INTERNATIONAL STRATEGIC

MANAGEMENT

Author- Himanshu Sisodia

BUSINESS POLICY

PROCEDURE AND STANDARD OPERATING PLAN ( Handling incoming orders, servicing customer complaints,

Shipping to foreign countries )

FUNCTIONAL POLICIES( Marketing, Production, Research, Finance

Material & Quality management etc. )

MAJOR POLICYLines of business

( Code of ethics )

SECONDRY POLICIES( Selection of geographical area, major customers, major products )

RULES( Delivery of pay cheques ,loitering around plant, security Smoking, use of company car etc)

STRATEGY

• GREEK WORD STRATEGIA – Science of guiding & Directing

• COMPLEX PROCESSOF DETERMINING LONG TERM GOALS & COURSE OF ACTIONS NEEDED TO BE CARRIED OUT, ALLOCATION OF RESOURCES FOR CARRYING OUT THESE GOALS.MOVING FROM WHERE YOU ARE TO WHERE YOU WANT TO BE IN NEAR FUTURE THROUGH A SERIES OF DECISIONS AND ACTIONS.

• PRE DETERMINED COURCE OF ACTION

• HAS DEFINITE DIRECTION

• SUSTAINABLE COMPETITIVE ADVANTAGE: Delivering superior value to target customer at the same cost or delivering equal customer

value at lower cost relative to your competitor, on a continuing basis.

STRATEGIC DECISION MAKING • SETTING REALISTIC GOALS: Challenging but achievable

• RATIONALITY: Exercising best choice among alternatives

• CREATIVITY: Decision creative and original through brainstorming

• VARIABILITY : Every situation is unique

• DEMOGAFIC FACTORS: Age. Education, Intelligence, Values

Cognition. risk taking and creativity

• GROUP DECISION MAKING: Participation

CONCERNS OF STATEGIC PLANNING• FUTURE Long term dynamics is its concern not day-to-day tasks• GROWTH Direction, extent, pace and timing of growth• ENVIRONMENT The fit between business and its environment• PORTFOLIOS OF BUSINESSES Product-market scope and postures• STRATEGY Strategy is its concern ; not the operational activities• INTEGRATION Integration is its concern ; not a particular function• CREATING CORE COMPETENCIES / COMPETITIVE ADVANTAGE Creating long term , sustainable organizational capability• CORPORATE STRATEGY In one word corporate strategy is its concern

STRATEGIC MANAGEMENT

ESTABLISHMENT OF

STRAT. INTENTS

FORMULATION of

STATEGIES

IMPLEMENTATION

OFSTRATEGIES

REVIEW,EVALUATION

CONTROL

VISION & MISSION statements, Business DefinitionAdopting Business Model, Setting Goals & Objectives

Conducting SWOT, Formulating CORPORATE & BUSINESS LEVEL Strategies, Strategic AnalysisStrategic Choice, Strategic Plan.

Activating Strategies, Designing Structure, Systems& Processes, Behavioral & Functional implementationAnd Operationalising strategies

Performing Strategic Evaluation, Exercising Strategic Control and Reformulating Strategies

STRATEGIC MANAGEMENTENVIRONMENTSCANNING

STRATEGYFORMATION

STRATEGYIMPLEMENTATION

EVALUATION& CONTROL

EXTERNAL

SOCIETAL

TASK

ENVIRONMETAL

INTERNAL

STRENGTS

WEAKNESSES

• structure

•Culture ( Beliefs,

xpectations,Values )

• Resourses, Skills,

ompetencies,Knowledge

MISSION(Reason for existence)

OBJECTIVES (What results to accomplish & by when )

STRATEGIES (Plan to achieve Mission & Objectives)

POLICIES (Broad guidelines for decision Making)

PROGRMS Activities needed To accomplish plans

BUDGETS Cost of programs

PROCEDURE Sequence of steps needed to do the job

PERFORMANCEActual results

FEEDBACK / LEARNING

NATURE OF

INTERNATIONAL STRATEGIC MANAGEMENT

SINGLE COUNTRY, EXPORT & INTERNATIONAL STRATEGY

Y

THE CENTRE

SUBSIDIARYS3

SUBSIDIARYS1

SUBSIDIARYS2 SUBSIDIARY

S4

FIRM A OPERATESIN COUNTRY X

FIRM AOPERATESIN COUNTRY X

EXPORT TO COUNTRY YSINGLE COUNTRY STRATEGY

INTERNATIONAL STRATEGY

EXPORT STRATEGY

GLOBAL STRATEGY

THE CENTRESUBSIDIARY

S6

SUBSIDIARYS5

SUBSIDIARYS1

SUBSIDIARYS2

SUBSIDIARYS3

SUBSIDIARYS4

LEVELS OF STRATEGY & EVOLUTION OF STRATEGIC MANAGEMENT

HIERARCHY OF STRATEGY

CORPORATE STRATEGY

BUSINESS STRATEGY

FUNCTIONALSTRATEGY

STRATEGY AT DIFFERENT LEVELS

CORPORATE STRATEGY

PURPOSE OR MISSION

SHAREHOLDER VALUE ?

STAKEHOLDER INTEREST?

ASPIRATIONAL ?

MEANS :

. GOOD PARENTING

. SELECT PORTFOLIO

. GUARD REPUTATION

COMPETITIVE STRATEGY

ATTAIN SUSTAINABLE COMPETITIVE ADVANTAGE BY:

. LEVERAGING RESOURSES

. DEVELOPING CAPABILITIES

AND

. COMPETING ON COST,OR

DIFFERENTIATING OR

OCCUPYING A NICHE

OPERATIONAL

FUNCTIONAL LEVELSTRATEGY

HR,FINANCE,PRODUCTN

MARKETING,QUALITY

Etc.

