cm ch eight on strategy formulation and implem spring

8/6/2019 Cm Ch Eight on Strategy Formulation and Implem Spring

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International StrategicInternational Strategic

ManagementManagementStrategic Formulation andImplementation

Chapters 8, Hodgetts, Luthans and Doh, International Management:Culture, Strategy and Behavior, 6th edition (New York: McGraw-HillIrwin, 2006)

Adapted from PowerPoint slides by R. Dennis Middlemist, Professor ofManagement, Colorado State University


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OVERVIEWOVERVIEW1.Strategic Management2.Approaches to Strategic

Planning

3.Global vs. RegionalStrategies

4.Elements of StrategicPlanning

5.Specialized Strategies


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Strategic ManagementStrategic Management

Strategic management Determining the firms basic

mission and long-term objectives,and developing and implementingan appropriate plan of action Where are we going?How are we going to get there?

Strategic management growing inimportance because of the needto coordinate and integratediverse operations


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Benefits of StrategicBenefits of Strategic

PlanningPlanning

Perceived benefits Coordinate and monitor operations

Streamline product lines and

supply chains Manage political, currency, and

competitive risks

Potential costs Micromanagement of subsidiary

operations

Misallocation of time and staff

resources


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Approaches to StrategicApproaches to Strategic

PlanningPlanning

Economic ImperativeEconomic Imperative

Quality ImperativeQuality Imperative

Political ImperativePolitical ImperativeAdministrative CoordinationAdministrative Coordination


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Economic ImperativeEconomic ImperativeWorldwide Strategy based on cost

leadership, differentiation, andsegmentation

Product mix

Value is added in the upstream activitiesthe industrys value chain

Product is regarded as a generic good (noname brand or support service

dependent)Global sourcing to shorten the productio

or buying cycle

Examples: Automobile chemicals heav


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Economic ImperativeEconomic Imperative

Other Examples:

European PC marketUsed to be dominated by IBM,

Apple & Compaq.

International Textile or Tradingcompanies

Relying on global sourcing


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Political ImperativePolitical Imperative

Strategy country- responsive anddesigned to protect local marketniches

Success of the product or servicedepends heavily on marketing,sales or service

Customer or client-focusedApproach most often used by MNCspursuing a country-centered orMultidomestic strategy.


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Quality ImperativeQuality ImperativeTwo possible paths :

Change in attitudes to raise expectationfor service quality

Implementation of practices to makequality improvement an ongoingprocess

Total quality management (TQM)takes the following forms:

Cross-training personnel Process re-engineering

Reward systems designed to reinforcequality performance.


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Quality ImperativeQuality Imperative

Famous Example:

Motorolas failure to recognize the

importance of digital cell technology. Resultantly, it was almost wiped out by

the new players like Samsung, &Ericsson.

Whereas, previously in 1998 for instance,Motorola was dominating the U.S.handset market.

Ad i i t tiAdministrati e


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AdministrativeAdministrativeCoordinationCoordination

Decision making based on the meritsof the individual situation ratherthan a predetermined economic or

political strategy.

For example, Wal-Mart in Brazil

introduced a computerizedbookkeeping system which couldnot deliver results because of thecomplicated tax system of Brazil.


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The Four ImperativeThe Four Imperative

It is not necessary for an MNC topursue its strategic planning based ononly one of the above mentionedimperatives.

It is very much likely that firms mayuse the combination of theimperatives discussed above.

For instance, IBM relies on economicimperative when in less developedcountries, political & quality

imperatives when in mature market of


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..StrategiesStrategies Global Integration

Products and services homogeneous in terms of type and

quality. Customers have common taste preferences.

This approach has helped to spread internationalconsumerism.

National Responsiveness Segmented regional markets.

Need to respond to differing national standards andregulations.

Adaptation of tools and techniques to manage localworkforces.

For instance companies like Toyota, Mitsubishi &Honda have all abandoned their ideas of producing aglobal vehicle.


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..StrategiesStrategies

Famous Example of the ignorance of

National Responsiveness by MNCs.

Toyotas full size T100 pick up proved muchtoo small to attract market share in U.S.

This resulted in replacing the model with Tundrapickup that is powered y a V-8 engine and has acabin design to accommodate a passenger wearing a10-gallon cowboy hat!

Honda has developed its new model with moreAmericanized features such as big interior roomsallowing passengers to eat and sleep in the vehicle.


