INTERNATIONAL STRATEGIC MANAGEMENT

Author- Himanshu Sisodia

BUSINESS POLICY
MAJOR POLICY

Lines of business ( Code of ethics )
SECONDRY POLICIES ( Selection of geographical area, major customers, major products ) FUNCTIONAL POLICIES ( Marketing, Production, Research, Finance Material & Quality management etc. ) PROCEDURE AND STANDARD OPERATING PLAN ( Handling incoming orders, servicing customer complaints, Shipping to foreign countries ) RULES ( Delivery of pay cheques ,loitering around plant, security Smoking, use of company car etc)

STRATEGY
• GREEK WORD STRATEGIA – Science of guiding & Directing
• COMPLEX PROCESSOF DETERMINING LONG TERM GOALS & COURSE OF ACTIONS NEEDED TO BE CARRIED OUT, ALLOCATION OF RESOURCES FOR CARRYING OUT THESE GOALS. MOVING FROM WHERE YOU ARE TO WHERE YOU WANT TO BE IN NEAR FUTURE THROUGH A SERIES OF DECISIONS AND ACTIONS. PRE DETERMINED COURCE OF ACTION HAS DEFINITE DIRECTION SUSTAINABLE COMPETITIVE ADVANTAGE: Delivering superior value to target customer at the same cost or delivering equal customer value at lower cost relative to your competitor, on a continuing basis.

• • •

STRATEGIC DECISION MAKING
• • • • • SETTING REALISTIC GOALS: Challenging but achievable RATIONALITY: Exercising best choice among alternatives CREATIVITY: Decision creative and original through brainstorming VARIABILITY : Every situation is unique DEMOGAFIC FACTORS: Age. Education, Intelligence, Values Cognition. risk taking and creativity GROUP DECISION MAKING: Participation

CONCERNS OF STATEGIC PLANNING
• • • • • • • • FUTURE Long term dynamics is its concern not day-to-day tasks GROWTH Direction, extent, pace and timing of growth ENVIRONMENT The fit between business and its environment PORTFOLIOS OF BUSINESSES Product-market scope and postures STRATEGY Strategy is its concern ; not the operational activities INTEGRATION Integration is its concern ; not a particular function CREATING CORE COMPETENCIES / COMPETITIVE ADVANTAGE Creating long term , sustainable organizational capability CORPORATE STRATEGY In one word corporate strategy is its concern

STRATEGIC MANAGEMENT
ESTABLISHMENT OF VISION & MISSION statements, Business Definition STRAT. INTENTS Adopting Business Model, Setting Goals & Objectives

FORMULATION of STATEGIES

Conducting SWOT, Formulating CORPORATE & BUSINESS LEVEL Strategies, Strategic Analysis Strategic Choice, Strategic Plan. Activating Strategies, Designing Structure, Systems& Processes, Behavioral & Functional implementation And Operationalising strategies

IMPLEMENTATION OFSTRATEGIES

REVIEW,EVALUATION Performing Strategic Evaluation, Exercising Strategic CONTROL Control and Reformulating Strategies

STRATEGIC MANAGEMENT
ENVIRONMENT SCANNING STRATEGY FORMATION
MISSION (Reason for existence) OBJECTIVES (What results to accomplish & by when ) STRATEGIES (Plan to achieve Mission & Objectives) POLICIES (Broad guidelines for decision PROGRMS Activities needed To accomplish plans BUDGETS Cost of programs PROCEDURE Sequence of steps needed to do the job PERFORMANCE Actual results

STRATEGY IMPLEMENTATION

EVALUATION & CONTROL

EXTERNAL
SOCIETAL TASK ENVIRONMETAL

INTERNAL
STRENGTS WEAKNESSES • structure •Culture ( Beliefs, xpectations,Values ) • Resourses, Skills, ompetencies,Knowledge

Making)

FEEDBACK / LEARNING

NATURE OF INTERNATIONAL STRATEGIC MANAGEMENT

SINGLE COUNTRY, EXPORT & INTERNATIONAL STRATEGY
FIRM A OPERATES IN COUNTRY X

FIRM A OPERATES IN COUNTRY X

Y

EXPORT TO COUNTRY Y

SINGLE COUNTRY STRATEGY

EXPORT STRATEGY SUBSIDIARY S3

SUBSIDIARY S1 THE CENTRE SUBSIDIARY S2 INTERNATIONAL STRATEGY

SUBSIDIARY S4

GLOBAL STRATEGY

SUBSIDIARY S1

SUBSIDIARY S2

SUBSIDIARY S6

THE CENTRE

SUBSIDIARY S3

SUBSIDIARY S5

SUBSIDIARY S4

LEVELS OF STRATEGY & EVOLUTION OF STRATEGIC MANAGEMENT

HIERARCHY OF STRATEGY
CORPORATE STRATEGY

BUSINESS STRATEGY

FUNCTIONAL STRATEGY

STRATEGY AT DIFFERENT LEVELS
CORPORATE STRATEGY COMPETITIVE STRATEGY OPERATIONAL PURPOSE OR MISSION ATTAIN SUSTAINABLE FUNCTIONAL COMPETITIVE ADVANTAGE BY: LEVELSTRATEGY SHAREHOLDER VALUE ? HR,FINANCE,PRODUCTN STAKEHOLDER INTEREST? . LEVERAGING RESOURSES MARKETING,QUALITY ASPIRATIONAL ? . DEVELOPING CAPABILITIES Etc. AND MEANS : . COMPETING ON COST,OR Functional Level Managers DIFFERENTIATING OR are responsible for: . GOOD PARENTING . SELECT PORTFOLIO OCCUPYING A NICHE developing annual objectives . GUARD REPUTATION & short term implementation Plans.

