INTERNATIONAL COMPETITIVE STRATEGY International Strategy o The way

INTERNATIONAL COMPETITIVE STRATEGY

International Strategy o The way firms make choices about acquiring and using scarce resources in order to achieve their international objectives o Involves decisions that deal with all the various functions, products and regional unit activities of a company

o The goal is to achieve and maintain a unique and valuable position both within a nation and globally: competitive advantage o Competitive advantage is the ability of a company to have higher rates of profits than its competitors

Competitive Advantage o To create a sustainable competitive advantage, a company tries to develop skills that n n 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 Planning o Provides a means for top management to n Identify opportunities and threats n Formulate strategies to handle them n Stipulate how to finance and manage the strategies’ implementation o Provides consistency of action o Provides a thorough, systematic foundation for making decisions

Global Strategic Planning Process The process of strategic planning provides a formal structure in which managers o Analyze the company’s external environments o Analyze the company’s internal environment o Quantify goals o Define the company’s business and mission o Set corporate objectives o Formulate strategies o Make tactical plans

Define the Corporate Business, Vision, and Mission Statements o 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 n Mission statement o A broad statement that defines the organization’s purpose and scope

Define the Corporate Business, Vision, and Mission Statements n Vision Statement o Description of the company’s desired future position if it can acquire the necessary competencies and successfully implement its strategy n Values Statement o Clear and concise description of the fundamental values, beliefs, and priorities of the organization’s members

Set Corporate Objectives o Objectives n Direct the firm’s course of action n Maintain it within the boundaries of the mission n Ensure its continuing existence o In order to implement an effective strategy, it is important to quantify objectives

Formulate Competitive Strategies o Competitive Strategies n Action plans to enable organizations to reach their objectives n Generally, participants in the strategic planning process will formulate alternative competitive strategies along with action plans that seem plausible

Formulate Competitive Strategies o In the international market companies confront two opposing forces n Reduction of costs n Adaptation to local markets o Basic strategies address these pressures n n Home Replication Multidomestic Global Transnational

Cost and Adaptation Pressures and Their Implications for International Strategies

Home Replication Strategy o Used when companies typically centralize product development functions in their home country n Then transferred to foreign markets in order to capture additional value n Microsoft

Multidomestic Strategy o Used when there is strong pressure for adaptation to local market n Decision making decentralized to allow for quick change n Increases cost structure

Global Strategy o Used when a company faces strong pressure to reduce costs and limited pressure to adapt products for local markets n Strategy and decision making centralized n Company offers standardized products and services n Value chain activities in only one or a few areas n Results in limited ability to adjust to meet customer needs and higher transportation costs n Intel, Boeing

Transnational Strategy o Used when a company confronts pressures for both cost effectiveness and local adaptation n Company locations based on where most beneficial for each activity o Upstream value chain activities will be more centralized o Downstream activities will be more decentralized n Achieving an optimal balance is challenging n Strategic decisions, structures and systems will be complex

Scenarios o Multiple, plausible stories about the future n Often the “what if” questions reveal weaknesses in present strategies n Types of subjects for scenarios include o o 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 o Contingency Plans n Plans for the best-or-worst-case scenarios or for critical events that could have a severe impact on the firm o Tactical Plans (Operational) n Spell out in detail how objectives will be reached n Short-term

Strategic Plan Features o Sales Forecast and Budget n Sales Forecast o Provides management with an estimate of the revenue to be received and the units to be sold n Budget o During planning, budgets coordinate the functions within the firm and provide management with a detailed statement of future operating results

Plan Implementation Facilitators o Policies and Procedures o Policies n Broad guidelines to assist lower-level managers in handling recurring problems n Permit discretionary action and interpretation n The object is to economize managerial time and promote consistency among the various operating units

Plan Implementation Facilitators o Procedures n Prescribe how certain activities will be carried out n Ensure uniform action on the part of all corporate members n Facilitate comparison among operational units

Performance Measures o Assess if the strategy and its implementation are proceeding successfully and what modifications may be needed

Kinds of Strategic Plans o Time Horizon n Strategic plans may be classified as short, medium, or long term o Level in the Organization n Each organizational level will have its level of plan o Functional area

Methods of Planning o Top-down planning n Begins at the highest level in the organization and continues downward o o o definition of the business mission statement company objectives financial assumptions content of the plan special issues

Methods of Planning o Bottom-Up Planning n Begins at the lowest level in the organization and continues upward o Iterative Planning n Repetition of the bottom-up or top-down planning process until all differences are reconciled