Research Highlights

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Competitive Advantage Internationalisation The Origins of Advantage The Evolution of Capabilities

Competitive Advantage

The foundations of competitive advantage in CANZ exemplars has been found to be unusually broad. Typically, these firms have established several of the sources that are capable of supporting advantage over the long term:

• high-quality relationships of mutual dependency, trust and benefit with business partners, employees and customers;
• positions of market leadership gained through innovation that are locked-in before competitors can respond;
• mastery and integration of multiple technologies;
• organisation processes that foster learning;
• distinctive organisation cultures that support the above; and
• a balance in the portfolio of capabilities so that each part of the organisation is able to support the demands placed on it by others.

Above all, these firms create strong coherences between all their activities that delivers a coherent value package to the customer, which other firms find hard to achieve.

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Internationalisation

The CANZ project has found that patterns of internationalisation evident in the CANZ exemplars are, in several important respects, opposite to theories developed for much larger economies. Two distinct internationalisation strategies are evident:

• Global leaders establish positions of global leadership for tightly focussed products. In every case, proprietary New Zealand-developed innovation has been the launch vehicle into global markets.
• Regional leaders have built positions of market leadership on both sides of the Tasman with a product scope that is broader than global leaders. They derive advantage from their ability to integrate capabilities across this broad range.

Contrary to overseas theory, it is global leaders who keep their production consolidated at home in New Zealand, and regional leaders who have a preference for direct representation of their products offshore.

These two internationalisation strategies have their own distinct logic. Moving from regional to global leadership is not an automatic or ‘natural’ progression, but rather involves radical change into a fundamentally different pattern of strategic
coherences.

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The Origins of Advantage

In every case, CANZ exemplars have found ways to create international advantage from aspects of their experience that are distinctive to New Zealand. For example, some attributes of New Zealand culture have been repeatedly cited as helping these firms create value in ways that much larger competitors find hard to match:

• Ingenuity — an ability to do more with less
• Self-reliance — a readiness to have a go and get things done
• All-rounders, based on a broader base of experience than is common in larger more specialised companies
• Open communication and the expectation of an open society facilitates learning and the creation of . .
• . . . broad-based networks that engage a wide range of skills in creating customer value.

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The Evolution of Capabilities

Several development patterns have been salient in the evolution of competitive capabilities in the CANZ exemplars:

• Search and exploration for positions of advantage has involved many low-cost, broad-cast efforts, followed by focussed development of markets and products that show promise. We call these search patterns sow and reap and focus and grow.
• When success strikes these globally very small firms, the result is a period of intense growth that we call the gusher during which sales double and re-double every year for a period of 3-4 years. These are periods of great potential but also of great danger.
• Limitations of size are overcome by extensive use of networks of business partners, to extend firms’ capabilities in technology, production and marketing.
• Capabilities are built up in a process of constant leverage in which one position of advantage is used to reach for another. A portfolio of world-class competitive capabilities is not reached quickly, and its shape today is shaped by the pattern of its past successes.
• Above all, CANZ exemplars have shown an ability to radically re-invent themselves on several occasions in their history. These periods are relatively brief (a couple of years or so) and involve large-scale change to the pattern of coherences that integrate the firm’s activities. We call these vital periods of re-invention de/re-coherencing