Group 1 Seth Schulz, Daniel Lujan, Jacob Martin Chapter 8 Strategic Management in Action

The International Environment 8.1 Important aspects of International Environment ◦ Legal-Political Environment ◦ Economic Environment ◦ Cultural Environment

Legal-Political Environment Legal-Political environment in the U.S. is stable ◦ Slow changes, legal and political procedures are well established, laws governing actions of individuals and institutions are fairly stable Other Countries are different ◦ Deutsche Bank’s assessment of global political risk categorizes countries into different stability categories such as maximum, high, moderate, low, and failed states

Legal-Political Environment cont… Maximum stability ◦ U.S., Spain, Japan, Germany, Australia Low stability ◦ Bosnia, Nigeria, North Korea Failed state ◦ Haiti, Sudan, Somalia Countries will low stability levels face greater uncertainty and strategic threats

Economic Environment Important factors ◦ Currency exchange rates  Timing of conversion is crucial ◦ Inflation rates  How fast are prices for products and services rising ◦ Tax Policies  Some countries more restrictive than others

Cultural Environment National culture – values and attitudes shared by individuals from a specific country that shape their behavior and their beliefs about what is important ◦ Global Oil Company  Employee productivity in Mexico plants Once strategic managers are familiar with the opportunities and threats found in the international environment, they can begin to look at strategies for doing business internationally

Cultural Environment cont… Two frameworks for assessing a company’s culture ◦ Geert Hofstede – Five dimensions  Indivdualism vs.. Collectivism – degree to which people in a country want to act as individuals or as members of groups  Power distance – measure of the extent to which a society accepts that power in institutions and organizations is distributed unequally

Cultural Environment cont…  Uncertainty avoidance – degree to which people tolerate risk and prefer structured over unstructured situations  Achievement vs. Nurturing – degree to which a country values assertiveness and competitiveness versus relationships and concern for others  Long term vs. Short term orientation – measure of a country’s orientation toward life and work ◦ Global Leadership and Organizational Behavior Effectiveness (GLOBE)  Ongoing investigation of cross-cultural leadership behaviors and focuses more on the managerial and leadership implications of cultural differences

Cultural Environment cont… Nine dimensions ◦ Assertiveness, future orientation, gender differentiation, uncertainty avoidance, power distance, individualism/collectivism, in-group collectivism, performance orientation, and humane orientation

International Strategic Decisions 8.2 Multicountry Approach – an organization’s strategies vary according to the countries in which it does business. ◦ Based on developing a differentiation advantage ◦ Products are tailored to fit customer tastes and preferences ◦ Marketing and distribution are adapted to local customs and cultures ◦ Competitive actions are chosen to fit the unique circumstances of the market

International Strategic Decisions Global Approach – strategies are basically the same in all countries in which the organization does business ◦ Designed to help develop a low cost advantage ◦ More emphasis on globally integrating operations rather than on local market responsiveness ◦ Products have minor variations but emphasizes coordination between functions and business units and more sharing of capabilities, competencies, and technologies across the functions and units

International Strategy Alternatives When a company decides to expand into other countries, it has several alternatives to use ◦ Exporting – organization makes producs in its home country and transports those products to other countries ◦ Importing – selling products at home that are made in another country

International Strategy Alternatives cont… ◦ Licensing – an arrangement in which a foreign license buys the rights to manufacture and market a company’s product in that country for a negotiated fee ◦ Franchising – company sells franchisees in other countries limited rights to use its brand name in return for a lump sum payment and a share of the franchisee’s profits ◦ Direct Investment – organization actually owns assets in another country

International Strategy Alternatives cont… Born global firm – an organization which chooses to go international from founding

Small Business - Independent business having less than 500 employees. Entrepreneurial Venture- -pursue opportunities, are characterized by innovational practice and growth and profitability as their main goal

Why are they important. Job Creation ◦ Small business provide up to 80% of all jobs Number of New Start ups ◦ Due to the evolving markets Innovation ◦ Creating, changing experimenting, transforming and revolutionizing

Planning (Value??) Lies more in doing (the process itself) than formalizing a plan.

External analysis Importance of information, exploit new idea and competitive advantages Changes in the market (customer needs, demographics Opportunities

Internal analysis Assessing the strengths and weaknesses Know your resources, capabilities, and core competency.

