MGMT. 416
International Business II
Instructor: Evrim Tören
Chapter 12
International
Competitive Strategy
Thinking Strategically about the future
in an Uncertain World:
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Managers must fully understand why, how and
where they intend to do business, now and over
time.
There should be a clear understanding of
company’s mission, a vision for how they intend
to achieve that mission and an understanding of
how they plan to compete with other companies.
Managers must understand the strengths and
weaknesses and be able to compare them
accurately.
What is International Strategy and
Why is it important?
The way firms make choices about acquiring
and using scarce resources in order to
achieve their international objectives.
Internal Consistency: The various functions,
products and regional units of the company.
External Consistency: The variety of
demands associated with operating in the
international competitive environenment.
Competitive Advantage
The ability of a company to have higher rates of
profits than its competitors.
This suggests the international company must
either perform activities different from the
competitors or perform the same activities in
different ways.
In order to create the competitive
advantage:
The international company should try to
develop skills or competencies.
 Create value for customers and for which
customers are willing to pay,
 Rare characteristics should be found out.
 Create value which is difficult to imitate or
substitute.
 Capture the value from the competitive
potential.
Strategic Planning
The process by which an organization
determines where it is going in the future,
how it will get there and how it will assess
whether and to what extent it has achieved
its goals.
Global Strategic Planning
Strategic plans should ensure that decisions
makers have a common understanding of the
business, the strategy, the assumptions
behind the strategy, the external business
environment pressures and their own
direction, as well as their promoting
consistency of action among the firm’s
managers worldwide.
Global Strategic Planning Process
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Analyze the company’s external environment
Analyze the company’s internal environment
Define the companies business and mission
Set corporate objectives
Quantify goals
Formulate strategies
Make tactical plans
1. Analyze Domestic, International and
Foreign Environments.
Environmental Scanning
Recognition of the nature, and implications of
the current and future domestic,
international, and foreign environments is
very important.
2. Analyze Corporate Controllable
Variables
Value Chain Analysis:
The examination of the firm’s activities from the
time raw materials enter the plant until the end
product reaches the final user.
The managers must address three key questions:
1. Who are the company’s target customers?
2. What value does the company want to deliver
to these customers?
3. How will this customer value be created?
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Knowledge as a Controllable
Corporate Resource
Knowledge Management:
The practices that organizations and their managers
use for the identification, creations, acquisition, development,
dispersion and exploitation of competitively valuable
knowledge.
 Tacit Knowledge:
Knowledge that an individual has but it is difficult to
express clearly in words, pictures or formula and therefore
difficult to transmit to others.
 Explicit Knowledge:
Knowledge that is easy to communicate to others via
words, pictures, formula or other means.
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3. Define the Corporate Mission,
Vision and Values Statements
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Mission Statement:
A broad statement that defines the organization’s
purpose and scope.
Vision Statement:
A description of the company’s desired future’s position
if it can acquire the necessary competencies and
successfully its strategy.
Values Statement:
A clear and concise description of the fundamental
values, beliefs and priorities of the organization’s
members.
4. Set Corporate Objectives
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Objectives direct the firm’s course of action, maintain it
within the boundaries of the stated mission, and ensure
its continuing existence.
For example, McDonald’s has three worldwide objectives.
1. To be the best employer for its people in each
community around the world.
2. To deliver operational excellence to its customers in
each of its restaurants.
3. To achieve enduring profitable growth by expanding
the brand and leveraging the strengths of the company
through innovation and technology.
5. Quantify the Objectives
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To enhance a company’s ability to develop
and implement an effective strategy, one that
will enable the company’s objectives to be
attained.
It is important that efforts be made to quantify
these objectives.
6. Formulate the Competitive
Strategies
Participants in the strategic planning process should
formulate alternative competitive strategies.
 Competitive Strategies:
Actions plans to enable organizations to reach
their objectives.
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Companies competing in international markets
confront two opposing forces: reduction of costs and
adaptation to local markets.
5 Different Types of Strategies
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Home Replication
Multi domestic
Regional
Global
Transnational
The appropriate strategy is determined according to the
various activities in the value chain. It depends on the
amount of pressure the company faces in terms of
adapting to local markets and achieving cost reductions.
Home Replication Strategy
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Companies pursuing home replication strategy
typically centralize product development functions
in their home country.
After developing products in the home market,
these innovations are then transferred to foreign
markets in order to capture additional value.
A tight control over marketing and product
strategy.
Ex: Mcdonald’s and Microsoft
Multidomestic Strategy
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It tends to be used when there is strong pressure for
the company to adapt its product or services for
local markets.
The decisions are more decentralized in order to allow
the company to modify its products and to respond
quickly to changes in local competition and demand.
