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The Success and Failure of Global Firms Based On Institution - and Resource-Based Views
The Success and Failure of Global Firms Based On Institution - and Resource-Based Views
The Success and Failure of Global Firms Based On Institution - and Resource-Based Views
1.Explain the success and failure of global firms based on institution- and
resource-based views.
The success and failure of the global firms are affected by the two core
perspectives: institution- based view, and resource- based view. Institution-
based view means that the institution governs individual and firm behavior
formally and informally. So, its view consists of formal rules (laws, regulations,
and rules) and informal rules (cultures, ethics and norms). As an example of
formal rules, before the election of 2010 in Myanmar, there was only Telecom
Company that was owned by the government. Other telecom private companies
were not allowed to do the business in Myanmar. Today, another two telecom
company: Ooredoo and Telenor are coming in Myanmar because of the
government's openness. As a result of the changing rules, the two companies
can get the first mover advantages, and be successful. And another example is
that until very recently, the Office of the Register of Deeds in Myanmar did not
accept long-term foreign leases for registration. This fact made the global firms
difficult to get land. The Foreign company also became to face difficulty.
Informal institutions include cultures, languages, norms, behavior, religion,
education, and ethics. They have the effects on the success and failure of the
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threats. And these resources can give the company the increasing perceived
customer value. If the resources can not add the value, the company will face
the competitive disadvantages. Are we sure that the valuable resources and
capabilities are rare? Rarity means a measure of the scarcity of an object in
Cambridge dictionary. Not only the firms should possess the valuable resources
and capabilities, but also these resources and capabilities should be rare over the
competitors.
And the third one is costly to imitate. Imitability is that the competitors have a
difficult time to imitate. For example, CP all corporation has a very vast
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resources and also powerful capabilities over the competitors and imitators. The
competitors can not imitate quickly because CP All has made the collaboration
with other firms. So, there are a lot of firms under the CP All umbrella, so that
the resources and capabilities would costly and rarely to imitate. The final part
is how can the firm be organized to develop and leverage the full potential of its
resources and capabilities?. The resources and capabilities itself do not give any
advantage to the firm if it’s not well- organized to capture the value from them.
A firm must and should organize, manage, and control these resources and
capabilities by using its management systems, processes, policies,
organizational structure and culture to be able to fully realize and obtain the
potential of its valuable, rare and costly to imitate resources and capabilities.
Only then the companies can achieve sustained competitive advantage.
3. Elaborate on Michael Porter’s “diamond” theory.
Michael Porter’s “diamond” theory is also known as the theory of
national competitive advantage of industries. Porter argued that some nations or
industries within local have more competitive advantages than others based on
the global scale. Why? The reason is that these nations and industries can create
the potential competitive advantages by applying their organizations with
specific factors and resources. In diamond theory, there are four aspects figured
the diamond: factor endowment, domestic demand conditions, national firm
strategy, structure and rivalry, and related and supporting industries. The first
aspect of diamond theory, factor endowment or factor condition, means the
inputs that are necessary to produce goods and services. The contributions to
carry out the business have two parts: fundamental factors (natural resources
and labors), and advanced factors (infrastructure and communication system). If
the industry has all these inputs, it will achieve in the global market. For
example, Myanmar is rich in the natural resources, but short in technology and
infrastructure. It is sure that Myanmar does not have the enough factor
endowment. The second point is domestic demand condition. Demand
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conditions refer to the size and nature of the customer base for products. When
the product is required in the local market, the company emphasizes to create
new products, improve the quality, and to make the customer satisfied over the
global competitors. It also helps the local company grew up and looked forward
to the global trend. Third, although strategy of the firms, structure, and rivalry
are quite different among the countries, strategy helps the company to set
corporate objectives and new goals, structure assists to organize and manage the
production and operation, and the rivalry gives some helps like making the
innovative ideas and generating the product development. Finally, in the related
and supporting industries are there two parts: related industries, and suppliers. If
the local firms have the big and local suppliers and related industries, the firms
would get the raw materials at the lower price, and receive the innovative parts
and products.
- The research and development costs may be enormous because they may need
to create and innovate for survival and being the first movers.
