Business Strategy Quiz 3: Hyper-competition and International Growth

This document presents the solutions to Quiz 3 on Business Strategy. The first question addresses whether a company can maintain a sustainable competitive advantage in a hyper-competitive industry. The solution argues that while a sustained advantage is challenging, companies with unique and valuable resources can retain customers. It uses Dell Computers as an example, highlighting the importance of adapting to changing trends and, in some cases, cannibalizing products. The second question explores the tradeoffs between internal and external growth strategies, concluding that external growth is often more suitable for international entry. It discusses the pros and cons of each approach, emphasizing the benefits of strategic alliances, such as joint ventures and licensing agreements, for entering new markets and building global competitiveness, while mitigating risks through trial partnerships before committing to long-term investments. This assignment is contributed by a student to be published on the website Desklib.

Quiz 3
Name: Shamir Arif
Reg. ID: 16E00101
Q1. Is it possible for a company to have a sustainable com- petitive advantage when its
industry becomes hyper- competitive?
Hyper competition is a situation in which there is a lot of very strong competition between
companies, markets are changing very quickly, and it is easy to enter a new market, so that it is
not possible for one company to keep a competitive advantage for a long time.
It is impossible for every company to have sustainable advantage when its industry becomes
hyper competitive. But firms that have unique, valuable, inimitable resources leading to
sustainable competitive advantages can retain its customers.
Many companies that are in this hyper competitive industry would use the strategies that are
adopted by the successful market leaders. However, the things that have worked for others
may not work for one. Therefore, it becomes difficult to maintain the competitive advantage.
A company can stay competitive in this hyper competitive industry by keeping itself up to date
with the changing environmental trends and should be able to take risks. Companies should
cannibalize their products to sustain competitive advantage.
In addition to this, it is important for the companies to stay on par with the latest trends and
embrace them with the ever-changing conditions.
Example of this would be in the early 90's the personal computer industry was hyper
competitive. Anyone could buy motherboards from dozens or suppliers and build their own
brand of computers. There was one little company that stood up was PC's Limited. Their
competitive strategy was to build to order, to be extremely operationally efficient, and to price
computers forward, estimating the decrease in component cost between the time the ad was
placed and when a customer got the magazine and placed an order. PC's Limited was
successful, and later changed its name to Dell Computers.
In both cases, the competitive advantage has been sustained over long periods of time. In the
case of Dell, it served it well to grow to be a multi-billion dollar public company, even if today
that strategy is somewhat obsolete.

Q2. What are the tradeoffs between an internal and an external growth strategy? Which
approach is best as an international entry strategy?
The pros and cons of internal strategies are as follows. The pros are that the business can
expand its operations internally because the company understands its product or services and
can identify how the operations can grow. Another pro is that if the business is losing money
within it's organization then the business can make strategic changes to cut costs within that
operation. Also, the business can maximize profits by creating ways to increase sales within the
organization. The internal cons are that management may be hesitant to make changes
without a good strategic plan which can sometimes take time to create. Another con is that the
business make take too long to create new products that will increase sales and profit.
The pros of external strategies are that the company can grow quicker and can build
partnerships. The company can grow quicker by expanding its products and services to be
utilized with other companies that will lead to an increase in profits. If another business likes
the product your business is using then the company can definitely grow. Also, building
partnerships can help get the business reach a global scale. Connecting with a company in
countries like China may help market the business and bring in more stakeholders. The cons
are that it can be costly and sometimes it is hard to trust other companies with privy
information.
The best strategy for growth on an international basis appears to be determined by the
corporation and industry. However, on a broad perspective, external growth is more suitable.
Strategic alliances, such as joint ventures and licensing agreements, between an MNC and a
local partner in a host country are becoming increasingly popular as means by which a
corporation can gain entry onto another country, especially developed countries. Relationships
with local governments, workforces and suppliers, can help an MNC enter and institute itself
within a new country. It can then experience growth which will develop into a true global
competitor, managing its worldwide operations as if they were completely interrelated.
Strategic alliances may complement or even substitute for an internal functional activity.
Furthermore, by forming strategic alliances and licensing agreements, a company can
experience external growth on a trial basis. They can observe and analyze the market and all of
the variables associated with this market from an external growth perspective. They have not
committed to any long term contracts or made any purchases requiring the outlay of
considerable finances. Once a company experiences confidence in developing relationships and
operation, it should consider additional growth opportunities in the form of mergers,
acquisitions and internal growth.