1-1 12-1 motivations for companies to pursue ib opportunities increase profits and sales access...
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Motivations For Companies Motivations For Companies To Pursue IB OpportunitiesTo Pursue IB Opportunities
Increase profits and sales Access new markets Protect existing markets, profits, and sales Satisfy overall desire for growth
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The Competitive Challenge Facing The Competitive Challenge Facing Managers of International BusinessManagers of International Business
Managers must quickly identify and exploit opportunities wherever
they occur, domestically and internationally fully understand why, how, where, and when to do
business in specific world markets know the company’s strategic mission, its
strengths and its weaknesses
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What is International Strategy?What is International Strategy?
International strategy refers to the way firms make choices about acquiring and using scarce resources in order to achieve their international objectives
It involves decisions about which markets to enter with which
products, when and how all the various functions and activities of the company
and how they interact ensuring that strategy is consistent across functions,
products, and regional units a variety of unique demands associated with
operating internationally
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Competitive AdvantageCompetitive Advantage
To create a sustainable competitive advantage, a company tries to develop skills that create value for customers are rare are difficult to imitate or substitute for are organized in a way that the company can fully
exploit
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Why Plan Globally?Why Plan Globally?
Companies face forces that are increasingly complex, global and subject to rapid change Political Economic Social Technological Legal Environmental
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Global Strategic Planning ProcessGlobal Strategic Planning Process
The global strategic planning process provides a formal structure with which managers
define company’s business and mission
analyze the company’s internal and external environments
set corporate objectives
quantify goals
formulate strategies
make a tactical plan LO2LO2
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Uncontrollable Forces AssessmentUncontrollable Forces Assessment
The uncontrollable forces assessment involves an analysis of domestic, international and foreign
environments recognition of current and future implications strategy design to navigate major global trends
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Analyze Corporate Analyze Corporate Controllable VariablesControllable Variables
A controllable forces analysis is a situational analysis involves forecasting involves a value chain analysis of firm’s activities
from raw materials to end products to final customer delivery
Who are the target customers? What value do we deliver to them? How will we create this value?
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The Value ChainThe Value Chain
Adapted from M. E. Porter, Adapted from M. E. Porter, Competitive Advantage,Competitive Advantage, New York: Free Press, 1985 New York: Free Press, 1985
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Analyze Corporate Analyze Corporate Controllable VariablesControllable Variables
Competitive advantage can be gained through leveraging organizational knowledge across national borders
Knowledge as a Controllable Corporate Resource Capabilities of employees Structures, systems, organizational routines
Build knowledge database and transfer best practices
Protect tacit and explicit knowledge from competitors
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Tacit - Explicit KnowledgeTacit - Explicit Knowledge
Tacit Knowledge Embedded in individuals Difficult to express in words, pictures, formulas Difficult to transmit to others Lost when a valued manager leaves
Explicit knowledge Easy to communicate with words, pictures,
formulas, etc. Can be documented in company-wide knowledge
bases
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Vision and Mission StatementsVision and Mission Statements
Broad statements that communicate to the corporation’s stakeholders what the company is where it is going the values that will guide the organization’s
members behavior
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Define the Corporate Business,Define the Corporate Business, Vision, and Mission Statements Vision, and Mission Statements
The mission statement refers to a road statement that defines the organization’s purpose and scope
The vision statement describes the company’s desired future position if it can acquire the necessary competencies and successfully implement its strategy
The values statement is a clear and concise description of the fundamental values, beliefs, and priorities of the organization’s members
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Set Corporate ObjectivesSet Corporate Objectives
Objectives Direct the firm’s course of action Maintain action within the mission’s boundaries Ensure the mission’s continuing existence
To implement an effective strategy quantifiable objectives are important
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Formulate Competitive StrategiesFormulate Competitive Strategies
Competitive strategies and corresponding action
plans enable organizations to reach their objectives
The strategic planning process will formulate
alternative competitive strategies along with plausible
action plans
Conscious choice of the course to be followed
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Formulate Competitive Strategies Formulate Competitive Strategies For the International Market PlaceFor the International Market Place
Formulation of international strategy must consider two opposing forces Reduction of costs: achieved best through standardization
and global integration of operations Adaptation to local markets: achieved best through more
local autonomy Basic strategy types address pressures for cost reduction and
local adaptation Home Replication Multidomestic Regional Global Transnational
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Cost and Adaptation Pressures and Their Cost and Adaptation Pressures and Their Implications for International Strategies Implications for International Strategies
Adapted from C. Bartlett and S. Ghoshal. Adapted from C. Bartlett and S. Ghoshal. Managing Across Borders: The Transnational SolutionManaging Across Borders: The Transnational Solution, 2002 , 2002 2nd ed., Cambridge: Harvard Business Press 2nd ed., Cambridge: Harvard Business Press LO4LO4
