INTERNATIONAL STRATEGIC

MANAGEMENT

CHAPTER 9:INTERNATIONAL STRATEGIC MANAGEMENT

LEARNING OBJECTIVES

• To understand the meaning and importance of International Strategic Management

• To identify and discuss the components of international strategy

• To describe the international strategic management process

• To identify and describe levels of international strategies

• To assess national economies, demands and foreign markets.

“Without a strategy the organization is like a ship without a rudder,

going around in circles”

Joel Ross and Michael Kami

INTERNATIONAL STRATEGIC MANAGEMENT

Definition:

The process of formulating, implementing and evaluating large-scale action plans after an in-depth SWOT analysis) and which will enable a company to compete effectively (competitive advantage) internationally and therefore achieve its overall, long-term objectives.

IMPORTANCE

• Provides direction for efforts and resources

• Forces all units into a coordinated effort

• We think of the unexpected: Contingency Planning

• There is participation: Better communication

• We are proactive in a fast changing environment: (Technology, customers´ needs and tastes, competitors, demographics) (especially helpful for very large Organization)

LEVELS OF STRATEGIC-MAKING

Corporate-Level Managers (The whole Company)

Business-Level Managers (Divisions or strategic business units)

Functional Managers (MKT, PROD., FIN, H/R)

Components Addressed by Executives

• Scope of operations: Decision on range of products or geographical areas

• Resources deployment: Where will the financial, human and material resources go?

• Competitive advantage: What do we do better than others?... so as to focus resources on that.

• Synergy: How can different business units benefit from each other?

The Walt Disney Example

• Develop a strategic vision and mission• Set objectives• Develop strategies to achieve objectives

Implement and Execute Strategy

Evaluate and Make Corrections

External and Internal Analysis

Developing a Vision and Mission

The first task of strategic management

Begins with thinking strategically about The firm´s future business make up Where to take the firm

The task is to Create a roadmap of a company´s future Decide what future business position to stake out Provide long-term direction Give the firm a strong identity

ExampleVision Statement

Mc Donald´s Corporation

McDonald´s vision is to dominate the global foodservice industry. Global dominance means setting the performance standard for customer satisfaction while increasing market share and profitability through our Convenience, Value, and Execution Strategies

Examples:Mision and Vision Statement

Intel

Intel supplies the computing industry with chips, boards, systems and software. Intel´s products are used as “building blocks” to create advanced computing systems for PC users.

Compaq Computer

To be the leading supplier of PCs and PC Servers in all customer segments

ExampleStrategic Vision

DELTA AIRLINES

…. We want Delta to be the

WORLDWIDE AIRLINE OF CHOICE

ExampleStrategic Vision

DELTA AIRLINES

WORLDWIDE because we are and intend to remain an

innovative, aggressive, ethical, and successful competitor who will continue to look for

opportunities to extend our reach through new routes and creative global alliances

ExampleStrategic Vision

DELTA AIRLINES

AIRLINE, because we are and intend to stay in business

we know best – air transportation and related services. We won´t stray from our roots. We believe in the long-term prospects for profitable growth in the airline industry, and we will continue to focus time, attention, and investment on enhancing our place in that business environment.

ExampleStrategic Vision

DELTA AIRLINES

OF CHOICE, because we value the loyalty of our customers, employees and investors. For passengers and shippers, we will continue to provide the best service and value. For our provide the best service and value. For our personnel, we will continue to offer an ever more challenging, rewarding, and result-oriented workplace that recognizes and appreciates their contributions. For our shareholders, we will earn a consistent, superior financial return.

Types of Objectives Required

Financial Objectives Strategic Objectives

Outcomes focused on improving a firm´s

financial performance

Outcomes focused on improving a firm´s

competitiveness and its long-term business

position

Examples: Financial Objectives

Boost annual return on investment from 15% to 20%

Increase annual dividends per share to stockholders by 5% each year

Strive for stock price appreciation equal to or above the S&P 500 average

Achieve and maintain AA bond rating.

Examples: Strategic Objectives

Increase firm´s market share

Overtake key rivals on quality or customers service or product performance

Boost firm´s reputation with customers

Attain stronger foothold in international markets

Achieve technological superiority

Become leader in new product introductions

Example: Strategic and Financial Objectives

3M Corp.

Annual growth in earnings per share of 10% or better, on average

A return on stockholders´ equity of 20-25%

Have at least 30% of sales come from products introduced in the past four years.

What is the External and Internal Analysis?

SWOT analysis focuses on two considerations:

A company´s EXTERNAL environment (for identifying Opportunities and Threats)

Competitors, demographics, economic indicators, political changes, cultural changes)

A company´s INTERNAL environment (for identified Strengths and Weaknesses)

(its competencies, capabilities in the various areas of finance, marketing production…..)

Core Elements of Mc Donald´s Strategy

• Add 2500 restaurants annually• Be highly selective in granting franchises• Locate on sites offering convenience to customers and profitable

growth potential• Focus on limited menu and consistent quality• Careful attention to store efficiency• Extensive advertising and use of Mc prefix• Hire courteous personnel; pay an equitable wage; provide good

training

CORPORATE STRATEGY

Single – businessRelated diversificationUnrelated diversification

BUSINESS STRATEGY

Differentiation (unique, best, different)Cost leadership (lower price)Focus (market niche)

FUNCTIONAL STRATEGY

Finance, Marketing, Operations, HRM, R&D

Formulating Business Level Strategies

A. Cost Leadership: Attempting to have the lowest costs throughout so as to offer the lower prices

BIG TIMEX

B. Differentiation : Attempting to develop products and services that are viewed as unique and different in the industry and therefore offer them at a higher price

XEROX BMW

C. Focus (Niche): Applying cost leadership or differentiation for a particular customer or particular geographical area of an entire market

SWATCH

Formulating Functional-Level Strategies

• Functional strategies will spell out the specific ways functional areas will formulate for the achievement of the business strategy

Example: (Supporting a differentiation strategy)• The R & D department might have to accelerate the innovation

process• The Marketing department might have to develop a plan to

support the new product lines with premium prices, distribution through prestigious locations and the appropriate advertising.

• Production department will attempt to focus on producing a product with excellent raw materials

Assessing National Economies and the Markets as a Whole

A. Assessing the Economy

Economic size: The most import information an MNE will seek about a country is its income level. (Higher-income countries might be an opportunity for expensive, luxury consumer goods. A low-income country might be of interest for its low-wage workers.

A country´s income is usually measured by its GNP (Gross National Product – focuses on whatever is produced by property and labor owned by the country´s residents). Lately, most countries use the GDP (Domestic-focuses on whatever is produced locally in the country). GDP might be important for firms selling equipment, steel, agricultural products.

Assessing National Economies and the Markets as a Whole

Other firms might look at per capita income (average income per person). It might be important for companies selling personal care products.

Income distribution (the relative numbers of a country´s rich, middle and poor. According to the World Bank it is high, middle and low-income. E.g. Rolls Royce will be interested in the number of millionaires in the country while firms selling refrigerators and automobiles in the numbers of middle class.

Sectorial trends should also be examined. What is the size of the agricultural sector? In combination with a rising trend in per capita income we might see a change form rimary to secondary sector.

Assessing National Economies and the Markets as a Whole

B. Legal/Political Environment

Trade policies, government restrictions and regulations should be examined. Political stability should also be examined. Changes might affect profits.

C.Sociocultural Environment

A company might prefer to enter a market of similar culture.