INTERNATIONAL BUSINESS STRATEGIES

Andrey G. Medvedev,

Professor

September 14, 2009CEMS MIM Programme

© 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

© Andrey Medvedev

INTERNATIONAL STRATEGIC MANAGEMENT

Responsibilities of International ManagerResponsibilities of International Manager:

Select a foreign strategic business areaforeign strategic business area Define internationalisation motivesinternationalisation motives

and company’s competitive advantages Undertake a strategic analysisstrategic analysis of an internal

and external environmentof a company’s international operations

Formulate a foreign expansion strategic alternativeforeign expansion strategic alternative Establish strategic alliances with foreign partnersstrategic alliances with foreign partners

© Andrey Medvedev

INTERNATIONAL STRATEGIC MANAGEMENT

INTERNATIONAL STRATEGY PROCESSINTERNATIONAL STRATEGY PROCESS

IS LIKE A DOMESTIC ONE

WITH INCLUDING SOME EXTRA DATAINCLUDING SOME EXTRA DATA

FROM AN INTERNATIONAL ENVIRONMENTFROM AN INTERNATIONAL ENVIRONMENT

© Andrey Medvedev

INTERNATIONAL STRATEGY PROCESS

INTERNATIONAL STRATEGY PROCESSINTERNATIONAL STRATEGY PROCESSCONSISTS OF SEVERAL COMPONENTS AS FOLLOWS:

EVALUATIONEVALUATION OF A CORPORATION CURRENT PERFORMANCE RESULTS

ANALYSISANALYSIS OF THE STRATEGIC FACTORS

STRATEGY FORMULATIONFORMULATION

STRATEGY IMPLEMENTATIONIMPLEMENTATION

AND CONTROLCONTROL

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CONVERGENCE

GLOBALISATION MEANS APPEARANCE OF GLOBAL PRODUCTSGLOBAL PRODUCTS AND GLOBAL CUSTOMERSGLOBAL CUSTOMERS (WITH SIMILAR NEEDS)

MULTINATIONAL FIRMS SEEK GLOBAL PRODUCTSAND AT THE SAME TIME SEEK EFFECTIVE STRATEGIESEFFECTIVE STRATEGIESWHICH MAY NOT DIFFER IN DIFFERENT COUNTRIES

WORLD-WIDE KNOWLEDGE OF SUCCESSFUL STRATEGIESWORLD-WIDE KNOWLEDGE OF SUCCESSFUL STRATEGIESIS BEING CREATED

MANAGERS IN ALL COUNTRIESCOPY SUCCESSFUL PRACTICESCOPY SUCCESSFUL PRACTICES

SIMILAR STRATEGIES ARE USED IN ALL COUNTRIES

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LEVELS OF INTERNATIONAL STRATEGY

CORPORATE (PORTFOLIO)CORPORATE (PORTFOLIO) STRATEGY

– WHAT?WHAT? TO PRODUCE AND SELL?

– WHERE?WHERE? TO BE SUPPLIED FROM, TO MANUFACTURE, TO SELL?

– WHEN?WHEN? TO START BUSINESS?

BUSINESS (COMPETITIVE) BUSINESS (COMPETITIVE) STRATEGY

– HOW?HOW? TO COMPETE IN EACH OF THE SBA SELECTED?(WHAT IS INTERNATIONAL COMPETITIVE ADVANTAGEINTERNATIONAL COMPETITIVE ADVANTAGE?)

FUNCTIONAL FUNCTIONAL STRATEGIES (POLICIES)– INTERNATIONAL RESEARCH AND DEVELOPMENTRESEARCH AND DEVELOPMENT, PRODUCTIONPRODUCTION,

MARKETINGMARKETING, HUMAN RESOURCESHUMAN RESOURCES, FINANCIALFINANCIAL STRATEGY

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CORPORATE STRATEGY: DEFININGSTRATEGIC BUSINESS AREAS (SBA) SINGLE-BUSINESS STRATEGYSINGLE-BUSINESS STRATEGY

