STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
ARIZONA STATE UNIVERSITY
OMT 440 - INTERNATIONAL BUSINESS
SPRING 2024 - WEEK 1
LEARNING OBJECTIVES:
1.
Strategy International, competencies, and international competitive advantage
2.
Steps in the global strategic planning process
3.
Describes new methods and directions in strategic planning
4.
Discuss the importance of industrial espionage
5.
Explaining sources of competition information
INTRODUCTION:
Since the beginning of the industrial revolution in the mid-18th century, business
management has embraced the modern management paradigm with the concept of achieving
effectiveness and efficiency. Two centuries passed before the modern management paradigm
evolved into strategic management, which is based on the concept of developing long-term
and sustainable competitive advantages. If an analogy is used from the military world, then
this paradigm means that business management is no longer winning "battles", but most
importantly must win "wars". It is no longer the performance per year that is important, but
the competitive ability so that sustainable long-term above average returns can be achieved,
With the globalization of the world economy, international business has become very
important for companies. as well as for the country. As explained earlier, international
business does provide very profitable potential for companies doing international business,
but international business also provides great risks, especially because of the complexity of
this business. Therefore, strategic management can be said to be non-negotiable for any
company entering into international business. Due to the differences in the environment faced
by companies in domestic business with international business, strategic management for
companies doing international business, or called strategic international business
management, is also relatively more complicated and complex.
STRATEGIC MANAGEMENT
DEFINITION:
Strategic management is defined as an iterative managerial process to create a vision,
mission and philosophy of corporate values, determine objectives, formulate strategies,
implement and execute strategies and then make improvements as needed to the vision,
mission, objectives, strategies and their implementation. Meanwhile, the strategy itself is a
comprehensive plan, oriented to the future, to interact with a competitive environment in
order to achieve company objectives.
As a process, the stages of strategic management are strategy formulation, strategy
implementation, and strategy evaluation. The strategy formulation stage includes the steps of
determining the company's vision, mission and value philosophy, analyzing opportunities and
threats from the environment, analyzing the company's strengths and weaknesses,
determining long-term objectives, developing the company's strategic plan, and developing
the company's strategy alternative strategies and selecting the right strategy to achieve the
objectives. The implementation stage includes the steps of setting annual objectives,
developing company policies, motivating employees, and allocating resources to enable
strategy implementation. The strategy evaluation stage includes steps to monitor and review
the external and internal factors used as the basis for strategy formulation, measure company
performance, and take corrective measures.
TERMINOLOGY OF EACH STEP OF THE PROCESS:
Vision is the answer to the basic question of a company, which is "what do we want to
become?". A vision is a possible and desirable state of the company in the future, and it
reflects management's aspirations about the organization and its business, showing a picture
of where the company is heading.
The mission answers the next question, which is "what is our business?". The mission
is thus a statement of the reason for the company's existence, distinguishing one company
from another. The mission defines the business that the company will do, and conveys the
essence of who the company is, what it fulfills, whose needs it fulfills, and how it produces
those needs.
The value philosophy is a statement of the norms that form the basis of the company's
entire strategic management process. It is the company's moral norms that underlie all aspects
of the company's business activities.
The external environment is concerned with an analysis of the conditions and trends
in economic, social, cultural, demographic, political, legal, governmental, technological,
environmental factors that significantly affect the company's organization. These
environmental factors are usually beyond the company's power to influence. Analysis of the
external environment will provide identification of opportunities and threats from the
environment to the company.
The internal environment is concerned with the condition of the company in
management, marketing, finance, production, research and development, information systems
management of the company, the internal environmental analysis will identify the strengths
and weaknesses of the company to compete in the international market.
Objectives are defined as specific long-term results that the company aims to achieve
in carrying out its mission. The timeframe means more than one year, and is commonly
defined as five years.
Strategy is the means by which long-term objectives will be achieved. Strategies can be
seen in perspective as potential activities that require top management decisions and are
meant to be long-term beyond one year, and typically within five years.
Annual objectives are short-term targets that the company must achieve in order to
achieve long-term objectives. Annual objectives need to be expressed in terms of
achievements for management, marketing, finance, production, human resources, research
and development.
