Strategic

management

Assoc. Prof. Dr. Nguyen Dang Hao

Hue College of Economics
 The World We Are Living In…

Networking
Wealth

Globalization

ICT/Digitalization/ Knowledge economy

AI

Environment Individualization 24/24 society

 The Nature of Strategic
Management

• A global perspective is a matter of

survival for businesses.
• E-commerce is a vital strategic
management tool.
• The natural environment is an important
strategic issue.

Ch. 1-3
The Global Economy Dynamics

What Will Happen?

Globalization Impacts

The shift
toward Markets
a more
integrated and
interdependent Production
economy
Key Features of Globalization

• Rapid expansion of international trade

• Internationalization of products and services
by large firms
• Growing importance of multinational corporations (MNC)
• Increase in capital transfers across national borders
• Globalization of technology
• Shifts in production from country to country
• Increased freedom and capacity of firms to undertake
economic transactions across national boundaries
• Fusing of national markets
• Economic integration
• Global economic interdependence

Source: www.tutor2u.net
Global Key Players

Company operates in a select

International few foreign countries, with
Competitor modest ambitions to expand
further

Company markets products in

Global 50 to 100 countries and
is expanding operations into
Competitor additional country markets
annually

Multinational companies shift resources from one country

to another to maximize profits and productivity.

Source: Thompson et al. (2007)

Globalization Concerns

• Trade in goods and services

• Investment
• Labor force movement
• Products
• Production
• Technology
• Research and development (R & D)
• Exchange of ideas and knowledge
• Intellectual property

Source: www.tutor2u.net
The Globalization Debate
FOR
• Lower prices for goods & services
• Economic growth stimulation
• Increase consumer income
• Create jobs
• Countries specialize in production
of goods and services that are
produced most efficiently
AGAINST
• Destroys manufacturing jobs in
wealthy, advanced countries
• Wage rates of unskilled workers
in advanced countries declines
• Companies move to countries
with fewer labor and environment
regulations
• Loss of sovereignty
Source: Hill (2007)
New Forces of Change
Nature of Commerce Global Dynamics

• Customer intimacy • Better worldwide economic

• From product push to consumer
pull
• Electronic commerce
• Mass customization
• Merging of products and services
• Global delivery with local
reverence
• Commoditization
model
• Power shift in supply chains
• Rapidly falling barriers to entry
• Stealth competitors
• Major shifts in demand
• Shift to digital and intellectual
assets
• Deregulation

Pervasive computing, intelligent devices

Ubiquitous, high-speed connectivity (ICT)
Globalization and Organization Size

1. Multinational Corporations (MNCs)

 Adopt a global perspective and compete in the
global marketplace.
2. Medium-size Businesses
 Remain primarily domestic organizations that may
buy and sell abroad through trade specialists and
compete with foreign companies in local markets.
3. Small Businesses
 Participate in global markets when they serve as
local suppliers for MNCs.

Source: Houghton Miffin Co.

Changing the Nature of MNCs
• In the 1960s global business activity
was dominated by large US MNCs
• In 1973, 48.5% of MNCs were US
firms
• In 2002, 28% of largest MNCs were
US firms
• Globalization of the world economy
has resulted in a relative decline
in the dominance of US firms in
the global marketplace
• Growth of SME multinationals has
become a trend in international
business
• International business is now
conducted not only just by large
firms but also by SMEs
e.g.: Lubricating Systems Inc. employs
25 people and generates sales of
$6.5 million, of which $2.0 million
are from global sales
 Types of International Business

International Uses existing capabilities to

expand into foreign markets
Multinational Several subsidiaries operating as
Global Glocal stand-alone business units in
Global effectiveness

multiple countries
Global Views the world as a single
market. Operations are
controlled centrally from the
corporate offices

International Multinational Glocal Specialized facilities permit local

responsiveness. Complex
coordination mechanisms
provide global integration

Local responsivenesss Source: Adapted from Danield et al. (2007:396)

The global company does not have to be everywhere, but it has

the capability to go anywhere, deploy any assets, and access any resources,
and it maximizes profits on a global basis (Yip, 2003:7)
Forces Driving the Growth of MNEs

• The search for growth markets

• Globalization of markets
• Desire to reduce production costs
• Desire to shift production to country
with lower unit labor costs
• Desire to avoid transportation costs
• Desire to avoid tariff and non-tariff
barriers
• Forward vertical integration
• Extension of product life-cycles
• Deregulation of capital markets
Source: www.tutor2u.net
Possible Contributions of MNEs

MNEs

Investment Human Technology Trade Environment

Resources
• Links to local •R&D • Access to clean
companies • Industrial upgrading • Export expansion technologies
• Increased • Training
• New capital • Lower-cost imports • Pollution abatement
productivity • Employment
equipment skills
• Improved efficiency • Managerial
• Company-wide
• Capital formation skills
standards

Source: Daniels et al. (2007: 167)

Operating in the Global Arena
A running shoe company
• headquartered in the United States
• financed by a Japanese bank
• buying rubber from Indonesia and leather from China
• manufacturing in Vietnam
• employing a U.S. company for the legal and accounting work
• and a British firm to handle all its advertising and marketing.

