Micheal Porter Diamond: MNC Interplay Between Firm & Country - Level Factors | International Business Assignment Help

International Business

Using an example of an MNC from an emerging market, present an analysis of the firm-level and country-level factors that have contributed to its success and/or failure. What are the main lessons international business managers can learn about the interplay between firm and country-level factors in achieving success?

Note:

Use IB theoretical frame for example Micheal porter diamond regarding to country level and MNC level.

Introduction

Due to the increase in globalization, countries have a gained a larger influence on the internal level front of the companies. For a particular business to work it is essential that these factors affecting the country as well as the firm are taken into consideration for the success of a business. By operating a business which is devoid of these considerations, a company many not reach the desired result for its product or service. An emerging market is considered as country that has some characteristics of a developed market, but has not completely transformed into a developed market. The report consists of an analysis behind the success of a company in an emerging market based on the firm-level and country-level factors that as an impact on the workings of a company (Hitt et al, 2000).

Company overview

The company which is chosen for analysis in this report is the success is Café Coffee Day. Café Coffee Day is a retail premium coffee chain present in all the major cities of Indian with a number of outlets. The company is the largest producer of well known beans known as Arabica beans in Asia. The company exports these beans to Europe, USA and Japan. The company is known for its vertical integration. The company has around 1500 stores across India and it also has stores in other countries like Czech Republic, Egypt, Malaysia and Austria. The company has won many awards and is a rapidly growing coffee chain in India.

Literature review

The country specific factors and the firm specific factors allow a company to gauge the competitive advantage a multinational has in terms of the market. The use of Porters diamond model is used to gauge the country specific factors and the value chain model is used to gauge the firm level factors

Michael porter diamond model

The porters’ diamond model shows the competitive advantage that a country enjoys on a global platform. The 4 determinants of national advantage are described below which have been outlined by the Porters diamond model (Curran, 2000).The first one is the factor conditions which can be exploited by a firm in a given country. The example of this would include the presence of cheap labour, high number of skilled workers, presence of natural resources etc. the second one is demand conditions which means that the demand for a particular product is more in the local market compared to foreign markets hence the companies producing those product gain competitive advantage on the global platform (Markus, 2008). The third is the relating and supporting industry due to which the home countries can produce the products in a more cost effective manner (Neven & Droge, 2001). For example due to the presence of high competent fashion products and leather, Italy has furthered the cause of shoe industry in the world. The fourth is the structure and strategy of the different firms which can affect the competitive advantage since different countries have different structures (Weiping & Shubin, 2002).

Business leaders use this model to assess the country’s competitive advantage and the government of the country acts like a catalyst or a challenge to the above factors. The benefit of the model is that it addresses the various factors at a country specific level which can be analysed by a company to check whether it will allow them to achieve success (Smit, 2010)

However the drawback of the model is that it is not exhaustive and there may be other factors which influence the competitive nature of the country. Also the model does not have any consideration for the private and public partnerships which can be a source of competitive advantage in countries (Jinand Moon, 2006)

Value chain model

In order to analyse the firm level factors which affect company the report employs the value chain model. This consists of the Primary activities and the secondary activities of a firm. Through the analysis of these activities, managers can analyse if they have competitive advantage with respect to the firm specific factors.

The primary activities of a company consists of the inbound logistics, operations, outbound logistics , marketing and sales and after sales services provide by the company (Kaplinsky, 2000). The primary activities consist of these activities which are directly related to the product. The secondary activities of a company consist of the Human resources management, technology development and the procurement of the company (Humphrey & Schmitz, 2000). The support activities furnish the smooth functioning of the primary activities of a company. The main advantage of the model is that the firm can identify the various segments in which it has an advantage over its competition. It also allows an examination of the various aspect of the firm in a clear manner (Elloumi, 2004).The limitation of the value chain is that the model breaks down into segments which does not give a holistic view of the company and does not allow analysis on a whole. Also academician’s outline that the activities in the value chain model are not linked with each other due to which the relationship between these activities cannot be analysed (Riisgaard, 2010)

Hence by looking at the literature review that is given, it can be said that the Porters diamond model and the value chain model are apt theories which can be used to gauge the country specific and firm specific features if order to achieve success.

Analysis

The section analysed the country specific factors and the firm’s specific factors of Café Coffee Day by using the porter diamond model and value chain model

Country specific factors – Porters diamond model

Factor conditions

The young population of India is one of the biggest factors for the development of the country because it can be said that they are the productive population of the country. Also the population is deemed to increase in the next 10 years by 8% which makes it a lucrative market for any multinational. The country also boasts about a robust financial system where a channel of good financial resources is available for investors. Due to the growing advantage of natural resources of the country, it is another factor which contributes to competitive advantage (Mehta and Kaushik, 2015).

Demand Conditions

Demand conditions are another aspect of the competitiveness because local demand is necessary to allow the local companies to learn how to succeed in the industry. The county has a GDP growth of 7% which states the demand of products is constantly increasing in the country. Also the purchasing power of the country is increasing due to which the economy experiences a higher buying power. Also the share of market of low household income has decreased in a significant manner while the ones who are a part of the high income bracket have increased in the past 5 years (Mehta and Kaushik, 2015).

Related and supporting industries

It has been mentioned earlier as well that Café Coffee day is the largest producer in Asia to produce Arabica beans. India is one of the highest producers of coffee beans in the world. The presence of raw ingredients which is one of the most basic requirements of the beverage and food industry enhances the country’s favourability towards the food and beverages industry. Also the number of food caterers and restaurants are on an increase due to which there is positive proposition to get competitive advantage (Mingjie, 2006).

