Group 1
Seth Schulz, Daniel Lujan,
Jacob Martin
Chapter 8
Strategic Management in Action
The International Environment
8.1

Important aspects of International
Environment
◦ Legal-Political Environment
◦ Economic Environment
◦ Cultural Environment
Legal-Political Environment

Legal-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 Environment

Important 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 Environment

National 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 plants

Once 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 8.2

Multicountry 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 Decisions

Global 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 Alternatives

When 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 analysis
Importance of information,
 exploit new idea and competitive
advantages
 Changes in the market (customer needs,
demographics
 Opportunities

Internal analysis
Assessing the strengths and weaknesses
 Know your resources, capabilities, and
core competency.

The Boiled Frog Phenomenon

Picture you tube
Strategy choices
Extent and range of possible strategy
varies
 Focus strategy
 Avoid head to head competition


Decision will come down to resources,
capabilities and core competency.
Strategy Evaluation
Goal Attained
 Performance 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 Destruction

Process in which existing products,
processes, ideas, and businesses are
replaced with better ones,

Defined by Economist Joseph Schumpeter.
8.4 SM Practices & Issues for Notfor-Profit and Public Sector
Organizations
Not-for-Profit Organization
 Def: 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 Revenues
Revenue comes from a number of sources
 Taxes
 Dues
 Grants
 Permits, user fees, and charges
 Product (good or service) sales
 Donations of time or money
NFP Revenues

If 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 Organizations


Def: 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’s

Educational
◦ Public schools, colleges…

Charitable
◦ United way, American Cancer Society…

Religious
◦ Churches, synangogues…

Social Service
◦ American Red Cross, Habitat for Humanity…




Cultural/Recreational
Professional membership
Cause Related
Foundations
Why are NFP’s Important
They 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’s

Need competitive advantage because they
compete for resources and customers

Researchers have found positive link
between SM and NFP’s
External & Internal Environmental
Analysis

External 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 Choices
Functional Level
 Must have strategies that allow it to do what
it is set up to do
 Functional 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’s
Compete to
 Keep costs low
 Be different
 Focusing on a specific niche
Must develop and exploit a sustainable
competitive advantage to ensure
continued existence
Strategy Evaluation

Most 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 Issues

Many 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 Marketing

Business 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 Strategies

NFP 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 End

Yes, 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