INTERNATIONAL
STRATEGIC
MANAGEMENT
CHAPTER 9:
INTERNATIONAL STRATEGIC MANAGEMENT
LEARNING OBJECTIVES
• To understand the meaning and importance of International
Strategic Management
• To identify and discuss the components of international
strategy
• To describe the international strategic management process
• To identify and describe levels of international strategies
• To assess national economies, demands and foreign markets.
“Without a strategy the organization
is like a ship without a rudder,
going around in circles”
Joel Ross and Michael Kami
INTERNATIONAL STRATEGIC MANAGEMENT
Definition:
The process of formulating, implementing and evaluating
large-scale action plans after an in-depth SWOT analysis)
and which will enable a company to compete effectively
(competitive advantage) internationally and therefore
achieve its overall, long-term objectives.
IMPORTANCE
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Provides direction for efforts and resources
Forces all units into a coordinated effort
We think of the unexpected: Contingency Planning
There is participation: Better communication
We are proactive in a fast changing environment:
(Technology, customers´ needs and tastes, competitors,
demographics) (especially helpful for very large
Organization)
LEVELS OF STRATEGIC-MAKING
Corporate-Level Managers (The whole Company)
Business-Level Managers (Divisions or strategic
business units)
Functional Managers (MKT, PROD., FIN, H/R)
Corporate
Strategy
Business
Strategies
Functional Strategies
Components Addressed by Executives
• Scope of operations: Decision on range of products or
geographical areas
• Resources deployment: Where will the financial, human
and material resources go?
• Competitive advantage: What do we do better than
others?... so as to focus resources on that.
• Synergy: How can different business units benefit from
each other?
The Walt Disney Example
• Develop a strategic vision and mission
• Set objectives
• Develop strategies to achieve objectives
External and Internal
Analysis
Evaluate and Make
Corrections
Implement and
Execute Strategy
Developing a Vision and Mission
The first task of strategic management
Begins with thinking strategically about
The firm´s future business make up
Where to take the firm
The task is to
Create a roadmap of a company´s future
Decide what future business position to stake out
Provide long-term direction
Give the firm a strong identity
Example
Vision Statement
Mc Donald´s Corporation
McDonald´s vision is to dominate the global
foodservice industry. Global dominance means
setting the performance standard for customer
satisfaction while increasing market share and
profitability through our Convenience, Value,
and Execution Strategies
Examples:
Mision and Vision Statement
Intel
Intel supplies the computing industry with chips,
boards, systems and software. Intel´s products
are used as “building blocks” to create advanced
computing systems for PC users.
Compaq Computer
To be the leading supplier of PCs and PC
Servers in all customer segments
Example
Strategic Vision
DELTA AIRLINES
…. We want Delta to be the
WORLDWIDE AIRLINE OF CHOICE
Example
Strategic Vision
DELTA AIRLINES
WORLDWIDE because we are and intend to remain an
innovative, aggressive, ethical, and successful
competitor who will continue to look for
opportunities to extend our reach through new routes
and creative global alliances
Example
Strategic Vision
DELTA AIRLINES
AIRLINE, because we are and intend to stay in business
we know best – air transportation and related
services. We won´t stray from our roots. We believe
in the long-term prospects for profitable growth in
the airline industry, and we will continue to focus
time, attention, and investment on enhancing our
place in that business environment.
Example
Strategic Vision
DELTA AIRLINES
OF CHOICE, because we value the loyalty of our
customers, employees and investors. For passengers and
shippers, we will continue to provide the best service and
value. For our provide the best service and value. For our
personnel, we will continue to offer an ever more
challenging, rewarding, and result-oriented workplace that
recognizes and appreciates their contributions. For our
shareholders, we will earn a consistent, superior financial
return.