Tactics are ways or programs of activities that need to be carried out by the company
so that annual objectives can be achieved. Tactics must integrate themselves with strategy,
because what matters is the achievement of long-term objectives, not annual objectives.
Company policies are guidelines for making decisions and are useful for repetitive
situations. Policies are specific guidelines, methods, procedures, regulations, forms, and
administrative practices created to support and encourage objectively directed work. With a
policy, it is possible to achieve consistency and coordination within and between
organizational departments.
Resource allocation is a key management activity for strategy execution. Strategic
management demands that resource allocation be based on the priorities defined in the annual
objectives.
STRATEGIC MANAGEMENT LEVEL:
A company is a collection of functions or departments that work together to bring a
product to market. A company that specializes in multiple products and markets often needs
to duplicate functions and create divisions to manage each product or market. The figure
below shows the organization of a multidivisional company.
At the corporate level, corporate management is managed by the top management and
is responsible for formulating and implementing corporate strategy. Whereas at the Strategic
Business Unit (SBU) level, divisional management is led by divisional management
responsible for formulating and implementing business strategies. At the functional level,
each function is led by the management of each function (marketing, production, human
resources, etc.), finance, etc. depending on the organizational structure). Each functional level
is responsible for the division underneath it.
BENEFITS AND RISKS OF IMPLEMENTING STRATEGIC MANAGEMENT:
The main benefit expected from the implementation of strategic management is the
formulation of better strategies in achieving company objectives using a more systematic and
rational approach. It is expected that with this strategy the company's performance in the long
term will be better.
Research to date has concluded that the strategizing process itself makes a more
important contribution to the implementation of strategic management in companies. By
engaging in the process, managers and employees foster a commitment to developing the
company, and this is achieved through communication and cooperation.
More specifically, the benefits that can be obtained by the company include:
1.
Enables Identification, determining prioritization and exploitation of opportunities
2.
Provide an objective view of management issues.
3.
Provide a framework for better coordination and control of activities.
4.
Minimize the adverse impact of the changes made.
5.
Allows decisions to be made based on the objective to be achieved.
6.
Allows for more effective resource allocation.
7.
Reduce errors in operations performed, because Objectives and means of achieving
them have been formulated with comprehensive consideration.
8.
Create a framework of internal communication structures among employees.
9.
Assist in integrating the behavior of individuals in the company into a unified activity.
10.
Provides a basis for clarification of individual responsibilities
11.
Encourage forward thinking from employees.
12.
Provides a cooperative and integrative approach to solving problems and opportunities.
13.
Encourage a positive attitude towards change.
14.
Foster discipline and formality in the management of the business.
In addition to the benefits that may be obtained by implementing strategic management,
there is also a risk of losses experienced by the company. The implementation of strategic
management requires a considerable amount of time, so it can affect the operational
responsibilities of the employees involved. Since not all employees will be involved in
strategy formulation, there is a tendency that those who are not involved in strategy
formulation will not feel responsible for its implementation. In addition, it is necessary to
train employees to accept the dissatisfaction that occurs when the company's performance is
not in line with what is expected.
STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
DEFINITION:
The definition of strategic international business management is not much different
from the definition of strategic management, which is a comprehensive and iterative planning
process with the aim of formulating and implementing strategies that enable companies to
compete effectively in international markets. The difference lies in the scope of the intended
market, and the number and characteristics of the business environment faced.
Strategic international business management results in the development of various
international strategies, which are a comprehensive framework for achieving a company's
main objectives in international business. Conceptually, developing a strategy for one country
is no different from developing a strategy for competing in many countries around the world.
However, in reality, international strategy development is more complicated than domestic
business strategy. This is because international business faces 3 business environments
(domestic environment, target country environment, and international environment).
Compared to domestic business which only faces 2 business environments (domestic
environment and international environment), so international business is more complex than
domestic business. In addition, international business management needs to coordinate its
business activities in many countries with different conditions.
