Four Models of Competition and their Implications for Marketing Strategy

Global Competition Model
 
A global competition model focuses on competitors as 
they exist in different political and social economies. For 
example, Samsung, Daewoo, and Sony compete in con-
sumer electronics not just in South Korea but in the US, 
China, and even Russia. When they compete in South 
Korea, Samsung and Daewoo have innate advantages 
over Sony because of who and where they are. When 
they compete in the US, Sony may have a slight ad-
vantage given its experience and knowledge of the 
market. Competition in China is similar in nature to the 
US, but with Daewoo having an advantage based on 
location and on the talent for global marketing pos-
sessed by its Chairman, Kim Woo-Choong. (However, 
if South and North Korea were to form an economic 
zone, Samsung and Daewoo would have considerable 
advantage in the short-term, based on North Korea's
 
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much lower wage.) Finally, competition in Russia is 
limited just to Samsung and Daewoo—the Japanese are 
currently avoiding the former Soviet Union.
 
Such a model of competition sees competitors 
against backdrops of geography, history, governments, 
political policies and actions, economic systems, and 
social systems. Thus, strategic competition inside one 
social-political unit differs from that inside another; 
lessons learned in one unit may not transfer to the other. 
Strategic competition in several social-political units 
keeps this point and adds the idea that .competitive 
"identities" change from unit to unit. A company that is 
a leader in one market may be a laggard in another. 
Nestle, for example, has a 60 per cent market share for 
its instant coffee in Japan but less than a 30 per cent 
share in the US.
 
Diversity leads to countries having absolute as well 
as comparative advantages, identified in economic 
theory as deriving from relationships between costs of 
production. However, advantages in product quality, 
product performance, advertising, and research and 
development are also possible (Porter, 1986, p 37). No 
matter what the source of the advantage may be, the 
general principle is clear: production of particular 
goods and services should take place in countries pos-
sessing the advantage(s); trade between countries will 
achieve cost and production efficiencies. It should be 
noted that some initial impetus for globalization came 
from perceptions of advantages in labour cost. How-
ever, more current views hold that a country's labour 
cost advantages tend to disappear quickly and that a 
better impetus is the country's long-term market poten-
tial.
 
Other than absolute and comparative advantage, 
why identify a globalization model of competition? A 
number of reasons. The last decade has seen an in-
credible change in communication technology, permit-
ting a firm to have different locations for manu-
facturing, engineering, research and development, 
marketing, and finance. Communication technology 
such as satellite transmission of TV signals also has 
made many consumer markets more homogeneous. 
Larger, more homogeneous markets offer scale 
economies and high profits. Also adding to 
homogeneity, many managers around the world have 
received formal training in management methods (from 
universities, institutes, or McKinsey & Company) using 
concepts and analyses from the US. With the collapse of 
the USSR, new market opportunities and new com-
 
Vikalpa 

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petitors have emerged almost overnight. GATT 
negotiations have brought about liberalizations of in-
ternational trade policy, stimulating trade and 
heightening competition.
 
All these changes mean that managers today must 
think globally even if they act only locally. Almost all 
small and medium scale enterprises already face inter-
national competition in varying degrees in their local 
markets. This competition will only increase. Conse-
quently, many small and medium scale enterprises 
have begun to think and act internationally by export-
ing, licensing, or forming joint ventures abroad. Some 
of these enterprises will soon find it beneficial to shift 
from this "part-time" international orientation to a "full-
time" orientation, first seeing neighbouring markets as 
attractive as their own and then looking at more distant 
possibilities. It can be done—approximately 15 per cent 
or $ 43 billion of Japan's total foreign investment is 
accounted for by businesses having fewer than 500 
employees 
(Asian Wall Street Journal, 
August 25,1993).