HOW HAS STRATEGIC MANAGEMENT EVOLVED
• PHASE I: BASIC FINANCIAL PLANNING : Seeking better operational control by trying to
meet budget

. PHASE II : FORECAST BASED PLANNING : Seeking more effective planning for growth
by trying to predict the future beyond next year. . PHASE III : EXTERNALLY ORIENTED PLANNING ( STRATEGIC PLANNING ) : Seeking increased responsiveness to markets and competition by trying to think strategically. . PHASE IV : STRATEGIC MANAGEMENT : Seeking a competitive advantage by considering implementation and evaluation and control when formulating strategy. . PHASE V : INTERNATIONAL / GLOBAL STRATEGIC MANAGEMENT : Managing a worldwide competitive advantage

STRATEGIC MANAGEMENT PROCESS

STRATEGIC MANAGEMENT PROCESS
IV INTERNAL’ ANALYSIS
.STENGTHS .WEAKNESSES

I I ORG. . MISSION
. OBJECTIVES .STRATEGIES . POLICIES

II ORG.
CURRENT PERFORM - ANCE.

III REVIEW
BOARD OF DIRECTORS & TOP. MGMT

V
SELECTION OF STRATEGIC FACTORS

VI REVIEW
REDEFINE
. MISSION .OBJECTIVES

VII
GENERATION & EVALUATION OF STRATEGIC ALTERNATIVES

VIII

IMPLEMENT BEST ALTERNATIVE

IV EXT. ENV. ANALYSIS . OPP.
. THREATS

REWORK AS NEEDED

IX
MONITORING

TYPICAL VALUE CHAIN
OF A MANUFACTURED PRODUCT

RAW MATERIAL

PRIMARY MANUF.

FABRICATION

PRODUCT DISTRIBUTOR RETAILER PRODUCER

A CORPORATE VALUE CHAIN
FIRM INFRASTRUCTURE ( Gen.Mgmt,Accounting,Finance, Plg) SUPPORT ACTIVITIES HUMAN RESOURCE DEVELOPMENT
( Recruitment, Training, development )

TECHNOLOGY DEVELOPMENT
( R&D,Process & Product Development0

PROFIT MARGIN

PROCUREMENT ( Purchasing of Raw Materials, Machines, Supplies)
INBOUND LOGISTICS (RAW MAT) OPERATIONS ( Machining, ( Assembly, Testing ) OUTBOUND LOGISTICS ( Distribution ) MARKETING & SALES ( Advt. Prom - otion ) SERVICES ( Installation, Repair )

PRIMARY ACTIVITIES

VALUE CHAIN ANALYSIS
• Value Chain: Linked set of value creating activities, beginning with basic Raw materials coming from suppliers to a series of value added activities involved in producing and marketing a product,

• • •

ending with distributor getting the final goods into the hands of ultimate customer Focus of value chain: To examine corporation in the context of overall chain of value creating activities of which firm may only be a small part. INDUSTRY VALUE CHAIN ANALYSIS: 2 segments i) Upstream Activities: Petroleum Industry- Oil exploration, drilling and moving crude oil to refinery. ii) Downstream activities: Refining the oil, Transporting and marketing of Gasoline and Refined Oil to distributors and gas station retailers Ex: British Petroleum: Dominant in upstream activities like exploration. AMCO: Great expertise in downstream activities like marketing and retailing. Merger combined their core competencies In analyzing value chain a firm operates up and down the entire chain but usually has area of prime expertise called – centre of gravity Differences among competitor’s value chain are key sources of competitive advantage Backward & Forward integration One of the strategic moves: Moving forward or backwards along the value chain in order to reduce costs, guarantee access to key raw materials ( Backward Int.) or to guarantee cost effective and proper distribution ( Forward Int. )

CORPORATE VALUE CHAIN
• • • Framework for identifying competitive advantage Differences among competitor’s value chain are key source of competitive advantage Each corporation has internal value chain of activities. Activities performed by any firm can be grouped under 9 areas

PRIMARY ACTIVITIES 1. INBOUND LOGISTICS: Raw mat. Handling and warehousing 2. OPERATIONS: Product manufacturing ( Machining, Assembly & Testing) 3. OUTBOUND LOGISTICS: Warehousing & Distribution 4. MARKETING & SALES: Advertising, Promotion etc.. 5. SERVICE: Installation, Repairs & After sale service SUPPORT ACTIVITIES 6 FIRM’S INFRASTRUCTURE 7 HUMAN RESOURCE DEVELOPMENT 8 TECHNOLOGY DEVELOPMENT: R&D , Product & Process development 9 PROCUREMENT: MP&IC, Purchasing, Outsourcing and Material Handling & Storage • • Each of the Product line has its distinctive value chain For several products, internal analysis of firm involves analyzing a series of different value chains

EXTERNAL ENVIRONMENT

COMPANY AND ENVIRONMENT
ENVIRONMENT INPUTS PROCESSES ACTIVITIES OPERATIONS PLANNING MANUFACTURING INSPECTION PACKING OUTPUTS