The running shoes may be sold all over the world.

If a shoe is shipped from San Francisco to Vietnam, it is simply a U.S. export.
However, if Vietnam imposes a tariff on the shoe, it harms more than just the
U.S. exporter; all businesses around the world that were involved in the process
are affected, including Vietnam’s own rubber exports. With globalization, it is
increasingly difficult for governments to target trade policies effectively.

To remain competitive, individuals, companies, and governments

all must adapt to the changing global marketplace.
Management Challenges in a Global Economy

 Planning in a Global Economy

 Understanding of both environmental issues and competitive
issues.
 Organizing in a Global Economy
 Addressing issues of creating and managing operations on a
world-wide scale.
 Leading in a Global Economy
 Learning how to interact with and motivate persons of
different cultural, social, and economics backgrounds.
 Controlling in a Global Economy
 Integrating global operations that encompass time-zone
differences, cultural factors, and varying communication
methods.

Source: Houghton Miffin Co.

Today Business Game

Improve (quality)

Accelerate (growth)

Increase (revenue)

Reduce (costs)
Competitiveness Dynamics

Diversification

Innovative Efficient
Competitive
Advantage

Quality Price
Effective
International Business Dynamics
EXT. ENVIRONMENT
Physical and
Societal Factors
• Political policies and
legal practices
• Cultural factors
• Economic factors
• Geographical factors
Competitive Factors
• Major advantages in
price, marketing,
innovation, or other
factors
• Number and comparative
capabilities of competitors
• Competitive differences
by country
INT’L. OPERATIONS
OBJECTIVES
• Sales expansion
• Resource acquisition
• Risk minimization
STRATEGY
MEANS
Modes Functions Overlaying
alternatives
• Importing & exporting • Marketing
• Tourism & transportation • Global manufacturing
• Licensing & franchising & supply chain
• Turnkey operations management
• Management contracts • Accounting • Choice of countries
• Direct & portfolio • Finance • Organization and
investment • Human Resources control mechanisms
Source: Daniels et al. (2007: 8)
GCS Conceptual Framework
CHANGES
IN BUSINESS
ENVIRONMENT
Response Forces
to NEW
of
Change REQUIREMENTS Change
TO DO BUSINESS

CULTURE STRUCTURE PEOPLE

(Multinational) (Glo-Cal) (Expat/Local)

Global Business Environment

- Analyzing
- Developing
- Implementing
- Organizing
- Measuring

Effective
Global Corporate Strategy
The GCS Dynamics

Formulation

Global
Corporate
Strategy

Measurement Implementation
Integration
Course Objectives

• To review the current trends in international

business and the impact of globalization on
organizations.

• To examine how to formulate and implement

a complete and effective global corporate
strategy.

• To determine what structures, systems

and processes best support the
corporate strategy.
Expected Outcomes

After the course participant will:

• Understand the new dynamics of

international business in the face of
globalization.
• Be able to minimize risks and optimize the
benefits of business overseas.

• Develop the right attitudes and skills of

an effective global manager.
• Build an effective strategy to enter and
operate successfully in foreign markets.
Text and Reference Books
Fred R. David (2017)., Strategic Management: Concept and
Cases:Pearson Education, Inc., publishing as Prentice Hall

Arthur A. Thompson., Margaret A. Pateraf., John E. Gamble., A.J.

Strickland III (2014) Crafting & Executing Strategy: The quest for
competitive advantage: concept and cases.: McGraw-Hill.

Daniels, John D., Radebaugh, Lee H., and Sullivan Daniel O.

(2007) International Business: Environments and
Operations (11th ed.). New Jersey: Pearson/Prentice Hall.

Hill, Charles W.L. (2015) International Business: Competing in

the Global Marketplace (9th ed.). New York etc.: McGraw-Hill.

Pearce II, John A. and Robinson Jr. Richard B. (2007) Formulation,

Implementation, and Control of Competitive Strategy (10th ed.).
Boston etc.: McGraw-Hill.

Peng, Mike W. (2006) Global Strategy. Ohio: Thomson/South-Western.

