International bussiness the challenge of global competition 11e chapter 13

International Strategy • The goal is to achieve and maintain a unique and valuable position both within a nation and globally: competitive advantage • Competitive advantage is the abi

Learning Objectives

 Explain international strategy and

competencies and international

 Describe the sources of competitive information

 Understand the importance of industrial espionage

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

International Strategy

• The goal is to achieve and maintain a

unique and valuable position both within

a nation and globally: competitive

advantage

• Competitive advantage is the ability of a company to have higher rates of profits than its competitors

Competitive Advantage

• To create a sustainable competitive

advantage, a company tries to develop

skills that

– Create value for customers

– Are rare

– Are difficult to imitate or substitute for

– Are organized in a way that the company can

Global Strategic Planning

• Provides a means for top management to

– Identify opportunities and threats

– Formulate strategies to handle them

– Stipulate how to finance and manage the

strategies’ implementation

• Provides consistency of action

• Provides a thorough, systematic foundation

for making decisions

Global Strategic Planning Process

• Set corporate

objectives

The process of strategic planning provides a formal structure in which managers

Global Planning Process

Analyze Corporate Controllable Variables

• Situational analysis

– Forecast

– Value Chain Analysis

• Who are the target customers?

• What value do we deliver?

• How will customer value be created?

– Figure 13.2

Figure 13.2 – The Value Chain

Analyze Corporate Controllable Variables

• Knowledge as a Controllable Corporate

Resource

– Capabilities of employees

– Structures, systems, organizational routines

• Build knowledge database and transfer best

practices

• Protect knowledge from competitors

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

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

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

Formulate Competitive Strategies

• Competitive Strategies

– Action plans to enable organizations to

reach their objectives

– Generally, participants in the strategic

planning process will formulate alternative

competitive strategies along with action

Formulate Competitive Strategies

• In the international market companies confront two opposing forces

– Reduction of costs

– Adaptation to local markets

• Basic strategies address these pressures

Cost and Adaptation Pressures and Their Implications for International Strategies

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

– Microsoft, McDonald’s

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

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

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

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

Types of Plans

• Contingency Plans

– Plans for the best-or-worst-case scenarios

or for critical events that could have a

severe impact on the firm

• Tactical Plans (Operational)

– Spell out in detail how objectives will be

reached

– Short-term

Strategic Plan Features

• Sales Forecast and Budget

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

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

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

• Functional area

Methods of Planning

• Top-down planning

– Begins at the highest level in the

organization and continues downward

• definition of the business

Methods of Planning

• Bottom-Up Planning

– 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

New Directions in Planning

• Who Does the Planning?

– Many firms have introduced innovation to

the planning process

• Bring in customers and suppliers

who have firsthand experience with the firm’s markets

New Directions in Planning

• How Planning is Done

– Many firms have moved toward less

structured formats and much shorter

documents

• Contents of the Plan

– Top managers much more concerned with

issues, strategies, and implementation

Summary Changes in the International

Planning Process

• Top management must assume more explicit

strategic decision-making role, decide how things ought to be, not listen to analyses of how they are

• The nature of planning must change from

forecasting to creativity

• Planning processes and tools that assume a

Summary of Changes in International

Planning Process

• The planner must change from purveyor

of incrementalism to crusader for action

• Strategic planning must be restored to

core of line management responsibilities

Competitor Analysis

• Competitor Analysis

– Process in which principal competitors are

identified and their objectives, strengths,

weaknesses, and product lines are

assessed

• Industrial Espionage

– Act of spying on a competitors to learn

secrets about strategy and operations

Competitor Intelligence Systems

• Procedure for gathering, analyzing, and

disseminating information about competitors

• 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

Benchmarking

• A technique for measuring a firm’s

performance against the performance of

others