Theories Affecting Companies' Global Strategies

Porter’s Five Forces of Competitive Position Analysis 

The approach of Porter's Five Forces as stipulated by Michael E Porter, alumni of the Harvard School of Business in 1979 predominantly is a theory that assesses and evaluates company's positions and strengths in the competitive business market (CGMA.org, 2013) . In the global business market, the intensity of business competitions in addition to market attractiveness is mainly determined by five forces that help in identifying the location of power in various business conditions. These forces will help ACME to understand their market strengths and competitive positions to identify their weaknesses and thus avoid mistakes (CGMA.org, 2013) . In this manner, the company will be able to know if the new products they are launching have a potential to be profitable 

Porter’s National Competitive Advantage Theory 

The National Advantage theory as developed by Michael Porter mainly stipulates that the company's home country features are fundamental determinants for its success in the global business market (Nitisha) . National Advantage theory describes mostly contributing processes to businesses success in international industries. These factors predominantly determine whether a company will succeed in its ventures in the global business market. If the home nation of ACME offers a more forward-looking, challenging and dynamic business environment that is driven by innovation, it will ultimately succeed in the international market (Porter, 1990) . Therefore, if ACME employs innovation as its primary strategic theme by incorporating new technologies and ways of doing business, there is a high likelihood that it will attain a competitive advantage over its rivals. 

Theory of Comparative Advantage 

According to the method of comparative advantage, as stated by David Ricardo, business organizations should specialize in producing those products or services for which they incur the lowest opportunity costs (Suranovic, 1996) . Therefore to ensure successful business dealings in the international market, ACME should only produce the products for which they incur the lowest opportunity cost in production. For instance, if the company takes the same hours to create one product A and three products B, then it should specialize in the production of B for in producing B it will sacrifice one third of A. If the same hours are used to produce one product of A and two products of B then the company should specialize in production of A since in producing B it will sacrifice half of A (Suranovic, 1996) . 

Theory of Absolute Advantage 

The theory of absolute advantage as stated by Adam Smith stipulates that a business organization should specialize in producing products for which it uses the lowest amount of resources (snhu) . Therefore to enable the success of ACME in the global business market, the global strategic management team should ensure that the company only launches products that it employs the least costs in production (Suranovic, 1996) . For instance, if in producing product A the company will use fewer inputs compared to another company providing the same product in the global business market, then the company should solely focus on producing A. 

Ghemawat’s AAA Strategies for Global Value Creation 

The framework by Ghemawat predominantly provides the generic approaches that are needed for global value creation. The context involves; 

Adaptation strategy 

This strategy mainly aims at increasing revenues in addition to company market shares through tailoring of various structures of organization business models in a manner that conforms to local market preferences (Gupta, 2015) . In employing this strategy, organizations who want to expand their business dealings globally predominantly have to adapt their business practices and measures in a way that is favored by locals. Furthermore, organizations may have to incorporate various aspects of adaptation into their businesses such as variation, externalization, focus, innovation and design (Open Textbooks.org, 2015) . Even though this may be a tempting strategy for ACME to adopt, it is not a viable strategy for the company . This is because ACME is a widget producing company and is predominantly a functioning organization that focuses mainly on balancing supply and demand of widgets across its organizational boundaries. 

Aggregation Strategy 

This strategy when employed predominantly aims to achieve economies of scale through the creation of global efficiencies. In this manner, fundamental parts of value propositions are standardized an; additionally, production and development processes are grouped (Schmitz, 2012) . This strategy aims at creating significant cost advantages by centralizing the purchase of raw materials and producing final products. However, Achieving business success using this strategy does not depend on geographic aggregation to generate economies of scope (Open Textbooks.org, 2015) . Therefore, this is not a viable strategy for ACME to employ since for the company to attain a competitive advantage over its business rivals, its resources and business operations must work in concert with one another, and if they do not, the company will ultimately fail its global expansion. Moreover, this strategy offers more challenges when integrating business operations together to produce leverages and achieve a competitive business advantage. 

