1. INTERNATIONAL BUSINESS STRATEGIES Andrey G. Medvedev, Professor September 14, 2009 CEMS MIM Programme

2. © Andrey Medvedev 2. INTERNATIONAL STRATEGIC MANAGEMENT 1. STRATEGIC MANAGEMENT PROCESS AT MNC 2. CORPORATE STRATEGY 3. BUSINESS STRATEGIES. COMPETITIVE ADVANTAGE 4. VALUE CHAIN. CONFIGURATION OF ACTIVITIES 5. CREATING VALUE THROUGH FOREIGN EXPANSION 6. STRATEGY FORMULATION

3. © Andrey Medvedev INTERNATIONAL STRATEGIC MANAGEMENT Responsibilities of International Manager Responsibilities of International Manager: foreign strategic business area n Select a foreign strategic business area internationalisation motives n Define internationalisation motives and company’s competitive advantages strategic analysis n Undertake a strategic analysis of an internal and external environment of a company’s international operations foreign expansion strategic alternative n Formulate a foreign expansion strategic alternative strategic alliances with foreign partners n Establish strategic alliances with foreign partners

4. © Andrey Medvedev INTERNATIONAL STRATEGIC MANAGEMENT n INTERNATIONAL STRATEGY PROCESS INCLUDING SOME EXTRA DATA FROM AN INTERNATIONAL ENVIRONMENT n INTERNATIONAL STRATEGY PROCESS IS LIKE A DOMESTIC ONE WITH INCLUDING SOME EXTRA DATA FROM AN INTERNATIONAL ENVIRONMENT

5. © Andrey Medvedev INTERNATIONAL STRATEGY PROCESS n INTERNATIONAL STRATEGY PROCESS n INTERNATIONAL STRATEGY PROCESS CONSISTS OF SEVERAL COMPONENTS AS FOLLOWS: n EVALUATION n EVALUATION OF A CORPORATION CURRENT PERFORMANCE RESULTS n ANALYSIS n ANALYSIS OF THE STRATEGIC FACTORS n FORMULATION n STRATEGY FORMULATION n IMPLEMENTATION CONTROL n STRATEGY IMPLEMENTATION AND CONTROL

6. © Andrey Medvedev CONVERGENCE GLOBAL PRODUCTS GLOBAL CUSTOMERS n GLOBALISATION MEANS APPEARANCE OF GLOBAL PRODUCTS AND GLOBAL CUSTOMERS (WITH SIMILAR NEEDS) EFFECTIVE STRATEGIES n MULTINATIONAL FIRMS SEEK GLOBAL PRODUCTS AND AT THE SAME TIME SEEK EFFECTIVE STRATEGIES WHICH MAY NOT DIFFER IN DIFFERENT COUNTRIES n WORLD-WIDE KNOWLEDGE OF SUCCESSFUL STRATEGIES n WORLD-WIDE KNOWLEDGE OF SUCCESSFUL STRATEGIES IS BEING CREATED COPY SUCCESSFUL PRACTICES n MANAGERS IN ALL COUNTRIES COPY SUCCESSFUL PRACTICES n SIMILAR STRATEGIES ARE USED IN ALL COUNTRIES

7. © Andrey Medvedev LEVELS OF INTERNATIONAL STRATEGY n CORPORATE (PORTFOLIO) n CORPORATE (PORTFOLIO) STRATEGY –WHAT? –WHAT? TO PRODUCE AND SELL? –WHERE? –WHERE? TO BE SUPPLIED FROM, TO MANUFACTURE, TO SELL? –WHEN? –WHEN? TO START BUSINESS? n BUSINESS (COMPETITIVE) n BUSINESS (COMPETITIVE) STRATEGY –HOW? INTERNATIONAL COMPETITIVE ADVANTAGE –HOW? TO COMPETE IN EACH OF THE SBA SELECTED? (WHAT IS INTERNATIONAL COMPETITIVE ADVANTAGE?) n FUNCTIONAL n FUNCTIONAL STRATEGIES (POLICIES) RESEARCH AND DEVELOPMENTPRODUCTION MARKETINGHUMAN RESOURCESFINANCIAL –INTERNATIONAL RESEARCH AND DEVELOPMENT, PRODUCTION, MARKETING, HUMAN RESOURCES, FINANCIAL STRATEGY