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Home Replication StrategyHome Replication Strategy The home replication strategy centralizes product
development functions in the home country developed products are then transferred to
foreign markets in order to capture additional value
microsoft, mcdonald’s The company has to possess a distinctive
competence that local companies lack Headquarters maintains control over marketing and
product strategy Subsidiaries leverage the home country capabilities
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Multidomestic StrategyMultidomestic Strategy
The multidomestic strategy is used when there is strong pressure for adaptation to local market
Decision making is decentralized, allowing for quick change
Leads to an increased cost structure Excessive adaptation may take away from product’s
distinctiveness Cost and complexity of coordination can be
substantial
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Global StrategyGlobal Strategy
The global strategy is used when a company faces strong pressure to reduce costs and limited pressure to adapt products for local markets
Strategy and decision making centralized Company offers standardized products and services Value chain activities are in only one or a few areas Limited ability to adjust to meet customer needs Higher transportation costs for physical products
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Transnational StrategyTransnational Strategy
The transnational strategy is used when pressures for cost effectiveness and local adaptation are equally important
Company locates activities where most beneficial for the firm globally Upstream value chain activities will be more
centralized Downstream activities will be more localized
Achieving an optimal balance is challenging Strategic decisions, structures and systems will be
complex
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ScenariosScenarios
Scenarios refer to multiple, plausible stories about the future
“What if” questions can reveal weaknesses in present strategies
Types of subjects for scenarios include Large and sudden changes in sales (up or down) Sudden increases in price of raw materials Sudden tax increases Change in the political party in power
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Types of Plans That Can Types of Plans That Can Result From ScenariosResult From Scenarios
Contingency Plans For the best-or-worst-case scenarios For critical events that could have a severe impact
on the firm Tactical Plans (Operational)
Spell out in detail how objectives will be reached in each case
Short-term
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Strategic Plan Features: Sales Strategic Plan Features: Sales Forecast and BudgetForecast and Budget
Sales Forecast Provides management with an estimate of the
revenue to be received and the units to be sold Provides assumptions for cost and capital
requirements Budget
During planning, budgets coordinate the functions within the firm and provide management with a detailed statement of future operating results
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Performance MeasuresPerformance Measures
Performance measures are used to assess strategy and its implementation Successfully on track? What modifications may be needed?
Measures of the company’s success Financial, technological, and human resources
Measures of effectiveness Measures of the company’s progress
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Kinds of Strategic PlansKinds of Strategic Plans
Time Horizon Strategic plans may be classified as short,
medium, or long term Level in the Organization
Each organizational level will have its level of plan
Functional area
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New Directions in PlanningNew Directions in Planning
Who does the strategic planning? Top down? Regional input? Firms have introduced innovation to the planning
process Firms consult with customers and suppliers who
have firsthand experience with the firm’s markets
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New Directions in PlanningNew Directions in Planning
How Planning is Done Many firms have moved toward less structured
formats and much shorter documents Contents of the Plan
Top managers are much more concerned with issues, strategies, and implementation
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Summary: New International Summary: New International Planning ProcessPlanning Process
Top management assumes explicit strategic decision-making role, decides how things ought to be, does not focus on analyses of how things are
Planning changes from forecasting to creativity Processes and tools that assume a future much like
the past must be replaced by a mind-set focused on change as a source of competitive advantage
Planners change from purveyors of incrementalism to crusaders for action
Strategic planning restored to core of line management responsibilities
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Competitor AnalysisCompetitor Analysis
Competitor Analysis Process in which principal competitors are
identified and their objectives, strengths, weaknesses, and product lines are assessed
Industrial Espionage Act of spying on competitors to learn secrets
about strategy and operations
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Competitor Intelligence SystemsCompetitor Intelligence Systems
Competitor intelligence systems are procedures for gathering, analyzing, and disseminating information about competitors
Benefits include ability to improve bidding success identify competitors’ key customers identify plant or other facility expansion plans improve understanding of competitors’ products
and processes
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Sources of InformationSources of Information
Source of information within the firm include sales representatives, librarians, and technical and R&D people
Information can also be sourced from published material including technical journals, databases, the internet, industry reports, and public documents
Suppliers and customers can be information sources The employees of competitors’ can provide information Direct observation or analysis of physical evidence is
another way to gain information Technical people Reverse engineering
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BenchmarkingBenchmarking Benchmarking measures a firm’s performance
against the performance of others Internal: compares firm’s operations amongst
each other Competitive: compares firm with a direct
competitor Functional: compares similar functions of firms
in industry Generic: compares operations in unrelated
industries
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