MEN MACHINE MATERIAL METHODS MONEY

GOODS SERVICES SALES PROFITS

OBJECTIVES GOALS CORRECTIVE TARGETS ACTION

FEEDBACK

ENVIRONMENT

PEST FACTORS

POLITICAL

TECHNOLOGICAL

ECONOMIC

SOCIAL

PESTLE MATRIX
POLITICAL
CURRENT/FUTURE LEGISLATION REGULATORY BODIES GOVT. POLICIES GOVT. TERM & CHANGE

ECONOMIC
ECONOMY SITUATION & TRENDS TAXATION INTEREST & EXCHANGE RATES MARKET & TRADE CYCLE

SOCIAL
LIFESTYLE TRENDS DEMOGAPHICS COMPANY ATTITUDES & OPINIONS BRAND,COMPANY ,TECHNOLOGYIMAGE CONSUMER BUYING PATTERNS ETHNIC/RELIGIOUS FACTORS

TECHNOLOGICAL
TECHNOLOGY ACCESS,LICENSING,PATENTS MATURITY OF TECHNOLOGY REPLACEMENT TECHNOLOGY / SOLUTIONS INNOVATION POTENTIAL MANUFACTURING MATURITY & CAPACITY

LEGAL
INTERNATIONAL LAW EMPLOYMENT LAW COMPETITIOM LAW HEALTH & SAFETY LAW REGIONAL LEGISLATION

ENVIRONMENTAL
ENVIRONMENTAL IMPACT ENVIRONMENTAL LEGISLATION ENERGY CONSUMPTION WASTE DISPOSAL

CONSTITUENTS OF MICRO ENVIRONMENT

MARKETING INTERMEDIARIES

MARKETS TYPES & DEMANDS

COMPETITION

SUPPLIERS MICROENVIRONMENT

E- COMMERCE

FINANCIAL INSTITUTIONS REGULATORY PROVISIONS

SKILL LEVEL OF WORKFORCE

IR CLIMATE

ENVIRONMENTAL CHANGES
WHICH FORCE THE FIRMS TO ADOPT STRATEGIC PERSPECTIVE

• • • • • • • •

CHANGES IN TECHNOLOGY PROLIFERATION OF NEW PRODUCTS FASTER COMMERCIALISATION OF NEW IDEAS EMERGENCE OF GLOBAL FIRMS, MARKETS & BRANDS CHANGING TASTES & PREFERENCES OF CUSTOMERS THE NEW AFFLUENCE OF CONSUMER SOCIO-CULTURAL & POLITICO-LEGAL CHANGES BUSINESS BOUNDRIES GETTING BLURRED ( DUE TO OVERARCHING TECNOLOGIES : FASTER
INTERNET, E-GOVERNANCE & E-COMMERCE COMMUNICATION,

etc )

NEW DEMANDS FIRMS HAD TO FACE
( CONSEQUENT TO ENVIRONMENTAL CHANGES )
• • • • • • TO BE STRATEGICALLY ALERT TO BE FUTURE - ORIENTED TO BE ABLE TO TAKE RISKS IN TAPPING OPPORTUNITIES TO BE INSULATED ENOUGH AGAINST ENVIRONMENTAL THREATS TO DEVELOP COMPETENCE FOR ASSIMILATING CHANGES FASTER TO RESPOND EFFECTIVELY AND MORE

ECONOMICALLY ( It helps avoid haphazard response to environment. Provides best possible fit between the firm & Ext. Env. Helps build sustainable competitive advantage. Prepares the firm to not only face future but even shape the future in its favor. )

INTERNAL ENVIRONMENT

A SWOT CHECKLIST
INTERNAL STRENGTHS: MANY PRODUCT LINES? BROAD MARKET COVERAGE? MANUFACTURING COMPETENCE? GOOD MARKETING SKILLS? GOOD INVENTORY MANAGEMENT? R&D? INFORMATION SYSTEM? GOOD HUMAN RESOURCES? BRAND EQUITY? COST ADVANTAGE? APPROPRIATE ORG. STRUCTURE? APPROPRIATE CONTROL SYSTEMS? ABILITY TO MANAGE STRAT. CHANGE Etc

INTERNAL WEAKNESSES: NARROW PRODUCT LINES? RISING MANUFACTURING COST? POOR MARKETING PLAN? POOR MATERIAL MANAGEMENT? INADEQUATE HUMAN RESOURCES LOSS OF BRAND NAME?LACK OF CORPORATE DIRECTION? LACK OF CORPORATE CONTROL POOR FINANCIAL MANAGEMENT INAPPROPRIATE ORG. STRUCTURE & CONTROL SYSTEMS HIGH CONFLICTS, POLITICS? Etc

SWOT CHECKLIST
POTENTIAL ENV. OPPORTUNITIES . . NEW MARKETA/BUSINESSES?
. COST OF DIFFERENTIATION ADV? . PROFITABLE NEW ACQUISITIONS? . BRAND NAME CAPITAL IN NEW AREAS . R&D SKILLS IN NEW AREAS . VERTICAL INTEGRATION( FORWARD/BACKWARD) . DIVERSIFICATION . OTHERS?

POTENTIAL ENV. THREATS . ATTACK ON CORE BUSINESSES?
. INCREASE IN DOMESTIC/ FOREIGN COMPETITION? . CHANGE IN CUSTOMER TASTE . BARRIERS TO ENTRY . NEW OR SUBSTITUTE PRODUCTS . INDUSTRY COMPETITION . SLOWDOWN IN ECONOMY . TAKEOVERS . LOWER MARKET GROWTH RATE . OTHERS?

MACKENZIE’S 7S MODEL
STRUCTURE STRATEGY SHARED VISION SYSTEMS

SKILLS STAFF

STYLE

VISION, MISSION & BUSINESS DEFINITION

STRATEGIC INTENTS
• To achieve success, organizations have to primarily focus on hierarchy of strategic intents – Vision, Mission, Business Definition, Business Model, Goals Objectives • Framework within which organization operate and adopt a predetermined direction • Purposes the organizations strive for.

