Competition in International Markets Theories and Concepts

Competition in global Markets Theories and ConceptsFIRMS, NOT INDIVIDUAL NATIONS COMPETE IN INTERNATIONAL MARKETSCompetition has always been central to the agenda of trustys. It has vex maven of the enduring themes of our times and the rising intensity of argument has continued until this solar day in that respectby spreading to more and more countries. As a go of sphericisation, most industries with the topics of foreignist trade and warring wages move over acquire much attention from business executives, public policy makers and scholars in recent years. This in conjunction with the rise of orbiculate competitors has helped to explain why a grounds militant advantage stack be incurd by the effectualness of its business firms. This has resulted in numerous rankings, where industries and firms ar compargond on a global scale to see which are the most competitive. Most firms prefer to fight in the business environment so that it will help break the competitiv e advantage of the country in which they operate. A firms ability to economize the same benefits as competitors but at a execrableer apostrophize or deliver benefits that exceed those of competing products, then such a firm is said to possess a competitive advantage over its rivals. Todays training in communication, information technology and transportation technology suffer enabled firms to securities industry their products and services beyond national borders. This level of involvement has contributed to the fancy of firms merchandise their products in international commercializes.AnalysisGlobal battle occur at the cross roads between international economics and strategic management. Wassily Leontief (1998) was unrivaled of the scholars to add an empirical fraction to the theoretical realm of international passel with his popular paradox of the Heckscher-Ohlin (1919) theory. Later, management scholars (Buckley Casson, 1998, Tsang 1999) adopted the concept of compet ing glob completelyy in their research. Hamel and Prahalad (1994) later rein pulld the concepts of core competencies, industry level analysis and competing for the future. aft(prenominal) much research by these scholars, most would agree that global combat in the aggregate for a nation is non equivalent to global battle at the individual firm level. Corden (1994) states that thither are tercet major(ip) areas of national competitiveness sectoral or industry competitiveness, cost competitiveness and productivity. Many of Porters (1990) ideas were shared by earlier scholars. Vernon (1966) attributed national competitiveness to a nations technology and capabilities, which are resembling to Porters sophisticated factors. With Hymers (1976) idea that firms have special competitive advantages that allow them to overcome the liability of unlikeness is similar to Porters concept of firm-specific advantages that lead to global competitiveness. Caves (1982) discussed the practice of f irms transferring knowledge gained in one country to another because of global contest is by utilizing the right mix of factors of output would lead to probable success. According to Papanastassou Pearce (1999), Porters diamond is one of the a couple of(prenominal) models in international business research that illustrates what comprises national competitiveness within a given industry. Thus Porter tried to analyse why about nations succeed and others fail in international disceptation. He tries to solve this paradox using the quadruplet determinants of national competitive advantage.The Determinants of National Competitive proceedsMichael Porter, in his book The Competitive Advantage of Nations has introduced a model that helped to determine a nations international competitive advantage.This model of determining factors of national competitive advantage is known as Porters Diamond. Porter distinguishes four determinants Demand Conditions, factor Endowments, Related and Su pporting Industries and Firm Strategy, twist and Rivalry.Demand conditions describe the size and affluence of the domestic market. These are merchandiseant because they play a subroutine home demand plays in upgrading competitive advantage and serves as the master(a) source of competition for firms in a given industry. A similar example gutter be found in the wireless scream equipment industry, where sophiscated and demanding local anaesthetic customers in S layaboutdinavia helped push Nokia of Finland and Ericsson of Sweden to invest in cellular auditory sensation technology long before demand for cellular phones took off in other developed nations. agentive role endowments allow in any factors of production that a firm uses in its business to maintain economic competitiveness. Thus, the natural resources which include land, labor, capital and similarly naturally occurring raw materials. Other factors of production can include manmade structures that facilitate commerce , including communication infrastructure, sophiscated and skilled labor, research facilities and technological know-how. An self-evident example of this phenomenon is Japan, a country that lacks arable land and mineral deposits and merely through investment has built a substantial endowment of advanced factors.Related and supporting industries are the third attribute of national competitive advantage. These are beneficial to MNEs because it provides them with low-cost inputs and supply them with information regarding industry environmental changes thereby helping them achieve a strong competitive go under internationally. For example, Swedish strengths in fabricated steel products have drawn on strengths in Swedens specialty steel industry. Similarly, Switzerlands success in pharmaceuticals is closely related to to its previous international success in the technologically related dye industry.Firm outline, structure and rivalry are also important in ensuring national competiti veness. Strategy refers to several key strategic factors that characterize a firm thus, actions firms utilize to achieve both long- regulate and short-range goals. This is important because it helps the firm to utilize the best actions with