Firm strategy, structure and rivalry

The country usually has hierarchical structure of companies where the managers take the decisions of the company and the subordinate execute the decision. Also the availability of cheap labour and employees means that the number of people employed with the company will be more than other countries. Countries also tend to achieve success on the basis of management practices and the modes of the company that are in favour favoured by the national Environment is well suited to the industries sources of competitive advantage (Asmussen, Pedersen & Dhanaraj, 2009).

Firm specific factors – Value chain model

Primary Activities

The primary activities of Café Coffee Day is listed below

Inbound logistics

The company has employed a system which allows them to track the ingredients which are over and place them simultaneously. The company has a fully owned subsidiary which supplies the raw material to the company which is centralized in nature. The ingredients are shipped through the logistics service the subsidiary (Kaplinsky& Morris, 2001).

Operations

The operation of the company consists of assembly of the orders and then delivering them to the consumer. The efficient infrastructure and the state of the over used by the company ensures that that the orders are ready within a few minutes.

Café Coffee Day is very strict about its inventory management the just in time (JIT)approach that is used for maintaining its inventory levels. It follows a three day cycle where all the raw material like milk, coffee beans, ice-cream are ordered through the calculation of the minimum amount of ingredients that are required to fulfil the demand request. Also the store is designed in such a way that the inventory is stored close to the line of assembly in a way that the team member has immediate access to the raw material. The stores also check the quality of the incoming raw material to ensure it is fir for consumption and maintains hygiene at all its stores (Keane, 2008).

Outbound Logistic

The outbound logistic consist of two parts. The first part is the customers who come and order at the Café Coffee Day outlet or order a take away from it where the customers are physically present at the store to take the order. The other is the home delivery of the beverages by the representatives but it is only present in some cities (Ponte, 2008).

Marketing and Sales

Café Coffee Day is extremely aggressive in its marketing due to which it has become the market leader in coffee and other beverages with more than 1500 stores present in India. The company employs a number of channels like the social media, television, radio and print advertisements to reach its target audience.

Service

The most unique point of the after sales service that the company provides is that there is a refund which is capped at 200 Rs. in case the company fails to deliver the coffee with a premium quality and in accordance with the choice of the customers. Due to this service provided by the company, the customers get attracted to have coffee at Café Coffee Day (Bonn, 2014).

Support activities

Firm infrastructure

The company has a state of the art infrastructure with a robust capacity planning system. For the purpose of forecasting demand Dominos uses Prescient such that it can plan its inventory as well as capacity in an efficient manner. With the help of Prescient, Café Coffee Day managed to develop advanced software that matched the receipts to the demand module that maximizes the overall efficiency of the system. The equipment used by the stores is laid out in a manner where it can optimize the space used in an efficient manner

HRM

The priority of the company is to retain talent and is done in a transparent manner by putting up a vacancy on their website, job portals and in the print media. The human resources departments of the company ensure that the employees are given health and pension benefits and the remuneration according to the country standards (Hult, Closs& Frayer,2013).

Technology development

The technology used in the stores has been developed according to the need of the market. They have latest machines and equipments to make the best coffee. The company uses inventory management software and capacity building software to gauge the needs of their consumers. The company also launched a mobile application so that the customers can order directly from their smart phones and be updated about the offers of the company

Procurement

The procurement of the raw material of the company is done through software where the inventory is automatically updated and the ingredients are shipped to the store according to the requirement. The company uses fresh ingredients and are sourced in a manner that the taste of the coffee remains the same throughout the country irrespective of the branch (Gereffi, Humphrey& Sturgeon, 2005).

Evaluation of statement

By looking at above analysis of the company, it is clear that the country specific factors and the firm specific factors are related and the managers cannot treat them in isolation. The success of the company is the analysis of its unique aspects with respect to the company and finding a country whose factors of success are in line with the strengths of the company. In such a way the company can obtain competitive advantage by maximizing on the factors of a country which furthers the success of the company.

The main lessons that mangers can learn is that the operation of a firm is subjected to the country that the company is beings set up in, this is evident since Café Coffee Day’ could become a market leader because it chose to operate in an emerging market like India where the demand for coffee deemed too rise due to the higher presence of the younger generation in the country. Hence it is essential that the mangers match the resources that are available in the country to the unique expertise that a firm has to enable a coordinated series of operations.

Also the advent of technology like latest machines for coffee and the availability of cheap labour in the country is another example where the managers can learn the aspect of integrating country specific and a firm specific role since the combination of both can lead to a success for the company. (Kothandaraman& Wilson, 2001).

Conclusions

By looking at above report it is evident that Café Coffee Day achieved success in the emerging market of India because it was in a position to tap into the country and gain competitive advantage. It successfully combined the factors of the firm to demonstrate efficiency in capturing the markets share of the country in beverage industry. The company is undertaking all the operations and activities very carefully to grab substantial market share in the country. It is also clear from the evaluation that all the functions like marketing, human resource, supply chain management, operations management are very strong and they are contributing in the success of the company. These are the factors that are also contributing in the global expansion of the company. Also the use of porters diamond model for the analysis of country specify factors and the use of value chain model for the analysis of firm specific factors allowed a comprehensive analysis for the company and they suggested that all the factors are positive for company to grow and expand.