strategic management
the process of determining an organization’s basic mission and long-term objectives and then implementing a plan of action for pursuing the mission and attaining these objects
mission statement
a description of what an organization actually does - what its business is - and why it does it
vision statement
expresses organization’s ultimate objectives
approaches to formulating and implementing strategy
- economic imperative
- political imperatives
- quality imperative
- administrative coordination
economic imperative:
worldwide strategy based on cost leadership, differentiation, and segmentation
- typically products for which a large portion of value is added in the upstream activities of the industry’s value chain
- product is basically homogeneous and requires no alteration from country to country; worldwide strategy that is consistent
- generic good
- global sourcing
political imperative
strategy formulation and implementation utilizing strategies that are country-responsive and designed to protect local market niches
- large portion of product value added in the downstream activities of the value chain
- success of product or service depends on: marketing, sales, service
- these MNCS usually use country-centered or multi-domestic strategy
Quality Imperative
takes two interdependent paths:
- a change in attitudes and a raising of expectations for service equality
- the implementation of management practices designed to make quality improvement an ongoing process (TQM-total quality management)
Administrative Coordination
- MNC makes strategic decisions based on the merits of the individual situation rather than using a predetermined economic or political strategy
- used when rapid, flexible decision making is needed to close the sale
- least common approach to formulation and implementation of strategy
Global Integration
production and distribution of products and services of a homogeneous type and quality on a worldwide basis
National Responsiveness
- the need to adapt tools and techniques for managing the local workforce
- need to understand different consumer tastes in segmented regional markets and respond to different national standards and regulations imposed by autonomous governments and agencies
Global Strategy
a low-cost strategy when attempting to benefit from scale economies in production, distribution, marketing (integrated strategy: price competition)
International strategy
make use of valuable core competencies that host-country competitors lack (mixed strategy: low demand for integration and responsiveness)
Transnational Strategy
pursued when there are high cost pressures and high demand for local responsiveness (integrated strategy: high global integration and local responsiveness)
Multi-domestic Strategy
useful with high pressure for local responsiveness and low pressures for cost reductions (differentiated strategy: local adaptation)
Strategic Planning Process
define/clarify mission and objects -> assess environment for threats, opportunities -> assess internal strengths and weaknesses -> consider alternative strategies using competitive analysis -> choose strategy
Environmental scanning
provides management with accurate forecasts of trends relating to external changes in geographic areas where the firm is doing business or considering doing business
environmental factors that can affect the company
industry or market, technology, regulations, economic aspects, social aspects, political aspects
strategic tripod
helps choose among strategic alternatives
Industry- Industry based competition (industrial organization)
Internal factors- firm-specific resources and capabilities (resource based view)
External environment- institutional conditions and transitions (institutional perspective
Implementation
implement strategy through complementary structure, systems, and operational processes–> set up control and evaluation systems to ensure success, feedback to planning
performance measures
accounting based measures- ROI, ROE, ROA, profit margin, corporate ratios;
market-based measures- market shares, EPS, etc.;
cross sectional analysis;
bench marking;
trend analysis;
value chain analysis
Factors to consider when choosing a country
- advanced industrialized countries offer largest markets for goods/services
- amount of government control
- restrictions on foreign investment
- specific benefits offered by host countries
What are the 2 primary considerations when choosing a location?
- the country: the amount of gov’t control and restrictions is a factor as well as specific benefits offered by host countries include low tax rates, low/no interest loans, subsidies (but this trend is changing)
- the specific locale within the chosen country: access to markets, proximity to competitors, availability of transportation and electric power, desirability of location for employees coming in from outside
what are frontier markets?
frontier markets are pre-emerging markets that offer potentially high rewards, but with high risk; are often located in Africa and Asia, and a potential strategy for them is to go for a joint venture with a local company with cultural knowledge of the market
What are country-specific advantages?
country-specific advantages or CSAs are natural resource endowments, the labor force, or less tangible factors (education and skills, institutional protections of intellectual property, entrepreneurial dynamism, etc.)