Arbitrage Strategy 

This strategy mainly focuses on the exploitation of economic differences that occur between national markets through the location of separate segments of the supply chain in various regions (Gupta, 2015) . Organizations thus focus on lowering production costs relative to the one achievable in their home countries. For instance, a business organization may focus on situating their firms in regions with low labor and raw material costs. By buying from places where prices are low and selling in high priced areas, companies can earn revenues by situating the market for their products in areas where their demand exist (Schmitz, 2012) . This strategy is most beneficial for ACME since it is a labor intensive company specializing in the production of widgets. The success of ACME as it is expanding into the international market lies on a thin thread between revenues earned from sales and production costs. By taking advantage of cultural, geographic, administrative and economic effects, ACME will be highly viable to achieve competitive advantage in the global market. 

Supply Chain 

Supply Chain Management 

This is the act of actively managing the processes of supply chains to maximize the value of customers to attain a competitive business advantage that is sustainable. 

Push Model 

In this model, demands that are projected by an organization predominantly determine the type of product that enters the production process, a factor that allows organizations to plan their productions to meet customer needs (Lander, 2018) . 

Pull Mode 

Under this model, products are delivered into the supply chain after legitimate demands from customers predominantly to avoid carriage inventory costs that might not sell (Lander, 2018) . 

Horizontal Dimension 

The horizontal dimension is the number of tiers that exist across the entire supply chain and can either be long or short depending on the number of layers. 

Vertical Dimension 

This dimension constitutes suppliers and consumer numbers that are represented within each tier (Cecere, 2015) . The vertical size can either be broad or narrow depending on the number of suppliers or customers, or companies at each tier level respectively. 

Key Supply chain Activities 

The crucial first activity involves planning which a strategic process is employed by organizations to come up with the best blueprint to fulfill the company's objectives. The second consists of a source in which efficient raw material suppliers are determined. The third activity involves execution involving execution of company key processes (Cecere, 2015) . The fourth activity is the delivery of products while the fifth activity encompasses the return of products for final reviewing to determine their quality and to manage inventories. 

Qualities of Top-Performing Supply Chains 

Attainment of top-notch supply chain often does not depend on one single element but is achieved by combining various behaviors and initiative. The factors that distinguish an excellent performing supply chain from one that is lagging behind constitute consistency in leadership, robust horizontal processes, implementation of technologies at the correct time, horizontal organizational alignment, reliable supply chain capabilities involving planning and network designs, a precise definition of supply chain excellence and strategy, and making and delivery of reports to a common leader (Cecere, 2015) . 

Principle Components of Supply chain Management. 

For an organization to achieve a competitive advantage in the supply chain, it must employ key principle components that are a necessity to manage supply chains effectively. These principles include; having knowledge of customers, adoption of lean philosophies, and creation of supply chain information infrastructure, unification of support systems education and integration of critical business processes. 

PART 3 

Offshore Manufacturing 

Even though offshore manufacturing is an effective strategy when it comes to cutting production costs, as ACME Widget company plan on moving its production to Vietnam to facilitate sales in China and India, it has to take some significant factors that are associated with offshoring into consideration. First, the company has to determine whether their actual production volume is suitable for relocation (Leung, 2015) . Moreover, the company has to have more oversight over production to ensure that the correct products are delivered at the required time and place. Since offshore manufacturing often involve extensive travels and sourcing of product expertise in addition to an understanding of local consumers customs and culture, the company has to be agile in its operations to avoid cases of improper vendor management, existence of contract gaps and derailed production schedules as a result of incompetence’s (Leung, 2015) . Consequently, the company's leadership team has to not only think of labor costs but focus on factors such as costs associated with transportation and shipping, risks of supply chains, and labor skills. The company has to efficiently outline its needs and objectives in addition to charges that might be incurred along the supply chain (Leung, 2015) . More importantly, ACME has to take into consideration offshoring risks and opportunities common to each offshore location to make its strategic decision. 