8. © Andrey Medvedev CORPORATE STRATEGY: DEFINING STRATEGIC BUSINESS AREAS (SBA) n SINGLE-BUSINESS STRATEGY n VERTICAL INTEGRATION n INDUSTRIAL RELATED DIVERSIFICATION (MATCHING) –COMBINATION OF BUSINESS ACTIVITIES IN DIFFERENT BUT RELATED INDUSTRIES n INDUSTRIAL UNRELATED DIVERSIFICATION –COMBINATION OF ACTIVITIES IN TOTALLY DIFFERENT INDUSTRIES

9. © Andrey Medvedev STRATEGIC BUSINESS AREAS: FAZER GROUP n Bakeries n Staff and students restaurants n Confectionery

10. © Andrey Medvedev GLOBAL DIVERSIFICATION n RELATED GLOBAL DIVERSIFICATION HOMOGENEOUSCLUSTER –ACTIVITIES OF A GLOBAL FIRM ACROSS COUNTRIES WITHIN RELATIVELY HOMOGENEOUS CLUSTER OF COUNTRIES n UNRELATED GLOBAL DIVERSIFICATION HETEROGENEOUSREGIONS –ACTIVITIES OF A GLOBAL FIRM ACROSS HETEROGENEOUS REGIONS

11. © Andrey Medvedev BUSINESS STRATEGIES n GENERIC STRATEGY n GENERIC STRATEGY IS A BASIC WAY THAT COMPANIES ACHIEVE AND SUSTAIN COMPETITIVE ADVANTAGE n COMPETITIVE ADVANTAGE n COMPETITIVE ADVANTAGE TAKES PLACE WHEN A COMPANY CAN OUTDO ITS COMPETITORS IN ATTRACTING AND MAINTAINING ITS TARGET CUSTOMERS n GENERIC STRATEGIES –DIFFERENTIATION –COST LEADERSHIP n COMPETITIVE SCOPE n COMPETITIVE SCOPE SHOWS HOW BROADLY A FIRM TARGETS ITS PRODUCTS OR SERVICES FOCUS STRATEGY –GENERAL VS. FOCUS STRATEGY

12. © Andrey Medvedev VALUE CHAIN VALUE CHAIN n ALL THE ACTIVITIES OF THE FIRM “TO DESIGN, PRODUCE, MARKET, DELIVER, AND SUPPORT ITS PRODUCT” MAY BE PRESENTED AS THE VALUE CHAIN (MICHAEL PORTER) R & DR & DInput Logistics OperationsMarketing and Sales Primary activities UpstreamDownstream Service (Repair) Support activities OD, Control, HRM

13. © Andrey Medvedev INTERNATIONAL VALUE CHAIN ANALYSIS INTERNATIONAL COMPETITIVE ADVANTAGE WHICH ACTIVITIES ARE BEST LOCATED IN WHICH COUNTRIES n IN ESTABLISHING AN INTERNATIONAL COMPETITIVE ADVANTAGE, THE MNC MUST DECIDE WHICH ACTIVITIES ARE BEST LOCATED IN WHICH COUNTRIES n CONFIGURATION CONCEPT –DESCRIBES THE EXTENT TO WHICH VARIOUS OF THE COMPANY’S ACTIVITIES ARE CONCENTRATED IN ONE LOCATION OR DISPERSED ACROSS A NUMBER OF LOCATIONS

14. © Andrey Medvedev COMPETENCIES, RESOURCES, CAPABILITIES DISTINCTIVE COMPETENCIES n TO ACHIEVE HIGHER VALUE OR LOWER COST FOR ITS PRODUCTS, FIRMS MUST TAKE ADVANTAGE OF THE DISTINCTIVE COMPETENCIES IN THEIR VALUE CHAIN –STRENGTHS –STRENGTHS ANYWHERE IN THE VALUE CHAIN THAT ALLOW A FIRM TO OUTPERFORM RIVALS –EFFICIENCY, QUALITY, INNOVATIVENESS, CUSTOMER SERVICES n COMPETENCIES COME FROM RESOURCES AND CAPABILITIES n RESOURCES –INPUTS INTO PRODUCTION OR SERVICE PROCESSES –TANGIBLE AND INTANGIBLE ASSETS n CAPABILITIES –THE ABILITY OF FIRMS TO USE THEIR AVAILABLE RESOURCES TO REDUCE COST OR DIFFERENTIATE PRODUCTS (SERVICES)

