CHAPTER 9
STRATEGIC
PLANNING
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Copyright © 2011 John Wiley & Sons
1. Outline the process of strategic planning in
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Learning
Objectives
the context of the global marketplace
2. Examine both the external and internal
factors that determine the conditions for
development of strategy and resource
allocation
3. Illustrate how best to utilize the
environmental conditions within the
competitive challenges and resources of the
firm to develop effective programs
4. Suggest how to achieve a balance between
local and regional/global priorities and
concerns in the implementation of strategy
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Globalization
Globalization reflects a business
orientation based on the belief that
the world is becoming more
homogenous and that distinctions
between national markets are not
only fading, but may eventually
disappear
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Evolution of Global Strategy
Develop Core
Business Strategy
Core Business Strategy
Internationalize
the Strategy
Globalize
the Strategy
Country
A
Country
B
Country
C
Country
D
Country
E
Figure 9.1
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Globalization Drivers
Market Factors
 World customers are similar across nations
 Channels of distribution are becoming more global
 Technology is making world markets more accessible
 Avoiding cost inefficiencies
Cost Factors
 Avoiding duplication of effort
 Size is a major asset
Environmental
Factors
Competitive
Factors
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 Government barriers have fallen dramatically
 Accelerated flow of information across borders
 Removal of barriers and rapid technology growth
 Companies take action to match competitors’ moves
 Companies look for less competitive markets
 Market presence necessary to execute global strategies
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Focus on Entrepreneurship:
How Social Entrepreneurs Think
Global
The concept of doing good while building a
profitable business model has grown in popularity.
Social enterprises are born global for 3 reasons:
1. Social problems exist in developing countries.
2. Resources are mainly in the developed world.
3. Global for-profit social enterprises can be
adapted to other situations.
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Mininationals and Born Globals
 Mininationals are newer companies with
sales between 200 million and 1 billion that
are able to serve the world from a handful of
manufacturing bases
 Born globals are newly founded firms that,
from inception, are established as an
international business
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Global Strategy Formulation
Assessment and Adjustment of Core Strategy
Market/Competitive Analysis
Internal Analysis
Formulation of Global Strategy
Choice of Competitive Strategy
Choice of Target Countries/Segments
Development of Global Program
Implementation
Organizational Structure
Control
Figure 9.3
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Understanding and Adjusting the Core
Strategy
 Strategic Business Units (SBUs) – Groupings with
product-market similarities:



Needs or wants
End-user customers
Good or services used to meet needs of specific customers
 Requires the participation of executives from different
functions
 Market and Competitive Analysis