Predominantly, the move for offshore manufacturing in Vietnam will drastically drive the company to shorten its supply chain. Being that the global business economy of today is continuously bombarded with fluctuating demand and fuel costs, ACME will be forced to curtail its supply chain to achieve market agility and flexibility to reduce risks and costs associated with offshoring (Leung, 2015) . Offshore manufacturing will allow the company to make economies of scale by diversifying their product positions so at to attain discounts in product volumes while purchasing or even assets. Additionally, the company will work in a condition with favorable government policies in which it might be exempted from taxes or given access to cheap credit as an encouragement for direct investment, a factor which can drastically improve the company’s business operations (Lisondra, 2017) . Furthermore, the company may have the opportunity of exerting great controls over production due to close physical collaborations with offshore manufacturers (Lisondra, 2017) . In this way, the company will have a business advantage of directly overseeing production without being hindered by filters or even delays arising from the use of technology. However, ACME may be faced with various security issues and breaches such as compromised data integrity associated with data transfer challenges resulting from space collaborations that are shared. Furthermore, the company may be faced with social and cultural difficulties that might affect the company’s productivity (Lisondra, 2017) . This issue may result from the differences in time zones that often cause delayed productions arising from fluctuations in the availability of human resources. 

References 

Cecere, L. (2015). Seven characteristics of top-performing supply chains. Retrieved August 2018, from Supply Chain Quarterly: http://www.supplychainquarterly.com/columns/20150922-seven-characteristics-of-top-performing-supply-chains/ 

CGMA.org. (2013, June 11). Porter’s Five Forces of Competitive Position Analysis. Retrieved August 2018, from CGMA: https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html 

Gupta, P. (2015, May 17). AAA Framework- What are your Globalization Options? Retrieved August 2018, from Linked In https://www.linkedin.com/pulse/aaa-framework-what-your-globalization-options-parshvi-gupta 

Lander, S. (2018, June 26). Push vs Pull Supply Chain Strategy. Retrieved August 2018, from Small Business: https://smallbusiness.chron.com/push-vs-pull-supply-chain-strategy-77452.html 

Leung, S. (2015, June 30). Offshore Manufacturing: 5 Key Considerations. Retrieved August 2018, from Handshake: https://www.handshake.com/blog/offshore-manufacturing-5-key-considerations/ 

Lisondra, G. (2017, October 04). Offshoring and outsourcing - advantages and disadvantages. Retrieved August 2018, from My Business: https://www.mybusiness.com.au/sales/3366-offshoring-and-outsourcing-advantages-and-disadvantages 

Nitisha. (n.d.). Porter’s Diamond Theory of National Advantage. Retrieved August 2018, from Economics Discussion: http://www.economicsdiscussion.net/international-economics/porters-diamond-theory-of-national-advantage/4223 

Open Textbooks.org. (2015, September 17). Ghemawat’s “AAA” Global Strategy Framework . Retrieved August 2018, from Open Textbooks: http://www.opentextbooks.org.hk/ditatopic/26822 

Porter, E. M. (1990, March-April). The Competitive Advantage of Nations. Retrieved August 2018, from Harvard Business Review: https://hbr.org/1990/03/the-competitive-advantage-of-nations 

Schmitz, A. (2012). Ghemawat’s “AAA” Global Strategy Framework. In Global Strategy (Vol. 1.0). https://2012books.lardbucket.org/books/global-strategy/s05-01-Ghemawat-s-aaa-global-strategy.html 

snhu. (n.d.). Episode34: Comparative Advantage and Trade. Retrieved from snhu. 

Suranovic, M. S. (1996). The Theory of Comparative Advantage - Overview. In Irwin, International Trade Theory and Policy. http://internationalecon.com/Trade/Tch40/T40-0.php