CONCEPT OF STRETCH,LEVERAGE & FIT
STRETCH : Misfit between Resources & Aspirations LEVERAGE : Refers to concentrating, accumulating, conserving. contemplating and utilizing precious & scarce resources in such a manner that these are stretched to meet the aspirations of a company. FIT : Positioning the firm by matching its organizational resources to its environment.

VISION
• Future aspirations that lead to an inspiration • Basic & at the top of hierarchy of strategic intents • Aspirations expressed as strategic intent should lead to an end. • This is what a person or an organization would ultimately like to attain in the near future. • A vision is generally more dreamt than it is articulated • By its nature it may be as good as a dream, yet it is a powerful motivator to action.

GOOD VISION STATEMENTS
• Inspiring & exhilarating • Help in the creation of a common identity and a shared sense of purpose. • Competitive, original and unique. • Make sense as these are practical. • Foster risk- taking and experimentation. • Foster long term thinking. • Truly genuine, represent integrity and are meant to benefit stakeholders.

ENVISIONING PROCESS
A Well conceived vision has 2 major components 1. Core Ideology : Defines enduring character of an organization that remains unchangeable . It rests on core values & core purposes. Envisioned Future : A long term, time bound goal and vivid description of what it would be like to achieve that goal.

2.

WHAT A VISION SHOULD AND SHOULDN’T BE
• . A VISION SHOULD BE: An organization charter of core values & principles The ultimate source of our priorities, plans and goals A puller into the future A reflection of what makes an organization unique Inspire & motivate A VISION SHOULD NOT BE: A ‘ high concept statement’ or an advertising slogan A strategy/view from top A history of proud past A soft business issue Passionless

A FEW VISION STATEMENTS
VISION 2001 0F BHEL A world-class , innovative , competitive and profitable Engineering enterprise providing total business solutions. VISION OF CANARA BANK To emerge as the best bank in customer service, profitability , productivity and innovations. VISION OF IOC Indian Oil aims to achieve international standards of excellence in all aspects of energy and diversified business with focus on Customer delight through quality products & services

• •

MISSION It is purpose / reason behind existence of any organization

Derived from VISION and reflects the corporation’s philosophy , identity, character and image which helps to achieve the vision. • When defined explicitly, provides enlightenment to insiders and outsiders on what the organization stands for. • Many strategists/consultants contribute to the building up of mission statements. CHARACTERISTICS OF A MISSION SATEMENTS FEASIBLE PRECISE CLEAR MOTIVATING DISTINCTIVE INDICATES MAJOR COMPONENTS OF STRATEGY INDICATES HOW OBJECTIVES ARE TO BE ACHIEVED HOW MISSION STATEMENTS ARE FRMULATED Derived from particular set of tasks and priorities and reflects corporate philosophy • Executive committee is setup to formally discuss • Help of consultants also taken for an in-depth analysis of an organization and to suggest an appropriate Mission statement • A Mission statement once formulated should serve an organization for many years • As the organization grows with time and goes on adding new products, services, technologies and markets, there may even be a need for revising its Mission statements as

FEW MISSION STATEMENTS
• BHEL To be a leading engineering enterprise providing quality systems goods and services in the field of Energy, Transportation , Industry, Infrastructure and other potential areas • RANBAXY To become research based International pharma company • UTI To keep the common man in sharper focus to encourage savings and investment habits among them.

BUSINESS DEFINITION
• Defined along 3 parameters CUSTOMER GROUPS: WHO is being satisfied CUSTOMER FUNCTIONS: WHAT is being satisfied ALTERNATIVE TECHNOLOGIES: HOW the need is being satisfied
• • • • • • • Provides powerful insights into understanding and defining business Helpful in Strat. Mgmt in many ways . It Indicates choice of objectives and helps exercising best choice. A single business firm has simple Business Definition. Company with several businesses has separate BD for each of its business. 3 dimensions provide scope for further activities and facilitates understanding of company’s performance areas At corporate level ,BD concerns itself with a wider meaning of 3 dimensions. Each division of highly diversified co.can have more accurate BD at SBUlevel BD offers unique insights to companies operating in a competitive market. where customer is an important stakeholder of the firm.

EXAMPLES
EX: Time Keeping Business: Customer Groups: ‘Individual customers” & Industrial Customers” Customer Functions: Finding time, Recording time, Using watches as fashionable accessories and gift items. Alternative Technologies: Mechanical. Quartz digital, Quartz Analog EX: MODI XROX Customer Groups: ‘Individual Organization , Govt. departments Customer Functions: Provide communication with ease of reproduction. Alternative Technologies: High quality and state-of-the-art tecnology available with Xrox of US.

GOALS & OBJECTIVES
GOALS: • What an org. hopes to achieve/accomplish in a future period of time. Represent future state or outcome of an effort put in now. OBJECTIVES: • Ends that tell how goals shall be achieved • Define org’s relationship with Environment; • Help org to achieve VISION & MISSION; • Provide basis for Strategic Decision making; • Provides standards for performance appraisals, • OBJECTIVES: - Concrete & specific Make goals operational -Quantitative, measurable & comparable - Short Term GOALS Generalized

Qualitative Long Term( Org. translates its purpose into long term goals )

OBJECTIVE SETTING
• • • • • • • • • • • EX Profit: ROI, Net profit as % of sales, Return on shareholders capital. Marketing: Sales volume, Market segment, Customer service.Promotion Growth: Output, Sales T/O, Investment HR: Training, Welfare IR Social Responsibility: Environment, Community Service, Rural Development etc.. Understandable Concrete & Specific ( Say 10% increase in sales ) Periodicity :Related to time frame. Long Term, Medium & Short term Measurable & Controllable Challenging Diff. Objectives must correlate with each other Should be set within constraints Should cover all aspects of functioning. Verifiability: basis on which to decide whether Objective met or not. Reality: Operational objective not the broad official objectives Quality: Capable enough to provide direction and tangible basis for evaluation.