 What is strategy?
• Charles W.L. Hill: “a strategy is a set of related
actions that managers take to increase their
company’s performance.” or “the strategies that
managers can pursue to achieve superior
performance and provide their company with a
competitive advantage.
• Alfred D. Chandler: “the determination of the long
run goals and objectives of an enterprise and the
adoption of the courses of action and the allocation of
resource necessary for carrying out these goals”.
• Johnson: “the long term direction of an organization”
Ch. 1-26
 What is strategy?
• Michael Porter: “competitive strategy is about being
different. It means deliberately choosing a different
set of activities to deliver a unique mix of value”

Ch. 1-27
 Strategic Management Achieves
Organizational Success
Process of Integrating:
– management
– marketing
– finance/accounting
– production/operations
– research and development
– computer information systems
Ch. 1-28
Three-Stage Process

Strategy Formulation

Strategy Implementation

Strategy Evaluation
Ch. 1-29
Strategy Formulation

Vision & Mission

Opportunities & Threats

Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

Ch. 1-30
 Strategy Formulation

Issues include:
– What new businesses to enter
– What businesses to abandon
– How to allocate resources
– Expand operations or diversify
– Enter international markets
– Merge or form joint venture
– Avoidance of hostile takeover
Ch. 1-31
Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation

Ch. 1-32
 Strategy Implementation

Action Stage of strategic management:

– Most difficult stage
– Mobilizing employees and managers
– Interpersonal skills are critical
– Consensus on pursuing goals

Ch. 1-33
Strategy Evaluation

Internal Review

External Review

Performance Measurement

Corrective Action

Ch. 1-34
 Strategy Evaluation

Final stage of strategic management:

– All strategies subject to future modification
– Success today is no guarantee of success
tomorrow
– Success creates new and different problems
– Complacency leads to demise

Ch. 1-35
 Prime Task of Strategic
Management

According to Peter Drucker…

The prime task is to think through the
overall mission of a business
Ask the question:
What is our Business?

Ch. 1-36
 Integrating Intuition and Analysis

The strategic management process

attempts to organize quantitative and
qualitative information under
conditions of uncertainty.

Ch. 1-37
 Integrating Intuition and Analysis

Intuition based on:

– Past experiences
– Judgment
– Feelings
Useful for decision making
– Conditions of great uncertainty
– Conditions with little precedent
Ch. 1-38
 Integrating Intuition and Analysis

Intuition and judgment

– Management at all levels
– Analyses are influenced

Analytical thinking and intuitive thinking

– Complement each other

Ch. 1-39
 Adaptation to Change

Organizations must monitor events

– On-going process
– Internal and external events
– Timely changes

Ch. 1-40
 Adaptation to Change

Rate and magnitude of changes

– Increasing dramatically
• E-commerce
• Demographics
• Technology
• Merger-mania
– Effective Adaptation
• Long-run focus
Ch. 1-41
 Adaptation to Change

Key strategic-management questions:

– What kind of business should we become?
– Are we in the right fields?
– Should we reshape our business?
– What new competitors are entering our
industry?
– What strategies should we pursue?
– How are our customers changing?
Ch. 1-42
 Key Terms

Strategists
– Most responsible for success or failure of an
organization
– Various job titles:
• Chief executive officer
• President
• Owner
• Chair of the Board
• Executive Director
• Entrepreneur
Ch. 1-43
 Key Terms

Vision Statement
– What do we want to become?

Mission Statement
– What is our business?

Ch. 1-44
 Key Terms

External Opportunities and Threats

– Significantly benefit or harm the organization in the
future.

– Include the following trends:

• Economic
• Social
• Cultural
• Demographic Environmental
• Political, legal, governmental
• Technological
• Competitive trends
Ch. 1-45
 Key Terms

External Opportunities and Threats

– Largely beyond the control of a single
organization.

– Basic tenet of strategic management

• Strategy formulation to:
– Take advantage of external opportunities
– Avoid or reduce impact of external threats
Ch. 1-46
 Key Terms

Environmental Scanning

– Industry Analysis
• Process of conducting research and
gathering and assimilating external
information

Ch. 1-47
 Key Terms

Internal Strengths and Weaknesses

– Controllable activities performed especially
well or poorly.

– Arise in functional areas of the business:

• Management
• Marketing
• Finance/accounting
• Production/operations
• Research & development
• Computer Information Systems
Ch. 1-48
 Key Terms

Determining Internal Factors:

– Financial ratios
– Measuring performance
– Industry averages
– Survey data

Ch. 1-49
 Key Terms

Long-term objectives:

– Mission-driven pursuit of specific results more

than one-year out.
– Essential for organizational success
• State direction
• Aid in evaluation
• Create synergy
• Focus coordination
• Basis for planning, motivating and controlling
Ch. 1-50
 Key Terms

Strategies:
– Means by which long-term objectives will be
achieved.

