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CHAPTER 6
Global Competitors
CHAPTER OUTLINE
XXXVIII. The Globalization of Competition
A. Global Firm versus Global Firm
XLI. Home Country Actions and Global Competitiveness
XLII. The Country-of-Origin Advantage
A. Managing Country-of-Origin Perceptions
B. Beyond Quality
XLIII. Conclusion
CHAPTER OBJECTIVES
At the end of this chapter, students should be able to do the following:
Describe ways in which one global competitor can address another.
List and explain four basic strategic options that local firms can employ in the face of
competition from multinational firms.
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QUESTIONS FOR DISCUSSION
1. What advantages might a Japanese competitor have in the Japanese market over an
American firm attempting to enter that market?
A Japanese firm might belong to a keiretsu. Other keirestsu companies (including a
bank) might come to its aid if necessary. Japanese companies have traditionally had less
need to worry about stock prices and hostile takeovers. This could allow them to take a
longer-term perspective than the American firm.
2. What do you think governments should be allowed to do to help their home firms be
more globally competitive? What do you think constitutes unfair assistance?
It will be interesting to see what students come up with for answers to these questions. Some
ideas are as follows:
Education may be seen as a more fair area for government interference. It could
encompass foreign language requirements in high schools and colleges. Additionally, it
3. Are business groups doomed?
Business groups are the big private-sector competitors of the developing world, but today they face
the dual competitive threat of the multinational corporations and more focused local firms.
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4. Nearly all studies of the country-of-origin effect focus on how buyers evaluate products
and on their intention to purchase products. How might the country-of-origin effect
manifest itself in other situations?
Again, it will be interesting to hear student ideas. Three possibilities are:
Consumer reactions to product failures. Will consumers blame a company more if a
defective product was made in a country with a lesser image for quality? This is a key
question in the automobile industryan industry with numerous product problems and
CASE 6.1: JOLLIBEE GOES GLOBAL
This case presents students with a success story of a local competitor that faced McDonalds and
won. Today Jollibee of the Philippines, with its mango shakes and spaghetti topped with smoked
fish, is one of Asias most esteemed companies. The case allows students to think through each of
four strategies that local companies can apply against global companies entering their markets:
dodger, defender, extender, and contender. Students must also address why companies in the food
industry arguably a very culturally bound industryhave been (and can be) successful globally.
The case can also be used to explore issues of country of origin.
DISCUSSION QUESTIONS
1. What strategies did Jollibee follow—or consider following—during its evolution:
dodger, defender, extender, and/or contender? Explain your answer.
Arguably, Jollibee considered each of the four strategies:
Dodger. Mr. Tans friends suggested that he give up his incipient idea of starting his
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2. Which strategy do you think is most appropriate for Jollibee? Why?
This question in fact centers on a decision between extender and contender strategies. This
forces students to examine the nature of the fast-food industryis it one where
customization to local markets remains a competitive asset (extender) or one where buyer
3. Why do you think Jollibee was successful in the United States but not in China?
While an interesting question in and of itself, this question continues to explore the extender
contender issue. You may wish to actually begin with the questions: Why the United States?
Why China? Why do you think Mr. Tan thought these were good markets for Jollibee to
enter?
United States. This is more apparent straight from the caselarge, concentrated Filipino
populations who already knew the Jollibee name. Astute students might note that
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So why was Jollibee successful in the United States but not in China?
Perhaps without a substantial Filipino population, Jollibee could not survive. After all,
JFCs Chinese restaurants dont do so well in the Philippines, arguing possibly for a
So why could McDonald’s survive in China? More resources? More will? Or possibly a
better country of origin? This latter issue may be brought out by asking: Why do you
think Chinese consumers went to McDonalds when it opened, even though hamburgers
were not a Chinese tradition? Answers will likely center on issues such as being
modern, being Western, having an American experience. Can a Filipino firm
compete with these appeals?
To sum up:
You may enumerate the reasons why Mr. Tan successfully defended his home market
4. Do you think Jollibee’s attempt to enter the Chinese market might be more successful
than the first? Why or why not?
Students who say yes may believe that the acquisition of three popular Chinese brands will
CASE 6.2: ARMING THE MIDDLE EAST
This case presents a very different industry from fast foodsthe international arms industry. This
is not an industry for small players. This industry is dominated by global firms that work unusually
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closely with their home governments. They sell to government buyers. The case is also a good
review of government markets from Chapter 5.
DISCUSSION QUESTIONS
1. How is the global arms market similar to other government markets? How does it
differ?
From evidence in the case, students should conclude that there are clear similarities to other
industries where large government contracts are at stake (see Chapter 5):
On the other hand, there are some peculiarities surrounding this industry:
The products are potentially used for national defense making them of unusual
importance to the purchasing government, although ironically most high-tech arms
purchases are destined to sit around unused until they become obsolete. To bring this
out in class discussion, you might want to ask, Why does a government buy fighter
jets? Why will governments buy them even when they are not at war? What happens
to most of these planes?
