![Strategic Management
• “Strategic management is an ongoing process
that evaluates and controls the business and the
industries in which the company is involved;
assesses its competitors and sets goals and
strategies to meet all existing and potential
competitors; and then reassesses each strategy
annually or quarterly [i.e. regularly] to determine
how it has been implemented and whether it has
succeeded or needs replacement by a new
strategy to meet changed circumstances, new
technology, new competitors, a new economic
environment, or a new social, financial, or
political environment.”](https://image.slidesharecdn.com/hpsession9-230604142059-1a0381c9/85/HP-Session-9-pdf-7-320.jpg)
HP Session 9.pdf
- 1. International Strategic Management Dr. Harish Kumar Purohit
- 2. contents… 1. Strategic Management 2. Approaches to Strategic Planning 3. Global vs. Regional Strategies 4. Elements of Strategic Planning 5. Specialized Strategies
- 3. Strategic Management Strategic management ◦ Determining the firm’s basic mission and long-term objectives, and developing and implementing an appropriate plan of action “Where are we going?” “How are we going to get there?” Strategic management growing in importance because of the need to coordinate and integrate diverse operations
- 6. Strategic Management • the conduct of drafting, implementing and evaluating cross-functional decisions that will enable an organization to achieve its long-term objectives. • It is the process of specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs.
- 7. Strategic Management • “Strategic management is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment, or a new social, financial, or political environment.”
- 8. Strategic Planning Process Mission and Objectives Environmental Analysis / Scanning Formulate international strategies Strategy Implementation Evaluation of the performance and Control
- 9. Strategic Planning Process • In today's highly competitive business environment, budget-oriented planning or forecast-based planning methods are insufficient for a large corporation to survive and prosper. • The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track.
- 10. Group Assessment of SBUs
- 11. Evaluation Corporate Regional Performance on a Market Size-Growth Matrix
- 13. Benefits of Strategic Planning 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 ◦ Over-planning and lower profitability
- 14. Benefits of Strategic Planning Economic Imperative Economic Imperative Political Imperative Political Imperative Quality Imperative Quality Imperative Administrative Coordination Administrative Coordination
- 15. Economic Imperative • Strategy based on cost leadership, differentiation, and segmentation • Product mix – Value added in the upstream activities of the industry’s value chain – generic good (not name brand or support service dependent) • Global sourcing to shorten the production or buying cycle
- 16. Political Imperative • Strategy country- responsive and designed to protect local market niches • Success of the product or service depends heavily on marketing, sales or service – Customer or client-focused • Approach most often used by MNCs pursuing a country-centered or multidomestic strategy.
- 17. Quality Imperative • Two possible paths – Change in attitudes to raise expectation for service quality – Implementation of practices to make quality improvement an ongoing process • “Total quality management” (TQM) – Cross-training personnel – Process re-engineering – Reward systems designed to reinforce quality
- 18. Administrative Coordination • Decision making based on the merits of the individual situation rather than a predetermined economic or political strategy – Coordination of global supply chains – Localized marketing of products and services • Least common approach given the pressures on MNCs to coordinate strategy both regionally and globally
- 19. Global vs. Regional Strategies • Global Integration – Products and services homogeneous in terms of type and quality – Customers have common taste preferences • National Responsiveness – Segmented regional markets – Need to respond to differing national standards and regulations – Adaptation of tools and techniques to manage local workforces
- 20. Four Strategic Options Global strategy Global strategy International trade strategy International trade strategy Transnational strategy Transnational strategy Multi-domestic strategy Multi-domestic strategy National responsiveness Low High Global integration Low High Adapted from Figure 8–1: Global Integration vs. National Responsiveness
- 21. Choosing an Option The right strategy is tailored to particular country and industry characteristics Reasons to choose each strategy ◦ Global: low-cost strategy, commodification ◦ Multi-domestic: products and services differentiated by market ◦ International: core competencies set the MNC apart from local competitors ◦ Transnational: Require management of contradictory pressures for cost reductions and differentiation Successful firms engage in “glocalization,” localizing their activities while maintaining a global focus
- 22. Elements of Strategic Planning for International Management External Environmental Scanning for MNC Opportunities and Threats External Environmental Scanning for MNC Opportunities and Threats Internal Resource Analysis of MNC Strengths and Weaknesses Internal Resource Analysis of MNC Strengths and Weaknesses Strategic Planning Goals Strategic Planning Goals IMPLEMENTATION IMPLEMENTATION Adapted from Figure 8–2: Basic Elements of Strategic Planning for International Management
- 23. Environmental Scanning Provide management with accurate forecasts of trends that relate to external changes in geographic areas where the firm is currently doing business or considering setting up operations These changes relate to the economy, competition, political stability, technology, and demographic consumer data
- 24. Internal Resource Analysis Evaluate managerial, technical, material, and financial strengths and weaknesses Determine ability to take advantage of international market opportunities Match external opportunities (environmental scan) with internal capabilities (internal resource analysis) Key question: Do we have the people and resources that can help us to develop and sustain the necessary KFSs, or can we acquire them?
- 25. Strategic Planning Goals Goal formulation often precedes the first two steps However, more specific goals come out of external scanning and internal analysis Typically serve as an umbrella for subsidiaries and international operations Profitability and marketing goals almost always dominate Once set, the MNC will develop specific operational goals and controls for the subsidiary or affiliate level
- 26. Implementation Selecting a country and location ◦ Country factors: market openness, infrastructure, labor market flexibility ◦ Location: incentives, workforce, costs Functional areas ◦ Marketing: usually country specific ◦ Production: domestic to foreign, foreign to domestic, or foreign to foreign, dispersed or coordinated ◦ Finance: local sources, centralized control, international markets, or barter trade
- 27. SPECIALIZED STRATEGIES 1. First-Mover Strategies 2. “Bottom of the Pyramid” Strategies 3. “Born-Global” Strategies
- 28. First-Mover Strategies Useful in rapidly changing markets ◦ Market opening in developing economies ◦ Market reforms in transition economies ◦ Privatization of state-operated enterprises Advantages and risks ◦ Capture benefits of learning ◦ Form alliances with attractive local partners ◦ Uncertain pace of reform ◦ Opportunity costs of premature entry
- 29. “Base of the Pyramid” Strategies Targeting emerging market ◦ People making less than $2,000 p/year (4 billion) Marketing requires smaller-scale strategies ◦ Building relationships with local governments, small entrepreneurs, and nonprofits ◦ Less dependence on central governments and large local companies
- 30. “Born-Global” Firms Engage in significant international activity a short time after being established Successful firms leverage a distinctive mix of orientations and strategies ◦ Global technological competence ◦ Unique-products development ◦ Quality focus ◦ Leveraging of foreign distributor competences
- 31. Implications for Managers • The complexity and interdependence of the global economy increases the need for firms to plan strategically • Effective strategies must balance tensions between – Top-down and bottom-up strategies – Economies of scale and differentiation • Managers need to anticipate the future evolution of the firm and global markets
- 32. References….. • Chapters 8, Hodgetts, Luthans and Doh, International Management: Culture, Strategy and Behavior , 6th edition (New York: McGraw-Hill Irwin, 2006). • Prof. Ashwathapa, International Business, TATA McGrahHill.