To effectively adapt products, the company will have to
invest in additional capabilities and knowledge in terms
of local culture, language, customer demographics,
human resource practices, government regulations,
distributions systems and so forth.
Global Strategy
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A global strategy tends to be used when a
company faces strong pressures for
reducing costs and limited pressure to
adapt products for local markets.
Strategy and decision making are typically
centralized at headquarters, and the
company tends to offer standardized
products and services.
Transnational Strategy
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It tends to be used when a company
simultaneously confronts pressures for cost
effectiveness and local adaptation and
when there is a potential for competitive
advantage from simultaneously responding
to these two divergent forces.
7. Make Tactical Plan
Standardization and Planning
In making strategic plans, it is essential
that international companies look beyond what
makes sense under current circumstances and
also consider how the situation may change in
the future and the implications of these
changes.
Thus, they use scenarios in the planning
process.
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Scenaries
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Because of the rapidity of the changes in the
uncontrollable variables, many managers have
become dissatisfied with planning for a single
set of events.
Scenarios: Multiple, plausible stories about the
future.
Scenario analysis allows management to assess
the implications for the company of various
economic conditions and operating strategies.
Contingency Plans
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Plans for the best- or worst-case scenarios or
for critical events that could have a severe
impact on the firm.
Contingency planning is a common strategic
activity for domestic and international
airlines.
Strategic Plan Features and
Implementation Facilitators
Two prominent features of the strategic
plan
 Sales Forecast: A prediction of future sales
performance.
 Budget: An itemized projection of revenues
and expenses for a future time period.
Plan Implementation Facilitators
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Once the plan has been prepared, it must be
implemented. Two of the most important plan
implementation facilitators are:
Policies: Broad guidelines intended to assist
lower-level personnel in handling recurring
issues or problems.
Procedures: Specified ways of performing a
particular task or activity.
Performance Measures
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It has been done in order to assess whether the strategy
and its implementation are proceeding successfully or
whether modifications may need to be made.
There are three types of measures
1. Measures of the effectiveness of the company’s
personnel, within and across the firm’s international
network of operations, in performing their assigned jobs.
2. Measures of the company’s success in obtaining and
applying the required resource, such as financial,
technological and human resources.
3. Measures of the company’s progress toward achieving
its mission, vision and objectives.
Kinds of Strategic Plan
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Time Horizon: All strategic plans may be classified as
short, medium or long term. There is a little agreement
about the length of these periods. The time horizon
varies according to the age of the firm and the stability
of its market.
Level in the Organization: Each organizational level of
the company have its level of plan. It depends on how
the company is organized.
Methods of Planning
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Top-Down Planning: Planning process that begins at
the highest level in the organization and continues
downward.
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Bottom-Up Planning: Planning process that begins at
the lowest level in the organization and continues
upward.
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Iterative Planning: Repetition of the bottom-up or topdown planning process until all differences are
reconciled.
New Directions in Planning
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Who does Strategic Planning?
– Executives, Senior Executives, Top management
How Strategic Planning is done?
– Computer models, Sophisticated forecasting methods
“A good strategic planning process must allow ideas to
surface from anywhere and at any time.”
Contents of the Plan
– The content should be based on issues, strategies, and
implementation and with incorporating creative,
forward-looking ideas that are essential to competitive
success.
Analysis of the Competitive
Forces
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The success of strategic management and
the strategic planning process depends in
large part upon the quality of information that
goes into the process, as well as the
interpretation of this information.
If there is a lack of efficient and good
competitive information, this will be a
problem for the companies.
Is Competitor Assessment new?
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Industrial Espionage: Act of spying on a competitor
to learn secrets about its strategy and operations.
Competitor Analysis: Process in which principal
competitors are identified and their objectives,
strengths, weaknesses and product lines are
assessed.
Competitor Intelligence System: Procedure for
gathering, analyzing and disseminating information
about a firm’s competitors.
Sources of Information
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There are five primary sources of information about
the strengths, weaknesses, threats of a firm’s
competitors.
1. Within the firm
2. Published material, including computer databases
3. Suppliers/Customers
4. Competitors’ employees
5. Direct Observation or Analysis of Physical
evidence of competitors’ activities.
Using Competitor Assessment to
Look Forward, Not Back
Benchmarking:
A technique for measuring a firm’s performance against the
performance of others that may be in the same or a completely
different industry.
4 Types of Benchmarking:
Internal: Comparing one operation in the firm with another.
Productivity increases 10%.
Competitive: Comparing the firm’s operation with that of a direct
competitor. Productivity increases 20%.
Functional: Comparing the firm’s functions with similar functions at
firms in one’s broadly defined industry. American Airlines vs.
FedEx.
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Generic: Comparing operations in totally unrelated industries.