Functional Level Managers

are responsible for:

developing annual objectives

& short term implementation

Plans.

HOW HAS STRATEGIC MANAGEMENT EVOLVED

• PHASE I: BASIC FINANCIAL PLANNING : Seeking better operational control by trying to meet budget

. PHASE II : FORECAST BASED PLANNING : Seeking more effective planning for growth by trying to predict the future beyond next year.

. PHASE III : EXTERNALLY ORIENTED PLANNING ( STRATEGIC PLANNING ) : Seeking increased responsiveness to markets and competition by trying to think strategically.

. PHASE IV : STRATEGIC MANAGEMENT : Seeking a competitive advantage by considering implementation and evaluation and control when formulating strategy.

. PHASE V : INTERNATIONAL / GLOBAL STRATEGIC MANAGEMENT : Managing a worldwide competitive advantage

STRATEGIC MANAGEMENT PROCESS

STRATEGIC MANAGEMENT PROCESS

II II

ORG. CURRENTPERFORM - ANCE.

III V VI VII VIII

IX

REWORK ASNEEDED

IV

MONITORING

INTERNAL’ANALYSIS.STENGTHS.WEAKNESSES

REVIEW BOARD OF DIRECTORS & TOP. MGMT

IVEXT. ENV.ANALYSIS. OPP.. THREATS

ORG.. MISSION. OBJECTIVES.STRATEGIES. POLICIES

SELECTION OFSTRATEGICFACTORS

REVIEW

REDEFINE. MISSION.OBJECTIVES

GENERATION &EVALUATION OFSTRATEGICALTERNATIVES

IMPLEMENT BESTALTERNATIVE

TYPICAL VALUE CHAIN OF A MANUFACTURED PRODUCT

RAWMATERIAL

PRIMARYMANUF.

FABRICATIONPRODUCT PRODUCER

DISTRIBUTOR RETAILER

A CORPORATE VALUE CHAIN

TECHNOLOGY DEVELOPMENT

( R&D,Process & Product Development0

PROCUREMENT

( Purchasing of Raw Materials, Machines, Supplies)

SUPPORTACTIVITIES

PROFITMARGIN

INBOUNDLOGISTICS(RAW MAT)

FIRM INFRASTRUCTURE( Gen.Mgmt,Accounting,Finance, Plg)

HUMAN RESOURCE DEVELOPMENT( Recruitment, Training, development )

OPERATIONS( Machining, ( Assembly, Testing )

OUTBOUNDLOGISTICS( Distribution )

MARKETING & SALES( Advt. Prom - otion )

SERVICES( Installation, Repair )

PRIMARY ACTIVITIES

VALUE CHAIN ANALYSIS• Value Chain: Linked set of value creating activities, beginning with basic Raw materials coming from suppliers to a series of value added activities involved in producing and

marketing a product, ending with distributor getting the final goods into the hands of

ultimate customer• Focus of value chain: To examine corporation in the context of overall chain of value creating activities of

which firm may only be a small part. INDUSTRY VALUE CHAIN ANALYSIS: 2 segments i) Upstream Activities: Petroleum Industry- Oil exploration, drilling and moving crude oil to refinery. ii) Downstream activities: Refining the oil, Transporting and marketing of Gasoline and Refined Oil to

distributors and gas station retailers• Ex: British Petroleum: Dominant in upstream activities like exploration. AMCO: Great expertise in downstream

activities like marketing and retailing. Merger combined their core competencies• In analyzing value chain a firm operates up and down the entire chain but usually has area of prime expertise

called – centre of gravity • Differences among competitor’s value chain are key sources of competitive advantage Backward & Forward integration• One of the strategic moves: Moving forward or backwards along the value chain in order to reduce costs,

guarantee access to key raw materials ( Backward Int.) or to guarantee cost effective and proper distribution ( Forward Int. )

CORPORATE VALUE CHAIN• Framework for identifying competitive advantage• Differences among competitor’s value chain are key source of competitive advantage• Each corporation has internal value chain of activities. Activities performed by any firm can be grouped under 9 areas

PRIMARY ACTIVITIES1. INBOUND LOGISTICS: Raw mat. Handling and warehousing2. OPERATIONS: Product manufacturing ( Machining, Assembly & Testing)3. OUTBOUND LOGISTICS: Warehousing & Distribution4. MARKETING & SALES: Advertising, Promotion etc..5. SERVICE: Installation, Repairs & After sale service

SUPPORT ACTIVITIES6 FIRM’S INFRASTRUCTURE7 HUMAN RESOURCE DEVELOPMENT8 TECHNOLOGY DEVELOPMENT: R&D , Product & Process development9 PROCUREMENT: MP&IC, Purchasing, Outsourcing and Material Handling & Storage

• Each of the Product line has its distinctive value chain• For several products, internal analysis of firm involves analyzing a series of different value chains