TOTAL GLOBAL STRATEGY
1. DEVELOP CORE BUSINESS STRATEGY CORE BUSINESS STRATEGY

2. INTERNATIONALISE THE STRATEGY C O U N T R Y A C O U N T R Y B C O U N T R Y C C O U N T R Y D C O U N T R Y E

3. GLOBALISE THE STRATEGY

INTERNATIONAL STRATEGIES

PRESSURES FOR COST REDUCTION

GLOBAL STRATEGY
( OFFERING STANDARDISED PRODUCTS / SERVICES)

TRANSNATIONAL STRATEGY
(LOCATED IN A DEVELOPED COUNTRY)

INTERNATIONAL STRATEGY
(UNDER DEVELOPED COUNTRIES WHERE PRODUCT/SERVICES NOT AVAILABLE )

MULTIDOMESTIC STRATEGY
( SUITING TO NATIONAL CONDITIONS )

PRESSURES FOR LOCAL RESPONSIVENESS

INDUSTRY GLOBALISATION POTENTIAL
MARKET DRIVERS

COST DRIVERS

INDUSTRY GLOBALISATION POTENTIAL

GOVERNMENT DRIVERS

COMPETITIVE DRIVERS

THE GLOBALISATION TRIANGLE
GLOBAL STRATEGY LEVERS

BENEFITS & COSTS OF GLOBALISATION

INDUSTRY GLOBALISATION DRIVERS

GLOBAL ORGANISATION DRIVERS

A FRAMEWORK OF GLOBAL STRATEGY
INDUSTRY GLOBALISATION DRIVERS
MARKET COST GOVT COMPETITIVE

I

GLOBAL STRATEGY LEVERS
GLOBAL MARKET PARTICIPATION GLOBAL PRODUCTS GLOBAL LOCATION GLOBAL MARKETING GLOBAL COMPETITIVE MOVES

BENEFITS / COSTS
OF GLOBAL STRATEGY

GLOBAL ORGANISATION DRIVERS
PARENT ORG’S ABILITY ( POSITION & RESOURCES) TO IMPLEMENT A GLOBAL STRATEGY )

MANAGEMENT AND ORGANISATION FACTORS AFFECTING GLOBAL STRATEGY (GLOBAL ORGANISATION DRIVERS )
ORGANISATION STRUCTURE
. GLOBAL MIS . GLOBAL STRATEGIC PLANNING . GLOBAL BUDGETING . CROSS COUNTRY COORDINATION ( REPORTING RELATIONSHIPS ) . CENTRALISED GLOBAL AUTHORITY . INTERNATIONAL DIVISION . STRONG BUSINESS DIVISION

MANAGEMENT PROCESSES
( PLG,BUDGETING & INFORMATION SYSTEMS )

ABILITY TO DEVELOP AND IMPLEMENT GLOBAL STRATEGY

CULTURE
( VALUES & RULES THAT GUIDE BEHAVIOUR ) . GLOBAL IDENTITY . COMMITMENT TO WORLDWIDE ( VS DOMESTIC ) EMPLOYMENT . INTERDEPENDENCE VS AUTONOMY OF BUSINESSES

.USE OF FOREIGN NATIONALS .MULTICOUNTRY CAREERS .FREQUENT TRVEL .STATEMENTS & ACTIONS OF LEADERS

( HUMAN RESOURCES OF WORLDWIDE BUSINESS )

PEOPLE

MARKET GLOBALISATION DRIVERS
• COMMON CUSTOMER NEED –PER CAPITA INCOME
CONVERGING AMONG INDUSTRIALISED NATIONS & CONVERGENCE OF LIFE STYLES & TASTES

GLOBAL CUSTOMERS • GROWTH OF GLOBAL & REGIONAL CHANNELS • TRANSFERABLE MARKETING – PUSH TO DEVELOP GLOBAL
• INCREASED TRAVEL CREATING ADVERTISING & ESTABLISHMENT OF WORLD BRANDS

• LEAD COUNTRIES

COST GLOBALISATION DRIVERS
• GLOBAL SCALE ECONOMIES – CONTINUING PUSH FOR ECONOMIES
OF SCALE

STEEP EXPERIENCE CURVE EFFECT SOURCING EFFICIENCIES FAVOURABLE LOGISTICS DIFFERENCES IN COUNTRY COSTS- WRT TRANSPORTATION,LABOUR & RAW MATERIAL Etc. • HIGH PRODUCT DEVELOPMENT COST • FAST CHANGING TECHNOLOGY • • • •

GOVRNMENT GLOBALISATION DRIVERS
• • • • • • • FAVOURABLE TRADE POLICIES COMPATIBLE TECHNICAL STANDARDS COMMON MARKETING REGULATIONS GOVT. OWNED COMPETITORS AND CUSTOMERS HOST GOVT’S CONCERNS REDUCTION IN TARRIF & NON TARRIF BARRIERS DECLINE IN ROLE OF GOVTS AS PRODUCER & CONSUMERS – ie ENCOURAGING PRIVATISATION • SHIFT TO OPEN MARKET ECONOMIES

