International Business Management
International Strategic Planning And Market Screening
Respectable Lecturer:Dr. Hüda Hüdaverdi
Prepared By:Fatemeh Hashemi 093014007
Fall 2010
What we will learn in this chapter ?
1-1Introduction
The meaning of International strategic planning : The process
through which worldwide companies evaluate past results, assess
their corporate strengths and weaknesses and map out future
resource allocation and strategic based on marketplace
opportunities and threats.
Why International strategic planning is a complex process to
manage?
The organizational complexity of International corporations
Geographically far-flung nature of their commercial empires
Example: Unilever ,the Anglo-Dutch consumer product
company,employs223000 people worldwide, and sell over 400
brands through subsidiaries in over 90 countries and sale over 70
other nation.
1-The International Planning Process
•Since1945 as companies have internationalized their operations and integrated
them on the world wide basis, strategic planning role and philosophy have
changed.
During 1950s and early 1960s international planning was a centralized
activity:
- production-oriented activities.
- focus was on manufacturing level, expected revenues.
- little strategy were needed .
During 1960s and 1970s
- Japanese &European companies entered the world market place.
- competition heat up.
- development in tools for assessing (SWOT).
In1980s, global market expanded away from Triad to big emerging markets.
In 1990s:
- competition heightened
- central planning departments were cut .
- country subsidiaries were encouraged to “get close to customers”.
- new role of head office :coordination among divisions and subsidiaries and
monitoring global market.
1-2 The changing environment of
international planning : Historical perspective
1- The International Planning Process
International planning processes vary in complexity
according to the degree of strategic analysis involved
(Example: Japanese planning processes emphasized
budgetary mechanism while American firms have tended
to incorporate a wider variety of strategic elements in to
their plans)
To understand evolution of planning processes, 4 stages of
corporate planning development have identified as
follow:
1. Financial planning
2. Long term (forecast-based) planning
3. Environmental planning
4. Integrative strategic planning
1-3 The evolution of the international corporate
planning processes
2-Assessing Corporate position
2-1 Internal Assessments
Effective planning offer when firm have
definite ideas about where they want to be
and what has enabled them to get where
they are, to this end , mission statements
and reviews of core competencies guide
company efforts and provide continuity
between past and future planning efforts.
2-1 Internal Assessments2-1-1The corporate mission
Mission statements of most of the international
corporations encompass one or more following
features:
Description of the business
Strategic intent
Perceived organizational strength
Strategic elements
Organizational values
The challenge for international corporations is to make
mission statements relevant to employees and
stakeholders worldwide.
McDonald's mission is: to be the world's best quick service
restaurant experience. Being the best means providing
outstanding quality, service, cleanliness, and value, so
that we make every customer in every restaurant smile."
2-Assessing Corporate position
2-1-2 Corporate CompetenciesCore competencies are bundles of organizational skills and
corporate assets that produce winning marketplace formulas.
Core competencies have 3 characteristics:
1- They contribute to perceived customer benefits.
2- They are difficult for competitors to imitate.
3- They can be leveraged over variety of markets.
Types of competencies:
1- superior technological know-how and product innovation
( Microsoft , Intel )
2-reliable processes that produce consistent, efficient, quality products
and services in the world market.
( FedEx , Toyota )
3- Close relationships with suppliers, regulators, professional
organizations ,distributors and specially customers.( Unilever , Nestle)
4- building sufficient flexibility into worldwide operations to appeal to
local taste ( Unilever, IBM, Toshiba)
2-Assessing Corporate position
2-1Internal Assessments
2-Assessing Corporate position
2-2 External Assessments( the marketplace situation)
The front end of planning process involves
evaluating corporate performance from a strategic
business unit (SBU) and from geographic
perspective.
The managerial aim is to identify those SBUs and
geographic regions where the company is strong and
those where corporate performance is weak.
Companies divide their businesses or product lines into
strategic business units.
For example , GE has 13 business divisions worldwide
and requires its SBUs to be in the top 2 in their industry
sectors . how?
First step is to identify SBUs that contribute positively to
group performance(by determining the above and below
average financial performers).
And those that are competitive within their industry
sectors (by finding the above and below average
performers in their respective industries).
2-Assessing Corporate position
2-2 External Assessments2-2-1 SBU evaluation
2-Assessing Corporate position
2-2 External Assessments
2-2-1 SBU evaluationGroup assessments of SBUs ; Contribution to the group and performance in their industry
2-Assessing Corporate position
The assessment of geographic strategies is a key
element in deciding where to allocate corporate
resources on the worldwide basis.
