Strategic Business Management

12:00-4:30 PM, Saturday, Block 2

PREPARED BY: KULIGA, NORPHE L.

 Learning Objectives:
Global Strategy: Competing Around Strategic Control Mechanisms
the World What is a Strategic Control ?
What Is Globalization? Types of Strategic control according to
Stages of Globalization purpose
Going Global: Why? Types of strategic control according to
approach
Going Global: Where and How? Performance Metrics
How do MNEs Enter Foreign Financial Performance
Markets? Liquidity measures
Cost Reductions vs. Local Gearing (Risk) Measures and Other
Responsiveness: The Integration Investor’s Measures
Responsiveness Framework Facet of Strategy
 Chapter 10. Global Strategy: Competing Around
the World
What Is Globalization?
Globalization is a process of closer integration and exchange between different
countries and peoples worldwide. 
Made possible by:
- Falling trade and investment barriers
- Advanced telecommunications  
- Reduced transportation costs
- Importance of MNEs and FDIs
Stages of Globalization
Since the beginning of the 20th century, globalization has gone through three important
stages.
Each stage presents a different global strategy pursued by the MNE headquartered in the
United States.
1. Globalization 1.0: 1900-1941 Globalization 1.0 occurred from about 1900 until the early
years of the War World II. In that period, basically all important business functions located in
the country of origin. Typically, only sales and distribution operations are done abroad.
Basically exporting goods to other markets.This period ended with the entry of the US into
World War II.
2. Globalization 2.0: 1945–2000.With the end of World War II came a new focus on growth
business, not only to meet unmet needs war but also to reconstruct the damage from war.
From year 1945 to the end of the 20th century, in the stage of Globalization 2.0, MNE began
create a smaller, self-contained copy of yourself, with all the business functions remains
intact, in several countries considered to be key, namely Western European countries,
Japan, and Australia. Although expensive for duplicating business functions in overseas
posts, it is possible greater local response to country-specific circumstances.
3. Globalization 3.0: 21st Century Currently we are in Globalization 3.0, at this stage
the location of business functions based on costs, capabilities, and PESTEL factors.
Globalization 3.0 allows the company to operate 24 hours for 7 days or 365 day of the
year.

Going Global: Why? A company is “going global” if they can improve economic value
creation and enhance competitive advantage. Profit to compete globally including
gaining access to more markets large, gain access to low-cost input factors, and
develop new competencies. The disadvantage of competing globally is the responsibility
to foreigners, possible loss of reputation, and possible loss of capital intellectual.
Going Global: Where and How? Most of the costs and risks involved in off-market
expansion domestic created by distance. To assist MNE in deciding which will compete
globally, introduces CAGE distance frame. CAGE is an acronym for different types of
distance: Culture, Administrative and political, Geographic, and Economic.
How do MNEs Enter Foreign Markets?

Modes of Foreign Market

Entry along the Investment
and Control Continuum
Although it does not apply to globally born companies,This framework is relevant
for manufacturing companies that are just expanding to global operations. This
image shows a double-sided arrow. On the left above the title "Less Investment &
Control" is Contract Based Export. In the middle is the Strategic Alliance, which
contains three subsections from left to right, namely: long-term contracts (licenses
and franchises), equity alliances, and joint ventures.On the right, above the heading
"More Investment and Control" is Child Company, consisting of acquisitions and
greenfield
Cost Reductions vs. Local Responsiveness:
The IntegrationResponsiveness Framework

The Integration-Responsiveness
Framework: Global Strategy Positions and
Representative MNEs 10 -24
INTEGRATION-RESPONSIVENESS FRAMEWORK
Global-Standardization strategy: • Economies of
scale and location economies • Pursuing a global
division of labor based on best of class
capabilities reside at the lowest cost Ex: Lenovo’s
R&D in Beijing, Shanghai, and Raleigh; production
center in Mexico, India, and China Transnational
Strategy: • Combination of localization strategy
(high responsiveness) with global standardization
strategy (lowest cost position attainable) • “Think
globally but act locally”
 Chapter 14. Strategic Control Mechanisms

What is a Strategic Control ?

is a process of monitoring the various strategies of the
organization and determining whether there is a
parallelism between the organizational milieu and that of
the environment.
Types of Strategic control according to
purpose
1.Presupposition control
2.Implementation control
3.Strategic surveillance
4.Vigilance control
 Presupposition Control
- Is designed to check systematically and regularly whether the
arguments set during the planning and implementation
processes are still binding.
-When strategies formulated, these are based on certain
premises or assumptions.
- However since the external environments are continuously
changing, there need to closely monitor the set of strategies
and make necessary change or changes when needed.
 Implementation Control
Is applied to evaluate whether the intermediate strategies are
consistent with the overall strategy.
 In any instances, a strategy consist of small activities that
complement each other and lead to ultimate attainment of the mother
strategy.
 In cases when these transitional activities become misaligned for
one reason or another, then there is need to review the reasons for
such occurrence.
 Strategic Surveillance
Is a monitoring system whereby a broad range of occurrence inside
and outside the organization threatens the implementation of an
organization strategy.
 Surveillance means shadowing, observing and scrutinizing the
milieu.
 It demands constant awareness, consciousness and knowledge of
how the implementation of the strategy/strategies is fairing.
 Vigilance control
• Is a special type of strategic control that is applied when immediate
reconsideration of an organization’s strategies pursued.
• This is called for when unusual events happen and there is no choice
but for the organization to attend to it and do the corresponding
changes.
Types of strategic control according to
approach
•Sequential strategic control
Is the traditional way of looking at strategic monitoring .
• It is sequential, in the formulation of strategy is followed progressively
by the implementation of these designed strategies.
• Once the strategies have been employed, it is only then that
strategic monitoring is carried out

