Chapter 61 Formulating Strategy Chapter 6

2 Strategic Planning and Strategy  strategic planning - The process by which a firm’s managers evaluate the future prospects of the firm and decide on appropriate strategies to achieve long-term objectives.  Strategy - The basic means by which the company competes

Chapter 63 Reasons for Going International  Reactive Reasons Globalization of competitors Trade barriers Regulations and restrictions Customer demands

Chapter 64 Reasons for Going International (contd.)  Proactive Reasons Economies of scale Growth opportunities Resource access and cost savings Incentives

Chapter 65 Steps in Developing International and Global Strategies  Mission and objectives  Environmental assessment  Internal analysis  Competitive analysis  Global and international strategic alternatives  Approaches to world markets  Global Integrative strategies  Using e-business for global expansion  E-global or e-local  Entry strategy alternatives  Strategic choice

Chapter 66 Environmental Scanning  The process of gathering information and forecasting relevant trends, competitive actions, and circumstances that will affect operations in geographic areas of potential interest. – Political instability – Currency instability – Nationalism – International competition

Chapter 67 Internal Analysis  Determines which areas of the firm’s operations represent strengths or weaknesses (currently or potentially) compared to competitors  Focuses on the company’s resources and operations, and global synergies

Chapter 68 Approaches to World Markets  Globalization - refers to the establishment of worldwide operations and the development of standardized products and marketing.  Regionalization (or multilocal) - local markets are linked together within a region

Chapter 69 Pressures to Globalize  Increasing competitive pressure  Declining tariffs  The information technology explosion

Chapter 610 Pressures to Regionalize  Unique consumer preferences  Domestic subsidies  New production technologies

Chapter 611 Global B2B/B2C Strategy Does the exchange provide a technology solution that helps industry-trading partners to do business more efficiently? Is the exchange known to be among the top 3-5 within its vertical industry? Does the exchange offer industry-specific technology and expertise that gives it an advantage over generic exchange-builders?

Chapter 612 Entry Strategy Alternatives (In order of ascending risk)  Exporting  Licensing  Franchising  Contract manufacturing  Turnkey operations  Management contracts  International joint ventures (IJVs)  Fully owned subsidiaries

Chapter 613 International Entry Strategies: Advantages and Critical Success Factors (Exhibit 6-7) StrategyAdvantagesCritical Success Factors Exporting Licensing Franchising Contract Manufacturing Turnkey operations Management Contracts Joint ventures Wholly owned Subsidiaries

Chapter 614 Factors Affecting Choice of International Entry Mode (Exhibit 6-8) Factor Category  Firm Factors  Industry Factors  Location Factors  Venture-specific Factors Examples

Chapter 615 Strategic Choice The strategic choice of one or more of the entry strategies will depend on 1)a critical evaluation of the advantages (and disadvantages of each in relation to the firm’s capabilities, 2)the critical environmental factors, and 3)the contribution that each choice would make to the overall mission and objectives of the company.