International Business Strategy

International Business Strategy

Faculty:Prof. K. Rangarajan

Session 1 :

Session Date:

IIFT-IFM MBA Programme 2010

International Business Strategy / Session: 1

A Few Points to ponder

• Africa is rated as the preferred destination for FDIs in the coming years.

• Excess Capacity especially in the wake of WTO is becoming a strategic issue of top priority (Steel, Textile, Polyester etc.)

• Greenfield Investments is the preferred form for investment in developing countries.

• The No. of Parent Cos of TNCs operating in world economy is around 82k

• Only 2 coys from India are ranked in the top 100 non-financial TNCs by Foreign Assets from the Developing Countries.

• The R & D expenditure by Business firms in Tanzania is negligible

• The downslide of Traditional industries like Textiles in Tanzania

• Growing interdependence of global economies• Growing Economic Turbulence across the world• Crash of TNCs like Standard Oil, Union Carbide, Enron,

Lehman ………



Competitive success is transient...unless care is Competitive success is transient...unless care is taken to preserve competitive positiontaken to preserve competitive position

Challenge of Strategic ManagementChallenge of Strategic Management



Sustained Competitive AdvantageSustained Competitive Advantage

Above-Average ReturnsAbove-Average ReturnsReturns in excess of what an investor expects to earn from Returns in excess of what an investor expects to earn from other investments with similar riskother investments with similar risk

Occurs when a firm develops a strategy that competitors are not Occurs when a firm develops a strategy that competitors are not simultaneously implementingsimultaneously implementing

Provides benefits which current and potential competitors are Provides benefits which current and potential competitors are unable to duplicateunable to duplicate

StrategicStrategic CompetitivenessCompetitivenessAchieved when a firm successfully formulates and Achieved when a firm successfully formulates and implements a value-creating strategyimplements a value-creating strategy



which are required for firms to achieve:which are required for firms to achieve:

Above-Average ReturnsAbove-Average Returns

Strategic CompetitivenessStrategic CompetitivenessSustained Competitive AdvantageSustained Competitive Advantage

The Strategic Management ProcessThe Strategic Management Process

Involves the full set of:Involves the full set of:

ActionsActionsCommitmentsCommitments DecisionsDecisions



• Rapid technological changes

• Rapid technology diffusions

• Dramatic changes in information and communication technologies

• Increasing importance of knowledge

Fundamental nature of competition is changing

The pace of change is relentless....and increasing

Traditional industry boundaries are blurring, such as...

• Computers• Telecommunications• Cons. Electronics

21st Century Competitive Landscape21st Century Competitive Landscape



The global economy is changing

• People, goods, services and ideas move freely across geographic boundaries

• New opportunities emerge in multiple global markets

• Markets and industries become more internationalized

Traditional sources of competitive advantage no longer guarantee successNew keys to success include:

• Flexibility• Innovation• Speed• Integration

21st Century Competitive Landscape21st Century Competitive Landscape



Concept of Strategy:

Strategy is the direction and scope of an organization over the long term, which achieves advantage for the organization through its configuration of resources within the changing environment, to meet the needs of markets and to fulfill stakeholders’ expectations.

Features

- Concerned with or affect the long-term direction

- Achieve some advantage for the organization

- Scope of an organization

- Match making of the activities of the organization

with the environment

- Building on or stretching an organisation’s resources/ competences


International Business Strategy / Session: 1 Strategy as Plan:Consciously intended course of action which

may be in the form of guidelines/report guiding decision making.

Strategy as Ploy:Short-term tactic or a maneuver, intended to

outwit a competitor.Strategy as Pattern:It is after-the-fact view which emerges over a

period of time.



Strategy as Position:Managers see their firm as occupying a space

within an environment in terms of Market share, Profits, Assets etc.

Strategy as Perspective:This is a way of perceiving the world, and

individuals in an organization are united by common thinking and behaviour.

Eg.: Lucent Tech. claims that it makes the things that make communications work.


International Business Strategy / Session: 1 Strategic Management:

Set of decisions and actions resulting in formation and implementation of strategies designed to achieve the objectives of an organization.

•Determining the mission of the company

•Developing a company profile that reflects internal conditions and capabilities

•Assessment of the company’s external environment

•Analysis of possible options & desirable options

•Strategic choice of a particular set of long-term objectives and grand strategies

•Development of business and operational strategies

•Review & evaluation



Strategic Management Process

Company mission

External environment Operating and Industry

Analysis

Internal EnvironmentCompany

Profile

Strategic Choice

Grand strategyLong-term objectives

Operating strategies PoliciesAnnual objectives

Institutionalization of strategy

Control and evaluation

What is possible?

What isdesired?

Legend Major impactMinor impact



Levels of Strategy:

•Corporate Level – Choice of business, dividend policies, sources of long term financing and priorities for growth

•Business Level – Plant location, marketing segmentation and geographic coverage, and distribution channels

•Functional Level – Levels of Inventory, degree of supervision, selection of production equipment etc.


International Business Strategy / Session: 1 Features Corporate Business Functional

Type Conceptual Mixed Operational

Measurability Judgments Semi Quantifiable

Frequency Periodic/ Periodic/ Periodic

Sporadic Sporadic

Relation to Present Act Innovative Mixed Supplement

Risk Wide Moderate Low

Profit Potential Large Medium Small

Cost Major Medium Modest

Time Horizon Long-range Medium Short

Flexibility High Medium Low

Cooperation Required Considerable Moderate Little

Managerial Decisions (Vs) Strategic Levels:



Three Big Strategic Questions

• Where Are We Now?