which to compete and the market it wants to compete in. Structure refers to the industry com define, thus, the academic degree to which an industry is concentrated or dispersed, competitive or monopolistic, global or domestic. Rivalry indicates both the number of players and the level of competition among firms in an industry. Greater rivalry in an industry would lead a firm to higher levels of competitiveness visa vis its rivals. Rivalry is thought to be the most comprehensive of the three factors, as it often indicates the underlying strategy and structure of the competitors. This is more evident in Japan, where Japanese auto-makers have become competitive in the world market and has taken over major US and European auto producers.Some of the Challenges Faced By MNEsA multinational enterprise (MNE) is an enterprise that manages production or delivers services in more than one country. There are some challenges faced by MNEs that transact business in international markets which can hinder its competitiveness hence its controversies and these are as followsMarket imperfectionsIt may seem gothic that a corporation has decided to do business in a different country, where it doesnt know the laws, local customs or business practices of such a country is likely to face some challenges that can curb the managers ability to forecast business conditions. The additional costs caused by the delight in foreign markets are of less interest for the local enterprise. Firms can also in their own market be isolated from competition by transportation costs and other tariff and non-tariff barriers which can powerfulness them to competition and will reduce their profits. The firms can maximize their joint income by merger or acquisition which will lower the competition in the shared market. This could also be the case if there are few substitutes or limited licenses in a foreign market.Tax competitionCountries and sometimes subnational regions compete against one another for the establishment of MNC facilities, subsequent task revenue, employment, and economic activity. To compete, countries and regional political districts must offer incentives to MNCs such as levy breaks, pledges of governmental assistance or improved infrastructure. When these incentives fail they are liable to face challenges which limit their chance of becoming more winsome to foreign investment. However, some scholars have argued that multinationals are engaged in a race to the top. While multinationals certainly regard a low tax burden or low labor costs as an element of comparative advantage, there is no evidence to suggest that MNCs deliberately value themselves of tax environmental regulation or poor labour standards. policy-making a symmetryMany multinational Enterprises face the challenge of political instability when doing business in international markets. This kind of problem mostly occurs when there is an absence of a reliable government authority. When this happens, it adds to business costs, increase risks of doing business and sometimes reduces managers ability to forecast business trends. Political instability is also associated with corruption and weak legal frameworks that discourage foreign investments.Market secessionThe size of multinationals can have a significant wedge on government policy, primarily through the threat of market withdrawal. For example, in an confinement to reduce health care costs, some countries have tried to force pharmaceutical companies to license their patented drugs to local competitors for a very low fee, thereby artificially lowering the price. When faced with that threat, multinational pharmaceutical firms have simply withdrawn from the market, which often leads to limited availability of advanced drugs. Countries that have been the most successful in this type of confrontation with multinational corporations are large countries such as United States and Brazil, which have viable autochthonous market competitors.LobbyingMultinational corporate lobbying is directed at a range of business concerns, from tariff structures to environmental regulations. Companies that have invested heavily in contamination control mechanisms may lobby for very tough environmental standards in an effort to force non-compliant competitors into a weaker position. Corporations lobby tariffs to restrict competition of foreign industries. For every tariff category that one multinational wants to have reduced, there is another multinational that wants the tariff raised. Even within the U.S. auto industry, the fraction of a companys imported components will vary, so some firms favor tighter import restrictions, while others favor looser ones. This is very serious and is very hard and takes a lot of work for the owner.ConclusionThe discussion so far, points out that, the degree to which a nation is likely to achieve international success in a certain industry is a function of the combined impact of factor endowments, demand conditions, related and supporting industries, and domestic rivalry. It is very intelligible that these determinants are interrelated. Each is fixd by the others and in turn, brings the others. The presence of all these four components is usually required for this diamond to boost competitive performance although there are exceptions. Porter also points out that government can influence each of the four components of the diamond either positively or negatively. Factor endowments can be affected by subsidies, policies toward capital markets, policies toward education and others. municipal demand can also be shaped through local product standards or regulations that mandate buyer needs. Government policy can also influence supp orting and related industries through regulation and influence firm rivalry through such devices as capital market regulation, tax policy and antitrust laws. Countries should therefore be exporting products from those industries where all four components of the diamond are favourable, than importing in those areas where the components are not favourable in order to achieve competitive advantage.ReferencesBuckley, P. Casson, M. (1998). 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