GLOBAL ISSUES ON STRATEGIC MANAGEMENT 1 STRATEGIC MANAGEMENT

GLOBAL ISSUES ON STRATEGIC MANAGEMENT 1

STRATEGIC MANAGEMENT What is Strategic Management? Strategic management is the process of developing and executing a series of competitive moves to enhance the success of the organization both in the present and in the future. . It is a sound process that include an analysis of the current business situation, the formulation of objectives and strategies based on that analysis, and an implementation and evaluation procedure that ensures progress toward each strategy and objective. focuses on the formulation of appropriate strategic objectives based on a sound understanding of the internal and external environments faced by the firm. 2

GLOBALISATION The integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, the spread of technology, and military presence. usually recognized as being driven by a combination of economic, technological, sociocultural, political, and biological factors. influenced the use of language across the world. This street in Hong Kong, a former British colony, shows various signs, a few of which incorporate both Chinese and British English. Japanese Mc. Donald's fast food is an evidence of corporate globalization 3

Global strategic management in a new world order The globalization of business has become so rapid that a new field called "Global Strategic Management" has now emerged. This new field is a blend of strategic management and international business that develops worldwide strategies for global corporations. Events such as the collapse of communism, the arrival of an environmental ethic, and other remarkable new developments signal that a new era is emerging in global affairs. This article describes a broader approach to global strategic management that encompasses these revolutionary changes. project sponsored by the World Future Society called "WORLD 2000 focuses on conducting a global strategic management process among business, govt, education, and other sectors of society 4

Research in global strategic management Editorial Objectives: The focus of this series is the international dimension of strategic management. Through each original paper published on new issues of interest in the field it provides a rich understanding of international coverage of global strategic management. Topicality: First published in 1990, topical volumes are published regularly on an annual/bi-annual basis. On occasion a volume is produced based on the proceedings of a key conference called to debate a new aspect of international management strategy. Key Benefits: Each volume provides regional and global perspectives on current developments and research themes in an aspect of international strategic management. 5

CONT… Key Audiences: This series provides essential material for advanced students and decision-makers interested in the changing role of international strategic management. Coverage: Topics of interest in this series include: the strategies of multinational enterprises; the nature and extent of globalization as it applies to firm strategy; network relationships and organizational structures relevant to international strategic management; theories of international management; the implications of international trade and investment agreements as they affect business strategy; and other thematic issues relevant to studies in international business strategy. 6

Ten Reasons Why Going Global Is Advantageous To Your Company 1. Increases sales and profits (especially if fixed costs are tied to domestic operations) = bigger chunk of growth gain. 2. Earns a greater return from a set of core competencies. 3. Generates economies of scale in production. 4. Enhances local competitiveness and paves the way to larger, more lucrative customers. 5. Create jobs, productivity growth, and wealth. 7

CONT…. 6. Enlarges the pie of potential investors. 7. Insulates seasonal domestic (local) sales by finding new foreign markets and selling excess production capacity. 8. Cuts costs through global outsourcing. 9. Reduces dependence on existing markets. 10. Capitalizes on tax advantages. The knowledge you gain from learning the ropes of international business will make you open to new ideas, new approaches, new marketing techniques, new customers and new confidence to take on the world! 8

Global buisness environment In order to operate succesfully in a global market, a manager should understand the environmentvailing there. The environment should be understood, analysed and then used to one’s advantage. The environment may be devided into INTERNAL and EXTERNAL. INTERNAL ENVIRONMENT is related to internal variables of market. EXTERNAL FACTORS are uncontrollable factors as the firm have no control over constraints. The global buisness environmental factors are discussed as follows: 9

Global buisness Environmental factors Economic variables *global economy *indvidual economies Legal and political variables Socio-culture variables 10

GLOBAL BUSINESS ENVIRONMENTAL FACTORS ECONOMIC VARIABLES The economic variables are the mos important factors which require proper strategic decision making. q The economic factors prevailing in a global economy and factors of indvidual economy where one is to opreate should be understood before taking up opreations. q Secondly, economical variables keep on fluctuating or changing, so it is essential to adjust the plans as per the requirement of situation. q It is further devided into Global economy and indvidual economy which are discussed below: 11

GLOBAL ECONOMY: CONT… various countries have economic relations with one another. the trade relations among countries are based on mutual benefits. A global manager should know volume of global trade, its composition and contents, pattern of world trade, balance of payments, tarrifs, quotas etc. q The manager should also assess the positon of his country in relation to world economic system. q INDVIDUAL ECONOMIES: q The economy of every country has its own composition, strenghts and weaknesses. global manager has to understand the divergent attributes of domestic economies. q From buisness point of view, the availbility of infrastructural facilities like roads, energy banking, communication, water etc. the understanding of all this factors will help a global manager in taking strategic decision about buisness. 12

LEGAL AND POLITICAL VARIABLES: q Legal and political variables dfine and restrict the area of operation of outside businessmen q Government of time lays down role of foreign investors in industry and trade q International conventions and treaties should be clearly understood q Knowledge of laws help manager to make decisions SOCIO-CULTURAL VARIABLES: q Directly influence marketing of products in any market q Cultural factors influence the way of living of people which further influence availability of goods q Competition among suppliers forced them to adopt new and better ways of selling goods q manager should keep track of changing socio cultural factors q Education system also influences supply of technicians q Understanding of language, aspirations, likings etc is also necessary 13

GLOBAL STRATEGIC DECISIONS MARKET SELECTION: before deciding factors like size of market, growth potential, distribution system etc should be studied also influenced by policy of the firm position of the firm to cater to the demand MARKETING DECISION: strategies for domestic and foreign market Funds required for entry in market Consideration of risk factors METHOD OF ENTERING GLOBAL MARKET: direct and indirect imports and exports Licencing or franchising Foreign subsidiary alliance Joint venture 14

CONT…. MARKETING MIX: Variables of product, price, promotion and place should be planned Use of Standardised marketing mix Time saving and easy to control MARKETING ORGANISATION: organisation act as tool to plan, control and coordinate global issues. Fixation of tasks and responsibilities Organisational options can be functional, products, customer, area, matrix etc 15

BASIC ISSUES IN GLOBAL BUSINESS MODE OF OPERATIONS: business can enter in form of joint venture Open branches Franchising Establish subsidiary company there may be laws in some countries where mode of operations of foreign companies is decided. So one has to adopt only that mode of operations ALLOCATION OF RESOURCES: May be affected by organizational structure of the company Resources may be transferred from a place where these are surplus to place where those are required This type of balancing may save cost of providing funds 16

CONT… PLANS AND POLICIES: these to be followed in following departments Production Finance Marketing Research and development LEADEARSHIP: Create a powerful team Mass communicate the new strategy Form new teams to design and implement new changes Initiate new projects Anchoring new approaches 17

STRATEGIES FOR GLOBAL BUSINESS GLOBAL STRATEGY: customer liking is same for both markets is presumed. Standardised products can be sold simillarly in all markets Standardised products have competitive advantage in economy May centralize R&D activities in one country , production may be decentralized MULTIDOMESTIC STRATEGY: companies tries to achieve high level of responsiveness customer choices and preferences may be different in different countries Mainly based on differentiation Customised products is requirement of these markets 18

CONT…. . INTERNATIONAL STRATEGY: opening international division for exporting goods in countries where required all control is retained at home office regarding product MNC’s have adopted this strategy Does not allow company to benefit from lowering cost or customizing products to global customers TRANSNATIONAL STRATEGY: involves adoption of combined approach of low costs and high local responsiveness need to involve subsidiaries in generating ideas Difficult to adopt these contradictory strategy 19