• Where Do we Want to Go?

• How Will We Get There?



Crafting a Strategy

• HOW to out-compete rivals and win a competitive advantage

• HOW to respond to changing industry and competitive conditions

• HOW to defend against threats to company's well-being

• HOW to pursue attractive opportunities



A Company’s Actual Strategy Is Partly Planned and Partly Reactive

Company Experiences, Know-how,

Resource Strengths and Weaknesses,

and Competitive Capabilities

Abandoned strategy features

New initiatives plus ongoing strategy

features continued form prior periods

Adaptive reactions to changing circumstances

Actual Company Strategy

PLANNED STRATEGY

REACTIVE STRATEGY



Business Strategy

Functional Strategies (R&D, manufacturing, marketing,

finance, human resources, etc.)

Operating Strategies (regions and districts, plants,

departments within functional areas)

Two-Way influence

Two-Way influence

A Single-Business Company

Responsibility of corporate-level managers

Responsibility of heads of major functional activities within a business

Responsibility of plant managers, geographic unit managers, and lower-level supervisors

The Strategy-Making Pyramid



The Strategy-Making Pyramid

Functional Strategies (R&D, manufacturing, marketing,

finance, human resources, etc.)

Business Strategies

Corporate Strategy

Operating Strategies (regions and districts, plants,

departments within functional areas)

Two-Way influence

Two-Way influence

Two-Way influence

Responsibility of corporate-level managers

Responsibility of business-level general managers

Responsibility of heads of major functional activities within a business unit or division

Responsibility of plant managers, geographic unit managers, and lower-level supervisors

A Diversified Company



An organization’s Mission

• Reflects Management’s vision of what the organization seeks to do and to become

• Sets forth a meaningful direction for the organization

• Indicates an intent to stake out a particular business position

• Outline “Who we are, What we do, and Where we are headed”.



Mission Statement

Enduring Statements of Purpose that distinguish one organisation from other similar enterprises.

– Insure unanimity of purpose– Arouse positive feelings about the firm– Provide direction– Provide a basis for objectives and strategies– Serve as a focal point– Resolve divergent views among managers.



Components of Mission Statement

• Customers (the target market)• Products/Services (offerings and value provided to

customers)• Geographic Markets (where the firm seeks customers)• Technology (the technology used to produce and market

products)• Concern for Survival/Growth/Profits (the firm’s concern

for financial soundness)• Philosophy (the firm’s values, ethics, beliefs)• Public Image (contributions the firm makes to

communities)• Employees (the importance of managers and employees)• Distinctive Competence (how the firm is different or better

than competitors)



Examples: Mission and Vision Statements

Empower people through great software anytime, anyplace, and on any

device.

Microsoft Corporation

our mission is to enable people and businesses throughout the world to realize their full potential. We consider our mission statement a promise to our customers. We deliver on that promise by striving to create technology that is accessible to everyone—regardless of age or ability..



Microsoft - Values

• As a company, and as individuals, we value integrity, honesty, openness, personal excellence, constructive self-criticism, continual self-improvement, and mutual respect. We are committed to our customers and partners and have a passion for technology. We take on big challenges, and pride ourselves on seeing them through. We hold ourselves accountable to our customers, shareholders, partners, and employees by honoring our commitments, providing results, and striving for the highest quality.




Our vision: Getting to a billion connected computers worldwide, millions of servers, and trillions of dollars of e-commerce. Intel’s core mission is being the building

block supplier to the Internet economy and spurring efforts to make the Internet more useful. Being

connected is now at the center of people’s computing experience. We are helping to expand the capabilities

of the PC platform and the Internet.

Intel



Fresh Look at Intel

• Our missionDelight our customers, employees, and shareholders by relentlessly delivering the platform and technology advancements that become essential to the way we work and live.

Our valuesCustomer orientationResults orientationRisk takingGreat place to workQualityDiscipline

Our objectivesExtend our silicon technology and manufacturing leadershipDeliver unrivaled microprocessors and platformsGrow profitability worldwideExcel in customer orientation




Jet Airways will be the most preferred domestic airline in India. It will be the automatic first choice carrier for the travelling public and set standards, which other competing airlines will seek to match.

Jet Airways will achieve this pre-eminent position by offering a high quality of service and reliable, comfortable and efficient operations.

Jet Airways will be an airline which is going to upgrade the concept of domestic airline travel - be a world class domestic airline.

Jet Airways will achieve these objectives whilst simultaneously ensuring consistent profitability, achieving healthy, long-term returns for the investors and providing its employees with an environment for excellence and growth.

Mission Statement of Jet Airways




Vision & Mission

Videocon’s mission: a reflection of continuity and change

Videocon’s mission expression has been crafted to envelope both extant and emerging realities:

“To delight and deliver beyond expectation through ingenious strategy, intrepid entrepreneurship, improved technology,

innovative products, insightful marketing and inspired thinking about the future.”

Mission Statement of Videocon



Setting Objectives

• The purpose is to convert the mission into Specific Performance Targets

• Serve as yardsticks for tackling company progress and performance.

• Should be set at levels that require stretch and disciplined effort.



Two Types of Objectives are Needed

• FINANCIAL OBJECTIVES

• STRATEGIC OBJECTIVES* Short-Run* Long-Run



Why is a Company’s Strategy Constantly Evolving?

• Changing market conditions.• Moves of competitors.• New technologies and production

capabilities.• Evolving buyer needs and preferences.• Political and regulatory factors.• New windows of opportunity.• Fresh ideas to improve the current strategy.• A crisis situation

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International Business Strategy

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