FORMULATE STRATEGIES  IMPLEMENT STRATEGIES  STRATEGIC CONTROL

 Interactive strategic control
Is more appropriate approach for strategic control. Describe as
interactive, this approach shows the communicating and collaborative
natured of process of strategy formulation, strategy implementation
and strategy control.
Formulate Implement
Strategies Strategies

Strategic Control
 Feedback strategic control
•Is a combination of sequential and interactive approaches. Although
strategy formulation, strategy implementation and strategy monitoring
appear to be sequential. Financial
Perfomance

Formulate Implement Monitoring Maker

Strategies Strategies of Strategy Performance

Efficiency
performance

People
Performance
 Performance Metrics
• Feedback strategic control is accurately measured by
performance, market performance, efficiency/productivity
performance and people performance.
Performance = Results/Resources
 Financial Performance
•For most of all organization s intent on making profit, or at least, continue to
exist, financial performance is most important. These modes are expressed
through financial metrics.

Probability measures
Are financial indicators show the organization
or the company’s ability to generate earnings
as compared to its expenses and other
relevant cost incurred during a specific period
 Probability Measures

Metrics Meaning Formula

A percentage of turnover. A high

gross profit margin is desirable, it
Operating profit
Gross Profit Margin indicates either that the sales prices
Finance cost
are high or that production cost are
low.
A percentage of turnover less all
expenses. A high net profit margin is Net profit
Net profit Margin
desirable. It indicates either that the Turnover x 100
sales prices are high.
Shows the net profit generated from
Return on Capital every 1 peso of assets employed. Net profit Capital
employed (ROCE) Capital employed is total assets less employed x 100
current liabilities
Shows the turnover generated from
Turnover Capital
Asset Turnover every 1 peso of assets employed. A
Employed
high asset turnover is desirable.
 Liquidity measures
•Are financial indicators that measures are extent to when a organization
has a cash to meet immediate and short term obligations .
Current ratio- Measures company ability to meet its short term liabilities as they
fall due. Formula: Current Asset /Current Liabilities.
Inventory holding period - Indicates the average number of days inventory
items are held. A decrease in the inventory holding period is desirable . It means
that the company is able to sell. Formula: Inventory/Cost of Sales x 365
Receivables (debtor) Collection period - Shows the average period it takes a
company customers to pay their debts. Formula: Receivables/Turnover x 365
Payables (Creditor) period - Shows the average period that it takes a company
to pay its debt. Formula: Payables/Purchases x 365
 Gearing (Risk) Measures and Other Investor’s Measures
Gearing Ratio - Shows the long-term debt as a percentage of equity. A low level of
gearing is desirable where the level of risk is minimized in terms of payment of debts.
Formula : Debt/ Equity x 100
Interest Cover - The operating profit (profit before finance charges and tax) divided by
the finance cost. A decrease in the interest cover is desirable where operating profit is
higher than the finance costs. Formula: Operating profit/ Finance cost
Earnings Per Share (EPS) - Measures the profit attributable to each share; ideally must
show an increase in earnings per share. Formula: Profit after tax less preference
dividends/ Weighted no. of ordinary shares in issue
Dividend Cover - An increase in dividend cover means that the company is more able to
make dividend payments to shareholders. Formula: Net Profit/ Dividend
Dividend Yield - An increase in dividend yield means an increase in returns to
shareholders. Formula: Dividend or share /Current share price x 100
 Facet of Strategy
Facets Continuum

Strategy thinking need not to be too logical. To be over rational is to bring

Cogency to stiffness to one’s way of thinking. What is highly suggested is the development
Strategy Thinking
creativity of imagination, originality and inspiration in one’s way of looking at planning,
assessing and implementing strategies.
Profit Generally, the primary goal of an organization is to make profit. After all, it needs to be
Orientation to self-sufficient to survive it even needs to earn in return for its investment. However,
StrategyGoal
Communal organizations need to veer away from being self-serving to being socially responsible.
Focus
Although strategies are deliberately planned and designed to achieve
Strategy formulation Purpose to organizational and functional goals, they can be emergent, something that
Evolution naturally develops. New, better or more relevant plans may be designed and
formulated continuously.
While strategies are strictly implemented and controlled to make sure that the
Constraint to set plans are actualized, unintended and spontaneous activities may be carried
Strategy Implementation
structure out to allow for more originality, effectiveness and feasibility. There is no such
thing is absolute and strict strategy implementation.
 Facet of Strategy
Some organization may look at strategy planning and implementation as
Profit Orientation the be all and end all of attaining organizational success. They exhibit an
StrategyGoal to Communal attitude of inflexibility and rigidity. Although strategies carry out the
Focus goals and objectives of organizations, an outlook of openness to
strategy changes and improvements need to be cultivated.
While the reality of a volatile and unstable environment is a fact
strategy responses mat vary from being reactive to being proactive.
Purpose to Some facts, factors or realities are not expected that organizations have
Strategy formulation
Evolution no choice but to react. But these do not happen all the time. In many
instances, organizations should be prepared for changes to prevent
themselves from being overtaken by inevitabilities.
THANK YOU