Although more complex, strategic international management also has advantages over
domestic management. This is due to the fact that international business allows management
to exploit sources of competitive advantage and explore markets that domestic businesses do
not. These advantages enable companies to achieve global efficiency, market flexibility, and
learning from global businesses.
Multinational companies or even international companies can improve the efficiency of
their operations in many ways that domestic companies cannot. It can gain location
efficiencies, i.e. efficiencies it can gain by locating its business activities in country locations
that allow for efficiencies in both production and distribution. It can also gain efficiencies by
obtaining economies of scale, a location that can serve a much larger market than the
domestic market. In addition, efficiency can also be gained through economies of scope, as
different types of products can be developed to capture a larger market.
The business environment is not constant, but constantly changing. A multinational
company will be able to operate in a more conducive environment by moving its business to
that environment, and avoid operating in an environment that is detrimental to its business. In
contrast, a domestic company will be forced to operate in the business environment it faces,
without having the ability to avoid an unfavorable business environment by moving to
another business environment.
By doing business internationally, companies can learn from many sources, and adopt
beneficial methods and technologies from many sources. In contrast, domestic companies can
only learn from a single environment, which may have nothing to learn, or learn the wrong
things.
The concept of strategic international management is the same as strategic
management, except that it differs from the business environment that must be faced as
described earlier. Similarly, the essence of strategic international business management is the
same as strategic management, i.e. the way a company conducts its business activities
generates competitive advantages over its competitors, in each of its target markets. The
model depicted in Figure 6.1 can be used to understand both strategic domestic management
and strategic international business management.
STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT LEVEL:
The location of strategic international business management in the structure of a
company depends on the size and scope of each company's activities. Companies with more
than 50% international business activities are likely to make the whole company a global
business, so their strategic management is strategic international business management.
Domestic business is only one division of its business scope. Such a company can locate its
headquarters in any country, not necessarily in its domestic location. However, in general,
companies with global businesses have their headquarters in the location where the company
was founded. There are not many companies that locate their headquarters in a country of
choice for business considerations alone.
Some multinational companies have business activities that are less than 50%
international, so they still rely on their domestic activities. Therefore, strategic international
business management is formulated and implemented by its international division.
There are also multinational companies that allow each division to conduct
international business activities or not. In this case, strategic international business
management is a subset of the division's strategic management.
Thus, the level of strategic international business management may vary depending on
the size, scope and importance of the international business to the company. This is not a
problem at all, as long as it is remembered that each level of strategic management or
strategic international business management must refer to the level above it.
Indonesia does not yet have companies that are worthy of being categorized as
multinational companies or global companies. Therefore, in this teaching material, strategic
international business management for Indonesian companies doing international business is
formulated and implemented by the international division of the company.
STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT PROCESS
PROCESS STAGE:
The process of strategic international business management is no different from
strategic management, which is an iterative and continuous process. The process consists of
the stages: strategy formulation, implementation, and evaluation. The strategy formulation
stage includes the steps of determining the company's vision, mission and value philosophy;
analyzing opportunities and threats from the environment; analyzing the company's strengths
and weaknesses; determining long-term objectives; developing alternative strategies and
selecting the right strategy to achieve these long-term objectives. The strategy
implementation stage includes the steps of determining annual objectives, developing tactics,
The strategy evaluation stage includes steps to review the external and internal factors used in
strategy formulation, measure the company's performance, and take the necessary remedial
measures. The strategy evaluation stage includes steps to review the external and internal
factors used as the basis for strategy formulation, measure the company's performance, and
take necessary corrective measures.
The process stages of strategy formulation, implementation and evaluation are carried
out at three hierarchical levels for a large company doing international business, namely the
international division level, the level of target country units, and the functional business level.
The main requirement for successful strategic international business management is the
integration of each level of strategy, and this is required by every company doing
international business.
STAGES OF STRATEGY FORMULATION:
Strategy formulation begins with a statement of the vision, mission and value
philosophy of the company, which is actually a statement from the top of the company. For
the strategy formulation of the international division of a company, the vision, mission and
value philosophy are elaborated by the head of the international business division, referring to
the vision, mission and value philosophy of the company's top management.
