Global Business Study Set 3
Quiz 11 :
Managing Global Competitive Dynamics
Emerging economies are those which have risen from the concept of traditional economic methods of agriculture and exporting and have been industrializing rapidly and moving towards mixed economic methods. Simply, the emerging economies are those which are on the path of development but have not yet developed to the fullest. It is obvious that the organizations from developed economies often enter the emerging markets to make higher profits as well as to enjoy the global presence. Entering the emerging markets, these MNE's (multi national enterprises) put pressure on the local organizations leading them to fight back. MNE's also make them show what is possible if will is there. To overcome the competition, local firms therefore, try to expand from their existing markets and explore more opportunities. They are eager to do so because if they do not make fast decisions then it is possible that the MNE's which are already established, may eliminate their presence.
Price war in the industry kills profit for all firms. The pricing policies should not be discussed openly with the rivals, however one can signal towards it in following ways: • Various means of cost reduction can be addressed which will help in understanding price differences. • If research and development is focussed on cost reduction it signals competitors. • Adoption of different pricing strategy also signals competitors about price war.
Price war is a market situation where competitors are observed to struggle for market share by cutting down the prices of various goods and services. The top five strategic choices that the firm can follow in order to respond to the challenges faced by the price wars are as below: • Properly affirm the need which means properly studying the market data to know the changes in the preferences of the public and their spending patterns. This will help the firm to quickly understand and gather information before the consumer purchases the services or goods that are sold at lower prices. But, the disadvantage of this strategy is that it will take lot of time and effort to properly analyze the market. • Focus more on quality and better services as price wars are also characterized by decrease in the quality of the products and services of better quality. With this, the firm can create its image stronger than its competitors. The disadvantage is that the individuals have to pay more for better quality services and goods. • The firm should decide whether to reduce prices geographically in the various countries as it can help the firm to create its image in the market. The disadvantage of this strategy of battlefield is that cutting prices may result in loss for the firm as compared to its competitors. • The firm should pick the target and should first try to compete with the single competitor that appears to be more susceptible as taking on everyone is difficult and expensive. The advantage is that less effort and cost to the firm and the disadvantage is going after a single competitor sometimes is not advantageous as, the second competitors can win the battle with its planned strategies. • The firm should align revenues with the cost structures. The reduction in operating costs can help the firm generating profits on lower turnover. The disadvantage is that it sometimes forces the firms out of the market due to the price wars. The top strategic choice i s to cut the prices geographically in order to respond to the challenges faced by the competitors as it will help the firm of home country to compete in the market and become leader in the global market.
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