International business
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chapter_9_fenton_presentation.pptx
International Competitive Strategy
Chapter 9
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Learning Objectives
LO 9-1 Explain international strategy, competencies, and international competitive advantage.
LO 9-2 Describe the steps in the global strategic planning process.
LO 9-3 Explain the purpose of mission statements, vision statements, values statements, objectives, quantified goals, and strategies.
LO 9-4 Explain home replication, multidomestic, global, regional, and transnational strategies and when to use them.
LO 9-5 Describe the methods of and new directions in strategic planning.
What is International Strategy?
The way firms make choices about acquiring and using scarce resources in order to achieve their international objectives
Involves decisions that deal with all the various functions, products and regional unit activities of a company.
decisions about which markets to enter with which products, when and how
all the various functions and activities of the company and how they interact
ensuring that strategy is consistent across functions, products, and regional units
a variety of unique demands associated with operating internationally
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International Strategy
The goal is to achieve and maintain a unique and valuable position both within a nation and globally:
IOW: Have a competitive advantage
Competitive advantage is the ability of a company to have higher rates of profits than its competitors
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Competitive Advantage
To create a sustainable competitive advantage, a company tries to develop skills and control resources that:
Create value for customers
Are rare
Are difficult to imitate or substitute for
Are organized in a way that the company can fully exploit
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Competitive Advantage and International Companies
The challenge for international companies is that:
Resources are always scarce.
There are many alternatives for using these scarce resources
(for example, which foreign markets to enter).
These alternatives are not equally attractive.
Could be more costs or other risks involved
Competitive Advantage and International Companies
Managers must make choices regarding what to do, and what not to do, now and over time.
Companies make different choices, which have implications for each company’s ability to meet the needs of customers and create a defensible competitive position internationally.
Without adequate planning, managers are more likely to make decisions that do not make good sense competitively.
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The Competitive Challenge Facing Managers of International Businesses
Managers must
quickly identify and exploit opportunities wherever they occur, domestically and internationally
fully understand why, how, where, and when to do business in specific world markets
know the company’s strategic mission, its strengths and its weaknesses
Global Strategic Planning: Why Plan Globally?
Provides a means for top management to
Identify opportunities and threats
Formulate strategies to handle them
Allows, to the extent possible for standardized planning
Stipulate how to finance and manage the strategies’ implementation
Provides consistency of action
Provides a thorough, systematic foundation for making decisions.
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Global Strategic Planning Process
Analyze the company’s external environments
Analyze the company’s internal environment
Quantify goals
Define the company’s business and mission
Set corporate objectives
Formulate strategies
Make tactical plans
The process of strategic planning provides a formal structure in which managers can:
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Global Planning Process
This is very similar to the domestic planning process, but with the global component as part of the plan.
You can apply the same concepts from the previous slide to the international environment.
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Uncontrollable Forces Assessment
The uncontrollable forces assessment involves an
analysis of domestic, international and foreign environments
recognition of current and future implications
strategy design to navigate major global trends
Analyze Corporate Controllable Variables
A controllable forces analysis
is a situational analysis
involves forecasting
involves a value chain analysis of firm’s activities from raw materials to end products to final customer delivery
Who are the target customers?
What value do we deliver to them?
How will we create this value?
The Value Chain
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Analyze Corporate Controllable Variables (continued)
The goal of this analysis is to enable management to determine the set of activities that will comprise the company’s value chain,
Which activities the company will do itself; and
which will be outsourced.
Where to locate various value chain activities and,
Examine the linkages among the activities in the value chain.
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Analyze Corporate Controllable Variables (continued)
Value Chain Linkages are examined:
In terms of managing relationships with external entities such as suppliers, distributors, or customers within and across nations.
The outcome is the identification and establishment of a superior set of well-integrated value chain activities and linkages. And…
A system that will permit the organization to more effectively and efficiently develop, produce, market, and sell the company’s products and services to the target customers.
Tacit - Explicit Knowledge
Tacit Knowledge (Is known, but difficult to express.)
Embedded in individuals
Difficult to express in words, pictures, formulas
Difficult to transmit to others
Lost when a valued manager leaves
Explicit knowledge (Easy to express.)
Easy to communicate with words, pictures, formulas, etc.
Can be documented in company-wide knowledge bases
Define the Corporate Business, Vision, and Mission Statements
These broad statements communicate to the corporation’s stakeholders what the company is and where it is going and the values that will guide the behavior of the organization’s members
Mission statement
A broad statement that defines the organization’s purpose and scope
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Define the Corporate Business, Vision, and Mission Statements
Vision Statement
Description of the company’s desired future position if it can acquire the necessary competencies and successfully implement its strategy
Values Statement
Clear and concise description of the fundamental values, beliefs, and priorities of the organization’s members
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Some Examples
Samsung
“We will devote our human resources and technology to create superior products and services, thereby contributing to a better global society.”
Amazon.com
“Our vision is to be the earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.”
Set Corporate Objectives
Objectives
Direct the firm’s course of action
Maintain it within the boundaries of the mission
Ensure its continuing existence
In order to implement an effective strategy, it is important to quantify objectives
IOW: Objectives must be measurable
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Formulate Competitive Strategies
Competitive Strategies
Action plans to enable organizations to reach their objectives
Generally, managers and others in the strategic planning process will formulate alternative competitive strategies along with action plans that seem plausible keeping in mind external forces on company SWOT.
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Formulate Competitive Strategies
In the international market, companies confront two opposing forces
Reduction of costs per unit so customers will not perceive their products or services as being too expensive.
Forces some standardization and market specific operations.
Adaptation to local markets
Basic strategies address these pressures
Home Replication:
Multidomestic
Regional
Global
Transnational
See graph next slide.
