INTERNATIONAL BUSINESS ADMINISTRATION

International Strategic Management

Dr. George Y. Maalouf 1

OUTLINE:

1) The Challenges of International Strategic Management

2) Strategic Alternatives

3) Components of an International Strategy

4) Developing International Strategies

5) Levels of International Strategy

2

1)The Challenges of 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.

STRATEGIC PLANNING: The process of developing a particular international strategy.

Top-level executives and senior managers are normally responsible for strategic planning.

International Strategic Planners must contend with the following differences among countries:

Cultural

Differences

Political

Differences

Geographical

Differences

3

1)The Challenges of International Strategic Management. International companies are in a position to exploit three sources of competitive advantage – global

efficiencies, multinational flexibility, and worldwide learning – that are unavailable to domestic firms.

Global

Efficiency

Multinational

Flexibility

Geographical

Differences

4

2) Strategic Alternatives MNCs typically adopt one of four strategic alternatives in their attempt to

balance the three goals of global efficiencies, multinational flexibility, and

worldwide learning:

Home

Replication

Strategy

Multi-domestic

Strategy Global Strategy

Transnational

Strategy

Firm uses core

competency or firm-

specific advantage.

Firm operates as a

collection of

relatively

independent

subsidiaries.

Firm views the world as

a single marketplace.

Goal is to create

standardized products.

Firm combines benefits of

global scale efficiencies

with benefits of local

responsiveness.

5

3) Components of an International Strategy After determining the overall international strategic philosophy of their firm, managers

who engage in international strategic planning then need to address the four basic

components of strategy development.

These components are:

Distinctive

Competence

Scope of

Operations

Resource

Deployment Synergy

6

3) Components of an International Strategy

Distinctive

Competence

Answers the question:

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

Represents important resource for firms.

Example: cutting-edge technology, efficient distribution networks, superior organizational practices, or

well-respected brand names.

Without a distinctive competence, a foreign firm will have difficulty competing with local firms that are

presumed to know the local market better. 7

3) Components of an International Strategy

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

Scope is tied to the firm's distinctive competence: if the firm possesses a distinctive competence only

in certain regions or in specific product lines, then its scope of operations will focus on those areas

where the firm enjoys the distinctive competence.

8

3) Components of an International Strategy

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

This part of strategic planning determines relative priorities for a firm's limited resources.

9

3) Components of an International Strategy

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

Disney has excelled at generating synergy in the United States.

People know the Disney characters from television, so they plan vacations to Disney theme parks.

At the parks, they are bombarded with information about the newest Disney movies, and they buy

merchandise featuring Disney characters, which encourages them to watch Disney characters on TV,

starting the cycle all over again. 10

4) Developing International Strategies International strategic management is usually carried out in two broad stages: strategy

formulation and strategy implementation.

During the strategy formulation stage, the firm establishes its goals and the strategic plan that will lead to the

achievement of those goals.

During the strategy implementation stage, the firm develops the processes

It will use to achieve the formulated international strategies by means of specific tactics.

Strategy

Formulation

Strategy

Implementation

11

International Strategic Management is composed of the following six steps:

1. Develop a Mission Statement

2. Perform a SWOT analysis

3. Set Strategic Goals

4. Develop Tactical Goals and Plans

5. Develop a Control Framework

4) Developing International Strategies (Cont.)

12

4.1. Mission Statements A statement that clarifies the attempts to clarify an organization’s values, purposes,

and directions.

Mission statements may specify target customers and markets, principal products or

services, geographical domain, core technologies, concerns for survival, plans for growth

and profitability, basic philosophy, and desired public image.

A firm may have multiple mission statements – one for the overall firm and one for each foreign subsidiary.

Examples of 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

13

4.2. Perform a SWOT Analysis SWOT Analysis is an assessment of the firm’s strengths, weaknesses, opportunities, and

threats.

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.

14

4.3. Set Strategic Goals

Strategic Goals are the major objectives the firm wants to accomplish through pursuing

a particular course of action. They should be measurable, feasible, and time-limited.

4.4. Develop Tactical Goals and Plans Tactical goals and plans involve middle managers and focus on the details of how to implement

strategic plans.

15

4.5. Develop a Control Framework

This is the managerial and organizational process used to keep the firm on target

toward its strategic goals.

The control framework can prompt revisions in any of the preceding steps in the

strategy formulation process.

16

5) Levels of International Strategy Most companies develop strategies for three distinct levels within the organization:

corporate, business, and functional.

Corporate Business Functional

It helps a firm define the

domain of business in which

it intends to operate.

A firm might adopt any of

three forms of corporate

strategy: single-business,

related diversification, or

unrelated diversification.

Business strategy focuses on

each line of business within

an organization and answers

the question, “How should we

compete in each market we

have chosen to enter?”

Firms that follow a

diversification strategy (either

related or unrelated) usually

group lines of business into

strategic business units

(SBUs).

Functional strategy

answers the question,

“How will we manage the

functions of finance,

marketing, operations,

human resources, and

research and development

in ways consistent with

our international

corporate and business

strategies?”

17

Thank You!

Dr. George Y. Maalouf

18