VERTICAL INTEGRATIONVERTICAL INTEGRATION

INDUSTRIAL RELATEDINDUSTRIAL RELATEDDIVERSIFICATION (MATCHING)DIVERSIFICATION (MATCHING)– COMBINATION

OF BUSINESS ACTIVITIESIN DIFFERENTBUT RELATED INDUSTRIES

INDUSTRIAL UNRELATED DIVERSIFICATIONINDUSTRIAL UNRELATED DIVERSIFICATION– COMBINATION OF ACTIVITIES

IN TOTALLY DIFFERENT INDUSTRIES

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STRATEGIC BUSINESS AREAS:FAZER GROUP

Bakeries

Staff and students restaurants

Confectionery

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GLOBAL DIVERSIFICATION

RELATED GLOBAL DIVERSIFICATIONRELATED GLOBAL DIVERSIFICATION– ACTIVITIES OF A GLOBAL FIRM ACROSS COUNTRIES

WITHIN RELATIVELY HOMOGENEOUSHOMOGENEOUS CLUSTER CLUSTER OF COUNTRIES

UNRELATED GLOBAL DIVERSIFICATIONUNRELATED GLOBAL DIVERSIFICATION– ACTIVITIES OF A GLOBAL FIRM

ACROSS HETEROGENEOUSHETEROGENEOUS REGIONSREGIONS

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BUSINESS STRATEGIES

GENERIC STRATEGY GENERIC STRATEGY IS A BASIC WAY THAT COMPANIES ACHIEVE AND SUSTAIN COMPETITIVE ADVANTAGE

COMPETITIVE ADVANTAGE COMPETITIVE ADVANTAGE TAKES PLACEWHEN A COMPANY CAN OUTDO ITS COMPETITORSIN ATTRACTING AND MAINTAINING ITS TARGET CUSTOMERS

GENERIC STRATEGIESGENERIC STRATEGIES– DIFFERENTIATIONDIFFERENTIATION

– COST LEADERSHIPCOST LEADERSHIP

COMPETITIVE SCOPECOMPETITIVE SCOPE SHOWSHOW BROADLY A FIRM TARGETS ITS PRODUCTS OR SERVICES– GENERAL VS. FOCUS STRATEGY FOCUS STRATEGY

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VALUE CHAIN

ALL THE ACTIVITIES OF THE FIRM “TO DESIGN, PRODUCE, MARKET, DELIVER, AND SUPPORT ITS PRODUCT”MAY BE PRESENTED AS THE VALUE CHAINVALUE CHAIN (MICHAEL PORTER)

R & D Input Logistics

Operations Marketing and Sales

Primary activities

Upstream Downstream

Service (Repair)

Support activities

OD, Control, HRM

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INTERNATIONAL VALUE CHAIN ANALYSIS

IN ESTABLISHING AN INTERNATIONAL COMPETITIVE INTERNATIONAL COMPETITIVE ADVANTAGEADVANTAGE, THE MNC MUST DECIDE

WHICH ACTIVITIES ARE BEST LOCATED IN WHICH COUNTRIESWHICH ACTIVITIES ARE BEST LOCATED IN WHICH COUNTRIES

CONFIGURATION CONCEPTCONFIGURATION CONCEPT– DESCRIBES THE EXTENT TO WHICH VARIOUS OF THE COMPANY’S

ACTIVITIES ARE CONCENTRATED IN ONE LOCATIONOR DISPERSED ACROSS A NUMBER OF LOCATIONS

© Andrey Medvedev© Andrey Medvedev

COMPETENCIES, RESOURCES, CAPABILITIES

TO ACHIEVE HIGHER VALUE OR LOWER COSTFOR ITS PRODUCTS, FIRMS MUST TAKE ADVANTAGEOF THE DISTINCTIVE COMPETENCIESDISTINCTIVE COMPETENCIES IN THEIR VALUE CHAIN– STRENGTHSSTRENGTHS ANYWHERE IN THE VALUE CHAIN

THAT ALLOW A FIRM TO OUTPERFORM RIVALS

– EFFICIENCY, QUALITY, INNOVATIVENESS, CUSTOMER SERVICES COMPETENCIES COME FROM RESOURCES AND CAPABILITIES

RESOURCESRESOURCES– INPUTS INTO PRODUCTION OR SERVICE PROCESSES

– TANGIBLE AND INTANGIBLE ASSETS

CAPABILITIESCAPABILITIES– THE ABILITY OF FIRMS TO USE THEIR AVAILABLE RESOURCES

TO REDUCE COST OR DIFFERENTIATE PRODUCTS (SERVICES)

