Cm Ch Eight on Strategy Formulation and Implem Spring
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Transcript of 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