– May include:
• Geographic expansion, diversification
• Acquisition
• Product development, market penetration
• Retrenchment, divestiture
• Liquidation, joint venture

Ch. 1-51
 Key Terms

Annual Objectives:
– Short-term milestones that organizations must
achieve to reach long-term objectives.

Ch. 1-52
 Key Terms

Policies:
– Means by which annual objectives will be
achieved.

Ch. 1-53
 Comprehensive Strategic Management Model

External
Audit

Chapter 3

Long-Term Generate, Implement Implement Measure &

Vision
Objectives Evaluate, Strategies: Strategies: Evaluate
&
Select Mgmt Issues Marketing, Performance
Mission
Strategies Fin/Acct,
R&D, CIS
Chapter 2 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9

Internal
Audit

Chapter 4

Ch. 1-54
 Strategic-Management Model

Strategic-Management Process –

• Dynamic and Continuous

• More formal in larger organizations

Ch. 1-55
 Strategic-Management Model

1.Identify Organization’s existing:

• Vision
• Mission
• Objectives
• Strategies

Ch. 1-56
 Strategic-Management Model

2. Perform External Audit

3. Perform Internal Audit
4. Establish long-term objectives
5. Generate, evaluate, select strategies
6. Implement strategies
7. Measure and evaluate performance

Ch. 1-57
 Benefits of Strategic
Management

• Proactive in shaping organization’s future

• Initiate and influence activities
• Formulate better strategies
– Systematic, logical, rational approach

Ch. 1-58
 Benefits of Strategic
Management

• Financial benefits
– Improvement in sales
– Improvement in profitability
– Improvement in productivity

Ch. 1-59
 Benefits of Strategic
Management
• Non-Financial benefits
– Enhanced awareness of external threats
– Improved understanding of competitors’
strategies
– Increased employee productivity
– Reduced resistance to change
– Understanding of performance-reward
relationships
– Enhances problem-prevention capabilities

Ch. 1-60
 Benefits of Strategic
Management
1. Identification of opportunities
2. Objective view of management problems
3. Improved coordination and control
4. Minimizes adverse conditions and
changes
5. Decisions to better support objectives
6. Effective allocation of time and resources
7. Internal communication among personnel

Ch. 1-61
 Benefits of Strategic
Management

8. Integration of individual behaviors

9. Clarifies individual responsibilities
10.Encourages forward thinking
11.Encourages favorable attitude toward
change
12.Discipline and formality to the
management of the business

Ch. 1-62
 Why Some Firms Do No
Strategic Planning

• Poor reward structures

• Fire-fighting
• Waste of time
• Too expensive
• Laziness
• Content with success

Ch. 1-63
 Why Some Firms Do No
Strategic Planning (Cont’d)

• Fear of failure
• Overconfidence
• Prior bad experience
• Self-interest
• Fear of the unknown
• Suspicion

Ch. 1-64
 Business Ethics and Strategic
Management

Business ethics defined:

– Principles of conduct within
organizations that guide decision
making and behavior.

Ch. 1-65
 Business Ethics and Strategic
Management

Good business ethics:

– prerequisite for good strategic

management

Ch. 1-66
 Business Ethics and Strategic
Management

Code of business ethics:

– Provides basis on which policies can

be devised to guide daily behavior
and decisions at the workplace

Ch. 1-67
 Business Ethics and Strategic
Management

Internet privacy

– Emerging ethical issue of immense

proportion

Ch. 1-68
 Business Ethics and Strategic
Management
Internet and business ethics --

– 38% of companies store and review

employees email messages
– Up from 15% in 1997
– 54% of companies monitor
employees’ Internet connections
Ch. 1-69
 Business Ethics & Strategic
Planning
Business actions always unethical include:

• Misleading advertising
• Misleading labeling
• Environmental harm
• Poor product or service safety
• Padding expense accounts
• Insider trading
• Dumping flawed products on foreign markets

Ch. 1-70
 Nature of Global Competition

Companies conduct business across

borders
International or multinational corporations
 Parent company
 Host country

• Strategy implementation more difficult

Cultural differences
 Norms, values, work ethics
Ch. 1-71
 Advantages of International
Operations
• Absorb excess capacity
• Reduce unit costs
• Spread economic risks over wider
markets
• Low-cost production facilities
• Competition may be less intense
• Reduced tariffs, lower taxes
• Economies of scale
Ch. 1-72
 Disadvantages of International
Operations
• Different social, cultural demographic,
legal forces may create difficult
communication
• Weaknesses of foreign competition may
be underestimated
• Barriers to communication and effective
management of personnel
• Complications from different monetary
systems
Ch. 1-73