international strategic management 11 i n t e

international strategic management 11 - i n t e r n a t i o n a l b u s i n e s s , 5 t h e d i t i o n chapter 11

Chapter Objectives 1 • Characterize the challenges of international strategic management • Assess the basic strategic alternatives available to firms • Distinguish and analyze the components of international strategy 11 -2

Chapter Objectives 2 • Describe the international strategic management process • Identify and characterize the levels of international strategies 11 -3

International Strategic Management International strategic management is a comprehensive and ongoing management planning process aimed at formulating and implementing strategies that enable a firm to compete effectively internationally. 11 -4

Strategic Planning The process of developing a particular international strategy is often referred to as strategic planning. 11 -5

Fundamental Questions • What products and/or services does the firm intend to sell? • Where and how will it make those products or services? • Where and how will it sell them? • Where and how will it acquire the necessary resources? • How does it expect to outperform its competitors? 11 -6

Factors Affecting International Strategic Management 11 -7 • Language • Financing • Culture • Market research • Politics • Advertising • Economy • Money • Governmental interference • Transportation/ communication • Labor • Control • Labor relations • Contracts

Sources of Competitive Advantage Global efficiencies Multinational flexibility Worldwide learning 11 -8

Global Efficiencies Location efficiencies Economies of scale 11 -9 Economies of scope

Location Efficiencies Mercedes-Benz has achieved economies of scale by focusing production of its M -class at its assembly plant in Vance, Alabama. 11 -10

Strategic Alternatives Home replication strategy Multidomestic strategy Global strategy Transnational strategy 11 -11

Pressures for Global Efficiencies Figure 11. 1 Strategic Alternatives 11 -12 High Global Strategy Firm views the world as single marketplace. Goal is to create standardized products. Low Home Replication Firm uses core competency or firmspecific advantage Transnational Strategy Firm combines benefits of global scale efficiencies with benefits of local responsiveness Multidomestic Strategy Firm operates as a collection of relatively independent subsidiaries Low High Pressures for Local Responsiveness/Flexibility

Components of International Strategy 11 -13 Distinctive competence Scope of operations Resource deployment Synergy

Distinctive Competence • Answers the question – What do we do exceptionally well, especially as compared to our competitors? • Represents important resource to the firm 11 -14

Scope of Operations • Answers the question – Where are we going to conduct business? • Aspects of scope – Geographical region – Market or product niches within regions – Specialized market niches 11 -15

Resource Deployment • Answers the question – Given that we are going to compete in these markets, how will we allocate our resources to them? • Resource specifics – Product lines – Geographical lines 11 -16

Synergy • Answers the question – How can different elements of our business benefit each other? • Goal is to create a situation where the whole is greater than the sum of the parts 11 -17

Developing International Strategies Strategy formulation Strategy implementation 11 -18

Figure 11. 2 Steps in International Strategy Formulation Develop a mission statement Perform a SWOT analysis Set strategic goals Develop tactical goals and plans Develop a control framework 11 -19

Mission Statements • Clarifies the organization’s purpose, values, direction • Communicates firm’s strategic direction • Specifies firm’s target customers and markets, principal products, geographical domain, core technologies, concerns for survival, plans for growth and profitability, basic philosophy, and desired public image 11 -20

Mission Statements • Wells Fargo – Satisfy all our customers’ financial needs, help them succeed financially, be known as one of America’s great companies and the number-one financial services provider in each of our markets • Carpenter Technology – Major, profitable, and growing international producer and distributor of specialty alloys, materials, and components 11 -21

SWOT Analysis • Strengths • Weaknesses • Opportunities • Threats 11 -22

Environmental Scanning An environmental scan is a systematic collection of data about all elements of the firm's external and internal environments, including markets, regulatory issues, competitors' actions, production costs, and labor productivity. 11 -23

Figure 11. 3 The Value Chain 11 -24

Strategic Goals Strategic goals are the major objectives the firm wants to accomplish through pursuing a particular course of action. 11 -25

Tactical Goals and Plans • Middle management issues • Details of implementation 11 -26 • Examples – Hiring – Compensation – Career paths – Distribution and logistics

Control Framework A control framework is the set of managerial and organizational processes that keep the firm moving toward its strategic goals. 11 -27

Figure 11. 4 Levels of International Strategy 11 -28

Corporate Strategy • Single-Business Strategy • Related Diversification • Unrelated Diversification 11 -29

Advantages of Related Diversification • Less dependence on single product • Greater economies of scale • Entry into additional markets more efficient and effective 11 -30

Business Strategy Differentiation Overall cost leadership Focus 11 -31

Functional Strategies Financial 11 -32 Human resources Marketing R&D Operations