Evaluation of Strategy Tripod
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Evaluation of Strategy Tripod
In this perspective paper, Peng, Wang & Jiang (2008) state that the success of a MNE is based, especially in emerging markets, on a strategic tripod, whose three legs are the industry-based view, the resource-based view and the institution-based view. According the paper, the institution-based view complement the other two more traditional views and represent a critical element in the definition of the firms international business strategy. Basically, MNEs strategic choices are not only driven by industry conditions and firm capabilities, but are also a reflection of the formal and informal constraints of a particular institutional framework that managers confront (Peng, Wang & Jiang, 2008).
The institutional-based view focuses on nations political, regulatory and social aspects and their impact on the business environment MNEs interact with. These aspects significantly shape the strategy and performance of the firms – both domestic and foreign – in developing countries, where typically the rules of the game are changing or not completely known (Peng, Wang & Jiang, 2008)
To support the strategy tripod framework, the authors outline four different cases, grounded in the context of emerging economies: antidumping as entry barriers, competing in and out of India, growing the firm in China, and governing the corporation in emerging economies.
Regarding antidumping as entry barriers, the example discussed is related to a steel producer who enters into a new geography (Texas) by applying a price dumping strategy. The point made by the authors is that depending on the nationality of steel producer – domestic or foreigner -, incumbent companies would react very differently. In fact, if the new entrant were domestic (from Ohio in the example), incumbents would likely react by adopting a mix of industry- and resource-based strategy. In particular, since the attempt to invoke a “predatory pricing” violation would likely be rejected under these circumstances by the US authority, they would rather react by offering lower prices in Ohio, leading to an alignment of prices between Texas and Ohio for the benefit of consumers of the two locations. Contrarily, if the new entrant were foreign (from China in the example), incumbents would likely react by adopting an institution-based strategy. In particular, they would likely pursue a lawsuit for dumping practice, since under these circumstances US authorities would almost certainly punish the Chinese steel producer by applying antidumping duties on Chinese steel import.
The conclusion is that, when industry- and resource-based weapons fail, the institution-based missile might be launched (Peng, Wang & Jiang, 2008).
Regarding competing in and out of India, the point made by the authors is that political, legal and societal changes in India affect strategies of Indian and non-Indian firms (Peng, Wang & Jiang, 2008).
Indian IT and BPO industry emerged as global phenomena in the last decade or so, but the key reason for this amazing rise doesnt reside uniquely on the excellent mix of great skills and low cost that the Indian market can offer. In fact, the Indian government, who invested in education and pursued structural reforms that significantly liberalized the market, played a key role.
Thanks to these structural reforms, Indian IT&BPO organizations are now able to compete with foreign MNE who have entered in the Indian market to leverage the local talent pool and steal part of the their profits. On the other hand, Western government adopted protectionist legislation measures to raise the entry barriers for