-A first mover may face both the uncertainty about the market reflection and the
technological errors.
References
Mike W. Peng (2011), Global Business (3rd ed), South-Western, Cengage
Learning
https://www.strategicmanagementinsight.com/tools/vrio.html
http://www.investopedia.com/terms/p/porter-diamond.asp
http://www.toolshero.com/strategy/porter-diamond-model/
http://www.businessmate.org/Article.php?ArtikelId=49
http://www.investopedia.com/articles/forex/051415/pros-cons-strong-dollar.asp
https://www.divestopedia.com/definition/5024/first-mover-advantage
Article Analysis
I."Coca-Cola in Africa"
1. Why is Coca-Cola so interested in Africa, which is typically regarded as the
base of the global economic pyramid?
The following are the reasons of why Coca- Cola is interested in Africa.
-Coca- Cola is the mature stage of the life cycle. Between 2006 and 2011, US
sales declined. In Europe and Japan, sales are similarly flat. In Latin America,
sales are increasing, but the growth is limited. In these situations, Coca-Cola' s
market share is 29% in Africa but Pepsi is 15%. So, Coca-Cola pulled Africa.
-The people in all African countries have known Coca-Cola.. It has the familiar
brand name for the continent.
-In Africa, there is an incredibly young population. Besides disposable income
is growing, Africa' GDP is bigger than Russia and India.
2. What unique resources and capabilities does Coca-Cola have that will help it
compete well in Africa?
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Coca-Cola has the unique resources and capacities that will help it
compete well in Africa. The first one is the well-known global brand name. The
people in the African countries have the knowledge of what is Coca-Cola. The
second is strong commitment. Coca-Cola has committed $12 billion to invest in
Africa between 2010 and 2020. It can face and receive the challenge that can
deep dive into everywhere in Africa. So, it has built the 3000 manual
distribution centers throughout the Africa, while in Mexico it has courted small
corner store. Finally, Coca-Cola creates 65,000 jobs directly concerned with the
company, and one million of jobs indirectly related to it.
3. What are the drawbacks of making such large-scale commitments to Africa?
War, poverty, poor infrastructure are the drawbacks of making such
large- scale commitment to Africa. And, Coca-Cola has to search the solutions
about the critics that accuse it of depleting fresh water, encouraging expensive
and environmentally harmful refrigeration, and hurting local competitors.
4. Do stakeholders in the United States and Africa who criticize Coca-Cola have
a reasonable case against it?
Yes, the stakeholders have a reasonable case against Africa. There are
a lot of risks like government corruption, war, and strife. And poor
infrastructure such as lack of transportation and electricity is also a reasonable
fact against it. Also, reducing fresh water concerns with the fact against it as
well. And, many communities allow using a few calories. Finally, the case is the
refrigeration is expensive and harmful because of the environmental factors. Not
all stakeholders will necessarily agree with the criticisms or feel that they
significant enough to oppose Coca-Cola’s focus on Africa.
II."Unilever in India"
1. From a resource- based view, what were HLL' s competitive advantages prior
to launching Shakti?
From a resource-based view, HLL has analyzed its resources and
capabilities. HLL' s marketing strategy add the value to the company and the
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giving the information, and linking to the internet. So, it counted the number of
villages, and entrepreneur they reached. In 2003, there were less than 3000
entrepreneurs, but in 2006, it aimed to reach 100,000 villages and 30,000
contractors.
6. What should Shakti do to increase its effectiveness in relieving poverty?
Because of the sheer size of the population, Shakti has generated a
sheer size of the operations. The size of the operation has also brought the
challenges and threatened its effectiveness in relieving poverty. It means no
enough SHG. This fact caused to decrease its effectiveness in relieving poverty.
So, SHG has grown to 45 at HLL, and the company makes the relationship with
the non-profit organizations and non- traditional partners. The collaborating
makes the firm effective in poverty alleviation, but the firm faces the
challenges. Also, Shakti should put the effort on coming out the entrepreneurs.
They can distribute their knowledge to others. It supports upgrading the
education level. And, Shakti should make the transportation easier. The better
transaction, the smoother trade, as a result, the lower poverty.