The Boiled Frog Phenomenon Picture you tube

Strategy choices Extent and range of possible strategy varies Focus strategy Avoid head to head competition Decision will come down to resources, capabilities and core competency.

Strategy Evaluation Goal Attained Performance trends in comparison to competitors

Similar issues faced (SM & LG) Human resources ◦ Getting the right people and keeping the right people Innovation and Flexibility ◦ An advantage for Small and Entrepreneurial ventures

Creative Destruction Process in which existing products, processes, ideas, and businesses are replaced with better ones, Defined by Economist Joseph Schumpeter.

8.4 SM Practices & Issues for Not- for-Profit and Public Sector Organizations Not-for-Profit Organization Def: Organization whose purpose is to provide some service or good with no intention of earning a profit in order to meet the requirements of US tax code section 501(c)(3) as a tax exempt organization. Still earn revenue, must cover costs

NFP Revenues Revenue comes from a number of sources Taxes Dues Grants Permits, user fees, and charges Product (good or service) sales Donations of time or money

NFP Revenues If revenues exceed costs… ◦ Use extra to improve goods or services ◦ Reduce price for those goods or services ◦ Put aside for years where revenues do not meet expenses

Public Sector Organizations Def: an NFP that’s created, funded, and regulated by the public sector or government They provide public services that a society needs to exist and operate, such as ◦ police protection, ◦ paved roads, ◦ recreational facilities, ◦ care for needy and disabled…. All to enhance and support life

Other Types of NFP’s Educational ◦ Public schools, colleges… Charitable ◦ United way, American Cancer Society… Religious ◦ Churches, synangogues… Social Service ◦ American Red Cross, Habitat for Humanity… Cultural/Recreational Professional membership Cause Related Foundations

Why are NFP’s Important They provide many of society’s essential needs that can’t be, or shouldn’t be provided by For-Profit organizations Can provide funds to researchers (American Cancer Society) Encourages, facilitates, and protects the development and continued existence of for-profit orgs

SM Processes in NFP’s Need competitive advantage because they compete for resources and customers Researchers have found positive link between SM and NFP’s

External & Internal Environmental Analysis External Analysis- provides an assessment of the positive and negative trends that might affect the NFP’s strategic decisions. Internal Analysis- provides assessment of the organizations resources and capabilities and its strengths and weaknesses ◦ Internal Audits popular tool for assessing capabilities ◦ SWOT analysis used to assess various strategy options and choices

Strategy Choices Functional Level Must have strategies that allow it to do what it is set up to do Functional Strategies are the ways an org might choose to get resources and capabilities to deliver their goods/services Difference between Functional Strategy NFP and FP ◦ NFP’s don’t have wide variety of alternatives from which to choose because of scarce and limited resources or because of external constraints

Competition between NFP’s Compete to Keep costs low Be different Focusing on a specific niche Must develop and exploit a sustainable competitive advantage to ensure continued existence

Strategy Evaluation Most difficult process for NFPs that accurately assesses success ◦ No measuring stick (ex. Profits) No clearly stated performance standard More focus on what resources come into the organization, than how resources are used Still must evaluate to see if the plan was effective

Specific Strategic Issues Many people within NFPs do not understand or even believe managers are needed ◦ Not a business for profit, so why run it like one? Closely intertwined with politics ◦ Public sectors “owned” by public = many different demands

Cause Related Marketing Business pairs up with a NFP for a social cause that fits well with their products ◦ Ex: Relay for Life and all its sponsors Benefits NFP by getting greater exposure Mainly to enhance the image of supporting company

Unique Strategies NFP Marketing Alliances ◦ Strategic partnership between NFP and one or more corporate partners in which the corporate partner agrees to do marketing actions that will benefit both the NFP and the corporate partner Transaction based Promotion ◦ Corporate partner donates set amount of food, money, or supplies in proportion to sales (TOM’s shoes)

Joint issue Promotion ◦ Alliance where partners agree to tackle a social problem through actions such as advertising and distributing products Licensing ◦ NFP receives fee or percentage of revenues who use license entity

In the End Yes, NFP organizations need SM to get ahead NFPs important because they provide many essential societal needs Marketing alliances are great way for NFPs to cope with uncertain revenue sources