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Four Strategic OptionsFour Strategic Options

Global

strategy

Global

strategy

Internationalstrategy

Internationalstrategy

Transnational

strategy

Transnational

strategy

Multi-domesticstrategy

Multi-domesticstrategy

National responsivenessLow High

Glo

bal

integratio

n

Low

High

Adapted from Figure 81: Global Integration vs. National Responsiveness

Ch i O iCh i O ti


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Choosing an OptionChoosing an Option Global: low-cost strategy, based on

price. Mergers & acquisitions arecommon. Firms facing high costpressures must adopt globalstrategy.

Multi-domestic:products andservices differentiated by market.

Catering to niche markt.

International: core competencies

set the MNC apart from localcompetitors. Firms enjoy valuablecore competence.

Transnational:

Re uire mana ement of contradictor

Elements of StrategicElements of Strategic


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Elements of StrategicElements of StrategicPlanning for InternationalPlanning for InternationalManagementManagement

External EnvironmentalScanning for MNCOpportunities and

Threats

External EnvironmentalScanning for MNCOpportunities and

Threats

Internal ResourceAnalysis of MNC

Strengths andWeaknesses

Internal ResourceAnalysis of MNC

Strengths andWeaknesses

Strategic PlanningGoals

Strategic PlanningGoals

IMPLEMENTATIONIMPLEMENTATION

Adapted from Figure 82: Basic Elements of Strategic Planning for International Management


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Environmental ScanningEnvironmental Scanning

n Provide management with accurateforecasts of trends that relate

to external changes ingeographic areas where the firm

is currently doing business orconsidering setting upoperations

n These changes relate to the, ,economy competition political

, ,stability technology anddemographic consumer datan


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Internal Resource AnalysisInternal Resource Analysis

n , ,Evaluate managerial technical,material and financial strengthsand weaknessesn Determine ability to take

advantage of international

market opportunitiesn Match external opportunities( )environmental scan with

(internal capabilities internal)resource analysis

n :Key question Do we have the peopleand resources that can help us to

develop and sustain the necessary,KFSs or can we acquire them?


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Strategic Planning GoalsStrategic Planning Goals

n Goal formulation often precedesthe first two stepsn ,However more specific goals come

out of external scanning and

internal analysis

n Typically serve as an umbrellafor subsidiaries and

international operationsn Profitability and marketing

goals almost always dominaten ,Once set the MNC will developspecific operational goals andcontrols for the subsidiary oraffiliate level


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ImplementationImplementation

Selecting a country and location Country factors: market openness,

infrastructure, labor marketflexibility

Location: incentives, workforce,costs

Functional areas Marketing: usually country specific

Production: domestic to foreign,foreign to domestic, or foreign toforeign, dispersed or coordinated

Finance: local sources, centralized


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SPECIALIZEDSPECIALIZED

STRATEGIESSTRATEGIES

1.First-Mover Strategies

2.Bottom of the PyramidStrategies

3.Born-Global Strategies


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First-Mover StrategiesFirst-Mover Strategies

Useful in rapidly changing markets Market opening in developing

economies

Market reforms in transitioneconomies

-Privatization of state operatedenterprises

Advantages and risks Capture benefits of learning Form alliances with attractive local

partners

Uncertain pace of reform

Base of the PyramidBase of the Pyramid


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Base of the PyramidBase of the PyramidStrategiesStrategies

-4 5 billion people at the bottom of the

economic pyramid represent fully two .thirds of the world s population Targeting emerging market

, / (People making less than $2 000 year 4)billion

-Marketing requires smaller scalestrategies Building relationships with local

, ,governments small entrepreneurs and

nonprofits Less dependence on central governments

and large local companies : Best example Bangladeshi s Gerameen

, . .bank introduced by M Yousuf

Born Global FirmsBorn Global Firms


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Born-Global FirmsBorn-Global FirmsThe first reference to the term Born Global appears to

have been made by Rennie (1993). During aninvestigation into emerging Australian exporters onbehalf of the Australian Manufacturing Council, theMckinsey & Co consultants observed that approximatelyone quarter of the firms began exporting in substantialquantities very early in their organizational lifespan.

E n g a g e in sig n ifica n t in te rn a tio n a l a ctiv ity a sh o rt tim e a fte r

b e in g e sta b lish e d

Many firms now do not develop in incremental stages withrespect to their international activities.

S u cce ssfu l firm s le v e ra g e a d istin ctiv e m ix o f o rie n ta tio n s

a n d stra te g ie s Global technological competence

cm ch eight on strategy formulation and implem spring

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