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International Strategic

ManagementStrategic Formulation andImplementation

Chapters 8, Hodgetts, Luthans and Doh, International Management:Culture, Strategy and Behavior, 6th edition (New York: McGraw-HillIrwin, 2006)

Adapted from PowerPoint slides by R. Dennis Middlemist, Professor ofManagement, Colorado State University

Mark McKennaBUS 162 (6), International and Comparative ManagementSan Jose State University

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OVERVIEW

1. Strategic Management

2. Approaches to Strategic Planning

3. Global vs. Regional Strategies

4. Elements of Strategic Planning

5. Specialized Strategies

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Strategic Management

Strategic management Determining the firms basic mission and

long-term objectives, and developing andimplementing an appropriate plan of action Where are we going? How are we going to get there?

Strategic management growing inimportance because of the need tocoordinate and integrate diverseoperations

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Benefits of Strategic Planning

Perceived benefits Coordinate and monitor operations

Streamline product lines and supplychains

Manage political, currency, andcompetitive risks

Potential costs

Micromanagement of subsidiaryoperations

Misallocation of time and staff resources

Over-planning and lower profitability

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Approaches to Strategic Planning

EconomicImperative

QualityImperative

PoliticalImperative

AdministrativeCoordination

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Economic Imperative

Strategy based on cost leadership,differentiation, and segmentation

Product mix

Value added in the upstream activities of theindustrys value chain

generic good (not name brand or support

service dependent) Global sourcing to shorten the production

or buying cycle

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Political Imperative

Strategy country- responsive anddesigned to protect local market niches

Success of the product or service depends

heavily on marketing, sales or service Customer or client-focused

Approach most often used by MNCs

pursuing a country-centered ormultidomestic strategy.

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Quality Imperative

Two possible paths

Change in attitudes to raise expectation forservice quality

Implementation of practices to make qualityimprovement an ongoing process

Total quality management (TQM)

Cross-training personnel Process re-engineering

Reward systems designed to reinforce quality

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Administrative Coordination

Decision making based on the merits ofthe individual situation rather than apredetermined economic or political

strategy Coordination of global supply chains

Localized marketing of products and services

Least common approach given thepressures on MNCs to coordinate strategyboth regionally and globally

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Global vs. Regional Strategies

Global Integration Products and services homogeneous in

terms of type and quality

Customers have common taste

preferences National Responsiveness

Segmented regional markets

Need to respond to differing nationalstandards and regulations

Adaptation of tools and techniques tomanage local workforces

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Four Strategic Options

Global

strategy

Internationalstrategy

Transnational

strategy

Multi-domesticstrategy

National responsivenessLow High

Glo

balintegratio

n

Low

High

Adapted from Figure 81: Global Integration vs. National Responsiveness

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Choosing an Option

The right strategy is tailored to particularcountry and industry characteristics Reasons to choose each strategy

Global: low-cost strategy, commodification

Multi-domestic: products and servicesdifferentiated by market International: core competencies set the

MNC apart from local competitors

Transnational: Require management of contradictory pressures forcost reductions and differentiation

Successful firms engage in glocalization, localizingtheir activities while maintaining a global focus

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Elements of Strategic Planning forInternational Management

External EnvironmentalScanning for MNCOpportunities and

Threats

Internal ResourceAnalysis of MNC

Strengths andWeaknesses

Strategic PlanningGoals

IMPLEMENTATION

Adapted from Figure 82: Basic Elements of Strategic Planning for International Management

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Environmental Scanning

Provide management with accurateforecasts of trends that relate toexternal changes in geographic areaswhere the firm is currently doingbusiness or considering setting upoperations

These changes relate to the economy,

competition, political stability,technology, and demographicconsumer data

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Internal Resource Analysis

Evaluate managerial, technical, material,and financial strengths and weaknesses

Determine ability to take advantage ofinternational market opportunities

Match external opportunities(environmental scan) with internalcapabilities (internal resource analysis)

Key question: Do we have the people andresources that can help us to develop andsustain the necessary KFSs, or can weacquire them?

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Strategic Planning Goals

Goal formulation often precedes the firsttwo steps

However, more specific goals come out ofexternal scanning and internal analysis

Typically serve as an umbrella forsubsidiaries and international operations

Profitability and marketing goals almost

always dominateOnce set, the MNC will develop specific

operational goals and controls for thesubsidiary or affiliate level

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Implementation

Selecting a country and location Country factors: market openness,

infrastructure, labor market flexibility

Location: incentives, workforce, costs

Functional areas Marketing: usually country specific

Production: domestic to foreign, foreign to

domestic, or foreign to foreign, dispersedor coordinated

Finance: local sources, centralized control,international markets, or barter trade

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SPECIALIZED

STRATEGIES

1. First-Mover Strategies

2. Bottom of the Pyramid

Strategies

3. Born-Global Strategies

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First-Mover Strategies

Useful in rapidly changing markets

Market opening in developing economies

Market reforms in transition economies

Privatization of state-operated enterprisesAdvantages and risks

Capture benefits of learning

Form alliances with attractive local partners Uncertain pace of reform

Opportunity costs of premature entry

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Base of the Pyramid Strategies

Targeting emerging market People making less than $2,000 p/year (4

billion)

Marketing requires smaller-scalestrategies Building relationships with local

governments, small entrepreneurs, and

nonprofits Less dependence on central governments

and large local companies

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Born-Global Firms

Engage in significant international activitya short time after being established

Successful firms leverage a distinctive

mix of orientations and strategies Global technological competence

Unique-products development

Quality focus Leveraging of foreign distributor

competences

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Implications for Managers

The complexity and interdependence ofthe global economy increases the needfor firms to plan strategically

Effective strategies must balancetensions between

Top-down and bottom-up strategies

Economies of scale and differentiation

Managers need to anticipate the futureevolution of the firm and global markets