EXTERNAL ENVIRONMENT

COMPANY AND ENVIRONMENT

MENMACHINEMATERIALMETHODS

MONEY

INPUTS PROCESSES OUTPUTS

ENVIRONMENT

ENVIRONMENT

ACTIVITIESOPERATIONSPLANNINGMANUFACTURINGINSPECTIONPACKING

GOODSSERVICESSALESPROFITS

OBJECTIVESGOALSTARGETS FEEDBACKCORRECTIVE

ACTION

PEST FACTORS

POLITICAL TECHNOLOGICAL

ECONOMIC SOCIAL

PESTLE MATRIXPOLITICAL

CURRENT/FUTURE LEGISLATION

SOCIAL

LIFESTYLE TRENDS

DEMOGAPHICS

COMPANY ATTITUDES & OPINIONS

BRAND,COMPANY ,TECHNOLOGYIMAGE

CONSUMER BUYING PATTERNS

ETHNIC/RELIGIOUS FACTORS

TECHNOLOGICAL

TECHNOLOGY ACCESS,LICENSING,PATENTS

MATURITY OF TECHNOLOGY

REPLACEMENT TECHNOLOGY / SOLUTIONS

INNOVATION POTENTIAL

MANUFACTURING MATURITY & CAPACITY

LEGAL

INTERNATIONAL LAW

EMPLOYMENT LAW

COMPETITIOM LAW

HEALTH & SAFETY LAW

REGIONAL LEGISLATION

ENVIRONMENTAL

ENVIRONMENTAL IMPACT

ENVIRONMENTAL LEGISLATION

ENERGY CONSUMPTION

WASTE DISPOSAL

ECONOMIC

REGULATORY BODIES GOVT. POLICIES GOVT. TERM & CHANGE

ECONOMY SITUATION & TRENDSTAXATIONINTEREST & EXCHANGE RATESMARKET & TRADE CYCLE

CONSTITUENTS OF MICRO ENVIRONMENT

MICROENVIRONMENT

FINANCIALINSTITUTIONS

SUPPLIERS

MARKETINGINTERMEDIARIES

COMPETITION

REGULATORYPROVISIONS

IR CLIMATE

E- COMMERCE

SKILL LEVEL OF WORKFORCE

MARKETSTYPES &

DEMANDS

ENVIRONMENTAL CHANGESWHICH FORCE THE FIRMS TO ADOPT STRATEGIC PERSPECTIVE

• CHANGES IN TECHNOLOGY• PROLIFERATION OF NEW PRODUCTS• FASTER COMMERCIALISATION OF NEW IDEAS• EMERGENCE OF GLOBAL FIRMS, MARKETS & BRANDS• CHANGING TASTES & PREFERENCES OF CUSTOMERS• THE NEW AFFLUENCE OF CONSUMER• SOCIO-CULTURAL & POLITICO-LEGAL CHANGES• BUSINESS BOUNDRIES GETTING BLURRED

( DUE TO OVERARCHING TECNOLOGIES : FASTER COMMUNICATION,

INTERNET, E-GOVERNANCE & E-COMMERCE etc )

NEW DEMANDS FIRMS HAD TO FACE( CONSEQUENT TO ENVIRONMENTAL CHANGES )

• TO BE STRATEGICALLY ALERT• TO BE FUTURE - ORIENTED• TO BE ABLE TO TAKE RISKS IN TAPPING OPPORTUNITIES• TO BE INSULATED ENOUGH AGAINST ENVIRONMENTAL

THREATS• TO DEVELOP COMPETENCE FOR ASSIMILATING CHANGES

FASTER

• TO RESPOND EFFECTIVELY AND MORE ECONOMICALLY ( It helps avoid haphazard response to environment. Provides best possible fit between the firm & Ext. Env. Helps build sustainable competitive advantage. Prepares the firm to not only face future but even shape the future in its favor. )

INTERNAL ENVIRONMENT

A SWOT CHECKLISTINTERNAL STRENGTHS:

MANY PRODUCT LINES?

BROAD MARKET COVERAGE?

MANUFACTURING COMPETENCE?GOOD MARKETING SKILLS?GOOD INVENTORY MANAGEMENT?R&D?

INFORMATION SYSTEM?GOOD HUMAN RESOURCES?BRAND EQUITY?

COST ADVANTAGE?APPROPRIATE ORG. STRUCTURE?

APPROPRIATE CONTROL SYSTEMS?

ABILITY TO MANAGE STRAT. CHANGE

Etc

INTERNAL WEAKNESSES:

NARROW PRODUCT LINES?

RISING MANUFACTURING COST?

POOR MARKETING PLAN?

POOR MATERIAL MANAGEMENT?

INADEQUATE HUMAN RESOURCES

LOSS OF BRAND NAME?LACK OF CORPORATE DIRECTION?

LACK OF CORPORATE CONTROL

POOR FINANCIAL MANAGEMENT

INAPPROPRIATE ORG. STRUCTURE

& CONTROL SYSTEMS

HIGH CONFLICTS, POLITICS? Etc

SWOT CHECKLISTPOTENTIAL ENV. OPPORTUNITIES

.

. NEW MARKETA/BUSINESSES?

. COST OF DIFFERENTIATION ADV?

. PROFITABLE NEW ACQUISITIONS?

. BRAND NAME CAPITAL IN NEW

AREAS

. R&D SKILLS IN NEW AREAS

. VERTICAL INTEGRATION-

( FORWARD/BACKWARD)

. DIVERSIFICATION

. OTHERS?

POTENTIAL ENV. THREATS

. ATTACK ON CORE BUSINESSES?

. INCREASE IN DOMESTIC/

FOREIGN COMPETITION?

. CHANGE IN CUSTOMER TASTE. BARRIERS TO ENTRY. NEW OR SUBSTITUTE

PRODUCTS

. INDUSTRY COMPETITION

. SLOWDOWN IN ECONOMY

. TAKEOVERS

. LOWER MARKET GROWTH

RATE

. OTHERS?

MACKENZIE’S 7S MODEL

STRATEGY

SKILLS

STRUCTURE

SHAREDVISION

STAFF

SYSTEMS

STYLE

VISION, MISSION &

BUSINESS DEFINITION

STRATEGIC INTENTS

• To achieve success, organizations have to primarily

focus on hierarchy of strategic intents – Vision, Mission, Business Definition, Business Model, Goals

Objectives

• Framework within which organization operate and adopt a predetermined direction

• Purposes the organizations strive for.

