©2004 Prentice Hall11-1 Chapter 11: International Strategic Management International Business, 4 th Edition Griffin & Pustay

©2004 Prentice Hall11-2 Chapter Objectives_1  Characterize the challenges of international strategic management  Assess the basic strategic alternatives available to firms  Distinguish and analyze the components of international strategy

©2004 Prentice Hall11-3 Chapter Objectives_2  Describe the international strategic management process  Identify and characterize the levels of international strategies

©2004 Prentice Hall11-4 International Strategic Management Comprehensive and ongoing management planning process aimed at formulating and implementing strategies that enable a firm to compete effectively internationally

©2004 Prentice Hall11-5 Fundamental Questions  What products and/or services does the firm intend to sell?  Where and how will it make those products or services?  Where and how will it sell them?  Where and how will it acquire the necessary resources?  How does it expect to outperform its competitors?

©2004 Prentice Hall11-6 Factors Affecting International Strategic Management for U.S. Firms  Language  Culture  Politics  Economy  Governmental interference  Labor  Labor relations  Financing  Market research  Advertising  Money  Transportation/ communication  Control  Contracts

©2004 Prentice Hall11-7 Sources of Competitive Advantage for International Businesses  Global efficiencies  Multinational flexibility  Worldwide learning

©2004 Prentice Hall11-8 Japanese MNC Matsushita has location efficiencies by producing microwaves in Shanghai to take advantage of China’s low labor costs

©2004 Prentice Hall11-9 Strategic Alternatives  Home replication strategy  Multidomestic strategy  Global strategy  Transnational strategy

©2004 Prentice Hall11-10 Figure 11.1 Strategic Alternatives Global Strategy The firm views the world as single marketplace. Primary goal is to create standardized products Home Replication The firm uses the core com- petency or firm-specific advantage it developed at home Multidomestic Strategy The firm operates as a collection of relatively independent Subsidiaries focusing on domestic market Transnational Strategy The firm attempts to combine the benefits of global scale efficiencies with the benefits of local responsiveness Low High Pressures for Local Responsiveness and Flexibility Pressures for Global Efficiencies High Low

©2004 Prentice Hall11-11 Components of International Strategy  Distinctive competence  Scope of operations  Resource deployment  Synergy

©2004 Prentice Hall11-12 Distinctive Competence  Answers the question –What do we do exceptionally well, especially as compared to our competitors?  Represents important resource to the firm

©2004 Prentice Hall11-13 Scope of Operations  Answers the question –Where are we going to conduct business?  May be defined by –Geographical region –Market or product niches within regions –Specialized market niches

©2004 Prentice Hall11-14 Resource Deployment  Answers the question –Given that we are going to compete in these markets, how will we allocate our resources to them?  May be specified by –Product lines –Geographical lines

©2004 Prentice Hall11-15 Synergy  Answers the question –How can different elements of our business benefit each other?  Goal is to create a situation where the whole is greater than the sum of the parts

©2004 Prentice Hall11-16 The Internet makes business through virtual markets possible anytime and anywhere!

©2004 Prentice Hall11-17 Figure 11.2 Steps in International Strategy Formulation Develop a Mission Statement Perform a SWOT Analysis Set Strategic Goals Develop Tactical Goals and Plans Develop a Control Framework

©2004 Prentice Hall11-18 Mission Statements  Clarifies the organization’s purpose, values, direction  Communicates firm’s strategic direction  Specifies firm’s target customers and markets, principal products, geographical domain, core technologies, concerns for survival, plans for growth and profitability, basic philosophy, and desired public image

©2004 Prentice Hall11-19 Mission Statements  Hershey Foods –No. 1 confectionary company in North America, moving toward worldwide confectionary market share leadership  Carpenter Technology –Major, profitable, and growing international producer and distributor of specialty alloys, materials, and components

©2004 Prentice Hall11-20 Environmental Scanning  Environmental scan: systematic collection of data about all elements of the firm’s external and internal environments –Markets –Regulatory issues –Competitors’ actions –Production costs –Labor productivity

©2004 Prentice Hall11-21 SWOT Analysis  Strengths  Weaknesses  Opportunities  Threats

©2004 Prentice Hall11-22 Control Framework  Set of managerial and organizational processes that keep firm moving toward its strategic goals  Feedback loop prompts revisions in earlier steps in strategy formulation process

©2004 Prentice Hall11-23 Figure 11.3 The Value Chain

©2004 Prentice Hall11-24 Levels of International Strategy  Corporate Strategy  Business Strategy  Functional Strategy

©2004 Prentice Hall11-25 Corporate Strategy  Single-Business Strategy  Related Diversification  Unrelated Diversification

©2004 Prentice Hall11-26 Business Strategy  Differentiation  Overall Cost Leadership  Focus

©2004 Prentice Hall11-27 Functional Strategies  Financial  Marketing  Operations  Human Resource  R&D