Types of Objectives Required
Financial Objectives
Outcomes focused on
improving a firm´s
financial performance
Strategic Objectives
Outcomes focused on
improving a firm´s
competitiveness and its
long-term business
position
Examples: Financial Objectives
Boost annual return on investment from 15% to 20%
Increase annual dividends per share to stockholders by 5% each year
Strive for stock price appreciation equal to or above the S&P 500
average
Achieve and maintain AA bond rating.
Examples: Strategic Objectives
Increase firm´s market share
Overtake key rivals on quality or customers service or product
performance
Boost firm´s reputation with customers
Attain stronger foothold in international markets
Achieve technological superiority
Become leader in new product introductions
Example: Strategic and Financial Objectives
3M Corp.
Annual growth in earnings per share of 10% or better, on average
A return on stockholders´ equity of 20-25%
Have at least 30% of sales come from products introduced in the past
four years.
What is the External and Internal Analysis?
SWOT analysis focuses on two considerations:
A company´s EXTERNAL environment
(for identifying Opportunities and Threats)
Competitors, demographics, economic indicators, political changes,
cultural changes)
A company´s INTERNAL environment
(for identified Strengths and Weaknesses)
(its competencies, capabilities in the various areas of finance,
marketing production…..)
Core Elements of Mc Donald´s Strategy
• Add 2500 restaurants annually
• Be highly selective in granting franchises
• Locate on sites offering convenience to customers and profitable
growth potential
• Focus on limited menu and consistent quality
• Careful attention to store efficiency
• Extensive advertising and use of Mc prefix
• Hire courteous personnel; pay an equitable wage; provide good
training
CORPORATE STRATEGY
Single – business
Related diversification
Unrelated diversification
BUSINESS STRATEGY
Differentiation (unique, best, different)
Cost leadership (lower price)
Focus (market niche)
FUNCTIONAL STRATEGY
Finance, Marketing, Operations, HRM, R&D
Formulating Business Level Strategies
A. Cost Leadership: Attempting to have the lowest costs throughout
so as to offer the lower prices
BIG
TIMEX
B. Differentiation : Attempting to develop products and services
that are viewed as unique and different in the industry and
therefore offer them at a higher price
XEROX
BMW
C. Focus (Niche): Applying cost leadership or differentiation for a
particular customer or particular geographical area of an entire
market
SWATCH
Formulating Functional-Level Strategies
•
Functional strategies will spell out the specific ways
functional areas will formulate for the achievement of the
business strategy
Example: (Supporting a differentiation strategy)
• The R & D department might have to accelerate the innovation
process
• The Marketing department might have to develop a plan to
support the new product lines with premium prices, distribution
through prestigious locations and the appropriate advertising.
• Production department will attempt to focus on producing a
product with excellent raw materials
Assessing National Economies and the Markets as a Whole
A. Assessing the Economy
Economic size: The most import information an MNE will
seek about a country is its income level. (Higher-income
countries might be an opportunity for expensive, luxury
consumer goods. A low-income country might be of interest
for its low-wage workers.
A country´s income is usually measured by its GNP (Gross
National Product – focuses on whatever is produced by
property and labor owned by the country´s residents). Lately,
most countries use the GDP (Domestic-focuses on whatever is
produced locally in the country). GDP might be important for
firms selling equipment, steel, agricultural products.
Assessing National Economies and the Markets as a Whole
Other firms might look at per capita income (average income
per person). It might be important for companies selling
personal care products.
Income distribution (the relative numbers of a country´s rich,
middle and poor. According to the World Bank it is high,
middle and low-income. E.g. Rolls Royce will be interested in
the number of millionaires in the country while firms selling
refrigerators and automobiles in the numbers of middle class.
Sectorial trends should also be examined. What is the size of
the agricultural sector? In combination with a rising trend in
per capita income we might see a change form rimary to
secondary sector.
Assessing National Economies and the Markets as a Whole
B. Legal/Political Environment
Trade policies, government restrictions and regulations should
be examined. Political stability should also be examined.
Changes might affect profits.
C. Sociocultural Environment
A company might prefer to enter a market of similar culture.