COMPETITIVE GLOBALISATION DRIVERS
• HIGH EXPORTS AND IMPORTS – CONTINUOUS INCREASE IN
THE LEVEL OF WORLD TRADE

• COMPETITORS FROM DIFFERENT CONTINENTS –
MORE COUNTRIES BECOMING KEY COMPETITIVE BATTLE GROUNDS

• INTERDEPENDENCE OF COUNTRIES – GROWTH OF
GLOBAL NETWORKS

• COMPETITORS GLOBALISED – RISE OF NEW COMPETITORS
INTENT UPON BECOMING GLOBAL COMPETITOR

INCREASED OWNERSHIP OF CORPORATIONS BY FOREIGN ACQUIRORS . INCREASED GLOBAL STRATEGIC ALLIANCES
.

OTHER DRIVERS
• REVOLUTION IN INFORMATION & COMMUNICAION
( PERSONAL COMPUTORS, INTERNET& INTRANET , FSCIMILE MACHINES )

• GLOBALISATION OF FINANCIAL MARKETS
( LISTING OF CORPORATIONS ON MULTIPLE EXCHANGES )

• IMPROVEMENTS IN BUSINESS TRAVELS
( RISE OF INTERNATIONAL HOTEL CHAINS )

GLOBAL STRATEGY LEVERS
• MARKET PARTICIPATION
( CHOICE OF COUNTRY MARKET IN WHICH TO CONDUCT BUSINESS AND LEVEL OF ACTIVITY, PARTICULARLY IN TERMS OF MARKET SHARE

)

• PRODUCT / SERVICE
( EXTENT TO WHICH A WORLDWIDE BUSINESS OFFERS THE SAME OR DIFFERENT PRODUCTS IN DIFFERENT COUNTRIES

• LOCATION OF VALUE ADDING ACTIVITIES
( WHERE TO LOCATE ACTIVITIES THAT COMPRISE ENTIRE VALUE ADDED CHAIN – FROM RESEARCH TO PRODUCTION TO AFTER SALE SERVICE

• MARKETING
( EXTENT TO WHICH WORLDWIDE BUSINESS USES SAME BRAND NAMES,ADVERTISING,AND OTHER MARKETING ELEMENTS IN DIFFERENT COUNTRIES )

• COMPETITIVE MOVES
( EXTENT OF COMPETITIVE MOVES IN DIFFERENT COUNTRIES )

I N C R E A S I N G I N T E R N A T I O N A L I S A T I O N

TYPE OF CUSTOMERS
BUY IN FOREIGN MARKRTS FROM FOREIGN SUPPLIER BUY IN DOMESTIC MARKET FROM FOREIGN SUPPLIER BUY IN DOMESTIC MARKETS FROM DOMESTIC SUPPLIER

FOREIGN CUSTOMER

GLOBAL CUSTOMER
INTERNATIO NAL CUSTOMER

FREE LOCAL CUSTOMER
NO HQ INVOLVEME NT HQ RECOMMENDS STANDARDS? PRODUCTS

CONTROLL ED LOCAL CUSTOMER
HQ MANDATES STANDARDS/ PRODUCTS HQ DOES THE PURCHASING

INCREASIBG GLOBALISATION OF PURCHASING

BUSINESS GROWTH / COMPETITIVE SRENGTH MATRIX
WILDCAT COUNTRIES

HI GROWTH POTENTIAL OF BUSINESS IN COUNTRY

STAR COUNTRIES

LO

DOG COUNTRIES
LO

CASH COW COUNTRIES
HI

COMPETITIVE STRENGTH OF BUSINESS IN COUNTRY

MODES OF ENTRY
HIGH

EXPORTING ( Firm produces in home country & markets in overseas markets ) LICENSING ( International co. transfers knowledge, technology Patent for a limited period of time to an overseas co, in return for some form of payment) FRANCHISING
(Right to use a business format, usually Brand Name- exchange programme )

PERCEIVED RISK

INTERNATIONAL JOINT VENTURE WHOLLY OWNED
LOW LOW HIGH

CONTROL

PROBLEMS IN GLOBAL STRATEGIC PLANNING
• Global plg- an extension of Domestic Plg is more complex; as it has to handle more complicated, uncertain & volatile environments. • Entirely based on future, if future events don’t occur as expected; it fails. • Greater problems in formulating corporate plans • Frequent fluctuations in value of currencies • Turbulent political developments • Uncertainties in supply of materials • Non availability of adequate information for developing International standards • Encounter typical problems like : subsidiary in Japan may require careful assessment of Finance, HR, Operations, MM & Marketing plans • Operating modes of multinational firm abroad has to be dynamic to cope up with changing situations.

PROBLEMS IN GLOBAL STRATEGIC PLANNING
• Issues of little significance in domestic planning assume a greater importance abroad. Eg reliable supplies of high quality components may not be a problem in domestic market but simple decision to buy instead of naking it may not be true abroad. • Logistics problem in countries lacking infrastructural support • Inventory supplies have to be kept at higher levels than home due to uncertainties involved. • Pressures due to prejudices of local authorities, Govts, TU’s, Consumer groups, impose restrictions on International trade. • Non availability or less reliability of the information about various aspects of environment of potential host countries.

