Ch 9 Strategic Planning SP

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Ch 9 Strategic Planning (SP) The Growing
Need for SP FDI Grew 3 times faster than Trade 4
times faster than the World GDP Ford in
Thailand Facing Shrinking Demand for Auto SP
Offer the right combination of price fin Same
SP worked in Mexico
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German Publisher Bertelsmann in China SP -
Created a book club 2000 members a day
Changed the way Chinese buy books - Variety of
books, low costs, home delivery - Plan to Expand
into other 4 Asian Nations
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Effect of SP Mixed Benefits of SP -
Help coordinate and monitor far-flung
operations - Help deal with pol risk,
competition, currency issue SP doesnt always
lead to higher profit - HQ interference with
sub, profit suffers - Planning Intensity of MNCs
Has a few foreign sub best with medium
level Has high sales overseas best with
high level The Specifics of the situation
dictates success
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• Citibank in China (1902-49, 1984-Now)
• Banking industry is closely regulated
• 500 B savings with Chinese consumers
• 70 of fin assets are in 4 state banks
• Citi got RMB license in 1995
• Make RMB loans only to foreign firms
• Opportunities after Chinas Joining WTO
• Can make RMB loans to elite local firms
• Can offer consumer financing service
• B2B

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Approaches to SP 1. Eco
Imperative Based on cost, differentiation,
segmentation If much value are added in upstream
activities e.g. Auto, chemicals, heavy electrical
system If the product is a generic good, e.g. PC
in EU Based on price, not on brand name or
support service Global Outsourcing e.g. Limited
or Target Li Fung supply chain magt
company
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2. Political Imperative - Country
responsive, protect local mkt Much value are
added in downstream activities e.g. Insurance,
consumer packaged goods Success based on mktg,
sales, service Thums Up, an Indian bottler
created in 1970s Bought by Coca-Cola in
1993 Thums Up outsells Coke, Coca-Cola relented.
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p. 256 Box Kodak/Fuji Dispute K F
blocked its growth in Japan F K has type of
monopoly in US - Investment K 750m F
2b - Mkt share K 10 F 11 - World
Profit Margin K 13 F 15.5 - Wholesale
photofinishing K 70, F 430
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Busi. Relationships K with retailers F
with distributors Govt Role K Japan not
enforce antitrust law, and Help set up the
system Thus F can subsidize its dumping
overseas F US not enforce consent decrees Both
compete and cooperate, e.g. smart film
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3. Quality Imperative TQM - Meet/exceed
customers expectations - Continuous
improvement As an approach to strategy, TQM
covers SF/SI - Consumers inside and outside -
TQM strategy is formulated at top magt. -
Techniques Inspection, statistical quality
control HRM self managing teams,
empowerment
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• Does Quality Payoff?
• Canadian Nortel Telecom Equipment Maker
• - Heavy RD
• - Acquisitions
• Had 40 global mkt for optical equipment
• Electrolux, Swedish Appliance Maker
• - Appliance industry has low profitability
• - Introduced Elextrolux by Toshiba brand
• - Half of its operating income from N. Am.

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4. Administrative Coordination Based
on merits of individual situation Wal-Marts
Goal - Intl Growth 25-30 Losses in Latin Am.
Why? - Timely delivery - Find suppliers with
right packaging quality - Adapt to the
culture IBM Combine all 4 approaches
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Strategy Formulation 1. Environmental
Scanning Monitor and Forecast External Changes -
Macro-eco and industry performance - Financial
trends, e.g. ex-rates, inflation, - Market
potential and share - Political factors OpenTVs
middle ware for Shanghai Cable Microsoft
purchased 60 of Titus cable firm
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2. Internal Resource Analysis Identify
KFS Airline Price, Safety, Quality Service Auto
Quality, Styling 3. Set Goals and
Plans Profitability and Marketing Dominate
strategic plans More externally
responsive Production, Fin, HR More internally
controlled
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Ford in EU Mkt Share 12 to 8, Goal
10 Traditional Turnaround Strategy - Closing,
More efficiency, Layoff, Cut Cost A Proactive
Strategy - Create a fresh image by new models -
Design a totally revised ad campaign - Develop a
revised dealership network
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• SI
• 1. The Country where to locate
• - Mkt for goods and services
• - Laws (import, local presence, FDI)
• - Government control
• - Incentives by host countries
• Japan (Table 9-3)
• Commercial Property, Merger Acquisitions
• Mexico
• Gate way to N. Am Cost effective Weak peso

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• Consideration for Specific Locale
• within a country
• Access to mkts
• Proximity to competitors
• Transportation and electricity availability
• Mobility of employee, nature of workforce
• Cost

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2. Entry Modes Ownership/Control
Wholly owned sub BP bought Amoco at 48.2
b Daimler-Benz bought Chrysler at 39 b Why be
present in each others mkt Complementary
models Complementary expertise Challenge make
the merger work
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Joint Venture (JV) Equity JV vs.
non-equity JV Licensing Industrial property
right Franchising Established busi. brand
name Export/Import 3. Functional Areas in SI