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SUSTAINABLE COMPETITIVE ADVANTAGE

TO HAVE LONG-TERM PROFITABILITY,A FIRM MUST HAVEA SUSTAINABLE SUSTAINABLE SUCCESSFULLOW-COST OR DIFFERENTIATIONSTRATEGY WHICH IS NOT EASILYNEUTRALISED OR ATTACKEDBY COMPETITORS

SUSTAINABILITYSUSTAINABILITY DEPENDSON A FIRM’S CAPABILITIESWHICH 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

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CREATING VALUEIN GLOBAL INDUSTRIES TRANSFERRING CORE COMPETENCETRANSFERRING CORE COMPETENCE ABROAD

– HELPS COMPANIES UTILISE THEIR COMPETENCIES BETTER GLOBAL LEARNINGGLOBAL LEARNING

– HELPS COMPANIES ENHANCE THEIR CORE COMPETENCIES LOCATION ECONOMY LOCATION ECONOMY (LOCATION ADVANTAGESLOCATION ADVANTAGES)

TAKING ACTIVITIES IN COUNTRIES WITH BETTERBETTER CONDITIONS CONDITIONS (DO THESE ACTIVITIES BEST BEST OR CHEAPEST CHEAPEST)– GETTING ACCESS TO GLOBAL RESOURCES AND SKILLSGLOBAL RESOURCES AND SKILLS

– HELPS COMPANIES ENHANCE COMPETITIVE ADVANTAGE

– LOCATION ECONOMY BARRIERSBARRIERS:

• TRANSPORTATION COSTS

• TRADE BARRIERS

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FOREIGN COUNTRY ENTRYAND VALUE CREATION MARKET ENTRYMARKET ENTRY

TRANSFERRING CORE TRANSFERRING CORE COMPETENCECOMPETENCE ABROAD

INDUSTRY ENTRYINDUSTRY ENTRY

TRANSFERRING CORE TRANSFERRING CORE COMPETENCECOMPETENCE ABROAD

GLOBAL LEARNINGGLOBAL LEARNING

GETTING ACCESS TO GLOBAL GLOBAL RESOURCES AND SKILLSRESOURCES AND SKILLS

LOCATION ECONOMYLOCATION ECONOMY

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OFFENSIVE AND DEFENSIVECOMPETITIVE STRATEGIES OFFENSIVE COMPETITIVE STRATEGYOFFENSIVE COMPETITIVE STRATEGY

– DIRECT ATTACK, SEEKING UNOCCUPIED MARKETS,FIRST-MOVER (PRE-EMPTIVE) STRATEGIES, AND ACQUISITIONS

DEFENSIVE COMPETITIVE STRATEGYDEFENSIVE COMPETITIVE STRATEGY– REDUCTION OF THE RISKS OF BEING ATTACKED,

CONVINCE AN ATTACKING FIRM TO SEEK OTHER TARGETS,OR BLUNT THE IMPACT OF ANY ATTACK

COUNTER-PARRY STRATEGYCOUNTER-PARRY STRATEGY– STRIKING BACK A COMPETITOR’S ATTACK IN ONE COUNTRY

BY ATTACKING IN ANOTHER COUNTRY,USUALLY THE COMPETITOR’S HOME COUNTRY

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FOREIGN EXPANSION STRATEGYFORMULATION FOREIGN EXPANSION STRATEGYFOREIGN EXPANSION STRATEGY IS A FIRM’S PLAN

TO EXTEND ITS VALUE CREATION ACTIVITIESINTO FOREIGN COUNTRIES

STRATEGIC ANALYSISSTRATEGIC ANALYSIS:TWO POSSIBLE APPROACHES– POSITIONING

– RESOURCE-BASED APPROACH

SWOT-COMBINATIONSWOT-COMBINATION(STRENGTHS – WEAKNESSES; OPPORTUNITIES – THREATS)

SELECTING A STRATEGYSELECTING A STRATEGY

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POSITIONING (‘STRATEGIC FIT’)