CONCEPT OF STRETCH,LEVERAGE & FIT

STRETCH : Misfit between Resources & Aspirations

LEVERAGE : Refers to concentrating, accumulating,

conserving. contemplating and utilizing precious &

scarce resources in such a manner that these are

stretched to meet the aspirations of a company.

FIT : Positioning the firm by matching its organizational

resources to its environment.

VISION

• Future aspirations that lead to an inspiration • Basic & at the top of hierarchy of strategic intents• Aspirations expressed as strategic intent should lead to

an end.• This is what a person or an organization would

ultimately like to attain in the near future.• A vision is generally more dreamt than it is articulated• By its nature it may be as good as a dream, yet it is a

powerful motivator to action.

GOOD VISION STATEMENTS

• Inspiring & exhilarating• Help in the creation of a common identity and a shared

sense of purpose.• Competitive, original and unique.• Make sense as these are practical.• Foster risk- taking and experimentation.• Foster long term thinking.• Truly genuine, represent integrity and are meant to

benefit stakeholders.

ENVISIONING PROCESS

A Well conceived vision has 2 major components

1. Core Ideology : Defines enduring character of an organization that remains unchangeable . It rests on

core values & core purposes.

2. Envisioned Future : A long term, time bound goal and vivid description of what it would be like to achieve that goal.

WHAT A VISION SHOULD AND SHOULDN’T BE• A VISION SHOULD BE:- An organization charter of core values & principles - The ultimate source of our priorities, plans and goals- A puller into the future- A reflection of what makes an organization unique- Inspire & motivate

. A VISION SHOULD NOT BE:- A ‘ high concept statement’ or an advertising slogan- A strategy/view from top- A history of proud past- A soft business issue - Passionless

A FEW VISION STATEMENTS

VISION 2001 0F BHEL

A world-class , innovative , competitive and profitable

Engineering enterprise providing total business solutions.

VISION OF CANARA BANK

To emerge as the best bank in customer service,

profitability , productivity and innovations.

VISION OF IOC

Indian Oil aims to achieve international standards of excellence

in all aspects of energy and diversified business with focus on

Customer delight through quality products & services

MISSION• It is purpose / reason behind existence of any organization• Derived from VISION and reflects the corporation’s philosophy , identity, character and image which helps to achieve the vision.• When defined explicitly, provides enlightenment to insiders and outsiders on what the organization stands for.• Many strategists/consultants contribute to the building up of mission statements.CHARACTERISTICS OF A MISSION SATEMENTSFEASIBLEPRECISECLEARMOTIVATINGDISTINCTIVEINDICATES MAJOR COMPONENTS OF STRATEGYINDICATES HOW OBJECTIVES ARE TO BE ACHIEVEDHOW MISSION STATEMENTS ARE FRMULATED Derived from particular set of tasks and priorities and reflects corporate philosophy• Executive committee is setup to formally discuss• Help of consultants also taken for an in-depth analysis of an organization and to suggest an

appropriate Mission statement• A Mission statement once formulated should serve an organization for many years• As the organization grows with time and goes on adding new products, services, technologies and markets, there may even be a need for revising its Mission statements as

FEW MISSION STATEMENTS• BHEL

To be a leading engineering enterprise providing quality systems goods and services in the field of Energy,

Transportation , Industry, Infrastructure and other potential areas

• RANBAXY

To become research based International pharma company

• UTI

To keep the common man in sharper focus to encourage

savings and investment habits among them.

BUSINESS DEFINITION• Defined along 3 parameters

CUSTOMER GROUPS: WHO is being satisfied

CUSTOMER FUNCTIONS: WHAT is being satisfied

ALTERNATIVE TECHNOLOGIES: HOW the need is being satisfied

• Provides powerful insights into understanding and defining business

• Helpful in Strat. Mgmt in many ways . It Indicates choice of objectives

and helps exercising best choice.

• A single business firm has simple Business Definition. Company

with several businesses has separate BD for each of its business.

• 3 dimensions provide scope for further activities and facilitates

understanding of company’s performance areas

• At corporate level ,BD concerns itself with a wider meaning of 3 dimensions.

• Each division of highly diversified co.can have more accurate BD at SBUlevel

• BD offers unique insights to companies operating in a competitive market.

where customer is an important stakeholder of the firm.

EXAMPLESEX: Time Keeping Business:

Customer Groups: ‘Individual customers” & Industrial Customers”

Customer Functions: Finding time, Recording time, Using watches as

fashionable accessories and gift items.

Alternative Technologies: Mechanical. Quartz digital, Quartz Analog

EX: MODI XROX

Customer Groups: ‘Individual Organization , Govt. departments

Customer Functions: Provide communication with ease of reproduction.

Alternative Technologies: High quality and state-of-the-art tecnology

available with Xrox of US.

GOALS & OBJECTIVESGOALS: • What an org. hopes to achieve/accomplish in a future period of time. Represent future state

or outcome of an effort put in now.