The next step is the analysis of the external environment. The purpose of this
process is to develop a list of opportunities that can benefit the company and a list of threats
that can harm the company. This does not mean all opportunities and all threats, but is limited
to the key variables for the company. The focus of the external environment analysis is the
identification and evaluation of trends and events that are beyond the company's control.
External environmental factors are factors that come from outside the company and are
not directly related to a company's business. External environmental factors provide
opportunities, threats, and limitations to a company, but the company itself generally does not
affect these environmental factors. External environmental factors can be divided into general
external factors, and external industry and competition factors.
General external environmental factors can be broadly classified into: (1) economic
factors, (2) socio-cultural and demographic factors, (3) political, governmental and legal
factors, (4) technological factors, and (5) physical and environmental factors. Industry
environment and competition factors are the economic facts and trends in the industry;
competition in the industry; what causes the industry's competitive structure and business
environment to change; the competitive position of each company; what strategies
competitors might take; key factors for succeeding in competition in the industry; and
whether the industry is attractive and what the prospects are for profitability.
Each company has different external environmental factors, depending on the
importance of these factors to the company, as well as depending on what industry the
company is in. The criteria often used to determine important factors include: (1) important to
achieve the company's objectives, (2) can be measured, (3) applies to all companies
competing in the market, (4) there is a hierarchy of importance to the organization.
The next step is to analyze the internal environment. Every organization must have
its own strengths and weaknesses. No company has only strengths, and no company has only
weaknesses. Identification and evaluation of a company's strengths and weaknesses can be
done on what has been produced in its business functions: management, marketing,
accounting and finance, production/operations, research and development, and management
information systems. In this internal analysis, it is very important to look for distinctive
competence, which is the strength of the company that is not easily imitated or matched by
competitors.
The process of conducting an internal audit is an attempt to collect and integrate
information about the company's management, marketing, accounting and finance,
production/operations, research and development, management information systems. In this
case, managers and employees of various functions must be involved in determining the
strengths and weaknesses of a company. The internal audit process can often serve as a forum
to improve communication processes within the organization, and provide opportunities for
the organization's managers and employees to participate in determining the future of the
company.
The process of identifying and assessing a company's internal strengths and weaknesses
is important to be done correctly so that it can be used to effectively formulate corporate
strategy. Although several methods have been developed to serve as guidelines in conducting
such internal analysis, the main difficulty is the psychological barrier in identifying what the
company's strengths are, and what its weaknesses are weaknesses of the company. Managers
tend to overestimate the company's strengths, and find it difficult to recognize the company's
weaknesses. Employees tend not to recognize the strengths that the company actually has,
and overestimate the weaknesses that the company has. The key to the success of internal
analysis is thus the open-mindedness to break away from the stigma attached to each
employee and manager to be able to correctly identify and evaluate the company's internal
factors. In addition, the main thing is the unity of understanding that this analysis is not to
find someone's fault, or to bring down the company's leadership.
Long-term objectives are the results that are expected to be obtained from carrying out
strategies. The strategy itself is the action that needs to be taken to achieve the long-term
objective. The definition of long-term itself is usually in terms of 5 years. Objectives should
be quantitative, measurable, realistic, understandable, sufficiently challenging, hierarchical,
achievable, and consistent across organizational units. Such long-term objectives are required
at every level of the organization: corporate objectives, objectives for each business unit or
business division, and objectives for each business function.
Clearly stated and communicated objectives are essential for organizational success.
Objectives provide direction, enable synergy, serve as a measuring stick for evaluation,
prioritize activities, reduce conflict, stimulate action, and aid in resource allocation and work
design. Without long-term objectives, the organization will walk without direction and
without knowing what it will achieve.
A company's long-term objectives can be classified into financial objectives and
strategic objectives. Financial objectives include those concerned with revenue growth, profit
growth, higher dividends, higher profit margins, higher return on investment, higher earnings
per share, increased stock prices, smooth cash flow, and so on. While strategic objectives
include higher market share, faster product delivery than competitors, faster time from design
to finished product than competitors, lower production costs, higher product quality,
achieving technological leadership, continuous consistent product development, and so on. In
general, a company's long-term objectives are a combination of financial objectives and
strategic objectives. Today's commonly written corporate long-term objectives concern
profitability, productivity, competitive position, employee development, employee relations,
technological leadership, social responsibility.