GLOBALISATION
• Concerned with degree of standardization of products and practices plus high level of co-ordination and integration of activities in the company’s value chain. Offers extensive opportunities for worldwide development and getting integrated to global economy. For developing countries, it offers prospects of integration with rest of developed economy. In economic terms , It’s the process of integration of world into one huge market. It is a process not an event. It has no beginning or end. It is fast becoming imperative for modern businessdue to: 1) crumbling trade barriers 2) global flow of capital & technology 3)Information explosion 4) Intensity of global market competition 5) Changing life styles and demand for innovative products etc… It offers free flow of information, goods, capital & people across political and economic boundaries and is a process by which enterprises become interdependent and interlinked globally.

• • • • •

GLOBALISATION
BENEFITS: • Cost benefits: Economies of scale due to standardization & Logistics management • Timing benefits: Coordinated approach in product launching and implementation strategies • Learning benefits: Coordinated transfer of information, best practices and people across subsidiaries. • Arbitrage benefits: using resources in one country for the benefit of another country. SOCIAL BENEFITS • Creates overall wealth for all nations as specialization increases trade. • Reduces inflation due to cost efficiencies • Benefits customers: quality products at competitive price. • Better allocation of financial ,material and Human resources • Reduces corruption due to free market trade. OTHER BENEFITS: • Leads to economic integration and globalized economy. • Transition from multinational to global competitiveness

PORTER’S MODEL
POTENTIAL ENTRANTS •Economies of scale •Absolute cost advantage •Switching cost •Access to distribution •Govt. policy THREAT OF NEW ENTRANTS

OTHER STAKEHOLDERS (RELATIVE POWER OF
UNIONS, GOVT)

SUPPLIERS
•Supp.concentration •No. of buyers •Switching cost •Substitute raw mat. •Threat of forward integration

BARGAINING POWER OF COMPETITIVE SUPPLIERS
RIVALARY ( INDUSTRY COMPETITORS )

BARGAINING POWER OF BUYERS

THREAT OF SUBSTITUTE PRODUCTS

BUYERS •Buyer’s concentration •No of suppliers •Switching cost •Substitute products •Threat of backward Integration

SUBSTITUTES
•Functional similarity •Price/Performance trend •Product identity

ETOP
( ENVIRONMENTAL THREAT & OPPORTUNITY PROFILE 0
ENVIRONMENTAL SECTOR MARKET TECHNOLOGICAL SUPPLIER ECONOMIC REGULATORY POLITICO – LEGA SOCIO – CULTURAL INTERNATIONAL NATURE OF IMPACT IMPACT OF EACH SECTOR

SAP
( STRATEGIC ADVANTAGE PROFILE ) CAPABILITY NATURE IMPACT OF EACH FACTOR FACTOR OF IMPACT
1 2 3 4 5 6 FINANCE MARKETING 0PERATIONSP PERSONNEL INFORMATION GENERAL MANAGEMENT

CONSOLIDATED SWOT PROFILE
ENVIRONMENTAL FACTOR MARKET TECHNOLOGICAL SUPPLIAR ECONOMIC REGULATORY POLITICAL SOCIO – CULTURAL INTERNATIONAL
NATURE OF IMPACT

STRATEGIC ADVANTAGE FACTOR

NATURE OF IMPACT

FINANCE MARKETING OPERATIONS PERSONNEL INFORMATION MANAGEMENT GENERAL MANAGEMENT

SWOT MATRIX and STRATEGIES
OPPRTUNITIES

QUADRANT 2
TURNAROUND STRATEGY

QUADERANT 1
AGGRESSIVE STRATEGY

QUADERANT 4 QUADERANT 3
DEFENSIVE STRATEGY THREATS WEAKNESSES STREGTHS DIVERSIFICATION STRATEGY

OPPORTUNITY MATRIX
HIGH Impact of Opportunities LOW MODERATE ATTRACTIONS HIGH ATTRACTIONS MODERATE ATTRACTIONS

LOW ATTRACTIONS

HIGH Occurrence

LOW

THREAT MATRIX
MAJOR THREATS MODERATE THREATS

HIGH IMPACT OF THREATS

LOW

MODERATE THREATS

MINOR THREATS

HIGH OCCURENCE

LOW

TOW’s MATRIX
SAP ETOP 1 2 3 4 1 2 3 4
1 2 3 4

W OW

O

1 2 3 4

S OS

Turnaround Strategies

Aggressive Strategies Take advantage of (Use strengths to take (Opportunities by overcoming advantage Of opportunities) Weaknesses)

T

TW
Defensive Strategies
( To minimize weaknesses & avoid Threats )

(Consider corporations strengths To avoid threats)

Diversification strategies

TS

BCG GROWTH SHARE MATRIX
20 18 16 STARS QUESTION MARKS

HIGH

Market Growth 14 rate 12 10 8 6 4 2 0 LOW 10 8

CASH COWS

DOGS

1.5 1 6 4 2 Relative market share

0.8

0.5

0.1

GE 9 CELL MATRIX
G
INDUSTRY ATTRACTIVENESS
HIGH

G
QUESTION MARKS

G
MEDIUM

Y
AVERAGE BUSINESS

R

LOW

PROFIT PRODUCER

R

R

ZONE AVERAGE WEAK GREEN G INVEST/EXPAND STRONG BUSINESS STREGTH / COMPETITIVE YELLOW Y SELECT/EARN RED R HARVEST/DIVEST POSITION

