HOW INTERNATIONAL COMPANIES ARE COPING WITH CHALLENGES: STRATEGIES ADOPTED BY MULTINATIONAL CORPORATIONS TO COPE WITH THEIR CHALLENGES. E.G COMPETITION IN KENYA

HOW INTERNATIONAL COMPANIES ARE COPING WITH  CHALLENGES: STRATEGIES ADOPTED BY MULTINATIONAL CORPORATIONS TO COPE WITH THEIR CHALLENGES. E.G COMPETITION IN KENYA

Multinational corporations (MNCs) operate in a global environment unfamiliar in political, economic, social, cultural, technological and legal aspects. Increased competition among multinational corporations and the entry of other players in the Kenyan market necessitate the design of competitive strategies that guarantee performance. Creating strategies for coping with competition is the heart of strategic management which is critical for the long term survival of any organization.  Multinational entities have played a major role in international trade for several centuries. A number of multinational corporations (MNCs) from developing economies are becoming key players in the global economy.

COMPETITIVE STRATEGIES

Competitive strategy specifies the distinctive approach which the firm intends to use in order to succeed in each of the strategic business areas. Competitive strategy gives a company an advantage over its rivals in attracting customers and defending against competitive forces

(Ansoff, 1985). There are many roots to competitive advantage, but the most basic is to provide buyers with what they perceive to be of superior value a good or service at a low price, a superior service that is worth paying more for, or a best value offering that represents an attractive combination of prices, features, quality, service, and other attributes that buyers find attractive (Thompson and Strickland, 2003).Competitive strategy is thus the search for a favorable competitive position, in an industry, the fundamental arena in which competition occurs. Competitive strategy aims to establish a profitable and sustainable position against the forces that determine industry competition (Porter, 1998).

Firms pursue competitive strategies when they seek to improve or maintain their performance through independent actions in a specific market or industry.

COST LEADERSHIP STRATEGY

A firm producing at the lowest cost in the industry enjoys the best profits. Producing at lower cost is a strategy that can be used by various firms so as to have a significant cost advantage over the competition in the market. This in effect leads to growth in the market share. This strategy is mostly associated with large business is offering standard products that are clearly different from competitors who may target a broader group of customers. The low cost leader in any market gains competitive advantage from being able to many to produce at the lowest cost. Factories are built and maintained; labor is recruited and trained to deliver the lowest possible costs of production. Cost advantage is the focus. Cost s is shaved off every element of the value chain. Products tend to be 'no frills.' However, low cost does not always lead to low price. Producers could price at competitive parity, exploiting the benefits of a bigger margin than competitors. Some organizations, such as Toyota, are very good not only at producing high quality autos at a low price, but have the brand and marketing skills to use a premium pricing policy. A low cost leader’s basis for competitive advantage is lower overall costs than competitors. The need to manage cost is nothing new, yet surprising number of organizations struggles to successfully control their operating expenses overtime (Bertone, Clark, West & Groves, 2009). Successful low cost leaders are exceptionally good at finding ways to drive costs out of their business.

COST FOCUS STRATEGY

Lower cost advantages to a section of the market segments with basic services offered to a higher priced market leader is a strategy acceptable in the corporate world. It results to similar products to much higher priced products that can also be acceptable to sufficient customers in the market. A focused strategy based on low cost aims at securing a competitive advantage by serving buyers in the target market niche at a lower price than rival competitors. This strategy has considerable attraction when a firm can lower costs significantly by limiting its customer base to a well defined buyer segment. Focused low cost strategies are fairly common (Porter, 1996). Differentiation Focus Strategy A business aims to differentiate within one or a number of target market segments. The special customer needs of the segment means that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers. This demands that the customer’s different needs and wants be recognized. Porter (1980) reiterates that only if a company makes a strong and unwavering commitment to one of the generic competitive strategies does it stand much chance of achieving sustainable competitive advantage that such strategies can deliver if properly executed. Many scholars have questioned this; in particular, Miller (1992) questions the notion of being “caught in the middle”. He claims that there is a viable middle ground between strategies. Many companies for example, have entered a market as a niche player and gradually expanded. Hill (1988) claimed that Porter’s model was flawed because differentiation can be a means for firms to achieve low cost. He proposed that a combination of differentiation and low cost might be necessary for firms to achieve a sustainable competitive advantage.

CONCLUSIONS

Regarding the key objective of the paper, It was established that MNCs in Kenya have adopted a number of strategies including: better quality, excellent customer service, innovation, differentiation, diversification, cost cutting measures, strategic alliances, joint venture, mergers/acquisitions and lower prices to whether competitive challenges. The study also found that 61 percent of the multinational corporations are foreign owned, while 39% are both locally and foreign owned suggesting that the majority of the MNCs are owned by non citizens.  Ownership may be important in the choice of strategy an organization. Foreign MNCs sometimes have to pursue the strategies of its foreign based company. Multinationals can overcome the challenges through training and other capacity building programmes to create a pull of qualified personnel to support operation especially by providing a focused onsite customer care.

REFERENCES

Aharoni, Y. (1993). “From Adam Smith to Schumpeterian Global Firms.” Research in Global Strategic Management. JAI Press Inc. Ansoff, H. I. (1965). Corporate Strategy. New York: McGraw-Hill. Aosa, E. (1992). An empirical investigation of aspects of strategy formulation and implementation within large, private manufacturing companies in Kenya Unpublished PhD Thesis. Barnett, W. P., & Hansen, M. T. (1996). “The Red Queen in Organizational evolution.” Strategic Management Journal. Barman & Chaves, M. (2005). “St rateg y and restructure at the United Church of Christ.” pp. 466-492. Chaffee, E. (1985). “Three models of strategy.”

Miller, D. (1989). Configuration of Strategy and Structure: Towards a Synthesis.

New York: Free press. Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. New York: Free Press

Porter, M. E. (1979). How competitive forces shape strategy. Havard business Review,

March/April 1979. Stern, C. W., & Stalk Jr, G. (1998). Perspectives on Strategy from The Boston Consulting Group. Boston Massachusetts: John Wiley & Sons. Su shil. (1990). “Corporate Financial Reporting in India Corporate Financial Reporting.” Penguin

books. Thompson, A. A Jr, & Strickland, A. J. III. (2003). “Strategic management:

http://www.the manager.org/models/diamond.htm

(2007, 08). Discuss the Management Problems Facing Multinational Companies and Companies with an International Dimension in Various Parts of the World.StudyMode.com. Retrieved 08, 2007, from http://www.studymode.com/essays/Discuss-The-Management-Problems-Facing-Multinational-120224.html

 http://www.businessdictionary.com/definition/multinational-corporation-MNC.html#ixzz393FDRiMT

http://www.unilever.com/sustainability/strategy/

Read more: http://www.ukessays.com/essays/business/issues-faced-by-the-multinational-companies-business-essay.php#ixzz393bNdhcs