IBT#3

• Competitive advantage


  The ability of the country or company to offer greater value to customers, either by means of lower prices, or offering more benefits and services at the same price
• Competitive advantage


  Cost Advantage + Quality Advantage
• Porter's diamond


  • A model introduced by Michael Porter that states a nation's competitiveness in an industry depends on the capacity of the industry to innovate and upgrade
• Stages of development in the evolution of a country

  • Development based on (production) factors
  • Development based on investments (capital)
  • Development based on innovation (creativity)
  • Development based on prosperity (economic growth and development)
• Determinants of Porter's diamond

  • Local market resources and capabilities
  • Local market demand conditions
  • Local suppliers and complementary industries
  • Local firm characteristics
• Advanced factors

  • Human resources, including skilled labor
  • Material resources, including natural resources, vegetation, space, and the like
  • Investments in education, including knowledge and research on universities
  • Technology
  • Infrastructure
• Porter's competitive advantage chain value


  Shows how a company attains competitive advantage through its main activities that provide cost advantage and the support activities that will provide the firm quality advantage
• Country similarity theory


  Developed by Swedish economist Steffan Linder in 1961, it describes the idea that countries with comparable qualities are mainly likely to trade with each other
• Qualities that determine country similarity

  • Stage of development
  • Per capita income
  • Savings rates
  • Natural resources
  • Cultural milieu
  • Geographical features
  • Political and economic interests
• Inter-industry trade


  Trade between and among different industries
• Intra-industry trade


  Trade between and among the same industry
• Geert-Hofstede model


  • A tool developed to compare countries using six dimensions: power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence
• Product life cycle


  The series of stages through which a product is introduced in the market until it is removed from the shelves
• Stages of product life cycle

  • Introduction
  • Growth
  • Maturity
  • Decline
• Product life cycle management (PLM)


  The process of managing a product's life cycle from inception, through design and manufacturing, to sales, service, and eventually, retirement
• Introduction stage


  1. Create awareness, not profits

  2. Gain widespread product and brand recognition

  3. Big money spent on distribution and promotion

  4. Sales low but gradually increasing

  5. Profitability negative

  6. No direct competition
• Price skimming


  Charging an initially high price and gradually reducing the price as the market grows
• Price penetration


  Charging a low price to "penetrate" the market and capture market share, before increasing prices in relation to market growth
• Global strategic rivalry theory


  A theory forwarded in 1980 by economists Paul Krugman and Kelvin Lancaster that focused on multinational corporations (MNCs) and how they get a competitive advantage by taking advantage of the barriers to entry for a particular industry
• Barriers to entry


  • Research and development
  • Ownership of intellectual property rights
  • Economies of scale
  • Unique business processes or methods
  • Extensive experience in the industry or exploiting the experience curve
  • Control of resources or favorable access to raw materials
• Research and development (R&D)


  Activities engaged in by companies for the invention of new products or services to remain competitive
• Intellectual property


  Creations of the mind, a work or invention that is the result of creativity, such as a manuscript (book) or a design, to which one has rights and for which one may apply for a patent, copyright, trademark, brand name, and the like
• Patent


  An exclusive right granted for a new, inventive, and useful product, process, or technical improvement to an existing invention, which may be used for licensing
• Trademark/brand name


  A word, a group of words, sign, symbol, or a logo that distinguishes your business' goods or services from those of other traders, used for franchising
• Copyright


  The exclusive legal right to reproduce, publish, sell, or distribute the matter and form of something (such as a literary, musical, or artistic work)
• Economies of scale


  A proportionate saving in costs (cost advantage) gained by an increased volume of production, resulting in lower average variable cost and operational efficiencies
• Internal economies of scale


  Economies that are unique to a firm, such as holding a patent over a mass production machine
• External economies of scale


  Economies of scale enjoyed by an entire industry, such as all cotton producers employing 1,000 workers to become competitively advantaged
• Experience


  Produces competitive advantage over those without experience, as those with experience become conversant with global trade
• Power distance


  Is power in the country distributed unequally?
• Individualism


  The degree of interdependence of the members of a society
• Masculinity


  The want to be the best versus liking what you do (feminine)
• Uncertainty avoidance


  Are members of a society feeling threatened by unknown situations?
• Long-term orientation


  The society has links with the past and deals with the challenges of the present and the future
• Indulgence


  Do members of a society control their impulses and desires?
• barriers to entry


  refer to the obstacles a new firm may face when trying to enter into an industry or a new market.
• life cycle


  is the series of stages through which a living thing passes from the beginning of its life until its death.
• maturity stage 


  sales increase continues in a decreasing pattern. but the sales curve tends to decrease after the top selling point is reached.
• growth stage


  demand for the product begins to increase and sales usually grows exponentially from the takeoff point.
• decline stage


  when no amount of marketing or promotion can keep the sales figures from declining.