international business, 5th edition

chapter 11
international strategic management

Chapter Objectives 1
Characterize the challenges of international strategic management
Assess the basic strategic alternatives available to firms Distinguish and analyze the components of international strategy

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Chapter Objectives 2
Describe the international strategic management process
Identify and characterize the levels of international strategies

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International Strategic Management

International strategic management is a comprehensive and ongoing management planning process aimed at formulating and implementing strategies that enable a firm to compete effectively internationally.

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Strategic Planning
The process of developing a particular international strategy is often referred to as strategic planning.

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Fundamental Questions
What products and/or services does the firm intend to sell?
Where and how will it make those products or services?

Where and how will it sell them?

Where and how will it acquire the necessary resources?

How does it expect to outperform its competitors?

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Factors Affecting International Strategic Management

Language
Culture Politics

Financing
Market research Advertising

Economy
Governmental interference Labor Labor relations

Money
Transportation/ communication Control Contracts

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Sources of Competitive Advantage

Global efficiencies

Multinational flexibility Worldwide learning

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Global Efficiencies

Location efficiencies

Economies of scale

Economies of scope

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Location Efficiencies
Mercedes-Benz has achieved economies of scale by focusing production of its M-class at its assembly plant in Vance, Alabama.

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Strategic Alternatives
Home replication strategy Multidomestic strategy Global strategy Transnational strategy

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Figure 11.1 Strategic Alternatives

Pressures for Global Efficiencies

High

Global Strategy Firm views the world as single marketplace. Goal is to create standardized products. Home Replication Firm uses core competency or firmspecific advantage

Transnational Strategy Firm combines benefits of global scale efficiencies with benefits of local responsiveness Multidomestic Strategy Firm operates as a collection of relatively independent subsidiaries

Low

Low High Pressures for Local Responsiveness/Flexibility

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Components of International Strategy

Distinctive competence Resource deployment

Scope of operations

Synergy

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Distinctive Competence
Answers the question
What do we do exceptionally well, especially as compared to our competitors?

Represents important resource to the firm

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Scope of Operations
Answers the question
Where are we going to conduct business? Aspects of scope
Geographical region

Market or product niches within regions

Specialized market niches
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Resource Deployment
Answers the question
Given that we are going to compete in these markets, how will we allocate our resources to them?

Resource specifics
Product lines
Geographical lines
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Synergy
Answers the question
How can different elements of our business benefit each other?

Goal is to create a situation where the whole is greater than the sum of the parts

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Developing International Strategies

Strategy formulation Strategy implementation

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Figure 11.2 Steps in International Strategy Formulation

Develop a mission statement
Perform a SWOT analysis Set strategic goals Develop tactical goals and plans Develop a control framework

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Mission Statements
Clarifies the organizations purpose, values, direction
Communicates firms strategic direction Specifies firms target customers and markets, principal products, geographical domain, core technologies, concerns for survival, plans for growth and profitability, basic philosophy, and desired public image

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Mission Statements
Wells Fargo
Satisfy all our customers financial needs, help them succeed financially, be known as one of Americas great companies and the number-one financial services provider in each of our markets

Carpenter Technology
Major, profitable, and growing international producer and distributor of specialty alloys, materials, and components

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SWOT Analysis
Strengths
Weaknesses

Opportunities
Threats

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Environmental Scanning
An environmental scan is a systematic collection of data about all elements of the firm's external and internal environments, including markets, regulatory issues, competitors' actions, production costs, and labor productivity.

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Figure 11.3 The Value Chain

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Strategic Goals
Strategic goals are the major objectives the firm wants to accomplish through pursuing a particular course of action.

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Tactical Goals and Plans

Middle management issues Details of implementation Examples
Hiring Compensation

Career paths
Distribution and logistics

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Control Framework
A control framework is the set of managerial and organizational processes that keep the firm moving toward its strategic goals.

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Figure 11. 4 Levels of International Strategy

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Corporate Strategy
Single-Business Strategy
Related Diversification

Unrelated Diversification

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Advantages of Related Diversification

Less dependence on single product
Greater economies of scale

Entry into additional markets more efficient and effective

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Business Strategy

Differentiation Overall cost leadership

Focus

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Functional Strategies

Financial Human resources

Marketing

R&D

Operations

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