GENERIC STRATEGIES
• Below Corporate Level Strategies, the strategies to be used by individual businesses HOW GENERIC STRATEGIES EMERGE • As humans function with their limbs; corporations operate through their business strategies .At business level most competitive interaction occurs; where competitive advantage is either won or lost. • Corporate strategies lay down the framework in which business strategies operate. COST LEADERSHIP • Vigorous cost reduction programmers and make all possible attempts to achieve the lowest cost. • Achieve efficiency at all levels for lowering costs. • Cumulative cost across the value chain is lower than competitor • Analyze cost drivers and optimization of costs • Commanding high price by introducing innovative product and by building brand loyalty. • Other initiatives: Accurate Demand Forecasting, Capacity utilization Economies of scale, Cost saving technologies. BENEFITS Threat of cheaper substitutes offset to some extent by lowering price, Effective entry barrier for potential entrants, Leas at affected by bargaining power of supplier a firm can adopt price increase to some extent though operational effectiveness. RISKS Competitors imitate cost reduction quickly, Not a market friendly approach if customers interest is ignored Low cost leadership doesn’t always work;

DIFFERENTIATION:
• Providing unique characteristics/special features to product/service demanded by customers, who are willing to pay. • Customers prefer differentiated products/services which offers them a utility they value. Such products and services stand apart in the market and attract customers due to its special featured attributes. • A differentiated firm can charge a premium price & commands customer loyalty. • Creating value at every point by providing special features and attributes. • Features that raise performance at lower cost, enhance buyer satisfaction, maintain/enhance quality. • Innovative ability of firm is important. strong R&D base required • Adopted when customer’s needs preferences are diversified and market is too large to be satisfied by standardized products BENEFITS Firm can charge a premium price, Reduces competitive rivalry Creates brand loyal customers, Barrier for new entrants Risks Long-term perceived uniqueness difficult to maintain, Several differentiators adopting similar differentiation, Fails if not valued by customer.

FOCUS BUSINESS STRATEGY
• • Attempt is to serve narrow strategic target effectively and efficiently Relies on either cost leadership or differentiation but cater to narrow segment of total market. Or customer. • Commonly used as basis for identifying customer groups. based on Demographic characteristics ( Age, gender, income, occupation ) Geographic segmentation (Rural/urban, Northern/sourthern0 0 Life style ( Traditional / Modern } • Firms seeking to adopt Focus Strategy has to locate a niche in the market where Cost Leaders and Differentiators are not operating • Identifying gaps not covered by Cost Leaders and Differentiators • Uniqueness in the segment. Niche marker big enough to be profitable and has potential for growth. • Major players not interested in niche BENEFITS Protected from competition from other firms who do not have ability to cater to niche markets, builds up brand loyalty, specialization- powerful barrier to new entrants and substitutes. CONSTRAINTS; Developing distinctive competencies – a difficult process, once committed it’s difficult to move on to other market segment, higher costs may cause customers to move low price products cost leaders.

GRAND STRATEGIES
• • • • • Basic framework of master strategies, classifies broadly various rules of business Provide guidance for major actions for meeting long term objectives and basic direction for strategic action Blueprints for action. Use of single or combination of 2 or more depends upon multiplicity and complexities of business. Corporate level strategies indicating the choice of direction a firm adopts for achieving its vision. Corp. Strategies Also tell about decisions relating to allocation of resources among different businesses, managing & nurturing diff. businesses in portfolio. Grand strategies revolve around one basic question : Whether to continue or change business to improve efficiency and effectiveness.

STABILITY STRATEGIES
Adopted by an organization when it attempts an incremental improvement of functional performance. 1. 2 NO CHANGE STRATEGY: Conscious decision to do nothing new. Continue with present business PROFIT STRATEGY: Reduce investments, cut costs , Increase productivity wrt external factors like: Economic recession, Govt’s attitude, Industry downturn and competitive pressures for sustaining profitability by whatever means till situation improves. PAUSE/ PROCEED WITH CAUTION : Consolidation before a firm goes for expansion.

2

EXPANSION STRATEGIES
Most popular corp. strategies as growth is the way of life. All progressive organizations plan for substantial growth due to increasing economy, markets & customer needs. Followed when companies aim at high growth, broadening the scope of its business for improving overall performance. .

CONCENTRATION STRATEGIES • Simple 1st level expansion strategy, aims at convergence of resources • Focus on Intensification / Specialization • Rely on where you are best at ie focusing on limited areas • Creating a separate niche/ identity in selective areas by investing money, time, energy & effort in specific areas INTEGATION STRATEGIES • Combining activities relating to present activities of firm • Widening scope of business Vertical Integration : Going up & down the value chain Going for forward or backward integration or both at a time. Horizontal integration : Same type of products

CHALLENGES OF LEADING AN ORGANISATION
( STRATEGIC LEADERSHIP )
• • • • • • • • • • • Influence the behavior of subordinates so that they work willingly & enthusiastically towards attainment of organizational goals. Situational leadership as per contingency of situation. Tasks involved include : Anticipating, Envisioning, Empowering, Direction. Growth & development, in addition to planning, organizing, staffing. directing, coordinating & controlling skills Determining strategic direction : Core ideology & future shape Effectively managing organization resource portfolio ( Financial capital, organization capital, Social capital & Human capital ) Sustaining an effective organization culture ( OCTAPACE CULTURE ) Charisma, vision , Drive, Desire to lead, Honesty & Integrity, Self – confidence, intelligence, Job related knowledge , Energetic, assertive & sociable To lead from front and be a role -model. Sustaining a definite direction, growth, development & competitive advantage for realizing its vision, goals & objectives in a global competitive environment. Encouraging participation, recognition and maintaining high morale of employees at all times. Suitable reward & punishment system for Ethical/Unethical behavior.

Author- Himanshu Sisodia

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