Strategic Management the process of determining an organization s basic mission and long term objectives then implementing a plan of action for pursuing the mission and attaining objectives Growing need for strategic management related to increasingly diversified operations in continuously changing Chapter 8 international environment Total Quality Management Process re engineering designed to help identify eliminate redundant tasks Cross train personnel to do jobs of all members in work group Reward system designed to reinforce quality performance Quality operationalized by meeting or exceeding customer expectations Quality strategy formulated at top management level and diffused through organization TQM techniques traditional inspection and statistical quality control cutting edge Human Resource Management techniques such as self managing teams and empowerment Globalization vs national responsiveness conflict Fundamental Tension The globalization vs national responsiveness conflict Global integration Production and distribution of products and services of a homogenous type and quality on a worldwide basis National responsiveness need to understand different consumer tastes in segmented regional markets and respond to different national standards and regulations imposed by autonomous governments and agencies Approaches to Strategic Planning 1 Economic imperative focused MNCs employ worldwide strategy based on cost leadership differentiation and segmentation support service chain a Strategy also used when product is regarded as generic and therefore is not sold on name brand or b Often sell products for which large portion of value is added in upstream activities of industry value 2 MNCs using political imperative are country responsive approach designed to protect local market niches a These MNCs often use country centered or multi domestic strategy b Success of product or service depends heavily on i Research and development ii Manufacturing iii Distribution i Marketing ii Sales iii Service 3 Quality imperative has 2 paths a Change in attitudes and raising of expectations for service quality b Implementation of management practices designed to make quality improvement an ongoing process i TQM Total Quality Management 4 Administrative Coordination Imperative MNC makes strategic decisions based on merits of individual situation rather than predetermined economic or political strategy a Least common approach to formulation and implementation of strategy b Many large MNCs work to combine all 4 of the approaches to strategic planning Appropriateness of each strategy depends on pressures for cost reduction and local responsiveness in each country served Global strategy is low cost strategy attempting to benefit from scale economies in production distribution marketing Transnational strategy pursued when high cost pressures and high demand for local responsiveness Environmental Scanning Provides management with accurate forecasts of trends relating to external changes in geographic areas where firm is doing business or considering doing business Changes relate to economy competition political stability technology demographic and consumer data Internal Resource Analysis Evaluate MNC s current managerial technical material and financial strengths and weaknesses Assessment then used to determine ability to take advantage of international market opportunities Match external opportunities gained in environmental scan with internal capabilities gained through internal resource analysis Key question for MNC Do we have the people and resources that can help us develop and sustain necessary Key Success Factors or can we acquire them Born global firms Firms that engage in significant international activity a short time after being established Successful born global firms leverage a distinctive mix of orientations and strategies o Global technological competence o Unique product development o Quality focus Most important business strategies employed by born global firms are global technological competence unique products development quality focus and leveraging of foreign distributor competencies Truly born global firms tend to survive longer than other seemingly global companies International Entrepreneurship a combination of innovative proactive and risk seeking behavior that crosses national borders and is intended to create value in organizations First Mover Strategies significant economies associated with early entry and first mover positioning May be a narrow window of opportunity within which these opportunities can be best exploited Strategies for Base of Pyramid BOP 4 5 billion potential customers around the globe heretofore ignored by global business BOP forces global business to rethink their strategies Must consider relationships with local governments small entrepreneurs and nonprofits rather than depend on established partners such as central government BOP strategies challenging to implement Represents opportunity to incubate new leapfrog technologies Successful BOP strategies can travel profitably to higher income markets Chapter 10 Political risk Macro political risk analysis The likelihood that a business foreign investment will be constrained by a host government s policy Analysis that reviews major political decisions likely to affect all enterprises in the country Risk factors Freezing the movement of assets out of the host country Placing limits on the remittance of profits or capital Devaluing the currency Refusing to abide by the contractual terms of agreements previously signed with MNC Government corruption Industrial piracy counterfeiters Political turmoil Micro political risk analysis Analysis directed toward government politics and actions that influence selected sectors of the economy or specific foreign businesses in the country Risk Factors Some MNCs are treated differently than others Industry regulation Taxes on specific types of business activity Restrictive local laws Impact of WTO and EU regulations on American MNCs Government policies that promote exports and discourage imports Transfer risks Government policies that limit transfer of capital payments production people and technology in and out of country How do governments achieve this Tariffs on exports and imports Restrictions on exports Dividend remittance Capital repatriation Capital flow from a foreign country to the country of origin This usually refers to returning returns on a foreign investment in