OBJECTIVES:• Ends that tell how goals shall be achieved• Define org’s relationship with Environment;• Help org to achieve VISION & MISSION;• Provide basis for Strategic Decision making;• Provides standards for performance appraisals,

• OBJECTIVES: GOALS - Concrete & specific Generalized Make goals operational

-Quantitative, measurable Qualitative & comparable

- Short Term Long Term( Org. translates its purpose into long term goals )

OBJECTIVE SETTING• Understandable• Concrete & Specific ( Say 10% increase in sales )• Periodicity :Related to time frame. Long Term, Medium & Short term• Measurable & Controllable• Challenging• Diff. Objectives must correlate with each other• Should be set within constraints• Should cover all aspects of functioning.• Verifiability: basis on which to decide whether Objective met or not.• Reality: Operational objective not the broad official objectives• Quality: Capable enough to provide direction and tangible basis for evaluation.EX Profit: ROI, Net profit as % of sales, Return on shareholders capital. Marketing: Sales volume, Market segment, Customer service.Promotion Growth: Output, Sales T/O, Investment HR: Training, Welfare IR Social Responsibility: Environment, Community Service, Rural Development etc..

TOTAL GLOBAL STRATEGY

CORE BUSINESS STRATEGY

1. DEVELOP CORE BUSINESS STRATEGY

2. INTERNATIONALISE THE STRATEGY

3. GLOBALISE THE STRATEGY

COUNTRY

A

COUNTRY

B

COUNTRY

C

COUNTRY

D

COUNTRY

E

INTERNATIONAL STRATEGIES

PRESSURES FORCOST REDUCTION

PRESSURES FOR LOCAL RESPONSIVENESS

GLOBAL STRATEGY

( OFFERING STANDARDISEDPRODUCTS / SERVICES)

TRANSNATIONAL STRATEGY

(LOCATED IN A DEVELOPED COUNTRY)

MULTIDOMESTIC STRATEGY

( SUITING TO NATIONAL CONDITIONS )

INTERNATIONAL STRATEGY

(UNDER DEVELOPED COUNTRIES WHERE PRODUCT/SERVICES NOT AVAILABLE )

INDUSTRY GLOBALISATION POTENTIAL

INDUSTRYGLOBALISATION

POTENTIAL

MARKET DRIVERS

COMPETITIVE DRIVERS

COST DRIVERS

GOVERNMENTDRIVERS

THE GLOBALISATION TRIANGLE

BENEFITS & COSTSOF

GLOBALISATION

GLOBAL STRATEGY LEVERS

INDUSTRYGLOBALISATIONDRIVERS

GLOBAL ORGANISATIONDRIVERS

A FRAMEWORK OF GLOBAL STRATEGY

GLOBAL STRATEGY LEVERS

GLOBAL MARKET PARTICIPATIONGLOBAL PRODUCTSGLOBAL LOCATION

GLOBAL MARKETINGGLOBAL COMPETITIVE MOVES

I

BENEFITS /COSTS

OFGLOBAL

STRATEGY

INDUSTRY GLOBALISATIONDRIVERS

MARKETCOSTGOVTCOMPETITIVE

GLOBALORGANISATIONDRIVERS

PARENT ORG’S ABILITY( POSITION & RESOURCES)TO IMPLEMENT A GLOBALSTRATEGY )

MANAGEMENT AND ORGANISATION FACTORS AFFECTING GLOBAL STRATEGY

(GLOBAL ORGANISATION DRIVERS )

PEOPLE

MANAGEMENTPROCESSES

CULTURE

ORGANISATIONSTRUCTURE

ABILITY TO DEVELOP AND IMPLEMENTGLOBAL STRATEGY

. CENTRALISED GLOBAL AUTHORITY

. INTERNATIONAL DIVISION

. STRONG BUSINESS DIVISION

. GLOBAL IDENTITY

. COMMITMENT TO WORLDWIDE( VS DOMESTIC ) EMPLOYMENT. INTERDEPENDENCE VS AUTONOMY OF BUSINESSES

.USE OF FOREIGN NATIONALS

.MULTICOUNTRY CAREERS

.FREQUENT TRVEL

.STATEMENTS & ACTIONS OFLEADERS

. GLOBAL MIS

. GLOBAL STRATEGIC PLANNING

. GLOBAL BUDGETING

. CROSS COUNTRY COORDINATION

( PLG,BUDGETING & INFORMATION SYSTEMS )

( REPORTING RELATIONSHIPS )

( VALUES & RULES THAT GUIDE BEHAVIOUR )

( HUMAN RESOURCES OF WORLDWIDE BUSINESS )

MARKET GLOBALISATION DRIVERS

• COMMON CUSTOMER NEED –PER CAPITA INCOME CONVERGING AMONG INDUSTRIALISED NATIONS & CONVERGENCE OF LIFE STYLES & TASTES

• INCREASED TRAVEL CREATING GLOBAL CUSTOMERS• GROWTH OF GLOBAL & REGIONAL CHANNELS• TRANSFERABLE MARKETING – PUSH TO DEVELOP GLOBAL

ADVERTISING & ESTABLISHMENT OF WORLD BRANDS

• LEAD COUNTRIES

COST GLOBALISATION DRIVERS

• GLOBAL SCALE ECONOMIES – CONTINUING PUSH FOR ECONOMIES OF SCALE

• STEEP EXPERIENCE CURVE EFFECT• SOURCING EFFICIENCIES• FAVOURABLE LOGISTICS• DIFFERENCES IN COUNTRY COSTS- WRT

TRANSPORTATION,LABOUR & RAW MATERIAL Etc.• HIGH PRODUCT DEVELOPMENT COST• FAST CHANGING TECHNOLOGY

GOVRNMENTGLOBALISATION DRIVERS

• FAVOURABLE TRADE POLICIES• COMPATIBLE TECHNICAL STANDARDS• COMMON MARKETING REGULATIONS• GOVT. OWNED COMPETITORS AND CUSTOMERS• HOST GOVT’S CONCERNS• REDUCTION IN TARRIF & NON TARRIF BARRIERS• DECLINE IN ROLE OF GOVTS AS PRODUCER &