Because the product is used for national defense, it becomes intrinsically tied to foreign
2. How can home governments help and hurt firms competing in this market?
There are several ways that governments might help:
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They can buy national, helping their own firms to build sales and expertise in their
fields.
They can leverage any influence they might have with friendly nations, particularly ones
from developing countries, to help clinch a contract. This influence may be political
3. Do you foresee any advantages or disadvantages to Lockheed partnering with an SOE?
Often global marketers must contend with SOEs as a customers, competitors, or collaborators.
And SOEs are different from multinational firms. They often pursue government agendas as
4. What qualities are necessary for a firm to compete in this market? Why are Russian
companies still viable global competitors?
It might be useful here to ask, What qualities would you look for in a firm in order for it to
pass the eligibility test? Answers are likely to encompass:
The company should be big and have deep pockets or access to extensive financing.
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So why are Russian companies still viable competitors? It appears that Russian arms
companies suffered from poor management, corruption and possibly a lack of deep pockets.
In summing up you might wish to make the following points:
This is an industry for the big guys. Deep pockets are behind many of the competitive
advantages that firms must have to compete.
This is an industry affected as much by politics as it is by market forces. You may point
CASE 6.3: THE NEW COLA WARS
This case illustrates how competitive landscapes can face sudden upheaval in the global
marketplace. Its not just about Coke and Pepsi anymore!
DISCUSSION QUESTIONS
1. Which do you think is the bigger threat to Coca-Cola—brands like Qibla and Mecca
Cola or the Ajegroup? Why?
Currently Qibla and Mecca Cola appear to be far the lesser threats. They are attempting to
play on consumer animosity towards the United States (and consequently hope to strike blows
2. What are the strengths and weaknesses of Qibla and Mecca Cola compared to Coca-
Cola?
Mecca Cola may be said to have certain competitive strengths:
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It appeals to a niche market driven by anti-American sentiment.
Competitive weaknesses of Mecca Cola vis-à-vis Coca-Cola might be said to include:
It is small. This hampers access to distribution and limits economies of scale in
3. Why has the new cola launched by the Ajegroup been so successful? Do you think this
cola could successfully compete outside Latin America? Why or why not?
Students may point out several reasons why the cola launched by the Ajegroup has been
successful in Latin America.
Cutting costs has resulted in being able to offer a cheap product which appeals to many
consumers in developing countries. Arguably, the group deleted services to distributors
4. Evaluate Coca-Cola’s response to the Ajegroup. What suggestions would you give Coca-
Cola?
Coca-Cola appears to be caught off-guard by the Ajegroup. It has been used to dealing with
Pepsi and relatively tame local players. An aggressive regional player is something new. As
we have seen before, Coke responded by trying to deny Big Cola distribution (legally, one
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FOLLOW-UP QUESTION: After its success with cola in Mexico, the Ajegroup announced that
it planned to enter the Mexican beer market thus taking on Mexicos beer duopolythe Mexican
firms of Modelo (see Case 9.1) and Femsa. Very quickly, Mexico passed a law taxing beer sold in
returnable glass bottles at a lower rate than beer marketed in deposable cans and bottles. Industry
observers believed this was to protect the established brewers. The Ajegroup would be forced to
invest heavily in expensive manufacturing and collection systems or face the costly tax. Remind
your students that Mexicos anti-trust case against Coke helped Big Cola enter the Mexican market.
Then ask them: Why is the Mexican government now protecting the big guys and torpedoing the
Ajegroup? Students might note:
Unlike Coke and Pepsi, Modelo and Femsa were probably not caught off-guard.
Evaluate Coca-Colas response to the Ajegroup. What suggestions would you give
Coca-Cola?
Coca-Cola appears to be caught off-guard by the Ajegroup. It has been used to dealing
Evaluate Coca-Colas response to the Ajegroup. What suggestions would you give
Coca-Cola?
Coca-Cola appears to be caught off-guard by the Ajegroup. It has been used to dealing
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5. Do you think Big Cola can be as successful in Asia as it has been in Latin America? Why
or why not?
Yes: The business model may extend well to other developing countries. The Ajegroups
UPDATE: Qibla Cola only survived a few years. Management blamed poor distribution for its
demise. Mecca Cola fared better, especially in Muslim countries outside the Middle East. Mecca
Cola notes that it is in 64 countries including the United States. To date, the cola has faced more
difficulties in the lucrative Arab Gulf markets. After a failed attempt in Saudi Arabia, the company
reformulated plans to reenter that market. However, the Saudi government will not allow the brand
to call itself Mecca. The company contends that it doesnt advertise in order to give more money
to charity.