M08_RUGM_6563_05_PPW_CH08

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Slide 8.1
Chapter 8
Multinational strategy
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.2
Multinational strategy
•
•
•
•
•
•
Objectives
Introduction
Strategic orientations
Strategic formulation
Strategic implementation
Control and evaluation.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.3
Objectives
• Define the term strategic planning and discuss
the strategic orientations that affect this planning
process.
• Explain how strategy is formulated, giving
particular emphasis to external and internal
environmental assessment.
• Describe how strategy is implemented, with
particular attention to location, ownership
decisions and functional area implementation.
• Discuss the ways in which MNEs control and
evaluate their strategies.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.4
Introduction
• The FSA and CSA framework is related to the
special nature of strategic management.
– Cell 1 will build competitive advantages due to its
home country CSAs.
– Cell 4 can best be described by the resourcebased view (RBV) of strategy.
– Cell 3 is where country and firm effects are
combined requiring the integration of firm and
country advantages in a sustainable and longrun manner.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.5
Introduction (Continued)
• Strategic planning: the process of evaluating
the enterprise’s environment and its internal
strengths, identifying long- and short-range
objectives and implementing a plan of action for
attaining these goals.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.6
Strategic orientations
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.7
Strategic orientations
• Ethnocentric predisposition: the tendency of a
manager or multinational company to rely on the
values and interests of the parent company in
formulating and implementing the strategic plan.
• Polycentric predisposition: the tendency of a
multinational to tailor its strategic plan to meet the
needs of the local culture.
• Regiocentric predisposition: the tendency of a
multinational to use a strategy that addresses
both local and regional needs.
• Geocentric predisposition: the tendency of a
multinational to construct its strategic plan with a
global view of operations.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.8
Table 8.1
Typical strategic orientations of MNEs
Source: Adapted from “Strategic Planning for a Global Business” Columbia Journal of World Business, Summer 1985 Copyright © Elsevier Science & Technology Journals, permission
conveyed through Copyright Clearance Center, Inc (Chakravarthy, B.S and Perlmutter, H.V)
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.9
Strategic formulation
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.10
Strategy formulation
• Strategic formulation: the process of evaluating
the enterprise’s environment (opportunities) and
its internal strengths (resources).
• External environmental assessment:
– information gathering;
– information assessment.
• Internal environmental assessment:
– physical resources and personnel competencies;
– value chain analysis.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.11
Conducting an environmental scan
• Four of the most common methods for
conducting an environmental scan are:
– Asking experts in the industry to discuss industry
trends and to make projections about the future.
– Using historical industry trends to forecast future
developments.
– Asking knowledgeable managers to write
scenarios describing what they foresee for the
industry over the next two to three years.
– Using computers to simulate the industry
environment and to generate likely future
developments.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.12
Examining the five forces that
determine industry competitiveness
• One of the most common approaches to make
an overall evaluation is based on the five
forces that determine industry competitiveness:
–
–
–
–
–
buyers
suppliers
potential new entrants to the industry
the availability of substitute goods and services
rivalry among the competitors.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.13
Figure 8.2
The five-forces model applied to the semiconductor industry
Source: Scott Beardsley and Kinji Sakagami, “Advanced Micro Devices: Poised for Chip Greatness,” Unpublished student paper, Sloan School of Management, MIT, 1988. Reported in
Arnoldo C. Hax and Nicolas S. Majluf, The Strategy Concept and Process: A Pragmatic Approach (Englewood Cliffs, NJ: Prentice Hall, 1991), p. 46
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.14
Internal environmental assessment
• Internal environmental assessment helps to
pinpoint MNE strengths and weaknesses.
• There are two specific areas the MNE will
examine in this assessment:
– physical resources and personnel competitiveness;
– the way in which value chain analysis can be used
to bring these resources together in the most
synergistic and profitable manner.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.15
Physical resources
and personnel competencies
• The physical resources are the assets the MNE
will use to carry out its strategic plan.
• The degree of integration that exists within the
operating units of the MNE.
– Vertical integration: To obtain control over the
supply and to reduce costs.
– Virtual integration: A networking strategy based on
cooperation.
• Personnel competencies are the abilities and
talents of the people.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.16
Value chain analysis
• Value chain: The way in which primary and
support activities are combined.
– Primary activities: inbound logistics, operations,
outbound logistics, marketing & sales and service.
– Support activities: firm infrastructure, HRM,
technology management and procurement.
• Analysis of the value chain can also help a
company to determine the type of strategy that
will be most effective.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.17
Figure 8.4
The value chain for IBM
Source: Reported in Arnoldo C. Hax and Nicolas S. Majluf, The Strategy Concept and Process: A Pragmatic Approach (Englewood Cliffs, NJ: Prentice Hall, 1991), p. 82
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.18
Three generic strategies
• Cost strategy: A strategy that relies on low price
through the pursuit of cost reductions
• Differentiation strategy: A strategy directed
toward creating something that is perceived as
being unique
• Focus strategy: A strategy that concentrates on a
particular buyer group and segments
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.19
Strategy implementation
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.20
Strategy implementation
• Strategy implementation is the process of
attaining goals by using the organizational
structure to execute the formulated strategy
properly.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.21
Strategy implementation (Continued)
• There are many areas of focus in this process,
some of the most important are:
– Location
– Ownership decisions
 A strategic alliance is an agreement between two
or more competitive MNEs for the purpose of
serving a global market.
 An international joint venture (IJV) is an
agreement between two or more partners to own
and control an overseas business (setting up a new
business entity).
– Functional area implementation
 Marketing, manufacturing, finance, procurement,
technology and human resources.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.22
Control and evaluation
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.23
Control and evaluation
• The strategy formulation and implementation
processes are a prelude to control and
evaluation.
• This process involves an examination of the
MNE’s performance for the purpose of
determining:
– how well the organization has done;
– what actions should be taken in the light of this
performance.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.24
Common methods of measurement
• Six of the most common methods of
measurement used for control and evaluation
purposes:
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–
–
–
–
–
return on investment (ROI)
sales growth and/or market share
costs
new product development
MNE/host-country relations
management performance.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 8.25
Figure 8.6
The control and evaluation process
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
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