INTERNATIONAL COMPETITIVE STRATEGY

International Strategy The way firms make choices about acquiring and using scarce resources in order to achieve their international objectives Involves decisions that deal with all the various functions, products and regional unit activities of a company

The goal is to achieve and maintain a unique and valuable position both within a nation and globally: competitive advantage Competitive advantage is the ability of a company to have higher rates of profits than its competitors

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

Global Strategic Planning Provides a means for top management to Identify opportunities and threats Formulate strategies to handle them Stipulate how to finance and manage the strategies’ implementation Provides consistency of action Provides a thorough, systematic foundation for making decisions

Global Strategic Planning Process The process of strategic planning provides a formal structure in which managers Analyze the company’s external environments Analyze the company’s internal environment Quantify goals Define the company’s business and mission Set corporate objectives Formulate strategies Make tactical plans

Define the Corporate Business, Vision, and Mission Statements These broad statements communicate to the corporation’s stakeholders what the company is and where it is going and the values that will guide the behavior of the organization’s members Mission statement A broad statement that defines the organization’s purpose and scope

Define the Corporate Business, Vision, and Mission Statements Vision Statement Description of the company’s desired future position if it can acquire the necessary competencies and successfully implement its strategy Values Statement Clear and concise description of the fundamental values, beliefs, and priorities of the organization’s members

Set Corporate Objectives Direct the firm’s course of action Maintain it within the boundaries of the mission Ensure its continuing existence In order to implement an effective strategy, it is important to quantify objectives

Formulate Competitive Strategies Action plans to enable organizations to reach their objectives Generally, participants in the strategic planning process will formulate alternative competitive strategies along with action plans that seem plausible

Formulate Competitive Strategies In the international market companies confront two opposing forces Reduction of costs Adaptation to local markets Basic strategies address these pressures Home Replication Multidomestic Global Transnational

Cost and Adaptation Pressures and Their Implications for International Strategies

Home Replication Strategy Used when companies typically centralize product development functions in their home country Then transferred to foreign markets in order to capture additional value Microsoft

Multidomestic Strategy Used when there is strong pressure for adaptation to local market Decision making decentralized to allow for quick change Increases cost structure

Global Strategy 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 in only one or a few areas Results in limited ability to adjust to meet customer needs and higher transportation costs Intel, Boeing

Transnational Strategy Used when a company confronts pressures for both cost effectiveness and local adaptation Company locations based on where most beneficial for each activity Upstream value chain activities will be more centralized Downstream activities will be more decentralized Achieving an optimal balance is challenging Strategic decisions, structures and systems will be complex

Scenarios Multiple, plausible stories about the future Often the “what if” questions 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 a change in the political party in power

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

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 Budget During planning, budgets coordinate the functions within the firm and provide management with a detailed statement of future operating results

Plan Implementation Facilitators Policies and Procedures Policies Broad guidelines to assist lower-level managers in handling recurring problems Permit discretionary action and interpretation The object is to economize managerial time and promote consistency among the various operating units

Plan Implementation Facilitators Procedures Prescribe how certain activities will be carried out Ensure uniform action on the part of all corporate members Facilitate comparison among operational units

Performance Measures Assess if the strategy and its implementation are proceeding successfully and what modifications may be needed

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

Methods of Planning Top-down planning Begins at the highest level in the organization and continues downward definition of the business mission statement company objectives financial assumptions content of the plan special issues

Methods of Planning Bottom-Up Planning Iterative Planning Begins at the lowest level in the organization and continues upward Iterative Planning Repetition of the bottom-up or top-down planning process until all differences are reconciled