International Strategic Management
International Strategic Management
International Strategic Management
Administrative Political
Coordination Imperative
Quality
Imperative
Focusing on economic imperative
Addressing the political imperative
Emphasizing the quality imperative
Implementing an administrative strategy
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
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.
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
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
Global Strategy
Pressures for global integration
universal needs - consumer tastes in different countries
are similar with regard to certain types of products
create strong pressures for a global strategy
pressures to reduce costs - impetus for global integration
of manufacturing
key international competitors located where factor costs are low
global strategic coordination - response to global
competitive threats
centralize decisions regarding the competitive strategies of
foreign subsidiaries
Global Strategy (cont.)
Pressures for local responsiveness
consumer tastes and preferences differ significantly
among countries
requires customized product and/or marketing messages
differences in traditional practices among countries
differences in distribution channels and sales
practices among countries
economic and political demands imposed by the host
government
Transnational
Pressures for global integration
Global
Specialized facilities permit local
Views the world as a single market.
responsiveness. Complex
Operations are controlled centrally
High coordination mechanisms provide
from the corporate office.
global integration.
Multinational
International Several subsidiaries operating as
Uses existing capabilities to stand-alone business units in
Low expand into foreign markets. multiple countries.
Low High
Pressures for local responsiveness
Global Strategy (cont.)
Choosing a global strategy
international model - helps companies exploit their
existing core capabilities to expand into foreign markets
uses subsidiaries in each country
ultimate control exercised by the parent company
core functions are centralized in the parent company
advantage - facilitates the transfer of skills and know-how from
the parent company to the subsidiaries
disadvantages
does not provide maximum latitude for responding to
local conditions
does not provide the opportunity to achieve a low-cost
position by means of scale economies
Global Strategy (cont.)
Choosing a global strategy (cont.)
multinational model - uses subsidiaries with substantial
discretion to respond to local conditions with ultimate
control exercised by the parent company
each subsidiary is a self-contained unit
each subsidiary can customize its products and strategies
advantage - less need for coordination and direction from
corporate headquarters
disadvantages
higher manufacturing costs
cannot realize scale economies
difficult to launch coordinated global attacks against
competitors
duplication of effort
Global Strategy (cont.)
Choosing a global strategy (cont.)
global model - enables a company to market a
standardized product in the global marketplace
product manufactured in locations where mix of costs and skills
is most favorable
characterized by centralized decision making and tight control by
the parent company over most aspects of worldwide operations
companies tend to become the low-cost players in any industry
advantage - often able to realize scale economies
disadvantages
less responsive to consumer demands in different countries
STRATEGIC CONTROL
18
Elements of Strategic Planning for
International Management
External Environmental Internal Resource
Scanning for MNC Analysis of MNC
Opportunities and Strengths and
Threats Weaknesses
Strategic Planning
Goals
IMPLEMENTATION
Adapted from Figure 8–2: Basic Elements of Strategic Planning for International Management
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
TECHNIQUES
PEST (Political, Economic, Socio-cultural &
Technological )Analysis
International trade regulations Government spending Labor / social mobility New inventions and
and restrictions development
Employment laws Taxation Work/career and leisure Life cycle and speed of
attitudes technological
Entrepreneurial spirit obsolescence
Economic Influences
Constant demand for food and beverages
Changes in disposable income could influence purchase levels
Social Influences
Consumer preferences could shift from coffee to other beverages
Technological Influences
Use of technology can improve operational efficiencies
ETOP (Environmental Threat & Opportunity Profile) Analysis
Suggested by Glueck (1984)
27
COMPETITOR ANALYSIS
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, or can we acquire them?
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
Elements of Strategic Planning:
Implementation
Provides goods and services in accord with plan of
action
Plan often will have overall philosophy or
guidelines to direct process
Considerations in selecting country:
Advanced industrialized countries offer largest markets
for goods/services
Amount of government control
Restrictions on foreign investment
Specific benefits offered by host countries
Elements of Strategic Planning:
Implementation (continued)
Local issues
Once country has been decided, firm must choose
specific locale
Important factors influence this choice:
Access to markets
Proximity to competitors
Availability of transportation and electric power
Desirability of location for employees coming in from outside
The Role of Functional Areas
in Implementation
Production
Traditionally handled through domestic operations
Increasingly consideration of world wide production is
important
Recent trend away from scattered approach and toward
global coordination of operations
If product labor intensive, farm out product to low-cost
sites (e.g., Mexico)
Marketing
country-by-country basis
built around well-known 4 P’s (product, price,
promotion, place)
The Role of Functional Areas
(continued)
Finance
Normally developed at home office
Carried out by overseas affiliate or branch
MNCs have learned that transferring funds from one
place in world to other, or borrowing funds in
international money markets often less expensive than
reliance on local sources
Major headache is reevaluation of currencies
1. First-Mover Strategies
2. “Bottom of the Pyramid” Strategies
3. “Born-Global” Strategies
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
“Base of the Pyramid”
Strategies
• Strategies for Base of Pyramid (BOP): 4-5 billion
potential customers around the globe heretofore
ignored by global business
– with local governments, small entrepreneurs, and
BOP forces global business to rethink their
strategies. Must consider relationships nonprofits
rather than depend on established partners such as
central government.
– BOP strategies challenging to implement
– Represents opportunity to incubate new, leapfrog
technologies
– Successful BOP strategies can travel profitably to
higher income markets
and
New Ventures
Increasingly small and medium size enterprises,
often in the form of new ventures, are becoming
involved in international management.
The earlier in its existence an innovative firm
internationalizes, the faster it is likely to grow both
overall and in foreign markets.
Venture performance (growth and ROE) is
improved by technological learning gained from
international environments.
International Entrepreneurship
Defined as “a combination of innovative proactive, and
risk-seeking behavior that crosses national borders
and is intended to create value in organizations”
International New Ventures and
“Born Global” Firms
“Born global”: firms that engage in significant
international activity a short time after being
established.
Most important business strategies employed by
born global firms are global technological
competence, unique products development,
quality focus, and leveraging of foreign distributor
competencies.
Truly born global firms tend to survive longer than
other seemingly global companies.
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