International Strategic Management

International Strategic Management
ongoing management planning process aimed at formulating and implementing strategies that enables a firm to compete affectively internationally
Strategy Planning
Process of developing international strategy, usually done by top managers and seniors
International Strategy
Results from Strategic Management
comprehensive frameworks for achieving a firms fundamental goals
Steps to International Strategy
1. Develop a strategy that deals with national government, 1 currency, 1 accounting system, 1 political and legal system & 1 language
2. Implementing among business units located in different parts of the world with different time zones
3. Monitor and control their performances
Competitive Advantage
Results from International Strategy
Global Effectiveness
Multinational Flexibility
Worldwide Learning
Global Effectiveness
Location effectiveness: can offer better quality service and product based on production
Economy of scale: building factories to serve more than one country
Economy of scope: Broadening their product lines in each of their countries they enter; lower productions, marketing and increase bottom line
Multinational Flexibilty
Able to respond to changes in one country by implementing change in another – solves the problem of changing economic, political changes in countries
Worldwide Learning
Learn from differences in other countries operating system and transfer learning to other countries – benefits emerging markets
Disadvantage Global Efficiency
Can only be done when a single unit firm is given the responsibility to design.
But then it lacks customization from each local market
Disadvantage of multinational Flexibility
Obtained by delegating responsibility to local managers and subsidiaries allows for customization
BUT lacks global efficiency – increases production and marketing costs
Disadvantage Worldwide Learning
Hindered by Global and Multinational
There is no incentive for either of them to share information with HQ and therefore there is no learning
Strategic Altneratives
In response to the problems with the competitive advantages:
Home replication
Multi-domestic
Global Strategy
Transnational
Home Replication
Takes what it does exceptionally well (core competencies) at home and replicates it in foreign country.

STARTS OFF WITH BIAS: Uses one strategy for all

Multi-Domestic
Corporations views itself as a collection of relative independent operating subsidiaries – each focusing on a specific domestic market. Gives a lot of power to local managers to adapt to market.
Multi-Domestic Used
Clear difference in differences in markets.
High – Cost of coordination between firms
Low – Cost of distribution, marketing, production
Global Strategy
Corporation views the world as a single marketplace. Goal is to create a standardized market for all goods and services that will meet all demands.
All decision making & power is focused in HQ
Transnational Strategy
Combines global efficiency and local responsiveness
Achieved by:
Centralizing: R&D, financial operations
Decentralizing: Marketing and HR
Balance- Global Strategy
Low: Local Response
High: Global Efficiency
Balance – Transnational
High: Local Response
High: Global Efficiency
Balance- Home Replication
Low: Local Response
Low: Global Efficiency
Balance-Multi-domestic
High: Local Response
Low: Global Efficiency
Components of an international Strategy
Managers address after deciding strategy:
Distinctive competence
Scope of operations
Resource deployment
Synergy
Distinctive Competence
What do we do exceptionally well compared to others?
cutting edge technology
efficient distribution networks
superior organizational practice
well respected brand name
Scope of Operations
Where are we going to conduct business?
Uses distinctive competence to assist in deciding – exploit it the most
Based on geographical regions & niches market
Managers has to decide what is most attractive to their firm
Resource Deployment
Given that we are going to compete in these markets, how should we allocate our resources to them?
Determines relative priorities of the firms limited resources.
Specified through product line or geography (or both).
Synergy
How different elements of our business benefit each other?
Create a situation where the whole is greater than the sum of the parts
Developing International Strategies
Firms goes about in two stages:
Strategy for formulation
Strategy for implementation
Strategy Formulation
Establishes goals and strategic plan that will lead to achieving goes.
I.e. Deciding to break into X market
Strategy Implementation
Tactics for achieving the formulated strategies
I.e. When to open, what products to sell, how to package.
Steps to International formulation
1. Mission Statement
2. SWOT
3. Strategic Goals
4. Develop Tactics
5. Control Framework
Mission Stratement
Clarifies organization’s purpose, values, and strategies.
Communicate with internal & External shareholders on their strategic direction.
SWOT
Analysis on environment:
External Analysis- Opportunities & Threats
Internal Analysis- Strengths & Weaknesses
Strategic Goals
Major Objectives the firm wants to accomplish through pursuing a particular action.
It has to be: Measurable, Feasible, and time limited
Develop Tactics
Middle managers focus on the details of implementing the firms strategic goals – by maintaining through daily activities
Contro Framework
Set of managerial and organizational processes that keep the firm moving towards its strategic goals.
Basically, after implementation if it is clear that the goals wont be met then managers should implement other policies to make sure they are met.
Levels of Strategies
Corporate Strategies
Business Strategies
Functional Strategies
Corporate Strategies
Focuses on the overall organization – attempts to define the domain of the business in which the firm intends to operate.
Single Business Strategy
Related Diversification
Unrelated Diversification
SIngle Business Strategy
relies all of its revenue on a single business, service unit – can focus all of its resources on one but is vulnerable to environmental changes
Related Diversification
Leverage competence in one market to strengthen another – linking various operations.
Advantage: firm depends on a single product or service, produces economy of scales, use tech & expertise developed in one market to enter a second more easily and cheaper.
Disadvantage: Cost of coordination the operations of related divisions & all firms may be affected by changes in economic conditions
Unrelated Diversification
Where a firm operates in several unrelated industries and markets – these firms are known as conglomerates.

Advantages: can raise capital more easily as a whole than independent units separately, overall riskiness reduced – less business cycles fluctuations, less vulnerable to competition – only affects one portion of operations not all, can cut away unprofitable segment and buy a new one.

Disadvantage: operations cannot sustain the other unrelated product line, staff is hard to coordinate and to evaluated performance

Conglomerates
Unrelated diversification
Business Strategy
Focus on specific business or subsidiaries – how should we compete in each market we have chosen.
Choose between:
Differentiation
Cost Leadership
Focus on strategy
Differentiation
establish and maintain image that is unique to that product. Usually use either quality or value.
Quality: can easily raise price
Value: Reasonable price for value provided
Cost Leadership
For firms to focus on achieving high operating procedures in order to lower costs compared to competitors.
Lower costs, means lower prices, and lower profit for each individual product sold BUT higher overall profit of products sold altogether
Focus on Strategy
target specific types of products for certain customer groups or regions. Match features of specific products to the needs of each market segment – specifically target aspects that may affect purchasing patterns
Functional Strategy
How manage finance, HR, operations, R&D in relation to corporate and business strategy.