Management of the company
Expanding globally allows companies to increase their profitability which is not-possible to purely domestic enterprises. Companies that operate internationally : i) earn a greater return from their unique competencies; ii) realize location advantages by dispersing different value creation activities to those locations where they will be performed most efficiently; and iii) come down the experience curve faster than the competitors, thereby offering more competitive products to the consumers.
Unique competencies are the unique strengths that allow a company to achieve superior efficiency, quality, innovation, or customer responsiveness. Such strengths are typified by product offerings that other companies find difficult to match or imitate. Thus, unique competencies are vital for a company’s competitive advantage. They enable a company to lower costs and also differentiate its product offerings. Pret A Manger with valuable distinctive competencies often realized huge returns by applying those competencies and the products they produced to foreign markets, where indigenous competitors lack similar competencies and products.
Location advantages are those that occur from performing a value creation activity in the most advantageous location for that activity- in whichever part of the world that might be. Locating a value creation activity in the most favorable location for that activity have one of two effects. It : i) lowers the costs of value creation, helping the company achieve a low-cost position or ii) enable a company to differentiate its product offering and charge a premium price.
Pret A Manger realized location economies by dispersing each of its value creation activities to its optimal location and had a competitive advantage over other companies that concentrates all its activities at a single location. It was better able to differentiate its product offering and lower its cost structure than its single-location competitor. The basic assumption is that by dispersing its manufacturing and design activities, a firm will be able to establish a competitive advantage for itself in the global marketplace.
Experience curve refers to the systematic decrease in production costs that occur over the life of a product. Learning effects and economies of scale lie behind the experience curve and moving down that curve allows a company to lower the costs. Most of the sources of experience-based cost economies are generally found at the plant level. Dispersing the fixed costs of building productive capacity over a large output reduced the cost of producing a product. Hence the answer to riding down the experience curve as rapidly as possible is to increase the accumulated volume produced by a plant as quickly as possible.
Global markets are larger than domestic markets and, therefore, Pret A Manger that serve a global market from a single location was able to build up accumulated volume faster than companies that focused primarily on serving their home market or on serving multiple markets from multiple production locations. Business Strategies that that management implemented to turn around the company Companies use four basic strategies to enter and compete in the international environment. Each of these strategies has its advantages and disadvantages.