Lec 7 Flashcards
(23 cards)
Strategic Management
Process of:
- > Determining an organization’s basic mission and long-term objectives
- > Implementing a plan of action for pursuing the mission and attaining the objectives
- > Required to keep track of firms’ increasingly diversified operations in a continuously changing international environment
Strategic Planning
Helps a MNE coordinate and monitor its far-flung(weit verbreitete) operations and deal with:
- Political risk
- Competition
- Currency instability
Does Strategic Planning lead to international success?
Evidence for effectiveness of planning is mixed
- > Planning does not always result in higher profitability
- > Specifics will dictate the success of the process
Approaches to Formulating and Implementing Strategy
economic -, political -, quality - imperative,
administrative coordination
–> some companies use more than one approac
economic imperative
Worldwide strategy based on:
Cost leadership
Differentiation
Segmentation
MNEs sell products for which a large portion of value is added in upstream activities of industry’s value chain
research and development, manufacturing, and distribution.
- Used when a product is regarded as a generic good and does not have to be sold based on name brand or support service
- Global sourcing: Gained prominence in recent years, Useful in formulating and implementing strategy
political imperative
Strategy formulation and implementation utilizing strategies that are country-responsive and designed to protect local market niches
- MNEs sell products for which a large portion of value is added in downstream activities of value chain
- Success of product/service depends on marketing, sales, and service
Country-centered/multi-domestic strategy is used
–> thums up acquired by coca cola
quality imperative
Strategic formulation and implementation utilizing strategies of total quality management to meet or exceed customers’ expectations and continuously improve products or services
Takes two interdependent paths
- > Change in attitudes and raising of expectations for service quality
- > Implementation of management practices designed to make quality improvement an ongoing process
Total quality management (TQM)
- > Cross-train personnel to do jobs of all members in work group
- > Process reengineering designed to help identify and eliminate redundant tasks and wasteful effort
- > Reward system designed to reinforce quality performance
TQM TOYOTA+apple
- customer focus
- process management
- planning process
- process improvement
- total participation
Administrative Coordination
MNE makes strategic decisions based on merits of the individual situation
Does not use 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
Forces/Pressures that influence strategy
- Pressure for global integration: this is the pressure for standardization and cost reduction.
- Pressure for national responsiveness: this is the pressure for adaptation to understand different customer needs
International Strategy
national responsiveness–>low
global integration–>low
Home-replication strategy
- Small firms like to use this.
- Normally keep R&D and innovation at home. Aim to create value by transferring valuable skills and products to foreign markets where competitors lack those skills and products
–> mc donalds, google, 7eleven, 5000dollar car wash
Global Strategy:
national responsiveness pressure –> weak
global integration pressure–> high
- Based on price competition
- Focus is on product standardization.
- Can achieve economies of scale
–>apple, samsung
Transnational Strategy:
global integration–> high
national responsiveness–> high
opportunities for leveraging valuable skills within a multinational global network of operations (Möglichkeiten zur Nutzung wertvoller Fähigkeiten in einem multinationalen globalen Betriebsnetzwerk)
Exploit (nutzen/ausbeuten) experience-based cost economies and location economies.
MNEs seek to operate there
min costs + reach most customers –> max differentiation + max integrated
Steps in Formulating Strategy
Scanning the external environment for opportunities and threats
Conducting an internal resource analysis of company strengths and weaknesses
Formulating goals in light of the external scanning and internal analysis
Step 1: Environmental Scanning
Provides management with accurate forecasts of trends
changes: of environmental factors that affect company( industry, market, technology, social aspects)
Step 2: Internal Resource Analysis
Helps firms evaluate their current managerial, technical, material, and financial resources and capabilities
To better assess their strengths and weaknesses
Determines firms’ ability to take advantage of international market opportunities
Identifies key success factors (KSF) that will dictate how well a firm is likely to do
Step 3: Goal Setting
For MNCs, goals are normally at parent level and at subsidiary level
Strategy Implementation
Process of providing goods and services in accord with a plan of action
Includes:
- Consideration of location for implementation
- Execution of entry and ownership strategies
- Implementation of functional strategies in marketing, production, and finance
Location Consideration of implementation
- Choose country
- Considerations for Choosing a Specific Locale
- ->Access to markets
- ->Proximity to competitors
- ->Availability of transportation and electric power
- ->Desirability of location for employees coming in from outside
- ->Nature of workforce
- ->Cost of doing business
Strategies for Emerging Markets
Emerging markets present exceptional risks due to political and economic volatility
- ->Corruption
- ->Failure to enforce contracts
- ->Red tape and bureaucratic costs
- ->General uncertainty in legal and political environment
First-Mover Strategies
First-mover or early-entry positioning - Being the first or one of the first to enter a market
- ->Capturing learning effects important for increasing market share
- ->Achieving scale economies that accrue/erhöhen from opportunities for capturing that greater share
- ->Developing alliances with the most attractive local partner
–> Huawei in Africa
Strategies for Base of Pyramid (BOP)
Challenging to implement - Companies must:
- ->Offer affordable goods that are highly available in a community that is willing to accept the product
- ->Bring awareness of the product to the general populace
–> danone in bangladesh and africa
Organizational strategies
Global Standardization (aircraft, cameras, consumer electronics, computers)
Transnational (telecommunications, aerospace)
International(synthetic fibers, cement)
Multidomestic/
Regionalization (steel, clothing, packaged goods)
multidomestic/ reginolaitazion
national responsiveness–> high
global integration–> low
niche companies adapt products to satisfy high demands of differentiation
no economies of scale–> integration not important