The process begins with plotting regional
corporate performances on a market size market
growth matrix.
2-2 External Assessments
2-2-2 Worldwide /regional evaluation
2-Assessing Corporate position
2-2 External Assessments
2-2-2Worldwide /regional evaluationEvaluating corporate regional performance on a market size –growth matrix
Managing similar product lines across regions
and markets has become increasingly important
for international corporations.
Executives can consolidate data from national
subsidiaries into regional and worldwide context
and giving them critical yardsticks such as market
shares, sales, costs and margins.
2-Assessing Corporate position
2-2 External Assessments
2-2-3Regional / country assessments
2-Assessing Corporate position2-2 External Assessments
2-2-3 Regional / country assessmentsProduct division Analysis across countries and regions
Subsidiary performance within product or
regional SBUs must also be evaluated to
identify above average contributors to SBU
profitability and those that are competitive
in their national markets.
2-Assessing Corporate position
2-2 External Assessments
2-2-4 Assessing subsidiary contribution
to group performance
2-Assessing Corporate position
2-2 External Assessments
2-2-4 Assessing subsidiary contribution
to group performanceAssessing SBUs geographic performance: SBU ROI and national industry ROI
Once management has assessed the relative
performance of its subsidiaries ,executive attention
can be focused on factors contributing to success
and failure at the national market level.
Two analysis contribute to this determination:
1- market share/momentum analysis
2- competitive benchmarking
2-Assessing Corporate position
2-2 External Assessments
2-2-5 Individual subsidiary analysis
2-2-5-1 market share/momentum analysis
2-Assessing Corporate position
2-2 External Assessments
2-2-5 Individual subsidiary analysis
Plot product performance against market
performance to ascertain which products are
underperforming market trends ( and losing market
share momentum) and which are out performing
market trends ( gaining market share momentum)
2-Assessing Corporate position2-2 External Assessments
2-2-5 Individual subsidiary analysis
2-2-5-1 market share/momentum analysis
Profiles the characteristics and strategies
of rival companies and their performances
along key competitive dimensions.
2-Assessing Corporate position
2-2 External Assessments
2-2-5 Individual subsidiary analysis
2-2-5-2 competitive benchmarking
2-Assessing Corporate position2-2 External Assessments
2-2-5 Individual subsidiary analysis
2-2-5-2 competitive benchmarking
Industry behaviors are important reference points for
individual firms and company industry comparisons of
worldwide resource deployments give key insights for
strategic decision makers.
using information derived from the global industry
analysis , corporate sales & manufacturing can be
mapped against global industry consumption and
production patterns to provide insights for market
expansion strategies and the sitting of manufacturing
and other facilities.
2-Assessing Corporate position
2-2 External Assessments
2-3 corporate and industry resource deployments
2-Assessing Corporate position
2-2 External Assessments
2-3 corporate and industry resource deployments
3-Formulation of strategic plan
Once management has assessed the current situation
and has evaluated competitors and environmental trends
,it is time to formulate plans for the future .
For most international corporations ,planning is done
with 3-5 year projection in future.
The process is involves making assumptions about
economic growth at the global ,regional and national
levels.
The role of senior management is :
To evaluate current and future plans against past
performances and expected future conditions.
3-Formulation of strategic plan
3-1 subsidiary-level planning
Planning at the subsidiary level starts with
historical analyses of product line sales, costs and
margins being projected into the future .
To place results into perspective , market size ,
growth , and market share trends are taken into
account.
Managerial assessments about effectiveness of
past strategies ,competitors , influential factors on
costs are added in this section
3-Formulation of strategic plan3-1 subsidiary-level planning with 3 years projection
3-Formulation of strategic plan
3-2 Integrating national plans into
regional and global strategies
Once subsidiary managements have completed
their preliminary forecasts , discussions are held
with regional or head office executives to put these
plans into regional or global contexts.
In these plans , critical assumptions are laid out
(economic growth rates , industry market sizes , key
competitor responses , etc) are major strategic
decisions are outlined.
3-Formulation of strategic plan
3-2 Integrating national plans into
regional and global strategies
3-Formulation of strategic plan
Setting objectives : for many
firms ,financial objectives are
emphasized and employee
behaviors are oriented toward
satisfying share – holders and the
expectations of financial
community
3-Formulation of strategic plan
Setting objectives : for many firms ,financial
objectives are emphasized and employee behaviors are
oriented toward satisfying share – holders and the
expectations of financial community
1-Financial perspective: are traditional business
measures that show how firms look to shareholders and
the financial community.
