Motivations For Companies To Pursue IB Opportunities

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Motivations For Companies To Pursue IB
Opportunities

• Increase profits and sales
• Access new markets
• Protect existing markets, profits, and sales
• Satisfy overall desire for growth

LO1
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The Competitive Challenge Facing Managers of
International Business

• Managers must
• quickly identify and exploit opportunities
  wherever they occur, domestically and
  internationally
• fully understand why, how, where, and when to do
  business in specific world markets
• know the companys strategic mission, its
  strengths and its weaknesses

LO1
3
What is International Strategy?

• International strategy refers to the way firms
  make choices about acquiring and using scarce
  resources in order to achieve their international
  objectives
• It involves
• decisions about which markets to enter with which
  products, when and how
• all the various functions and activities of the
  company and how they interact
• ensuring that strategy is consistent across
  functions, products, and regional units
• a variety of unique demands associated with
  operating internationally

LO1
4
Competitive Advantage

• To create a sustainable competitive advantage, a
  company tries to develop skills that
• create value for customers
• are rare
• are difficult to imitate or substitute for
• are organized in a way that the company can fully
  exploit

LO1
5
Why Plan Globally?

• Companies face forces that are increasingly
  complex, global and subject to rapid change
• Political
• Economic
• Social
• Technological
• Legal
• Environmental

LO1
6
Global Strategic Planning Process

• The global strategic planning process provides a
  formal structure with which managers
• define companys business and mission
• analyze the companys internal and external
  environments
• set corporate objectives
• quantify goals
• formulate strategies
• make a tactical plan

LO2
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Global Strategic Planning Process
LO2
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Uncontrollable Forces Assessment

• The uncontrollable forces assessment involves an
• analysis of domestic, international and foreign
  environments
• recognition of current and future implications
• strategy design to navigate major global trends

LO2
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Analyze Corporate Controllable Variables

• A controllable forces analysis
• is a situational analysis
• involves forecasting
• involves a value chain analysis of firms
  activities from raw materials to end products to
  final customer delivery
• Who are the target customers?
• What value do we deliver to them?
• How will we create this value?

LO2
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The Value Chain
Adapted from M. E. Porter, Competitive Advantage,
New York Free Press, 1985
LO2
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Analyze Corporate Controllable Variables

• Competitive advantage can be gained through
  leveraging organizational knowledge across
  national borders
• Knowledge as a Controllable Corporate Resource
• Capabilities of employees
• Structures, systems, organizational routines
• Build knowledge database and transfer best
  practices
• Protect tacit and explicit knowledge from
  competitors

LO2
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Tacit - Explicit Knowledge

• Tacit Knowledge
• Embedded in individuals
• Difficult to express in words, pictures, formulas
  
• Difficult to transmit to others
• Lost when a valued manager leaves
• Explicit knowledge
• Easy to communicate with words, pictures,
  formulas, etc.
• Can be documented in company-wide knowledge bases

LO2
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Vision and Mission Statements

• Broad statements that communicate to the
  corporations stakeholders
• what the company is
• where it is going
• the values that will guide the organizations
  members behavior

LO3
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Define the Corporate Business, Vision, and
Mission Statements

• The mission statement refers to a road statement
  that defines the organizations purpose and scope
• The vision statement describes the companys
  desired future position if it can acquire the
  necessary competencies and successfully implement
  its strategy
• The values statement is a clear and concise
  description of the fundamental values, beliefs,
  and priorities of the organizations members

LO3
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Set Corporate Objectives

• Objectives
• Direct the firms course of action
• Maintain action within the missions boundaries
• Ensure the missions continuing existence
• To implement an effective strategy quantifiable
  objectives are important

LO3
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Formulate Competitive Strategies

• Competitive strategies and corresponding action
  plans enable organizations to reach their
  objectives
• The strategic planning process will formulate
  alternative competitive strategies along with
  plausible action plans
• Conscious choice of the course to be followed

LO3
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Formulate Competitive Strategies For the
International Market Place

• Formulation of international strategy must
  consider two opposing forces
• Reduction of costs achieved best through
  standardization and global integration of
  operations
• Adaptation to local markets achieved best
  through more local autonomy
• Basic strategy types address pressures for cost
  reduction and local adaptation
• Home Replication
• Multidomestic
• Regional
• Global
• Transnational

LO4
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Cost and Adaptation Pressures and Their
Implications for International Strategies
Adapted from C. Bartlett and S. Ghoshal. Managing
Across Borders The Transnational Solution, 2002
2nd ed., Cambridge Harvard Business Press
LO4
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Home Replication Strategy