CONSUMERS – ie ENCOURAGING PRIVATISATION

• SHIFT TO OPEN MARKET ECONOMIES

COMPETITIVEGLOBALISATION DRIVERS

• HIGH EXPORTS AND IMPORTS – CONTINUOUS INCREASE IN THE LEVEL OF WORLD TRADE

• COMPETITORS FROM DIFFERENT CONTINENTS – MORE COUNTRIES BECOMING KEY COMPETITIVE BATTLE

GROUNDS

• INTERDEPENDENCE OF COUNTRIES – GROWTH OF GLOBAL NETWORKS

• COMPETITORS GLOBALISED – RISE OF NEW COMPETITORS INTENT UPON BECOMING GLOBAL

COMPETITOR

. INCREASED OWNERSHIP OF CORPORATIONS BY FOREIGN ACQUIRORS

. INCREASED GLOBAL STRATEGIC ALLIANCES

OTHER DRIVERS

• REVOLUTION IN INFORMATION & COMMUNICAION

( PERSONAL COMPUTORS, INTERNET& INTRANET , FSCIMILE MACHINES )

• GLOBALISATION OF FINANCIAL MARKETS ( LISTING OF CORPORATIONS ON MULTIPLE EXCHANGES )

• IMPROVEMENTS IN BUSINESS TRAVELS ( RISE OF INTERNATIONAL HOTEL CHAINS )

GLOBAL STRATEGY LEVERS• MARKET PARTICIPATION ( CHOICE OF COUNTRY MARKET IN WHICH TO CONDUCT BUSINESS

AND LEVEL OF ACTIVITY, PARTICULARLY IN TERMS OF MARKET SHARE )

• PRODUCT / SERVICE ( EXTENT TO WHICH A WORLDWIDE BUSINESS OFFERS THE SAME OR DIFFERENT

PRODUCTS IN DIFFERENT COUNTRIES

• LOCATION OF VALUE ADDING ACTIVITIES ( WHERE TO LOCATE ACTIVITIES THAT COMPRISE ENTIRE VALUE

ADDED CHAIN – FROM RESEARCH TO PRODUCTION TO AFTER

SALE SERVICE

• MARKETING ( EXTENT TO WHICH WORLDWIDE BUSINESS USES SAME BRAND

NAMES,ADVERTISING,AND OTHER MARKETING ELEMENTS IN DIFFERENT COUNTRIES )

• COMPETITIVE MOVES ( EXTENT OF COMPETITIVE MOVES IN DIFFERENT COUNTRIES )

TYPE OF CUSTOMERS

GLOBAL CUSTOMER

FOREIGNCUSTOMER

INTERNATIONALCUSTOMER

FREELOCALCUSTOMER

CONTROLLEDLOCALCUSTOMER

BUY IN FOREIGN MARKRTS FROMFOREIGN SUPPLIER

BUY IN DOMESTIC MARKET FROMFOREIGN SUPPLIER

BUY IN DOMESTIC MARKETS FROMDOMESTIC SUPPLIER

NO HQINVOLVEMENT

HQ RECOMMENDSSTANDARDS?PRODUCTS

HQ MANDATESSTANDARDS/PRODUCTS

HQ DOES THEPURCHASING

INCREASIBG GLOBALISATION OF PURCHASING

INCREASING

INTERNATIONALISATION

BUSINESS GROWTH / COMPETITIVE SRENGTH MATRIX

STAR

COUNTRIES WILDCAT COUNTRIES

DOG COUNTRIES

CASH COWCOUNTRIES

HI

LO

LO HI

COMPETITIVE STRENGTH OF BUSINESS IN COUNTRY

GROWTHPOTENTIAL OFBUSINESS INCOUNTRY

MODES OF ENTRY

EXPORTING( Firm produces in home country & markets in overseas markets )

LICENSING( International co. transfers knowledge, technology Patent for a limited period of time to an overseas co, in return for some form of payment)

FRANCHISING(Right to use a business format, usually Brand Name- exchange programme )

INTERNATIONAL JOINTVENTURE

WHOLLY OWNED

LOW HIGH

HIGH

CONTROL

PERCEIVEDRISK

LOW

PROBLEMS IN GLOBAL STRATEGIC PLANNING

• Global plg- an extension of Domestic Plg is more complex; as it has to handle more complicated, uncertain & volatile environments.

• Entirely based on future, if future events don’t occur as expected;

it fails.• Greater problems in formulating corporate plans• Frequent fluctuations in value of currencies• Turbulent political developments• Uncertainties in supply of materials• Non availability of adequate information for developing International

standards• Encounter typical problems like : subsidiary in Japan may require

careful assessment of Finance, HR, Operations, MM & Marketing plans • Operating modes of multinational firm abroad has to be dynamic

to cope up with changing situations.

PROBLEMS IN GLOBAL STRATEGIC PLANNING

• Issues of little significance in domestic planning assume a greater importance abroad. Eg reliable supplies of high quality components may not be a problem in domestic

market but simple decision to buy instead of naking it may not be true abroad.• Logistics problem in countries lacking infrastructural

support• Inventory supplies have to be kept at higher levels than

home due to uncertainties involved.• Pressures due to prejudices of local authorities, Govts, TU’s, Consumer groups, impose restrictions on

International trade.• Non availability or less reliability of the information about various aspects of environment of potential host

countries.