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Cost and Adaptation Pressures and Their Implications for International Strategies
Strategy decisions are based on cost and local adaptation pressures.
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Home Replication Strategy
Used when companies typically centralize product development functions in their home country
Then transferred to foreign markets in order to capture additional value
Similar to standardization, but differences will be minor for the foreign market.
E.g. Microsoft, McDonald’s
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Multidomestic Strategy
Used when there is strong pressure for adaptation to local market
Decision making decentralized to allow for quick change
Increases cost structure
Too much adaptation may take away from product
Cost and complexity of coordination can be substantial
E.g. Frances’ Schneider Electric Corporation
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Global Strategy
Used when a company faces strong pressure to reduce costs and limited pressure to adapt products for local markets
Strategy and decision making centralized
Company offers standardized products and services
Value chain activities in only one or a few areas
Results in limited ability to adjust to meet customer needs and higher transportation costs
Intel, Boeing
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Transnational Strategy
Used when a company confronts pressures for both cost effectiveness and local adaptation
Company locations based on where most beneficial for each activity
Upstream value chain activities will be more centralized
Downstream activities will be more decentralized
Achieving an optimal balance is challenging
Strategic decisions, structures and systems will be complex
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Standardization and Planning
Not all of a firm’s activities confront the same mix of globalization and localization pressures
R&D and manufacturing tend to be more standardized and coordinated world-wide
Marketing and HRM activities tend to be more locally adapted
Scenarios
Multiple, plausible stories about the future
Often the “what if” questions reveal weaknesses in present strategies
Types of subjects for scenarios include
large and sudden changes in sales (up or down)
sudden increases in price of raw materials
sudden tax increases
a change in the political party in power
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Types of Plans Resulting from Scenarios
Contingency Plans
Plans for the best-or-worst-case scenarios or for critical events that could have a severe impact on the firm domestically and internationally
Tactical Plans (Operational)
Spell out in detail how objectives will be reached
Short-term in nature
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Strategic Plan Features
Sales Forecast and Budget
Sales Forecast
Provides management with an estimate of the revenue to be received and the units to be sold.
Budget
During planning, budgets coordinate the functions within the firm and provide management with a detailed statement of future operating results
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Plan Implementation Facilitators
Policies and Procedures
Policies
Broad guidelines to assist lower-level managers in handling recurring problems
Permit discretionary action and interpretation
The object is to economize managerial time and promote consistency among the various operating units
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Plan Implementation Facilitators
Procedures
Prescribe how certain activities will be carried out.
Ensure uniform action on the part of all corporate members.
Facilitate comparison among operational units.
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Performance Measures
Assess if the strategy and its implementation are proceeding successfully and what modifications may be needed
Measures of the company’s success
Financial, technological, and human resources
Measures of the effectiveness
Measures of the company’s progress
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Kinds of Strategic Plans
Time Horizon
Strategic plans may be classified as short, medium, or long term
Level in the Organization
Each organizational level will have its level of plan
E.g. Three levels equals three plans with each being more specific than the previous.
E.g. by functional area
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Methods of Planning
Top-down planning
Begins at the highest level in the organization and continues downward
definition of the business
mission statement
company objectives
financial assumptions
content of the plan
special issues
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Methods of Planning
Top-down planning
Disadvantages–restricts initiative at lower levels and shows some insensitivity to local conditions.
Advantages–headquarters should be able to formulate plans that ensure optimal use of firm’s resources.
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Methods of Planning
Bottom-Up Planning (becoming more popular)
Begins at the lowest level in the organization and continues upward
Iterative Planning
Repetition of the bottom-up or top-down planning process until all differences are reconciled.
Advantage–those responsible for attaining the goals are formulating them.
Disadvantage–no guarantee that the sum total of the goals will coincide with those of headquarters.
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New Directions in Planning
Who Does the Planning?
Many domestic and international firms have introduced innovation to the planning process
Bring in customers and suppliers who have firsthand experience with the firm’s markets.
Multi-stakeholder approach.
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New Directions in Planning
How Planning is Done
Many firms have moved toward less structured formats and much shorter document procedures.
Contents of the Plan
Top managers much more concerned with issues, strategies, and implementation
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Summary Changes in the International Planning Process
Top management assumes explicit strategic decision-making role, decides how things ought to be, does not focus on analyses of how things are
Planning changes from forecasting to creativity
Processes and tools that assume a future much like the past must be replaced by a mind-set focused on change as a source of competitive advantage
Planners change from purveyors of incrementalism to crusaders for action
Strategic planning restored to core of line management responsibilities
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Competitor Analysis
Competitor Analysis
Process in which principal competitors are identified and their objectives, strengths, weaknesses, and product lines are assessed.
More complicated, but needed for international markets
Industrial Espionage
Act of spying on a competitors to learn secrets about strategy and operations
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Competitor Intelligence Systems
Procedure for gathering, analyzing, and disseminating information about competitors
Must be done on a high ethical and legal basis!
Benefits include ability to:
Improve bidding success
Identify competitor’s key customers
Identify plant or other facility expansion plans
Improve understanding of competitors’ products and processes
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Sources of Information
Within the Firm
Sales representatives
Librarians
Technical and R&D people
Published Material
Technical journals
Databases
Internet
Industry reports
Public documents
Suppliers/Customers
Competitors’ Employees
Direct Observation or Analysis of Physical Evidence
Technical people
Reverse engineering
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Benchmarking
A technique for measuring a firm’s performance against the performance of others.
Can be used domestically and internationally.
Can be very effective in identifying others’ best practices for adaptation.
Get the permission of organizations you want to benchmark.
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Benchmarking
Four types
Internal: comparing one operation in the firm with another
Competitive: comparing the firm’s operation with a direct competitor
Functional: comparing similar functions of firms in your industry
Generic: comparing operations in totally unrelated industries
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