Competition in Global Industries Competition in global industries presents some unique strategic issues compared to domestic competition.

Although their resolution depends on the industry and the home and host countries involved, the following issues must be confronted in some way by global competitors. Industrial Policy and Competitive Behavior. Global industries are characterized by the presence of competitors operating worldwide from home bases in different countries. Particularly outside of the United States, firms and their home governments must be regarded together in competitor analysis. The two have complex relationships which can involve many forms of regulation, subsidy, and other assistance. Home governments often have objectives, such as employment and balance of payments, that are not strictly economic, certainly from the point of view of the firm. Government industrial policy can shape companies' goals, provide R&D funds, and in many ways influence their position in global competition. Home governments can help negotiate for the firm in world markets (heavy construction, aircraft), help finance sales through central banks (agricultural goods, defense products, ships), or apply political leverage to advance its interests in other ways. In some cases the home government is directly involved in the firm through partial or complete ownership. A consequence of all this support is that barriers to exit may well increase. Competitor analysis is impossible in world industries without a thorough examination of the relationships between firms and home countries. The home country's industrial policy must be well understood, as well as the political and economic relations of the home government vis-a-vis governments in major world markets for the industry's product. It is often true that competition in world industries is distorted by political considerations which may or may not be related to the economics involved. Purchases of aircraft, defense products, or computers may depend as much on the political relations between home countries and buying countries as they do on the relative merits of one firm's product against another's. This factor implies not only that the competitor in a global industry needs a high degree of information about political matters but also that the firm's particular relationships with its home government and governments in buying countries become truly strategic in importance. Competitive strategy may have to include actions designed to build political capital, such as locating assembly operations in the major markets, even if they are not economically efficient. Relationships with Host Governments in Major Markets. The firm's relationship with host governments in major markets becomes a key competitive consideration in global competition. Host government have a variety of mechanisms that can impede the operation of global firms. In some industries they are major buyers, whereas in others their influence is more indirect but potentially as strong. Where host governments are prone to exercise their power, they can either block global competition altogether or create a number of different strategic groups in an industry. Studies by Doze have identified three groups.9 The first consists of firms competing globally on a coordinated basis; the second, of multinational companies (often with smaller market shares) that follow a strategy of local responsiveness rather than integration. These firms escape many government impediments and may actually receive host government support. Final'Doz (1979. the third group is made up of local firms. For international companies, the degree of responsiveness to host government concerns becomes a key strategic variable. I will describe the broad alternatives to competing globally

in some detail below. The firm trying to compete globally may need to compete in certain major markets to gain necessary economies. For example, it may need the volume of certain major markets in order to fulfill a global manufacturing strategy. it must therefore concern itself strategically with protecting its position in those markets that affect its ability to implement the global strategy as a whole. This requirement gives the host governments in these countries bargaining power, and the firm may have to make concessions in order to preserve the whole strategy. For example, Japanese firms in the television and automobile industries may have to manufacture partly in the United States, to appease U.S. political concerns, in order to maintain the U.S. volume that is a key source of their global competitive advantage. Another example is IBM's policies of local full employment, balanced intra-company transfers of goods among countries, and some local R & D.' Systemic Competition. A global industry, by definition, is one in which firms view competition as global and build strategies accordingly. Thus competition involves a coordinated worldwide pattern of market positions, facilities, and investments. The global strategies of competitors will usually involve only partial overlap in served markets, geographic location of plants, and so on. In maintaining a competitive balance from a systemic viewpoint, it may be necessary for firms to make defensive investments in particular markets and locations so a not to let competitors reap advantages that can be factored into their overall global posture. Knickerbockers' study of international competition found much evidence of this pattern of behavior. Difficulty in Competitor Analysis. Although the same sorts of factors as described in Chapter 3 are important in analyzing international competitors, this analysis is difficult in global industries because of the prevalence of foreign firms and the need to analyze systemic relationships. Data on foreign firms are generally less available than on U.S. firms, although the differences are narrowing. Analysis of foreign firms also may involve institutional considerations that are hard for outsiders to understand, such as labor practices and managerial structures.