15. © Andrey Medvedev SUSTAINABLE COMPETITIVE ADVANTAGE SUSTAINABLE n TO HAVE LONG-TERM PROFITABILITY, A FIRM MUST HAVE A SUSTAINABLE SUCCESSFUL LOW-COST OR DIFFERENTIATION STRATEGY WHICH IS NOT EASILY NEUTRALISED OR ATTACKED BY COMPETITORS n SUSTAINABILITY n SUSTAINABILITY DEPENDS ON A FIRM’S CAPABILITIES WHICH HAVE TO BE –VALUABLE –RARE –DIFFICULT TO IMITATE –NON-SUBSTITUTABLE RESOURCES CAPABILITIES SUSTAINABLE DISTINCTIVE COMPETENCIES LOW COST OR DIFFERENTIATION STRATEGY COMPETITIVE ADVANTAGE HIGHER PROFIT used effectively, mean provide leads to support and

16. © Andrey Medvedev CREATING VALUE IN GLOBAL INDUSTRIES n TRANSFERRING CORE COMPETENCE n TRANSFERRING CORE COMPETENCE ABROAD –HELPS COMPANIES UTILISE THEIR COMPETENCIES BETTER n GLOBAL LEARNING –HELPS COMPANIES ENHANCE THEIR CORE COMPETENCIES n LOCATION ECONOMY LOCATION ADVANTAGES BETTERCONDITIONS BEST CHEAPEST n LOCATION ECONOMY (LOCATION ADVANTAGES) TAKING ACTIVITIES IN COUNTRIES WITH BETTER CONDITIONS (DO THESE ACTIVITIES BEST OR CHEAPEST) GLOBAL RESOURCES AND SKILLS –GETTING ACCESS TO GLOBAL RESOURCES AND SKILLS –HELPS COMPANIES ENHANCE COMPETITIVE ADVANTAGE BARRIERS –LOCATION ECONOMY BARRIERS: TRANSPORTATION COSTS TRADE BARRIERS

17. © Andrey Medvedev FOREIGN COUNTRY ENTRY AND VALUE CREATION n MARKET ENTRY n TRANSFERRING CORE COMPETENCE n TRANSFERRING CORE COMPETENCE ABROAD n INDUSTRY ENTRY n TRANSFERRING CORE COMPETENCE n TRANSFERRING CORE COMPETENCE ABROAD n GLOBAL LEARNING GLOBAL RESOURCES AND SKILLS n GETTING ACCESS TO GLOBAL RESOURCES AND SKILLS n LOCATION ECONOMY

18. © Andrey Medvedev OFFENSIVE AND DEFENSIVE COMPETITIVE STRATEGIES n OFFENSIVE COMPETITIVE STRATEGY –DIRECT ATTACK, SEEKING UNOCCUPIED MARKETS, FIRST-MOVER (PRE-EMPTIVE) STRATEGIES, AND ACQUISITIONS n DEFENSIVE COMPETITIVE STRATEGY –REDUCTION OF THE RISKS OF BEING ATTACKED, CONVINCE AN ATTACKING FIRM TO SEEK OTHER TARGETS, OR BLUNT THE IMPACT OF ANY ATTACK n COUNTER-PARRY STRATEGY –STRIKING BACK A COMPETITOR’S ATTACK IN ONE COUNTRY BY ATTACKING IN ANOTHER COUNTRY, USUALLY THE COMPETITOR’S HOME COUNTRY

19. © Andrey Medvedev FOREIGN EXPANSION STRATEGY FORMULATION n FOREIGN EXPANSION STRATEGY n FOREIGN EXPANSION STRATEGY IS A FIRM’S PLAN TO EXTEND ITS VALUE CREATION ACTIVITIES INTO FOREIGN COUNTRIES n STRATEGIC ANALYSIS n STRATEGIC ANALYSIS: TWO POSSIBLE APPROACHES –POSITIONING –RESOURCE-BASED APPROACH n SWOT-COMBINATION n SWOT-COMBINATION (STRENGTHS – WEAKNESSES; OPPORTUNITIES – THREATS) n SELECTING A STRATEGY

