- 8 Marks
Question
Persiba IT Limited (PIL) started operations 10 years ago in Ghana providing a wide range of information technology solutions to diverse clientele. Mr. Quainoo, the chief executive officer (CEO) of the company, recently has been contemplating venturing into other West African markets to take advantage of untapped opportunities. This is also to strengthen the competitive position of PIL since Ghanaian market growth is beginning to slow down and competition is getting keener.
At the 2016 second quarter Board meeting, the CEO tabled his proposal for consideration and board’s input before the document was finalized. During the Board discussions Prof Amartey, who lectures Corporate Strategy, suggested to the CEO to use Porter’s Diamond of national advantage to assess competitive advantage of the other West African countries the company intends to enter. Prof. Amartey also mentioned to the CEO that companies that compete in the global marketplace typically face two types of competitive pressures: pressures for cost reductions or global integration and pressures to be locally responsive.
The cost reduction-local responsiveness dilemma shapes and results in four basic international strategies – international, global, multidomestic, and transnational – which the CEO should consider in making the choice.
Required:
Discuss how the FOUR factors in the Porter’s Diamond of national advantage determine competitiveness of the other West African countries on the global stage. (8 marks)
Answer
1. Factor Conditions: Factor conditions refer to the nation’s position in factors of production such as skilled labor, infrastructure, and natural resources. For West African countries, the availability of skilled IT professionals, modern infrastructure, and access to natural resources can significantly enhance the competitive advantage of a company like Persiba IT Limited when expanding into these markets.
2. Demand Conditions: Demand conditions pertain to the nature of home-market demand for the industry’s products or services. Strong and sophisticated demand in West African markets for IT solutions can push companies to innovate and improve, thereby strengthening their competitiveness on a global stage. Understanding the specific needs and expectations of local customers in these markets is crucial.
3. Related and Supporting Industries: The presence of related and supporting industries provides companies with cost-effective inputs and innovation opportunities. In West Africa, the existence of a strong network of suppliers, IT-related firms, and educational institutions can support Persiba IT Limited in maintaining competitive advantages as it expands. Collaborative efforts with these industries can lead to better product offerings and services.
4. Firm Strategy, Structure, and Rivalry: The way companies are organized and managed, along with the nature of domestic competition, influences their ability to compete internationally. A high level of competition within the West African IT industry can drive Persiba IT Limited to continually innovate and enhance its efficiency. The company’s internal strategies and the level of rivalry it faces will determine its long-term success in these new markets.
- Topic: Strategic management in the globalized workplace
- Series: MAY 2017
- Uploader: Theophilus