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Research suggests Japanese and Chinese firms have better capabilities to be the engine of recovery than U.S. firms

Publish Date: Wednesday, May 6, 2009

Companies choose different strategies to give them competitive advantages. Each strategy requires different kinds of technological capabilities to be successful. Focusing resources on the most important capabilities is the key to securing and maintaining a competitive advantage.

Conventional wisdom  suggests that the U.S. is the world’s technology creation leader and that will be our strategic role in the future, but this research indicates that Japanese and Chinese firms have more process technology related capabilities and information technology related capabilities than U.S. firms. These capabilities give them advantages operating in the current unstable economic environment.

“Not only does that cast doubt on our perceived innovative strength, but Japanese and Chinese companies tend to have more marketing capabilities than U.S. firms as well --another perceived bastion of U.S. strength,” said Robert Nason, Professor Emeritus of Marketing at the Eli Broad College of Business.

In a 2008 article published in the Journal of International Marketing titled “Distinctive Marketing and Information Technology Capabilities and Strategic Types: A Cross-National Investigation,” Nason, Michael Song, Endowed Chair in Technology Management at the University of Missouri-Kansas City, and Anthony Di Benedetto, Professor of Marketing at Temple University, explored what strategies companies have chosen internationally and what capabilities make them successful.

They found that within the three major successful business strategies -prospectors, defenders, and analyzers, different capabilities are essential for the success of that business model.

Prospectors, like Toyota and Honda, respond to early signals of opportunity through innovations that use new technologies and open new markets.  They prosper in unstable and changing environments because they have such strong information technology and technological capabilities.

 “On the other hand, General Motors, Ford, and Chrysler have tried to defend traditionally powered, larger car and truck market segments in the face of changing economic and environmental conditions,” Nason said. “This raises real questions as to their ability to create the capabilities of Prospectors given financial emergency or government restructuring requirements.”

Defenders, like Coca Cola, seek to maintain secure niches through efficiency, quality and service with lower prices typically in relatively stable product or service markets. Successful defenders have better ability to focus on linking to their internal and external markets through savvy targeting and positioning to products and promotions.

Analyzers are the in-between group. They are avid followers that learn from prospectors and make up for their slower market entry by being more efficient. Successful analyzers possess the capabilities of the defenders and the prospectors, but in different degrees.

“Given the current economic events, it becomes even more difficult to build competitive advantage by investing appropriately in building resources and capabilities,” Di Benedetto said.  “We try to provide some guidance to managers, since we find that it makes sense to align investment in capabilities with the overall strategic type chosen by the business unit, that is, whether the business unit competes by prospecting, analyzing, or defending.”

They found that some countries have more capabilities than others. They found that Japanese and Chinese companies are generally superior to the U.S. firms in technical and information technology capabilities both within and across the strategic types. They also found that Japan and China were generally stronger than U.S. firms in marketing capabilities, but both Prospectors and Defenders in the US were stronger in market-linking capabilities, while the reverse was true for Analyzers.

“More than ever, firms are under pressure to be successful in the global market, while at the same time having fewer financial resources available,” Di Benedetto said. “Our work suggests how important it is to invest the limited financial resources to build capabilities that provide the greatest potential sustainable competitive advantage.”

Song noted, “for firms pursuing a first-mover strategy through product-market innovation, it is important to build up technical and IT capabilities.  On the other hand, if a company’s strategy is to defend its market segments with existing technology, it needs to develop market linking and marketing capabilities.” 

Written by Gordon Shetler, Graduate Assistant at Global Initiatives.