Strategy For International Business Management

GLOBAL STRATEGIC MANAGEMENT

Topic Outline
(A) Introduction ; (B) Global Strategic Management; (C) Value Creation; (D) Global Strategic Management process; (E) Collaborative Strategies;

What Is Strategy?
Strategy is a plan of action that channels an

organizations resources so that it can effectively differentiate itself from competitors and accomplish unique and viable goals. Managers develop strategies based on the organizations strengths and weaknesses relative to the competition and assessing opportunities. Managers decide which customers to target, what product lines to offer, and with which firms to compete.

Strategic Management
Concerned with deciding on strategy and planning

how that strategy is put into effect. According to J. Paul Peter, Strategic management is a continuous, iterative cross functional process aimed at keeping an organization as a whole appropriately matched to its environment.

Strategy & the firm

Strategy: actions that managers must take to attain

the goals of the firm Main goal usually to maximize long-term profit (), (EPS) Profitability defined by return on sales or return on equity Think strategic, not operational - this is what makes a great CEO

Strategy in an International Context

Strategy in an international context is a plan for

the organization to position itself vis-a-vis its competitors, and resolve how it wants to configure its value chain activities on a global scale. Its purpose is to help managers create an international vision, allocate resources, participate in major international markets, be competitive, and perhaps reconfigure its value chain activities given the new international opportunities.

Peculiarities

Domestic

Strategic management of a global company is distinct from that of domestic company due to its peculiarities.

Global

Peculiarities of Global Strategic Management

Flow of goods and/or services across the countries

Analysis of global environment

Integrated strategic management Impact of present decision on the future

Action oriented
Continuous and dynamic management Integrated operations

Other differences

Components of Global Strategy

Distinctive competence

Scope of operations
Resource deployment

Synergy

Distinctive Competence
Answers the question
What

do we do exceptionally well, especially as compared to our competitors?

Represents important resource to the firm

Scope of Operations

Answers the question

Where

are we going to conduct business?

May be defined by
Geographical

region Market or product niches within regions Specialized market niches

Resource Deployment
Answers the question
Given

that we are going to compete in these markets, how will we allocate our resources to them?

May be specified by
Product

lines Geographical lines

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

The Purpose of Global Strategy

Bartlett and Ghoshal argue that managers should

look to develop, at one and the same time, global scale in efficiency, multinational flexibility, and the ability to develop innovations and leverage knowledge on a worldwide basis. These three strategic objectives efficiency, flexibility, and learning must be sought simultaneously by the firm that aspires to become a globally competitive enterprise.

Three Strategic Objectives

Efficiency lower the cost of operations and

activities Flexibility tap local resources and opportunities to help keep the firm and its products unique Learning -- add to its proprietary technology, brand name and management capabilities by internalizing knowledge gained from international ventures.

Trade-Offs among the Three Objectives

In the final analysis, international business success is

largely determined by the degree to which the firm achieves the goals of efficiency, flexibility, and learning. But it is often difficult to excel in all three areas simultaneously. Rather, one firm may excel at efficiency, while another may excel at flexibility, and a third at learning. Sustainability over time is also a challenge.

Long Term Objective: VALUE CREATION

Profit determined by : The amount of value customers place on firms goods or services (V) Firms cost of production (C) Consumer surplus occurs when price charged by a

firm on a good or service is less than value placed on it by a customer Firm creates profit by increasing value or lowering cost Two basic strategies to create value and attain competitive advantage according to Porter:
Low cost strategy Differentiation strategy

Cost Leadership
location economies

low Transportations cost

economies of experience curve effect economies of Scale

Location economies
Realized by performing a value creation activity in an

optimal location anywhere around the globe Often arise due to differences in factor costs It can lower costs of value to enable low cost strategy and/or Help in differentiation of products from competitors Global web: different stages of value chain are dispersed to those locations where perceived value is maximized or costs of value creation are minimized

Creating a Global Web

Location Economies

Assembly

Parts Sales

Advertising

Design

Parts

Parts

Firm as a value chain

Where does value come from Any firm is composed of a series of distinct value

creating activities Primary activities

Support Activities

Research & development Production Marketing & sales Service Materials management or logistics Human resource Information systems, (this includes you accts) Company infrastructure

Figure : The Value Chain

Factors Affecting International Strategic Management

Language
Culture Politics

Financing
Market research Advertising

Economy
Governmental

Money
Transportation/

interference Labor Labor relations

communication Control Contracts

Levels of International Strategy

Corporate Strategy
Business Strategy Functional Strategy

Corporate Strategy

Single-Business Strategy
Related Diversification Unrelated Diversification

Business Strategy
Differentiation Overall Cost Leadership Focus

Functional Strategies
Financial

Marketing
Operations Human Resource R&D