2-Customer perspective: concern how companies look
to their customers, and are measured by:
lead times , quality levels , performance/service level
3-Internal perspective: involve how firms are adapting
their organizations and procedures to maintain and
improve cycle times , quality levels, product/service
costs , technological capabilities and employees skill
levels
3-Formulation of strategic plan
The benefits of well- executed planning processes
1. External benefits: good resource-deployment
decisions. once management has evaluated
corporate performance, market trends, and
projections , and has set goals, decision about
resource deployments must be finalized and
market priorities established.
3-Formulation of strategic plan
The benefits of well- executed planning processes
This figure illustrates the process for the Asian division
of a hypothetical international corporation
3-Formulation of strategic plan
The benefits of well- executed planning processes
2 . Internal benefits:
1-Defining the strategic direction of the corporation.
2-Providing insights into competitors strategies and
how to compete against industry rivals.
3-Systematic incorporation of political , economic ,
societal , and technological industry change drivers
into global , regional, and national strategies.
4-Concise guidance for geographic strategies and
international resource commitments.
5-providing direction at the subsidiary level by
identifying performance criteria for product lines by
benchmarking competitor strengths and weaknesses.
4- Market Screening and risk assessments
Once managements have assessed past and
present company performances and looked at
future opportunities within their given industries,
they must assess the relative risks of operating in
different countries.
This involves evaluating country risks on a
comparative basis(using the same criteria)and for
individual markets , to gain critical insights about
how to operate and manage risk in those countries.
4- Market Screening and risk assessments
4-1 Seven types of risks :
4-1 Political Risks:
• fractionalization of the political spectrum
•Numerous linguistic, ethic , and religious
factions
•Restrictive means of retaining power
•Evidence of xenophobia , nepotism , or
corruption
•Poor social conditions
•Existence of radical , especially leftist, political
movements
4- Market Screening and risk assessments
4-1 Seven types of risks :
4-2 Economic Risks:
Economic risk assessment involves evaluating the stability ,
openness , and market forces orientations of national.
4-3 Financial and Foreign Currency Risks:
Legal frame works for profit , dividend , fees and capital
repatriation
Balance of payments analyses as a currency movements into
and out of a country determine its ability to generate foreign
exchange.
International reserves are countries stocks of foreign
currencies accumulated from exports and capital inflows and
their gold holding.
Foreign debt assessments are evaluations of foreign debt
relative to country gross domestic product, with creditor
nations receiving the highest rating.
4-4 Operations Risks:
Political policy continuity
Attitude towards foreign investors
Degree of nationalization
Bureaucratic delays
Use and enforceability of contract
Labor cost and availability , including inclusiveness
or exclusiveness of education opportunities
Availability of professional services and contractors
Quality and cost of local communication
Infrastructure availability: road, rail, water system,
energy sources
Caliber of local managers , partners
Financial institutions and availability of short,
medium , and long term financing
4- Market Screening and risk assessments
4-1 Seven types of risks :
4-5 Legal Risks:
Legal risks are important where companies rely
heavily on contracts (military , industrial , commodity
markets) and when legal recourse may be necessary
( medical products , counterfeit goods)
4-6 Taxation Risks:
Companies that move financial assets , money , and
components extensively through out world markets
are aware of needs to satisfy national tax authorities.
4-7 Security Risks:
For firms that depend on expatriates in their
management of local subsidiaries , personal security
must be evaluated
4- Market Screening and risk assessments
4-1 Seven types of risks :
• Two commercial services, business risk services(BRS) and
world markets online (WMO) , are constructed.
•Market covered: BRS covers about 50 markets ; WMO
takes in about 150 countries.
BRS:
assesses15 factors in its operations risk index and weights
them differentially
105 experts rates country conditions from 0 (unacceptable
conditions) to 4 (superior conditions) to total 100,the perfect
operating environment
WMO:
Provides measurement of 6 dimensions: political, economic,
legal, tax, operations, and security.
The sum and average of all six dimensions yields an overall
assessment of country risk, varying from 1-1.99(insignificant to
low risk) to 4 -5(very high to extreme risk)
4- Market Screening and risk assessments
4-2 Business risk evaluation methodologies