The international business strategy that needs to be formulated and implemented
consists of various strategies:
1.
Country targeting strategy
2.
Entry mode determination strategy
3.
International business division level competition strategy
4.
Business-level competitive strategy
5.
Overseas market entry strategy
6.
International business functional strategy
Target country strategy is the decision of which countries to target from all countries in
the world within the time period of the strategy. Entry mode strategy is the choice of entry
mode into each target market country. International business division-level competitive
strategy is a competitive decision based on the need for global integration and the need to
adapt to the local needs of the target market country. The business-level competitive strategy
is to develop core competencies in the target market country. The foreign market entry
strategy is about regional decisions that are selected during the period of time from the initial
entry into the target market country. International business functional strategy is the strategic
decisions of each business function in the target market country.
Target country determination strategy, entry mode determination strategy, international
business division level competition strategy are strategies that need to be determined at the
international division level. These strategies need to be determined before the company is in
the target market country.
Business-level competition strategies, foreign market entry strategies, and international
business functional strategies are strategic decisions made once the company is in the target
market country. These strategies are not covered in the teaching materials of this course, nor
in this International Business course.
STAGES OF STRATEGY IMPLEMENTATION:
Annual objectives: Determining annual objectives is the first step in translating the
chosen strategy into implementation. This is a decentralized activity that involves all
managers in the business. The company's overseas operations in the country that has been
determined as the target market. Active participation of all managers is important to generate
buy-in and commitment from all managers.
Annual objectives are important in strategy implementation because (1) they are the
basis for resource allocation; (2) they are the main mechanism for manager evaluation; (3)
they are the main instrument for monitoring progress in achieving long-term objectives; (4)
they determine the priorities of the organization, divisions, and departments. The purpose of
annual objectives can be further elaborated as follows: (1) as a guide to action, directing and
channeling the efforts and activities of all members of the organization; (2) providing a
source of legitimacy in the organization by justifying the activities carried out by the
organization, (3) is a standard of performance measures, and is an important source of
employee motivation and identification, (4) provides incentives for managers and employees
to excel, (5) is the basis for the design of the organizational structure.
Important characteristics of annual objectives are that they are measurable, consistent,
reasonable, challenging, clear, reasonably timed to achieve, contain sanctions and rewards,
and are communicated throughout the organization. Annual objectives should state the
quantity, quality, cost, and timing of their achievement, and be demonstrable.
Policies: The next step in strategy implementation is to develop policies. In every day's
work, policies are needed to make a strategy actionable. Policies facilitate recurring problem
solving, and direct strategy implementation. Policies are specific guidelines, methods,
procedures, regulations, forms, and administrative practices that are created to support and
encourage goal-directed work. Policies set limits, constraints, and limits on the administrative
actions that can be taken for behaviors that incur rewards or sanctions.
Policies are a mechanism for implementing strategies and achieving objectives.
Policies can apply to all divisions and departments in the organization, or to a specific
division or department. Policies should as far as possible be stated in writing so as not to
cause confusion in understanding and implementation.
Resource Allocation: Resource allocation is a key management activity that enables
strategy execution. In organizations that do not apply a strategic management approach,
resource allocation is often based on political and personal factors within the organization.
Strategic management demands that resource allocation be based on priorities defined in
annual objectives.
Every organization generally has different types of financial resources, physical
resources, human resources, and technological resources. The allocation of resources to
specific divisions and departments does not mean that strategies will be successfully
implemented. Many factors hinder effective resource allocation, including overprotection of
resources, too much emphasis on short-term financial criteria, politics within the
organization, unclear strategic targets, unwillingness to take risks, lack of knowledge, and so
on.
Matching Organizational Structure to Strategy: Formulated strategies often require
changes in organizational structure because structure generally determines how objectives
and policies are implemented. will be determined, as well as determining how resources will
be allocated. Therefore, a new strategy requires a new structure.