GLOBALISATION• Concerned with degree of standardization of products and practices plus high level of co-ordination and integration of activities in the company’s

value chain.• Offers extensive opportunities for worldwide development and getting

integrated to global economy.• For developing countries, it offers prospects of integration with rest of developed economy.• In economic terms , It’s the process of integration of world into one huge

market.• It is a process not an event. It has no beginning or end.• It is fast becoming imperative for modern businessdue to: 1) crumbling trade barriers 2) global flow of capital & technology 3)Information explosion 4) Intensity of global market competition 5) Changing life styles and demand for innovative products etc…• It offers free flow of information, goods, capital & people across political and

economic boundaries and is a process by which enterprises become interdependent and interlinked globally.

GLOBALISATIONBENEFITS:• Cost benefits: Economies of scale due to standardization & Logistics

management• Timing benefits: Coordinated approach in product launching and

implementation strategies• Learning benefits: Coordinated transfer of information, best practices and

people across subsidiaries.• Arbitrage benefits: using resources in one country for the benefit of another country.SOCIAL BENEFITS• Creates overall wealth for all nations as specialization increases trade.• Reduces inflation due to cost efficiencies• Benefits customers: quality products at competitive price.• Better allocation of financial ,material and Human resources• Reduces corruption due to free market trade.OTHER BENEFITS:• Leads to economic integration and globalized economy.• Transition from multinational to global competitiveness

PORTER’S MODELPOTENTIAL ENTRANTS•Economies of scale•Absolute cost advantage•Switching cost•Access to distribution•Govt. policy

SUBSTITUTES•Functional similarity•Price/Performance trend•Product identity

BUYERS•Buyer’s concentration•No of suppliers•Switching cost•Substitute products•Threat of backward Integration

SUPPLIERS•Supp.concentration•No. of buyers•Switching cost•Substitute raw mat.•Threat of forward integration

OTHERSTAKEHOLDERS(RELATIVE POWER OF UNIONS, GOVT)

THREAT OF NEW ENTRANTS

THREAT OF SUBSTITUTE PRODUCTS

BARGAININGPOWER OF

BUYERS

COMPETITIVERIVALARY( INDUSTRY COMPETITORS )

BARGAININGPOWER OF

SUPPLIERS

ETOP( ENVIRONMENTAL THREAT & OPPORTUNITY PROFILE 0

ENVIRONMENTAL

SECTOR

MARKET

TECHNOLOGICAL

SUPPLIER

ECONOMIC

REGULATORY

POLITICO – LEGA

SOCIO – CULTURAL

INTERNATIONAL

NATURE

OF IMPACT

IMPACT OF EACH SECTOR

SAP ( STRATEGIC ADVANTAGE PROFILE )

CAPABILITY

FACTOR

NATURE

OF

IMPACT

IMPACT OF EACH FACTOR

1

2

3

4

5

6

FINANCE

MARKETING

0PERATIONSP

PERSONNEL

INFORMATION

GENERAL

MANAGEMENT

CONSOLIDATED SWOT PROFILE

ENVIRONMENTAL

FACTOR

MARKET

TECHNOLOGICAL

SUPPLIAR

ECONOMIC

REGULATORY

POLITICAL

SOCIO – CULTURAL

INTERNATIONAL

NATURE OF

IMPACT STRATEGIC

ADVANTAGE FACTOR

FINANCE

MARKETING

OPERATIONS

PERSONNEL

INFORMATION MANAGEMENT

GENERAL MANAGEMENT

NATURE OF

IMPACT

SWOT MATRIX and STRATEGIES

QUADRANT 2

TURNAROUND

STRATEGY

QUADERANT 1

AGGRESSIVE

STRATEGY

QUADERANT 4

DEFENSIVE

STRATEGY

QUADERANT 3

DIVERSIFICATION

STRATEGY

OPPRTUNITIES

THREATS

WEAKNESSES STREGTHS

OPPORTUNITY MATRIX

MODERATE

ATTRACTIONS LOW

ATTRACTIONS

HIGH ATTRACTIONS

MODERATE ATTRACTIONSHIGH

LOW

HIGH LOW

Impact ofOpportunities

Occurrence

THREAT MATRIX

MAJOR

THREATS

MODERATE

THREATS

MODERATE THREATS

MINOR

THREATS

HIGH

LOW

HIGH LOW

OCCURENCE

IMPACT OFTHREATS

TOW’s MATRIX

W S

O OS

T TWDefensive Strategies

( To minimize weaknesses

& avoid Threats )

ETOP

SAP

OW

TS

Take advantage of (Opportunities by overcoming Weaknesses)

(Use strengths to take advantage Of opportunities)

(Consider corporations strengthsTo avoid threats)

Aggressive StrategiesTurnaround Strategies

Diversification strategies

1234

1234

1234

1234

BCG GROWTH SHARE MATRIX

0

10

20

12

14

16

18

2

4

6

8

10 8 6 4 2 1.5 1 0.8 0.5 0.1

STARS

CASH COWS

QUESTION MARKS

DOGS

MarketGrowthrate

Relative market shareLOWHIGH

HIGH

GE 9 CELL MATRIX

G G

G Y R

R RPROFITPRODUCER

QUESTIONMARKS

AVERAGEBUSINESS

BUSINESS STREGTH / COMPETITIVE POSITION

IND

US

TR

Y A

TT

RA

CT

IVE

NE

SS

STRONG AVERAGE WEAK

HIGH

MEDIUM

LOW

ZONE

GREEN YELLOW RED

INVEST/EXPANDSELECT/EARNHARVEST/DIVEST

GYR

GENERIC STRATEGIES• Below Corporate Level Strategies, the strategies to be used by individual businesses HOW GENERIC STRATEGIES EMERGE• As humans function with their limbs; corporations operate through their business strategies .At business level most competitive interaction occurs; where competitive

advantage is either won or lost.• Corporate strategies lay down the framework in which business strategies operate.COST LEADERSHIPCOST LEADERSHIP• Vigorous cost reduction programmers and make all possible attempts to achieve the lowest cost.• Achieve efficiency at all levels for lowering costs.• Cumulative cost across the value chain is lower than competitor• Analyze cost drivers and optimization of costs• Commanding high price by introducing innovative product and by building brand loyalty.• Other initiatives: Accurate Demand Forecasting, Capacity utilization Economies of scale, Cost saving technologies. BENEFITS Threat of cheaper substitutes offset to some extent by lowering price, Effective entry barrier for potential entrants, Leas at affected by bargaining power of supplier a firm can adopt

price increase to some extent though operational effectiveness.RISKS Competitors imitate cost reduction quickly, Not a market friendly approach if customers interest is

ignored Low cost leadership doesn’t always work;