20. © Andrey Medvedev POSITIONING (‘STRATEGIC FIT’) n BASIC POINTS –EXTERNAL BUSINESS ENVIRONMENT DETERMINES A FIRM’S BEHAVIOUR –THE FIRM HAS TO ADAPT ITS STRATEGY TO ITS EXTERNAL ENVIRONMENT (OPPORTUNITIES & THREATS) n STEPS OF STRATEGIC ANALYSIS DYNAMICS OF THE INDUSTRY –LOOKING AT THE COMPETITIVE DYNAMICS OF THE INDUSTRY KEY SUCCESS FACTORS –IDENTIFYING KEY SUCCESS FACTORS IN THE INDUSTRY COMPETITOR ANALYSIS –UNDERTAKING A COMPETITOR ANALYSIS THE FIRM’S COMPETITIVE POSITION –DEFINING THE FIRM’S COMPETITIVE POSITION IN THE INDUSTRY n SW OT n SW OT : BUSINESS OPPORTUNITY IS A STARTING POINT FOR DEVELOPING STRATEGIES

21. © Andrey Medvedev RESOURCE-BASED PERSPECTIVES (‘STRATEGIC STRETCH’) n BASIC POINTS –A FIRM CAN USE UNIQUE RESOURCES AND CAPABILITIES TO MODIFY THE INDUSTRY STRUCTURE –MANAGERS SHOULD EXPLOIT FIRM RESOURCES AND CAPABILITIES IN WAYS WHICH RIVALS FIND DIFFICULT TO MATCH n STEPS OF STRATEGIC ANALYSIS –IDENTIFYING THE RESOURCES AND COMPETENCIES OF THE FIRM TO YIELD NEW OPPORTUNITIES OR TO PROVIDE COMPETITIVE ADVANTAGE n SW OT n SW OT: UNIQUE FIRM RESOURCES ARE A STARTING POINT FOR DEVELOPING STRATEGIES

22. © Andrey Medvedev INTERNAL ENVIRONMENT ANALYSIS S TRENGTHS W EAKNESSES S TRENGTHS AND W EAKNESSES n PRODUCT (SERVICE) QUALITY n TECHNOLOGY n TRADE MARK n MARKETING n PRODUCTION n PERSONNEL n FINANCE

23. © Andrey Medvedev EXTERNAL ENVIRONMENT ANALYSIS n O PPORTUNITIES T HREATS n O PPORTUNITIES AND T HREATS n COUNTRY n COUNTRY(MACROECONOMIC ENVIRONMENT, GENERAL ENVIRONMENT) –PEST –PEST ANALYSIS –COMPARISON OF COUNTRIES –COMPARISON OF TERRITORIES IN A LARGE COUNTRY n INDUSTRY n INDUSTRY(MICROECONOMIC ENVIRONMENT) –INDUSTRIAL ANALYSIS IN A PARTICULAR COUNTRY FIVE FORCES MODEL –MICHAEL PORTER: FIVE FORCES MODEL

24. © Andrey Medvedev STRATEGY OF MNC: THE MAIN CONTENTS STRATEGY OF AN MINC n AS A RESULT, A STRATEGY OF AN MINC APPEARS ANSWERING THE FOLLOWING QUESTIONS: PRODUCTSBA INDUSTRY n WHAT PRODUCT TO PRODUCE (SBA OR INDUSTRY)? MANUFACTURING ACTIVITIES n WHERE MANUFACTURING ACTIVITIES HAS TO BE LOCATED? RESOURCES n WHERE RESOURCES HAVE TO BE SUPPLIED FROM? MARKETSELL n WHERE AND HOW TO MARKET AND SELL THE PRODUCT? COMPETITIVE ADVANTAGES DISTINCTIVE COMPETENCE n HOW COMPETITIVE ADVANTAGES SHOULD BE ACHIEVED? WHAT IS DISTINCTIVE COMPETENCE? ALLIANCE SYNERGY n IS AN ALLIANCE (PARTNER) NEEDED? WHAT WILL BE A SYNERGY? PARENT’S CONTROL n WHAT LEVEL OF PARENT’S CONTROL HAS TO BE SUPPORTED? SCALE OF FOREIGN OPERATIONS n WHAT SCALE OF FOREIGN OPERATIONS WILL BE MAINTAINED?