Chapter 8 Strategic Management process of determining an organization s basic mission and long term objectives and then implementing a plan of action for pursuing this mission and attaining these objectives Needs for Strategic Management o Keep track of their increasingly diversified operations in a continuously changing international environment need to coordinate and integrate diverse operations with a unified and agreed on focus Benefits for Strategic Management o o Strategic planning is critical to their success at home office and in subsidiaries Planning intensity degree to which a firm carries out strategic planning is an important variable in determining performance Approaches to Formulating and Implementing Strategy o Economic imperative A worldwide strategy based on cost leadership differentiation and segmentation Middle management key to stimulating profit growth within a company Sell products for which a large portion of value is added in upstream activities of industry s value chain Also used when product is a generic food and doesn t have to be sold based on name brand or support service ex Computers cheap or expensive do same things Global sourcing Ex Buying fabric and yarn go upstream to organize production Country responsive designed to protect local market niches Ex Insurance and consumer packaged goods success of the product service depends heavily on marketing sales and service Country centered or multi domestic strategy Ex Thums Up brand by Coca Cola in India Total quality management to meet or exceed customers expectations and continuously improve 2 interdependent paths change in attitudes and a raising of expectation for service quality and implementation of management practices that are designed to make quality improvement an ongoing Commonly called total quality management TQM Quality v important to overall strategy o Political imperative o Quality imperative products or services process o Administrative coordination strategy MNC makes strategic decisions based on the merits of the individual situation rather than using a predetermined economic or political strategy Ex Walmart expanded into Latin America Global and Regional Strategies o Global integration the production and distribution of products and services of a homogeneous type and quality on a worldwide basis Ex Automobiles and computers o National responsiveness the need to understand the different consumer tastes in segmented regional markets and respond to different national standards and regulations imposed by autonomous governments and agencies Ex International manufacturers now tailor their offerings to the American car market o Figure 8 1 page 278 vertical axis economies of scale takes advantage of large size and capitalizes on lowering unit costs through experience curve benefits Horizontal axis measures need for multinationals to respond to national responsiveness or differentiation MNC s must address local tastes and government o Quadrant 1 global strategies integrated strategy based primarily on price competition Mergers and regulations acquisitions occur o Quadrant 4 multi domestic strategy differentiated strategy emphasizing local adaptation o Quadrant 2 obtaining economies of scale and benefits of being sensitive to differentiation are of little value Increase standardization of products and services International strategy mixed strategy combining low demand for integration and responsiveness o Quadrant 3 transnational strategy integrated strategy emphasizing both global integration and local responsiveness Difficult to localize o transnational is often preferred strategy but most difficult to implement Basic Steps in Formulating a strategy Scanning the external environment for opportunities and threats conduct an internal resource analysis of company strengths and weaknesses formulating goals in light of the external scanning and internal analysis EXTERNAL Environmental scanning process of providing management with accurate forecasts or trends related to external changes in geographic areas where the firm currently is doing business or is considering setting up operations o Regulatory social political economic technological industry market Industry market role of all potential competitors and relationships surrounding those competitors Changes o Regulatory shifting laws or regulatory guidelines Ownership property rights Minimum wage laws in technology o o o o Economic rates rates of employment exchange rates inflation rates Social demographic shifts including age education income Political can impact how a company runs operations INTERNAL Internal Resource Analysis helps firm evaluate current managerial technical material and financial resources and capabilities to better asses strengths and weaknesses o Key success factor KSF a factor necessary for a firm to effectively compete in a niche market EX KSF for an airline is price safety quality of service Goal Setting for Strategy Formulation Profitability Marketing Operations Finance Human Resources o Profitability and marketing at top bc more externally environmentally responsive Whereas others are more internally controlled Also prof and mark often need higher profitability from their overseas operations than they do from their domestic operations Strategy Implementation process of providing goods and services in accord with a plan of action Three general areas that international managements must consider o MNC must decide where to locate operations Country and specific locale within the chosen country Amount of government control and restrictions on foreign investment Locale considerations include access to markets proximity to competitors availability of transportation and electric power desirability of location for employees coming in from the outside nature of workforce cost of doing business o MNC must carry out entry and ownership strategies o Must implement functional strategies in areas such as marketing production and finance o The Role of the Functional Areas in Implementation Marketing four P s product price promotion place Production worldwide production is important Finance transferring funds in the international money markets often is less expensive than relying on local sources Problem with this reevaluation of currencies o Specialized Strategies for emerging markets Strategies for the Base of the Pyramid strategy targeting low income customers in developing First Mover Strategies countries Page 291 o Entrepreneurial