The various types of organizational structures include (1) functional type, (2)
geographical division type, (3) product division type, (4) functional division type, (5) process
division type, (6) strategic business units (SBU) type, and (7) matrix type. Each type has its
own advantages and disadvantages, as well as its suitability for each organization.
Functional or centralized structure is the most widely used type, because it is the easiest
and least costly to operate. In this type of structure, activities are grouped based on business
functions, such as production/operations, marketing, finance/accounting, research and
development, and management information systems. Other advantages of this type are that it
encourages workforce specialization, promotes the effective use of managerial and technical
talents, minimizes the need for detailed control systems, and enables quick decision-making.
However, the disadvantages of this type are that it pushes accountability to the top level of
management, minimizes career development opportunities, and sometimes low employee
morale, conflicts between line and staff, weak delegation of authority, and lack of product
and market planning.
The next divisional or decentralized structure is a commonly used structure type. A
growing company will find it difficult to manage different products in different markets. A
form of division becomes necessary to motivate employees, control operations, and compete
successfully in different locations with different products. With a divisional structure,
functional activities are carried out centrally as well as in different divisions.
The divisional structure provides several advantages, such as clear responsibilities for
division managers, delegation of authority allows for higher employee morale, allows for
career development for managers, local control of situations encountered directly in the field,
a competitive climate in the organization, and allows for easy addition of new business. The
disadvantages of this type are high costs for operations, due to increased manpower,
duplication of activities, higher manager qualifications are required, and interdivisional
competition may become excessive.
The divisional structure can be based on geographical regions, on product basis, on
customer basis, or on process basis. The basis for choosing each type is primarily the
importance of each parameter to the organization's business strategy. A divisional structure
based on geographical regions is chosen when the organization's strategy needs to be tailored
for consumers in different regions. A product-based divisional structure is chosen when the
strategy requires emphasis on each of the organization's products. A customer-based
divisional strategy is appropriate for executing the strategy when the primary customer is
very important. A process-based divisional strategy is chosen when processes are critical to
the execution of the strategy.
The SBU structure is widely used by multinational companies, where the number, size
and diversity of divisions in the organization are increasing rapidly, making it very difficult
to continue using the divisional structure. The SBU structure groups similar divisions into
strategic business units and delegates the authority and responsibility of the divisions each
unit to an executive who is directly accountable to the top management of the company. This
structure facilitates strategy implementation by improving coordination between similar
divisions and channeling accountability to the strategic business unit. However, the role of
the strategic business unit leader means additional high costs.
The matrix structure is the most complex design as it depends on the vertical and
horizontal flow of authority and communication. This structure is usually adopted by
companies working on different projects. Unlike the functional or divisional structure which
depends only on the vertical flow of authority and communication, the matrix structure has
both vertical and horizontal flows. This incurs considerable additional costs. In addition, the
complexity of this structure is due to budget authority, sources of rewards and sanctions,
authority, vertical and horizontal reporting channels, which require an extensive and effective
communication system.
However, the matrix structure offers many advantages, such as clear project objectives,
multiple channels for communication, employees can see the results of their work
immediately, and closing a project can be done easily. Another advantage is the facilitation of
the use of specialized employees, equipment and facilities. Functional resources are shared in
a matrix structure. Highly skilled individuals can divide their time in different projects, thus
developing a wide range of skills.
Develop an Organizational Culture that Supports Strategy. Changes in target
market countries will always affect the existing culture of an organization. The importance of
culture to the implementation of the strategy has been understood for a long time. Therefore,
in implementing the strategy, it is necessary to preserve, emphasize and build cultural aspects
that support the formulated strategy. Identification needs to be made of cultural aspects that
are antagonistic to the strategy, and cultural changes made to form a culture that supports the
formulated strategy.
Various techniques can be used to change the organizational culture in accordance with
the strategy, including in recruitment activities, training, employee transfers, promotions, in
organizational design and so on. Efforts should be made to preserve, emphasize and build
cultural aspects that support the formulated strategy. A technique known as triangulation
technique can be used to study and change organizational culture. In this technique,
observation, questionnaires, interviews are used together to determine the characteristics of
organizational culture. In the process, it will be possible to recognize the necessary changes
to the culture that are beneficial to the implementation of the strategy.
