UNIT – III
INTERNATIONAL STRATEGIC MANAGEMENT
INTERNATIONAL STRATEGIC MANAGEMENT
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Strategy is derived from the Greek word
‘Strategos’
It means ‘Generalship – the actual direction
of military force’
Strategy Mgt involves the analysis of
internal
capabilities
and
external
environment of a firm in order to efficiently
and effectively uses the resources to meet
organizational objectives.
FRAMEWORK FOR
INTERNATIONAL STRATEGIC MANAGEMENT
International Strategic Management - Overview
External / Internal Analysis
Strategic Choice and Positioning
Leveraging Competitive Advantage
Implementing the Strategic Plan
Integration
STRATEGIC COMPULSIONS
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Strategic management includes strategic planning,
implementation, and review/control of the strategy
of an organization.
The companies want survive in the today’s business
competition, they must sell their products in the
global market and enlarge their market.
The companies face the compulsion to be global if
they want to gain the global market and more
values.
Ex: Sony, Pepsi, Microsoft…
AREAS OF STRATEGIC COMPULSIONS
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Orientation for Globalization
Emerging E-Commerce and Internet Culture
Cut-Throat Competition
Diversification
Active pressure groups
Motive for corporate social responsibility and
ethics
STANDARDIZATION VS DIFFERENTIATION
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Standardization or differentiation of the
marketing strategy are two extremes of a
continuum, i.e., as Differentiation increases
Standardization decreases, Conversely as
Differentiation decreases Standardization
increases.
Different aspects of Standardization vs
differentiation
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Regional Perspective (Ex. EU, NAFTA, SAARC)
Marketing Process Perspective
Marketing
Components
/
Marketing
Mix
Perspective (Ex. Google, Nokia, Microsoft)
DIFFERENCE BETWEEN
STANDARDIZATION VS DIFFERENTIATION
Basis of
Difference
Standardization
Differentiation
Application in marketing
means
Companies should apply 4Ps in
the Same way in World wide.
It is supported by strong market variety
by Market individualism and uniqueness.
Reason for Application
Integration Access
Regional or local Conditions
Product Offered
Complete standardization
Altering relevant feature according to
individual or geographic
Characteristics
Doesn’t have special Characters
Product is differential from competitors
product.
Approach
Increasing Commonality of
product
Detailing the differentiation that exists
between products and services
Economics of scale
Higher productivity and lowers
the total cost
Increasing cost of production and lower
productivity
Need
Satisfy the heterogeneous needs
of the buyer
Satisfy a particular need of buyer
End Result
Benefits buyer by lowering price
Show sense of value to the buyer
STRATEGIC OPTIONS
Strategic options are creative alternative
action – oriented responses to the
external situation that an organization (or
group of organizations) faces.
 A Strategic option is a set of related
options that form a potential strategy.
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INTEGRATION – RESPONSIVENESS GRID
FACTORS AFFECTING STRATEGIC OPTIONS
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External Constraints
Intra-Organizational forces and managerial
power-relations
Values and preferences and managerial
attitudes towards risk
Impact of past strategy
Time constraints
Information constraints
Competitors reaction
GLOBAL PORTFOLIO MANAGEMENT
Global portfolio investment (Mgt)
means a grouping of investment assets
that focuses on securities from foreign
markets rather than domestic market.
 Examples
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 Purchase
of shares
 Purchase of bonds issued by Foreign Govt.
 Acquisition of assets in Foreign Country
FACTORS AFFECTING GLOBAL PORTFOLIO
MANAGEMENT
Tax rates on interest or dividends
 Interest rates
 Exchange rates
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GLOBAL ENTRY STRATEGIES
FORMS OF INTERNATIONAL BUSINESS
1.Trade related forms of international
business
 Exports – direct and indirect
 Indirect Exports
 Domestic
Purchase
 Export Houses
 Piggybacking
 Trading companies
FORMS OF INTERNATIONAL BUSINESS
2. Manufacturing Strategies without FDI
 International licensing
 International franchising
 International Contract manufacturing
 Turnkey Projects
 Management contracts
FORMS OF INTERNATIONAL BUSINESS
3. Manufacturing Strategies with FDI
Joint Ventures
 International strategic Alliance
 Merger & Acquisition
 Wholly owned subsidiaries
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ORGANIZATIONAL ISSUES OF I.B
There are 3 issues
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First, the different elements of a firm’s
organizational architecture must be internally
consistent.
Second, the organizational architecture must
match or fit the strategy of the firm strategy
and architecture must be, consistent.
Third, the strategy and architecture must be
consistent with competitive conditions prevailing
in the firm’s market strategy , architecture and
environment must be, consistent
ORGANISATIONAL STUCTURE
A Functional Structure
 A typical Product divisional Structure
 One company’s international
divisional structure
 A world wide area structure
 A world Wide product Divisional Structure
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A FUNCTIONAL STRUCTURE
Top
Management
Purchasing
Buying
Units
Manufacturing
Plants
Marketing
Finance
Branch
Accounting
Sales Unit
Units
A TYPICAL PRODUCT DIVISIONAL STRUCTURE
Head Quarters
Product Line -
Product
A
Line - B
Product Line C
Purchasing
Buying units
Manufacturing
Plants
Sales unit
Marketing
Finance
Accounting
Units
COMPANY’S
INTERNATIONAL DIVISIONAL STRUCTURE
Head Quarters
Domestic Division, product
Domestic Division, product
Domestic Division, product
line - A
line - A
line - A
Intl. Division
G.M
Area Line
Country -1
Country – 2
G.M
G.M
Product A,B and C
Product A,B and C
A WORLD WIDE AREA STRUCTURE
Head Quarters
North
Latin
American
American
Area
Area
Middle
European
Area
Eastern –
African
Area
Far East
Area
A WORLD WIDE PRODUCT DIVISIONAL
STRUCTURE
Head
Quarters
WorldWide
Worldwide
Worldwide
Product Division A
Product Division B
product Division C
Area 1
Area 2
(Domestic)
(International)
A GLOBAL MATRIX STRUCTURE
CONTROLLING OF INTRENATIONAL BUSINESS
Personal Controls
 Bureaucratic Controls
 Output Controls
 Cultural Controls
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APPROACHES TO CONTROL
Market approach
 Rules approach
 Corporate culture approach
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PERFORMANCE EVALUATION SYSTEM
First, Incentive used often varies depending
on the employees and their tasks
 Second, the successful execution of
strategy in the multinational firm often
requires significant cooperation between
managers in different sub units
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CONTD…
Third, the incentive system used within a
multinational enterprise often have to be
adjusted to account for national
differences in institutions and culture
 Finally, it is important for managers to
recognize that incentive systems can have
unintented consequences.
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PROCESS OF PERFORMANCE MEASUREMENT
Establish standards of performance
Measure actual performance
Compare actual with standards
Construct and implement an action plan
Review and revise standards
OBJECTIVES OF PERFORMANCE EVALUATION
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To evaluate the economic performance of its
international performance, this is frequently
referred to as an evaluation of the unit’s
management performance.
To
evaluate
the
unit’s
management
performance.
To monitor progress towards corporate
objectives including strategic goals.
To assist efficient allocation of resources.
THANK U