- Slides: 11
LECTURE 3: THE PROBLEM WITH STRATEGY
FIVE STAGES OF STRATEGY FORMULATION WHERE COUNTRY RISK ANALYSIS IS AFFECTED q DIRECTION • Initial stage of strategy formulation • Decision is taken regarding whether to investigate a potential market • Often, decision is already taken to enter a market • Mid to lower level managers tailor-make their analysis to fit their supervisor’s conclusion. • A culture should be developed which encourages rational findings, not supervisor’s wishes
FIVE STAGES OF STRATEGY FORMULATION WHERE COUNTRY RISK ANALYSIS IS AFFECTED q INFORMATION COLLECTION • “Cost cutting” is the latest trend in most organizations around the world. • This compromises information collection process ( i. e. info collectors take “short cuts”) • Information collectors’ lack of adequate International experience
Tesco the largest UK retailer exited the Japanese market in 2012 due to intense competition and rapidly changing customer preferences. Tesco entered Japan in 2003 and invested approximately 100 billion pound. It opened small stores, convenience stores and supermarkets. The fact that the company’s format did not suit the taste of the Japanese consumers can be pointed out that they seek convenience and the market is dominated this way. Commuters preferred the local convenience store over Tesco’s stores. Tesco sold 50% of Tesco japan to Aeon Co. which is the largest retail group in Japan. One of the prime reasons for Tesco’s failure in the international market is because it failed to understand the retail industry elsewhere in the world
FIVE STAGES OF STRATEGY FORMULATION WHERE COUNTRY RISK ANALYSIS IS AFFECTED q. ANALYSIS AND PLANNING • Deals with INTERPRETATION of information gathered in Stage 2 • Planners and strategists also need to understand foreign culture
The latest Coca Cola ad campaign “Share a coke” is all about sharing your favorite drink with your loved ones with a new twist where you can add yours and your loved ones names on the cans and bottles. It turned out that the brilliant social campaign was criticized in Israel. In launching the campaign Coca Cola identified and printed the top 150 most popular first names. The goal is to attract new customers. However in Israel it was just the opposite. The problem surfaced when one Arab-Israeli citizen accused coke for not printing any Arabic name among the popular Israeli names. According to the citizens creating a campaign by adding the first names is like challenging the already existing socio-cultural dilemma. Coca Cola reacted to this by telling the customers that they can get their names printed at designated stores.
FIVE STAGES OF STRATEGY FORMULATION WHERE COUNTRY RISK ANALYSIS IS AFFECTED q. BARGAINING • Refers to organizational bargaining and politics • Rival managers may try to “sabotage” a project which might increase the power of a rival managers • Care should be taken so that a good project into a new country is not held back due to internal bargaining and politics
CASE 1: APPLE’S APOLOGY TO CHINA In the People’s Republic of China in April 2013, Apple CEO Timothy D. Cook apologized to PRC customers for Apple’s warranty policy and promised to rectify any wrongs resulting from that policy. In a negotiation research study by Professor William W. Maddux of INSEAD, researchers compared reactions to apologies in the United States and in Japan. They discovered that in “collectivist cultures” such as China and Japan, an apology can be an effective negotiation tactic to relieve conflict and resolve disputes even if the apology is delivered by someone who is not responsible for the wrong. Their findings showed that negotiators with carefully delivered apologies could resolve conflicts and alleviate its effects in a way that financial compensation cannot.
CASE 2: BANGLADESH FACTORYSAFETY AGREEMENTS On April 24, 2013 an eight-story building called Rana Plaza collapsed and killed an estimated 1, 129 people, most of whom were low-wage garment factory workers manufacturing goods foreign corporations such as fastfashion giant, Hennes and Mauritz (H&M). In the period following the tragedy, companies that outsourced their garment production were facing public pressure to eliminate sweatshops and were also encouraged to promote workers’ rights. By focusing on giants like H&M, negotiators hoped that by bringing the larger corporations onboard that the other smaller firms would follow suit. Negotiators for each side worked towards a mutually beneficial solution, however, ultimately the United States and European companies made separate negotiated agreements rather than a unified agreement. This negotiation case study offers an opportunity for negotiators to understand the pros and cons of all-inclusive, diffuse agreements versus targeted, specific agreements.
FIVE STAGES OF STRATEGY FORMULATION WHERE COUNTRY RISK ANALYSIS IS AFFECTED q. Decision making • Final stage where the board of directors/senior management needs to take the final decision • Need to revisit that the final decision that is being taken is based on rational thinking and NOT emotions or organizational politics.