• The home replication strategy centralizes product
  development functions in the home country
• developed products are then transferred to
  foreign markets in order to capture additional
  value
• microsoft, mcdonalds
• The company has to possess a distinctive
  competence that local companies lack
• Headquarters maintains control over marketing and
  product strategy
• Subsidiaries leverage the home country
  capabilities

LO4
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Multidomestic Strategy

• The multidomestic strategy is used when there is
  strong pressure for adaptation to local market
• Decision making is decentralized, allowing for
  quick change
• Leads to an increased cost structure
• Excessive adaptation may take away from products
  distinctiveness
• Cost and complexity of coordination can be
  substantial

LO4
21
Global Strategy

• The global strategy is used when a company faces
  strong pressure to reduce costs and limited
  pressure to adapt products for local markets
• Strategy and decision making centralized
• Company offers standardized products and services
• Value chain activities are in only one or a few
  areas
• Limited ability to adjust to meet customer needs
• Higher transportation costs for physical products

LO4
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Transnational Strategy

• The transnational strategy is used when pressures
  for cost effectiveness and local adaptation are
  equally important
• Company locates activities where most beneficial
  for the firm globally
• Upstream value chain activities will be more
  centralized
• Downstream activities will be more localized
• Achieving an optimal balance is challenging
• Strategic decisions, structures and systems will
  be complex

LO4
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Scenarios

• Scenarios refer to multiple, plausible stories
  about the future
• What if questions can reveal weaknesses in
  present strategies
• Types of subjects for scenarios include
• Large and sudden changes in sales (up or down)
• Sudden increases in price of raw materials
• Sudden tax increases
• Change in the political party in power

LO4
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Types of Plans That Can Result From Scenarios

• Contingency Plans
• For the best-or-worst-case scenarios
• For critical events that could have a severe
  impact on the firm
• Tactical Plans (Operational)
• Spell out in detail how objectives will be
  reached in each case
• Short-term

LO4
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Strategic Plan Features Sales Forecast and Budget

• Sales Forecast
• Provides management with an estimate of the
  revenue to be received and the units to be sold
• Provides assumptions for cost and capital
  requirements
• Budget
• During planning, budgets coordinate the functions
  within the firm and provide management with a
  detailed statement of future operating results

LO4
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Performance Measures

• Performance measures are used to assess strategy
  and its implementation
• Successfully on track?
• What modifications may be needed?
• Measures of the companys success
• Financial, technological, and human resources
• Measures of effectiveness
• Measures of the companys progress

LO4
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Kinds of Strategic Plans

• Time Horizon
• Strategic plans may be classified as short,
  medium, or long term
• Level in the Organization
• Each organizational level will have its level of
  plan
• Functional area

LO4
28
New Directions in Planning

• Who does the strategic planning?
• Top down? Regional input?
• Firms have introduced innovation to the planning
  process
• Firms consult with customers and suppliers who
  have firsthand experience with the firms markets

LO5
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New Directions in Planning

• How Planning is Done
• Many firms have moved toward less structured
  formats and much shorter documents
• Contents of the Plan
• Top managers are much more concerned with issues,
  strategies, and implementation

LO5
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Summary New International Planning Process

• Top management assumes explicit strategic
  decision-making role, decides how things ought to
  be, does not focus on analyses of how things are
• Planning changes from forecasting to creativity
• Processes and tools that assume a future much
  like the past must be replaced by a mind-set
  focused on change as a source of competitive
  advantage
• Planners change from purveyors of incrementalism
  to crusaders for action
• Strategic planning restored to core of line
  management responsibilities

LO5
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Competitor Analysis

• Competitor Analysis
• Process in which principal competitors are
  identified and their objectives, strengths,
  weaknesses, and product lines are assessed
• Industrial Espionage
• Act of spying on competitors to learn secrets
  about strategy and operations

LO6
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Competitor Intelligence Systems

• Competitor intelligence systems are procedures
  for gathering, analyzing, and disseminating
  information about competitors
• Benefits include ability to
• improve bidding success
• identify competitors key customers
• identify plant or other facility expansion plans
• improve understanding of competitors products
  and processes

LO6
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Sources of Information

• Source of information within the firm include
  sales representatives, librarians, and technical
  and RD people
• Information can also be sourced from published
  material including technical journals, databases,
  the internet, industry reports, and public
  documents
• Suppliers and customers can be information
  sources
• The employees of competitors can provide
  information
• Direct observation or analysis of physical
  evidence is another way to gain information
• Technical people
• Reverse engineering

LO6
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Benchmarking

• Benchmarking measures a firms performance
  against the performance of others
• Internal compares firms operations amongst each
  other
• Competitive compares firm with a direct
  competitor
• Functional compares similar functions of firms
  in industry
• Generic compares operations in unrelated
  industries

LO6