BASIC POINTSBASIC POINTS– EXTERNAL BUSINESS ENVIRONMENT

DETERMINES A FIRM’S BEHAVIOUR

– THE FIRM HAS TO ADAPT ITS STRATEGYTO ITS EXTERNAL ENVIRONMENT (OPPORTUNITIES & THREATS)

STEPS OF STRATEGIC ANALYSISSTEPS OF STRATEGIC ANALYSIS– LOOKING AT THE COMPETITIVE DYNAMICS OF THE INDUSTRYDYNAMICS OF THE INDUSTRY

– IDENTIFYING KEY SUCCESS FACTORSKEY SUCCESS FACTORS IN THE INDUSTRY

– UNDERTAKING A COMPETITOR ANALYSISCOMPETITOR ANALYSIS

– DEFINING THE FIRM’S COMPETITIVE POSITION THE FIRM’S COMPETITIVE POSITION IN THE INDUSTRY

SWSWOTOT: BUSINESS OPPORTUNITY IS A STARTING POINTFOR DEVELOPING STRATEGIES

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RESOURCE-BASED PERSPECTIVES (‘STRATEGIC STRETCH’) BASIC POINTSBASIC POINTS

– A FIRM CAN USE UNIQUE RESOURCES AND CAPABILITIESTO MODIFY THE INDUSTRY STRUCTURE

– MANAGERS SHOULD EXPLOIT FIRM RESOURCES AND CAPABILITIES IN WAYS WHICH RIVALS FIND DIFFICULT TO MATCH

STEPS OF STRATEGIC ANALYSISSTEPS OF STRATEGIC ANALYSIS– IDENTIFYING THE RESOURCES AND COMPETENCIES OF THE FIRM

TO YIELD NEW OPPORTUNITIES OR TO PROVIDE COMPETITIVE ADVANTAGE

SWSWOTOT: UNIQUE FIRM RESOURCES ARE A STARTING POINTFOR DEVELOPING STRATEGIES

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INTERNAL ENVIRONMENT ANALYSIS

SSTRENGTHS TRENGTHS AND WWEAKNESSESEAKNESSES

PRODUCT (SERVICE) QUALITY TECHNOLOGY TRADE MARK MARKETING PRODUCTION PERSONNEL FINANCE

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EXTERNAL ENVIRONMENT ANALYSIS

OOPPORTUNITIES PPORTUNITIES AND TTHREATSHREATS

COUNTRYCOUNTRY (MACROECONOMIC ENVIRONMENT,GENERAL ENVIRONMENT)

– PESTPEST ANALYSIS

– COMPARISON OF COUNTRIES

– COMPARISON OF TERRITORIES IN A LARGE COUNTRY

INDUSTRYINDUSTRY (MICROECONOMIC ENVIRONMENT)– INDUSTRIAL ANALYSIS IN A PARTICULAR COUNTRY

– MICHAEL PORTER: FIVE FORCES MODELFIVE FORCES MODEL

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STRATEGY OF MNC: THE MAIN CONTENTS

AS A RESULT, A STRATEGY OF AN MINCSTRATEGY OF AN MINC APPEARS ANSWERING THE FOLLOWING QUESTIONS:

WHAT PRODUCTPRODUCT TO PRODUCE (SBASBA OR INDUSTRYINDUSTRY)? WHERE MANUFACTURING ACTIVITIESMANUFACTURING ACTIVITIES HAS TO BE LOCATED? WHERE RESOURCESRESOURCES HAVE TO BE SUPPLIED FROM? WHERE AND HOW TO MARKETMARKET AND SELLSELL THE PRODUCT? HOW COMPETITIVE ADVANTAGESCOMPETITIVE ADVANTAGES SHOULD BE ACHIEVED?

WHAT IS DISTINCTIVE COMPETENCEDISTINCTIVE COMPETENCE? IS AN ALLIANCEALLIANCE (PARTNER) NEEDED?

WHAT WILL BE A SYNERGYSYNERGY? WHAT LEVEL OF PARENT’S CONTROLPARENT’S CONTROL

HAS TO BE SUPPORTED? WHAT SCALE OF FOREIGN OPERATIONSSCALE OF FOREIGN OPERATIONS

WILL BE MAINTAINED?