Chapter 12 Strategic Planning

Learning Objectives Outline the process of strategic planning in the context of the global marketplace. Examine both the external and internal factors that determine the conditions for development of strategy and resource allocation. Illustrate how best to utilize the environmental conditions within the competitive challenges and resources of the firm to develop effective programs. Suggest how to achieve a balance between local and regional/global priorities and concerns in the implementation of strategy.

Strategic Planning Globalization The Strategic Planning Process

Globalization Globalization reflects a business orientation based on the belief that the world is becoming more homogeneous and that distinctions between national markets are not only fading but, for some products, will eventually disappear.

Globalization Drivers Both internal and external factors will create favorable conditions for development of strategy and resource allocation on a global basis. These factors can be divided into: Market Factors Cost Factors Environmental Factors Competitive Factors

Market Factors The world customer gains new meaning. Developed infrastructures lead to attractive markets for other products. Similarities in demand conditions facilitates product design. Channels of distribution are becoming more global. Technology changes the landscape of markets.

Cost Factors Two powerful cost-related globalization drivers. Cost inefficiencies Duplication of effort

Environmental Factors Removal of physical, fiscal, and technical barriers to further facilitate globalization of markets. Rapid technological evolution contributes to globalization efforts. Smaller bureaucracies of mininationals facilitates new product development and allows for opportunities to seize new markets.

Competitive Factors Companies may have to be the first to do something new, or to preempt competitors’ moves. Market presence may be necessary.

The Strategic Planning Process Formal strategic planning contributes to: Non-financial Objectives Financial Performance

The Strategic Planning Process Involves: Adjusting the core strategy. Formulating global marketing strategy. Developing global programs. Implementing global programs.

Core Strategy Assessing and Adjusting: Forces determining business success are common to different countries. Companies must assess their own readiness for necessary moves Necessary Participants: Executives from marketing, production, finance, logistics and procurement.

Formulating Global Strategy The choices: Cost Leadership Differentiation Focus

Segmentation The recognition that groups within markets differ sufficiently to warrant individual approaches. Allows global companies to take advantage of the benefits of standardization. Involves looking at markets on a global or regional basis.

Developing Global Programs Decisions involved in developing a global program. The degree of standardization in the product offering. The marketing program beyond the product variable. Location and extent of value-adding activities. Competitive moves to be made.

Product Offering Product standardization may result in significant cost savings.

Marketing Approach Glocalization Uniformity is sought especially in elements that are strategic in nature, whereas care is taken to localize necessary tactical elements. Glocalization

Location of Value-Added Activities Cost Reduction: Pool Production Exploit Factor Costs Concentrate Activities service

Competitive Moves Global companies may have to respond to competitive moves a variety of markets. Cross-subsidization may offer competitive advantage. use recourses accumulated in one part of world

Implementing Global Programs Successful companies strive to balance local and global concerns. Too much local production may reduce import positioning. Too little planning involvement by the country organization may lead to NIH.

Avoiding The Not-Invented-Here Syndrome Ensure that local managers participate in the development of strategies and programs. Encourage local managers to generate ideas. Maintain local and global product portfolios. Allow local managers to control budget.

Localizing Global Moves The role of headquarters staff should be one of coordination, and leveraging the resources of the corporation. Globalization calls for the centralization of decision-making authority beyond that of the multidomestic approach. Executing global account management programs builds relationships with customers and allows for development of internal systems and interaction. Decision-making in global companies supports the goal of treating the world as a single market.