Organizational Behavior and Leadership In the 21st Century Nov 14

DereskyChapter6PPderesky_im9_inppt_FORMULATINGSTRATEGY1.pdf

Home >Business & Finance homework help >Management homework help >Organizational Behavior and Leadership In the 21st Century Nov 14

Ninth

Edition

Chapter Learning Goals

1. To understand the reasons companies

engage in international business

2. To learn the steps in global strategic

planning, including assessing entry

strategies for different markets

3. To become familiar with strategic planning

for emerging markets

Opening Profile: Amazon, eBay, and Flipkart

Bet Big on India

Amazon entered India in 2013 and plans to dominate the e-retailing marketplace before Walmart expands its e-commerce

EBay has been in India since 2005 and has invested large amounts in Snapdeal to grow its market share there

Flipkart, India’s biggest e-retailer is injecting $1 billion of fresh capital there

The Indian online retail market has grown at 56 percent annually for seven years and will grow to $8.3 billion in 2015

Chapter Learning Goals

To understand the reasons

companies engage in

international business.

Strategic Planning and Strategy

Strategic Planning

• More complex than domestic strategic planning because of more complex variables

Strategy

• The basic means by which the firm competes

Reasons for Going International

Reactive/Defensive Proactive/Aggressive

 Globalization of

competitors

 Trade barriers

 Regulations and

restrictions

 Customer demands

 Economies of scale

 Growth opportunities

 Resource access and cost

savings

 Incentives

Comparative Management In Focus: Global Companies Take Advantage of Opportunities in South Africa

 South Africa: ranked the leading economy in Africa

and 14th out of 26 emerging economies, behind China,

India, and Russia

 Businesses are taking advantage of opportunities

because of

 the legal protection of property

 high labor productivity

 low tax rates

 reasonable regulation

 low level of corruption

 good access to credit 6-7

6-8

South

Africa

6-9

Strategic Management Process

Chapter Learning Goals

To learn the steps in global strategic planning, including assessing entry strategies for

different markets

Steps in Developing International

and Global Strategies

Mission and Objectives

Environmental Assessment and Scanning

Internal and Competitive Analysis

Global Integrative and Entry Strategy Alternatives

Evaluate Entry Strategy alternatives

Step 1: Establish Mission and Objectives

Marketing

• Worldwide, regional, national market share

Production

• Production volume

• Economies of scale

Finance

• Tax burden

• Capital structure

Step 1: Establish Mission and Objectives

Profitability

• ROA

• ROE

• ROI

R & D • Global patents

6-14

Step 2: Assess External Environment

Under the Lens: McDonalds in Russia: A

Political Pawn

•In 2014, the Russian government consumer watchdog,

closed four McDonald’s restaurants in Moscow and conducted unscheduled checks on branches throughout the country

•McDonalds had been in the news, when Russia annexed Crimea, because management closed outlets in Crimea to protect employees

•McDonald’s has 37,000 employees in 440 branches in Russia. It is concerned about future growth because of government interference and crackdowns on business

Environmental Scanning Variables

Political and Economic

Risk

Technological,

Legal, Physical Restraints

Nationalism International Competition

Institutional Effects on

International Competition

• The extent to which countries have institutions to promote the rule of law to outside investors

Attractiveness of Overseas

Markets

• Creating barriers to entry in certain industries and making those industries more attractive (profitable) for incumbent firms

Entry Barriers and Industry

Attractiveness

Institutional Effects on

International Competition

• The current U.S. antidumping laws place a foreign entrant at a disadvantage if accused of “dumping”.

Antidumping as an Entry

Barrier

Internal Analysis Competitive Analysis

6-19

 Key Success Factors:  Technological

capability: Apple

 Distribution channels: Wal-Mart

 Promotion capabilities: Disney

 SWOT analysis

 Distinctive competencies

 Comparative advantage

 E-Business

Step 3: Analyze Internal Factors

6-20

Strategic

Decision-

Making

Models

Step 4: Evaluate Global and International

Strategic Alternatives

Alternative Strategies

Global

Regionalization/Lo calization

Global Integrative

Pressures to Globalize

 Increasing competitive clout resulting

from regional trading blocs

 Declining tariffs

 Information Technology explosion

Regionalization/Localization

 Local markets are linked together within a

region, allowing local responsiveness

 The impetus:

 Unique consumer preferences

 Domestic subsidies

 New production technologies

Cage Distances Between Countries

 Cultural Distance

 Administrative Distance

 Geographical Distance

 Economic Distance

Global Integrative Strategies

 Full vertical and horizontal integration

 Example: Dell

 Factories in Ireland, Brazil, China, and so on

 Assembly and delivery system from 47 locations around the world

 Little inventory, ability to change operations quickly

Change in World Internet Usage as of Q2 2014

6-27

E-Business for Global Expansion

E-Global or E-Local?

E-Global When: E-Local When:

 Trade is global in scope

 Business does not

involve delivering

orders

 When the business

model can be easily

hijacked by local

competitors

 Production and consumption are regional in scope

 Customer behavior and market structures differ across regions, but are similar within a region

 Supply-chain management is very important to success

Step 5: Evaluate Entry Strategy Alternatives

Exporting Licensing

Franchising Contract Manufacturing

Offshoring Service Sector Outsourcing

Turnkey Operations Management Contracts International Joint Ventures

Fully Owned Subsidiaries

E-business

Under the Lens: Ft article, “Modern Mexico Reshoring: Location and young workforce prove attractive”

• After manufacturing in China from 2000-2010, Mexico is a destination for US companies “reshoring”, as Chinese labor costs increase

• Mexico has reshoring advantages: • a young, skilled workforce

• the right time zone for US companies • successful industrial clusters

• A study warned that the country is squandering its advantages because the government is not promoting Mexico as a relocation destination

Service Sector

Outsourcing

Management in Action: Strategic Planning

for Emerging Markets

 Increasing business opportunities for companies wanting to set up operations in or export to emerging markets

 Different countries are at different levels of development and have different risk/return profiles

 Usually entails higher risk

Management in Focus: Strategic Planning

for Emerging Markets

 One size does not fit all: different

infrastructure, socio-economic and

regulatory challenges, different

environmental and geographic constraints

 Potential for innovation, not just new

customers

Top Three Strategic Objectives

Number of Functions

New Strategies for Emerging Markets

Operating Model for Emerging

Markets

Disconnected Governance Model

Step 6: Decide on Strategy

The strategic choice of one or more of the entry

strategies depends on:

•a careful evaluation of the advantages and

disadvantages of each in relation to the firm’s

capabilities and resources

•critical environmental factors

• the contribution that each choice would make to

the over- all mission and objectives of the company

The Influence of Culture on

Strategic Choice and Timing Entry

 China and Japan have longer-term time

horizons than the United States

 High uncertainty avoidance cultures (e.g.,

Latin American, African countries) prefer

non-equity modes of entry

 High power distance cultures (e.g., Arab

countries and Japan) tend to use more

equity modes of entry abroad

retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written

permission of the publisher. Printed in the United States of America.