The elements that are most useful in linking culture to strategy have been identified,
including the formal statement of the organization's philosophy, its articles of association, its
creed, the materials used for employee recruitment and selection, and the socialization of
these. The design of the office or factory building and physical space also contribute to the
culture of the organization that occupies it. Role modeling, education and training by
company leaders can also be used to build a positive culture. Explicit reward and status
systems, promotion criteria used also play a role in fostering the desired culture. Systems and
procedures The organization, the criteria used for recruitment, selection, promotion, and so
on also contribute to building a positive culture for strategy implementation.
STAGES OF STRATEGY EVALUATION:
Explanation: Strategy evaluation is necessary to ensure that the strategic management
process is carried out as planned. Timely evaluation can identify problems or potential
problems before they become critical. The stages of strategy evaluation include: (1)
examining the basis used in the formulation and implementation of the company's strategy,
(2) comparing the expected results with the realization, (3) taking corrective action to ensure
performance according to plan.
The strategic management process can result in decisions that have significant and
lasting effects on the organization. Mistakes in the strategic management process can be fatal
for the company, and it is often very difficult or even impossible to correct them. Therefore,
strategic evaluation is a very important stage for organizations. Timely evaluation can
identify problems or potential problems before they become critical.
The strategy evaluation stage includes three main activities: (1) examining the basis
used in the company's strategy, (2) comparing the expected results with the realization, and
(3) evaluating the strategy.
(3) take corrective action to ensure performance is in line with the plan. Strategy evaluation is
a sensitive and complex activity. Too much attention to strategy evaluation is expensive and
counter-productive. However, too little evaluation can lead to more severe problems.
The usefulness of strategy evaluation is questionable, as it is impossible to demonstrate
that a strategy is the most optimal for the organization, or even guarantee that it will achieve
its objectives. However, it is possible to use criteria to evaluate strategies that are based on
what should be present in the strategy and its implementation, namely consistency,
consonance, feasibility, and merit.
A strategy must be consistent, in the sense that it does not show inconsistencies
between goals and policies. Conflicts within organizations often show symptoms of strategic
inconsistency. Consonance is concerned with the need for strategy formulators and
implementers to examine trends in strategy evaluation. A strategy must be adaptive to the
external environment and critical changes that occur in the environment. Feasibility means
that the strategy is carried out within the limits of the company's resources, and does not
overload resources or cause other problems that cannot be resolved. A strategy must produce
competitive advantage for the company. Competitive advantage is superiority in one of (1)
resources, (2) skills, or (3) the firm's position in the market. The criteria of consonance and
merit are based on external assessments, while consistency and feasibility are based on
internal assessments of the firm.
Strategy Evaluation Process: Strategy evaluation is necessary for any business
organization, large or small, regardless of its field of activity. Strategy evaluation calls into
question the expectations and assumptions that have been used, reviewing the objectives and
values of the company. It is often necessary to stimulated creativity in finding alternatives
and formulating criteria for evaluation.
Strategy evaluation should be done on a continuous basis, and not just at the end of a
period. This way, progress benchmarks can be set and more effectively monitored. In the
strategy evaluation stage, just as in the formulation and implementation stages, the role of
managers and employees is fatal. Through involvement in the strategy evaluation process,
managers and employees provide a commitment to ensure the company continues to progress
towards its planned objectives.
PRACTICE QUESTIONS
1.
Describe and briefly explain the strategic management model.
2.
Why are strategic management levels divided into 3 levels? Explain and analyze this.
3.
What is the difference between strategic management and strategic international
management?
4.
What do you think is the reason why companies with more than 50% international
business activities can locate their headquarters in any country?
5.
Describe in simple terms the flow of the strategic international business management
process.
6.
How does the company develop an organizational culture that supports the strategy?
7.
What is the importance of the 3 main activities in the strategy evaluation stage?
