UNIT – IIIINTERNATIONAL STRATEGIC MANAGEMENT

INTERNATIONAL STRATEGIC MANAGEMENT

Strategy is derived from the Greek word ‘Strategos’

It means ‘Generalship – the actual direction of military force’

Strategy Mgt involves the analysis of internal capabilities and external environment of a firm in order to efficiently and effectively uses the resources to meet organizational objectives.

FRAMEWORK FOR INTERNATIONAL STRATEGIC MANAGEMENT

International Strategic Management - Overview

External / Internal Analysis

Strategic Choice and Positioning

Leveraging Competitive Advantage

Implementing the Strategic Plan

Integration

STRATEGIC COMPULSIONS Strategic management includes strategic

planning, implementation, and review/control of the strategy of an organization.

The companies want survive in the today’s business competition, they must sell their products in the global market and enlarge their market.

The companies face the compulsion to be global if they want to gain the global market and more values.

Ex: Sony, Pepsi, Microsoft…

AREAS OF STRATEGIC COMPULSIONS Orientation for Globalization Emerging E-Commerce and Internet

Culture Cut-Throat Competition Diversification Active pressure groups Motive for corporate social

responsibility and ethics

STANDARDIZATION VS DIFFERENTIATION Standardization or differentiation of the

marketing strategy are two extremes of a continuum, i.e., as Differentiation increases Standardization decreases, Conversely as Differentiation decreases Standardization increases.

Different aspects of Standardization vs differentiation Regional Perspective (Ex. EU, NAFTA, SAARC) Marketing Process Perspective Marketing Components / Marketing Mix

Perspective (Ex. Google, Nokia, Microsoft)

DIFFERENCE BETWEEN STANDARDIZATION VS DIFFERENTIATION

Basis of Difference

Standardization Differentiation

Application in marketing means

Companies should apply 4Ps in the Same way in World wide.

It is supported by strong market variety by Market individualism and uniqueness.

Reason for Application Integration Access Regional or local Conditions

Product Offered Complete standardization Altering relevant feature according to individual or geographic

Characteristics Doesn’t have special Characters Product is differential from competitors product.

Approach Increasing Commonality of product

Detailing the differentiation that exists between products and services

Economics of scale Higher productivity and lowers the total cost

Increasing cost of production and lower productivity

Need Satisfy the heterogeneous needs of the buyer

Satisfy a particular need of buyer

End Result Benefits buyer by lowering price Show sense of value to the buyer

STRATEGIC OPTIONS Strategic options are creative

alternative action – oriented responses to the external situation that an organization (or group of organizations) faces.

A Strategic option is a set of related options that form a potential strategy.

INTEGRATION – RESPONSIVENESS GRID

FACTORS AFFECTING STRATEGIC OPTIONS

External Constraints Intra-Organizational forces and

managerial power-relations Values and preferences and managerial

attitudes towards risk Impact of past strategy Time constraints Information constraints Competitors reaction

GLOBAL PORTFOLIO MANAGEMENT Global portfolio investment (Mgt)

means a grouping of investment assets that focuses on securities from foreign markets rather than domestic market.

Examples Purchase of shares Purchase of bonds issued by Foreign Govt. Acquisition of assets in Foreign Country

FACTORS AFFECTING GLOBAL PORTFOLIO MANAGEMENT

Tax rates on interest or dividends Interest rates Exchange rates

GLOBAL ENTRY STRATEGIESFORMS OF INTERNATIONAL BUSINESS

1.Trade related forms of international business

Exports – direct and indirect Indirect Exports

Domestic Purchase Export Houses Piggybacking Trading companies

FORMS OF INTERNATIONAL BUSINESS2. Manufacturing Strategies without

FDI International licensing International franchising International Contract manufacturing Turnkey Projects Management contracts

FORMS OF INTERNATIONAL BUSINESS3. Manufacturing Strategies with

FDI

Joint Ventures International strategic Alliance Merger & Acquisition Wholly owned subsidiaries

ORGANIZATIONAL ISSUES OF I.BThere are 3 issues First, the different elements of a firm’s

organizational architecture must be internally consistent.

Second, the organizational architecture must match or fit the strategy of the firm strategy and architecture must be, consistent.

Third, the strategy and architecture must be consistent with competitive conditions prevailing in the firm’s market strategy , architecture and environment must be, consistent

ORGANISATIONAL STUCTURE A Functional Structure A typical Product divisional Structure One company’s international

divisional structure A world wide area structure A world Wide product Divisional

Structure

A FUNCTIONAL STRUCTURE

Top Management

Purchasing

Buying Units

Manufacturing

Plants

Marketing

BranchSales Unit

Finance

AccountingUnits

A TYPICAL PRODUCT DIVISIONAL STRUCTURE

Head Quarters

Purchasing

Buying units

Manufacturing

Plants

Marketing Finance

COMPANY’S INTERNATIONAL DIVISIONAL STRUCTURE

Head Quarters

Domestic Division,

product line - A

Domestic Division,

product line - A

Domestic Division,

product line - A

Intl. DivisionG.M

Area Line

Country -1

G.MProduct

A,B and C

A WORLD WIDE AREA STRUCTUREHead Quarters

North American

Area

Latin American

AreaEuropean Area

Middle Eastern – African

Area

Far EastArea

A WORLD WIDE PRODUCT DIVISIONAL STRUCTURE

Head Quarters

WorldWideProduct Division A

Worldwide Product Division B

Area 1(Domestic

)

Worldwide product Division C

A GLOBAL MATRIX STRUCTURE

CONTROLLING OF INTRENATIONAL BUSINESS

Personal Controls Bureaucratic Controls Output Controls Cultural Controls

APPROACHES TO CONTROL Market approach Rules approach Corporate culture approach

PERFORMANCE EVALUATION SYSTEM First, Incentive used often varies

depending on the employees and their tasks

Second, the successful execution of strategy in the multinational firm often requires significant cooperation between managers in different sub units

CONTD… Third, the incentive system used within

a multinational enterprise often have to be adjusted to account for national differences in institutions and culture

Finally, it is important for managers to recognize that incentive systems can have unintented consequences.

PROCESS OF PERFORMANCE MEASUREMENT

Establish standards of performance

Measure actual performance

Compare actual with standards

Construct and implement an action plan

Review and revise standards

OBJECTIVES OF PERFORMANCE EVALUATION

To evaluate the economic performance of its international performance, this is frequently referred to as an evaluation of the unit’s management performance.

To evaluate the unit’s management performance.

To monitor progress towards corporate objectives including strategic goals.

To assist efficient allocation of resources.

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