intern

ation

al bu

siness, 5

th edition

chapter 11international strategic management

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Chapter Objectives 1

• Characterize the challenges of international strategic management

• Assess the basic strategic alternatives available to firms

• Distinguish and analyze the components of international strategy

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Chapter Objectives 2

• Describe the international strategic management process

• Identify and characterize the levels of international strategies

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International Strategic Management

International strategic management is a comprehensive and ongoing

management planning process aimed at formulating and implementing strategies that enable a firm to

compete effectively internationally.

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Strategic Planning

The process of developing a particular international strategy is often referred

to as strategic planning.

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Fundamental Questions

• What products and/or services does the firm intend to sell?

• Where and how will it make those products or services?

• Where and how will it sell them?

• Where and how will it acquire the necessary resources?

• How does it expect to outperform its competitors?

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Factors Affecting International Strategic Management

• Language

• Culture

• Politics

• Economy

• Governmental interference

• Labor

• Labor relations

• Financing

• Market research

• Advertising

• Money

• Transportation/ communication

• Control

• Contracts

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Sources of Competitive Advantage

Global efficiencies

Worldwidelearning

Multinational flexibility

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Global Efficiencies

Location efficiencies

Economies of scale

Economies of scope

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Location Efficiencies

Mercedes-Benz has achieved economies of scale by focusing production of its M-class at its assembly plant in Vance, Alabama.

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Strategic Alternatives

Home replication strategy

Multidomestic strategy

Global strategy

Transnational strategy

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Figure 11.1 Strategic Alternatives

Global StrategyFirm views the world assingle marketplace. Goal is to create standardizedproducts.

Home ReplicationFirm uses core competency or firm-specific advantage

Multidomestic StrategyFirm operates as a collection of relativelyindependent subsidiaries

Transnational StrategyFirm combines benefits of global scaleefficiencies with benefitsof local responsiveness

Low HighPressures for Local Responsiveness/Flexibility

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Glo

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High

Low

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Components of International Strategy

Distinctivecompetence

Scope of operations

Resourcedeployment

Synergy

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Distinctive Competence

• Answers the question

– What do we do exceptionally well, especially as compared to our competitors?

• Represents important resource to the firm

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Scope of Operations

• Answers the question

– Where are we going to conduct business?

• Aspects of scope

– Geographical region

– Market or product niches within regions

– Specialized market niches

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Resource Deployment

• Answers the question

– Given that we are going to compete in these markets, how will we allocate our resources to them?

• Resource specifics

– Product lines

– Geographical lines

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Synergy

• Answers the question

– How can different elements of our business benefit each other?

• Goal is to create a situation where the whole is greater than the sum of the parts

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Developing International Strategies

Strategyformulation

Strategy implementation

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Figure 11.2 Steps in International Strategy Formulation

Develop a mission statement

Perform a SWOT analysis

Set strategic goals

Develop tactical goals and plans

Develop a control framework

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Mission Statements

• Clarifies the organization’s purpose, values, direction

• Communicates firm’s strategic direction

• Specifies firm’s target customers and markets, principal products, geographical domain, core technologies, concerns for survival, plans for growth and profitability, basic philosophy, and desired public image

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Mission Statements

• Wells Fargo– Satisfy all our customers’ financial needs,

help them succeed financially, be known as one of America’s great companies and the number-one financial services provider in each of our markets

• Carpenter Technology– Major, profitable, and growing international

producer and distributor of specialty alloys, materials, and components

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SWOT Analysis

• Strengths

• Weaknesses

• Opportunities

• Threats

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Environmental Scanning

An environmental scan is a systematic collection of data about all

elements of the firm's external and internal environments, including

markets, regulatory issues, competitors' actions, production costs,

and labor productivity.

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Figure 11.3 The Value Chain

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Strategic Goals

Strategic goals are the major objectives the firm wants to

accomplish through pursuing a particular course of action.

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Tactical Goals and Plans

• Middle management issues

• Details of implementation

• Examples

– Hiring

– Compensation

– Career paths

– Distribution and logistics

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Control Framework

A control framework is the set of managerial and organizational

processes that keep the firm moving toward its strategic goals.

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Figure 11. 4 Levels of International Strategy

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Corporate Strategy

• Single-Business Strategy

• Related Diversification

• Unrelated Diversification

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Advantages of Related Diversification

• Less dependence on single product

• Greater economies of scale

• Entry into additional markets more efficient and effective

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Business Strategy

Differentiation

Focus

Overall cost leadership

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Functional Strategies

Financial

Marketing

OperationsR&D

Human resources