class answer will largely describe the issues surrounding political risk, but have
limited context to the question, there may be few or no examples and limited
knowledge.
Below 40%
A failure will possibly identify or list some key ideas, but little else of substance will be
discussed, no examples will be used or attempt at a structured answer given.
(60-70%)
A second class answer will evaluate government intervention and show a good
understanding of the issues outlined above, but generally the level of discussion will be
less broad. Some explanations may require further elaboration and/or examples may
be limited.
(50-60%)
Lower second class answers will provide satisfactory coverage of government
intervention but they will lack detailed insight and be more descriptive than analytical.
Examples may be scarce, weak or occasionally missing. However, the question is
broadly answered.
(40-50%)
A third class answer will largely describe the issues surrounding government
intervention, but have limited context to the question, there may be few or no
examples and limited knowledge.
Below 40%
A failure will possibly identify or list some key ideas, but little else of substance will be
discussed, no examples will be used or attempt at a structured answer given.