DIFFERENTIATION:• Providing unique characteristics/special features to product/service

demanded by customers, who are willing to pay.• Customers prefer differentiated products/services which offers them a utility they

value. Such products and services stand apart in the

market and attract customers due to its special featured attributes.• A differentiated firm can charge a premium price & commands customer loyalty.• Creating value at every point by providing special features and

attributes.• Features that raise performance at lower cost, enhance buyer

satisfaction, maintain/enhance quality.• Innovative ability of firm is important. strong R&D base required• Adopted when customer’s needs preferences are diversified and

market is too large to be satisfied by standardized products

BENEFITS

Firm can charge a premium price, Reduces competitive rivalry

Creates brand loyal customers, Barrier for new entrants

Risks

Long-term perceived uniqueness difficult to maintain, Several

differentiators adopting similar differentiation, Fails if not valued by

customer.

• versified,

Market too large to be satisfied by standardized products

FOCUS BUSINESS STRATEGY• Attempt is to serve narrow strategic target effectively and efficiently• Relies on either cost leadership or differentiation but cater to narrow segment of

total market. Or customer.• Commonly used as basis for identifying customer groups. based on Demographic characteristics ( Age, gender, income, occupation ) Geographic segmentation (Rural/urban, Northern/sourthern0 0 Life style ( Traditional / Modern }• Firms seeking to adopt Focus Strategy has to locate a niche in the market where

Cost Leaders and Differentiators are not operating• Identifying gaps not covered by Cost Leaders and Differentiators• Uniqueness in the segment. Niche marker big enough to be profitable and has potential for growth.• Major players not interested in nicheBENEFITS Protected from competition from other firms who do not have ability to cater to niche markets, builds up brand loyalty, specialization- powerful barrier to

new entrants and substitutes.CONSTRAINTS; Developing distinctive competencies – a difficult process, once committed it’s difficult to move on to other market segment, higher costs

may cause customers to move low price products cost leaders.

GRAND STRATEGIES• Basic framework of master strategies, classifies broadly various

rules of business• Provide guidance for major actions for meeting long term objectives

and basic direction for strategic action• Blueprints for action. Use of single or combination of 2 or more

depends upon multiplicity and complexities of business.• Corporate level strategies indicating the choice of direction a firm

adopts for achieving its vision.• Corp. Strategies Also tell about decisions relating to allocation of

resources among different businesses, managing & nurturing diff. businesses in portfolio.

• Grand strategies revolve around one basic question : Whether to continue or change business to improve efficiency and effectiveness.

STABILITY STRATEGIES

Adopted by an organization when it attempts an incremental improvement of functional performance.

1. NO CHANGE STRATEGY: Conscious decision to do nothing new. Continue with present business

2 PROFIT STRATEGY: Reduce investments, cut costs , Increase

productivity wrt external factors like: Economic recession, Govt’s attitude, Industry downturn and competitive pressures for sustaining profitability by whatever means till situation improves.

2 PAUSE/ PROCEED WITH CAUTION : Consolidation before a firm goes for expansion.

EXPANSION STRATEGIESMost popular corp. strategies as growth is the way of life. All progressive organizations plan for substantial growth due to increasing economy, markets & customer needs. Followed when companies aim at high growth, broadening the scope of its business for improving overall performance.. CONCENTRATION STRATEGIES• Simple 1st level expansion strategy, aims at convergence of

resources• Focus on Intensification / Specialization• Rely on where you are best at ie focusing on limited areas• Creating a separate niche/ identity in selective areas by investing money, time, energy & effort in specific areas

INTEGATION STRATEGIES• Combining activities relating to present activities of firm• Widening scope of businessVertical Integration : Going up & down the value chain Going for

forward or backward integration or both at a time.Horizontal integration : Same type of products

CHALLENGES OF LEADING AN ORGANISATION ( STRATEGIC LEADERSHIP )

• Influence the behavior of subordinates so that they work willingly & enthusiastically towards attainment of organizational goals.• Situational leadership as per contingency of situation.• Tasks involved include : Anticipating, Envisioning, Empowering, Direction. Growth & development, in addition to planning, organizing, staffing.

directing, coordinating & controlling skills• Determining strategic direction : Core ideology & future shape• Effectively managing organization resource portfolio ( Financial capital, organization

capital, Social capital & Human capital )• Sustaining an effective organization culture ( OCTAPACE CULTURE )• Charisma, vision , Drive, Desire to lead, Honesty & Integrity, Self – confidence,

intelligence, Job related knowledge , Energetic, assertive & sociable• To lead from front and be a role -model.• Sustaining a definite direction, growth, development & competitive advantage for

realizing its vision, goals & objectives in a global competitive environment.• Encouraging participation, recognition and maintaining high morale of employees at all times.• Suitable reward & punishment system for Ethical/Unethical behavior.

Author- Himanshu Sisodia