section four the organizational environment by ball, mcculloch, frantz, geringer, and minor
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International CompetitiveInternational Competitive StrategyStrategy
International Businessby Ball, McCulloch, Frantz,
Geringer, and Minor McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
This chapter covers:
•International strategy and competitive advantage
•Steps in global strategic planning
•The purpose of mission statements, objectives and goals
•Global, multidomestic and transnational straties
•New directions in strategic planning
•Industrial espionage
Chapter ObjectivesChapter Objectives
Understand international strategy and competencies and international competitive advantage
Describe the steps in the global strategic planning process
Understand the purpose of mission statements, objectives, goals, and strategies
Understand global, multidomestic, and transnational strategies and when to use them
Describe the new directions in strategic planningDescribe the sources of competitive informationUnderstand the importance of industrial espionage
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International StrategyInternational 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 and activities of a company
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International StrategyInternational Strategy
The goal is to achieve and maintain a unique and valuable position both within a nation and globally This position has
been termed competitive advantage Competitive
advantage is the ability for a firm to have higher rates of profits than its competitors
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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 fully exploit
Global Strategic PlanningGlobal Strategic Planning
Provides a means to identify opportunities and threats Formulate strategies to handle them Stipulate how to finance implementation
Provides consistency of action Requires participants to consider
ramifications Provides a thorough, systematic
foundation for making decisions
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Global Strategic Planning ProcessGlobal Strategic Planning Process
The process of strategic planning provides a formal structure in which managers
Analyze the company’s external environments
Analyze the company’s internal environment
Define the company’s business and mission Set corporate objectives Quantify goals Formulate strategies Make tactical plans
Global Planning ProcessGlobal Planning Process
Same format as domestic firm Variations in values
of uncontrollable forces make more complex
Must know present values of forces and where they are headed
Must include domestic, international, and foreign environments
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Analyze Corporate Analyze Corporate Controllable VariablesControllable Variables
Situational analysis Forecast Value Chain Analysis
Who are the target customers?
What value doe we deliver?
How will customer value be created?
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Knowledge as a Controllable Corporate Resource Capabilities of
employees Structures, systems
and routines Build knowledge
database and transfer best practices
Protect knowledge from competitors
Define the Corporate Business,Define the Corporate Business, Vision, and Mission Statements Vision, and Mission Statements
These broad statements communicate to the corporation’s stakeholders what the company is and where it is going The vision should be a vibrant and
compelling image of the organization’s purpose
The mission statement typically defines the scope of what the company does
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Set Corporate ObjectivesSet Corporate Objectives
Objectives Direct the firm’s
course of action Maintain it within
the boundaries of the stated mission
Ensure its continuing existence
Objectives should be quantified as much as possible
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Formulate Competitive StrategiesFormulate Competitive Strategies
Corporate Strategies Action plans to enable
organizations to reach their objectives
Generally, participants in the strategic planning process will formulate alternative corporate strategies, or action plans, that seem plausible
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In the international market companies confront two opposing forces Reduction of costs Adaptation to local
markets As a consequence,
companies have basically three strategies they can use Multidomestic Global Transnational
Global StrategyGlobal Strategy
Used when a company faces strong pressure for reducing costs, and limited pressure to adapt products
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 and
change to meet customer needs and higher transportation costs
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Multidomestic StrategyMultidomestic 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 substantial
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Transnational StrategyTransnational 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 Strategic decisions, structures and systems
will be much more complex13-14
ScenariosScenarios
Multiple, plausible stories about the future. Often, the “what if” questions raised
reveal weaknesses in present strategies Types of subjects for scenarios include
large and sudden changes in sales (up or down)
sudden increases in the price of raw materials
sudden tax increases a change in the political party in power
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Types of PlansTypes of Plans
Contingency Plans Worst and best
case scenarios Critical events
Tactical Plans Also called
operational Spell out in detail
how objectives will be reached
Short-term
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Strategic Plan FeaturesStrategic Plan Features
Sales Forecasts and BudgetsSales Forecasts
Provides management with an estimate of the revenue to be received and the units to be sold
Serve as a basis for planning in other areas
BudgetsDuring planning, budgets coordinate the
functions within the firm and provide management with a detailed statement of future operating results
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Plan Implementation FacilitatorsPlan Implementation Facilitators
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 units
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Procedures
Prescribe how certain activities will be carried out
Ensure uniform action on the part of all corporate members
Facilitate comparison among operational units
Kinds of Strategic PlansKinds of Strategic Plans
Time Horizon Strategic plans may be classified as short-,
medium-, or long-term Actual length varies according to age of firm
and stability of market Level in the Organization
Each organizational level will have its level of plan
Each will be more specific than the level above Functional areas will have their own plans
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Methods of PlanningMethods of Planning
Top-down planning corporate headquarters
develops and provides guidelines that include the definition of the
business the mission
statement company objectives financial assumptions the content of the
plan special issues
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Advantage The home office
should be able to formulate plans that ensure the optimal corporatewide use of the firm’s scarce resources
Disadvantage Restricts initiative
at the lower levels and shows insensitivity to local conditions
Method of PlanningMethod of Planning
Bottom-Up Planning Lowest operating levels
inform top management what they expect to do
Total becomes firm’s goals
Advantage People responsible for
attaining goals are formulating goals
Disadvantage No guarantee affiliates’
goals will coincide with headquarters
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Methods of Planning Methods of Planning
Iterative Planning
Repetition of bottom-up or top-down
planning process until all differences are
reconciled
Iterative planning is becoming more popular
Especially in global companies that seek to
have a single global plan while operating in
many diverse foreign environments13-22
New Directions in PlanningNew Directions in Planning
Who Does the PlanningMany firms have
introduced innovation to the planning process
Bringing in customers and suppliers to have firsthand experience with the firm’s markets
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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
Analysis of Competitive ForcesAnalysis of Competitive Forces
Success in strategic planning depends on Quality of information Interpretation of
information Common practice to
talk to competitors’ customers and distributors To test competitors’
products View competitors
exhibits at trade shows
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Competitor AnalysisCompetitor Analysis
Industrial Espionage Some companies have resorted to spying
on a competitor to learn secrets about its strategy and operations
Today’s top level managers recognize that Increased competition has created a need
for more knowledge of competitor The firm should have a competitor
intelligence system (CIS)
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Competitor Intelligence SystemsCompetitor Intelligence Systems
CIS can result in legal and ethical acquisition of valuable information and allow the company Improved bidding success Better target marketing and sales efforts Identification of competitors’ expansion
plans or changes in strategy Improved understanding of competitors’
products and processes
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Sources of InformationSources of Information
Within the Firm Sales representatives Librarians Technical and R&D
people Published Material
Technical journals Databases Internet Industry reports Public documents
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Suppliers/Customers May know in
advance about new products
Purchasing agents can ask suppliers
Competitors’ employees Actual or past
Direct observation or physical evidence Plant tours Reverse engineering Trash hauler
International Business ChallengesInternational Business Challenges
Industrial Espionage Briefcases, laptops,
hotel rooms searched Key targets R&D,
customer lists, financial data
Technology makes theft easier
Government has passed laws to attempt to help
Companies try new security systems
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BenchmarkingBenchmarking
Measuring your company against others Four types
Internal – comparing one operation in the firm with another
Competitive – comparing the firm’s operation with a direct competitor
Functional – comparing similar functions of firms in your industry
Generic – comparing operations in totally unrelated industries
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