Opportunities
Threats
 Internal analysis


Strengths
Weaknesses
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Abu Dhabi’s Energy City Plan
Abu Dhabi is proceeding with a plan known as Masdar, which involves
the development of a clean energy city. Founded in 2006, the $22
billion venture aims to develop a city run on renewable energy sources
like solar power to avoid producing the carbon emissions that cause
global warming.
The global financial crisis has resulted in funding cuts and
construction delays. After conducting a strategic review of the new
funding obstacles, it is expected that a revised plan will not scale back
significantly on the original plan.
Source: Bloomberg.com
http://www.bloomberg.com/news/2010-06-30/abu-dhabi-proceeds-with-masdar-energy-city-plan-jaber-tellsemirates-news.html
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Choice of Competitive Strategy
 In global markets, the manager has three
general choices of strategies:
Source of Competitive Advantage
Low Cost
Industry-wide
Cost
Leadership
Differentiation
Differentiation
Competitive
Scope
Focus
Single Segment
Figure 9.4
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Country-Market Choice
 Usual approach – First start with regions, then
further split the analysis by country
 Portfolio models typically look at internal
strength and external attractiveness and find the best
fit or gap not being served
 Three factors for determining country selection:
 Stand-alone attractiveness of a market
 Global strategic importance
 Possible synergies
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Bases for Global Market Segmentation
Bases for International
Market Segmentation
Marketing
Management
Bases
Environmental
Bases
Geographic
Variables
ProductRelated
Variables
Political
Variables
Economic
Variables
PromotionRelated
Variables
Cultural
Variables
PriceRelated
Variables
DistributionRelated
Variables
Figure 9.6
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Focus on Economy:
Global Extremes
The severity of the global recession has brought about a
change in some parts of the world. The GfK Roper
Mood of the World® index combines three measures to
calculate an overall score in terms of how consumers
are feeling: distress, reaction, and concern.
The consumer confidence index indicates that certain
areas of the world differ in terms of when consumers
expect to return to their previous spending patterns.
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Global Program Development
 Involves combining adaptation, aggregation, and
arbitrage elements
 Product Offering
 Standardization of core product or technology, adapted to local
preferences
 Marketing Approach
 Uniformity is sought in elements that are strategic in nature
 Care is taken to localize necessary tactical elements
 Glocalization – Networked global organization approach
 Location of Value-Added Activities
 Cost reductions by pooling production or other activities
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Competitive Moves
 A company can be attacked by competitors in any
market, included those that are most profitable
and successful
Cross-subsidization – Use of resources accumulated
in one part of the world to fight a competitive battle in
another
 Soft power – The ability to obtain what one wants
through co-option and attraction

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Implementing Global Programs
 Successful global companies can balance local,
regional, and global concerns
 Challenges
 Market-related
reasons
 Insufficient
research
 Over-standardization
 Internal
reasons
 Inflexibility

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in planning an implementation
“Not-invented-here” syndrome
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A New Global Strategy for Peugeot
Beginning with the sleek, new RCZ coupe in 2010, the French
carmaker Peugeot is planning to launch 14 new models in an effort to
boost its global repertoire as an auto maker. The company aims to
return to the virtues that made Peugeot great in the 1980s – classleading handling combined with pert styling.
Among the new models, Peugeot will unveil a saloon specially
developed for the Chinese market and a light pickup in Brazil.
Source: The Economist -- http://www.economist.com/node/15911980?story_id=15911980
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Localizing Global Moves
 Balancing what country managers do and what
global product managers do

Management Processes
Transfer of information
 Personnel interchange to facilitate philosophy, strategy, actions
 Headquarters should coordinate and leverage resources


Centralized decision making authority
Develop a strategy jointly
 Permit local managers to develop own programs within specified
parameters and with approval
 Motivate by participation and autonomy

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Organizational Structures
 Various organizational structures have emerged to
support the globalization effort:



Global or regional product managers and their support groups
at headquarters
Matrix structure – Effective system for managing today’s
global marketplace
Global account management – Builds relationships with
important customers and allows for the development of
internal systems and interaction
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Focus on Culture:
Staffing Creatively
Companies are trying to reduce their reliance on
the traditional expatriate to keep costs down and
maintain effectiveness. Many expatriates are
charged with finding their replacements as quickly
as possible. However, promising local candidates
become expatriates themselves when they are asked
to work in the head office to gain experience.
Some companies have successfully encouraged
local executives to step up to important roles.
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Two Dimensions of Corporate Culture
 Dimension One – The overall way a
company holds its operations together
making them a single entity
 Dimension Two – Commitment to the
global marketplace
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Local Company in a Global Environment
 The global marketplace presents significant
challenges and opportunities for local firms
 Strategies depend on both external and internal
realities
 Liberalization may mean hardship for some
companies as a result of economic integration or
WTO membership
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Competitive Strategies for Local
Companies
Dodger
Defender
 A local company that sells out to a global player
or becomes part of an alliance
 A local company that has assets that give it a
competitive advantage only in its home market
 A local company whose assets are transferable,
Contender
allowing it to compete head-on with established
global players worldwide
 A local company whose assets are transferable,
Extender
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allowing it to compete head-on with established
global players worldwide
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