Group 1Seth Schulz, Daniel Lujan,

Jacob Martin

Chapter 8Strategic Management in Action

The International Environment8.1Important aspects of

International Environment◦Legal-Political Environment◦Economic Environment◦Cultural Environment

Legal-Political EnvironmentLegal-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 EnvironmentImportant 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 EnvironmentNational 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 plantsOnce 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 8.2Multicountry 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 DecisionsGlobal 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 AlternativesWhen 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 analysisImportance of information, exploit new idea and

competitive advantagesChanges in the market (customer

needs, demographics Opportunities

Internal analysisAssessing the strengths and

weaknessesKnow your resources,

capabilities, and core competency.

The Boiled Frog PhenomenonPicture you tube

Strategy choicesExtent and range of possible

strategy variesFocus strategy Avoid head to head competition

Decision will come down to resources, capabilities and core competency.

Strategy EvaluationGoal AttainedPerformance 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 DestructionProcess 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 OrganizationDef: 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 RevenuesRevenue comes from a number of

sourcesTaxesDuesGrantsPermits, user fees, and chargesProduct (good or service) salesDonations of time or money

NFP RevenuesIf 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 OrganizationsDef: 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’sEducational

◦ Public schools, colleges…Charitable

◦ United way, American Cancer Society…Religious

◦ Churches, synangogues…Social Service

◦ American Red Cross, Habitat for Humanity…Cultural/RecreationalProfessional membershipCause RelatedFoundations

Why are NFP’s ImportantThey 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’sNeed competitive advantage

because they compete for resources and customers

Researchers have found positive link between SM and NFP’s

External & Internal Environmental AnalysisExternal 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 ChoicesFunctional LevelMust have strategies that allow it to do

what it is set up to doFunctional 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’sCompete to Keep costs lowBe differentFocusing on a specific nicheMust develop and exploit a

sustainable competitive advantage to ensure continued existence

Strategy EvaluationMost 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 IssuesMany 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 MarketingBusiness 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 StrategiesNFP 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 EndYes, 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