Strategy as a Concept & its

Formulation.

What is Strategy?
Concept:
The term strategy derived from Greek word Strategos,
which means generalship-the actual direction of military
force.
A strategy could be a plan or course or a set of decision rules
making a pattern (organization activities) or creating a
common thread.
In simplified terms a strategy is the means to achieve
objectives.

Definition of Strategy
Goal-directed decisions and actions in which capabilities
and resources are matched with the opportunities and
threats in the environment.
Managements Game Plan for:

Running the business.

Strengthening firms competitive position.
Satisfying customers.
Achieving performance targets.

Consists of competitive moves & business approaches to

produce successful performance
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Levels of Strategy

International Strategy
International Strategy
A strategy through which the firm sells its goods
or services outside its domestic market.
The way firms make choices about acquiring and
using scarce resources in order to achieve their
international objectives
Involves decisions that deal with all the various
functions, products and regional unit activities of a
company
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Competitive Advantage
The goal is to achieve and maintain a unique
and valuable position both within a nation
and globally: competitive advantage

Competitive advantage is the

ability of a company to have
higher rates of profits than its
competitors
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Competitive Advantage
To create a sustainable competitive
advantage, a company tries to develop skills
that
Create value for customers
Are rare
Are difficult to imitate or substitute for
Are organized in a way that the company can fully
exploit

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Reasons to having an international

strategy
International markets yield potential new
opportunities.
New market expansion extends product life cycle.
Needed resources can be secured.
Greater potential product demand

International Strategy Benefits

Increased Market Size
Domestic market may lack the size to support efficient
scale manufacturing facilities.

Return on Investment
Large investment projects may require global markets
to justify the capital outlays.
Weak patent protection in some countries implies that
firms should expand overseas rapidly in order to
preempt imitators.

International Strategy Benefits (contd)

Economies of Scale (or Learning)
Expanding size or scope of markets helps to
achieve economies of scale in manufacturing as
well as marketing, R&D or distribution.
Can spread costs over a larger sales base.
Can increase profit per unit.

International Strategy Benefits (contd)

Location Advantages
Low cost markets aid in developing competitive
advantage by providing access to:
Raw materials
Transportation
Lower costs for labor

Key customers
Energy

Global Planning Process

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Global Strategic Planning

Provides a means for top management to
Identify opportunities and threats
Formulate strategies to handle them
Stipulate how to finance and manage the
strategies implementation
Provides consistency of action
Provides a thorough, systematic foundation for making
decisions

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Global Strategic Planning Process

The process of strategic planning provides a
formal structure in which managers
Analyze the companys
external environments
Analyze the companys
internal environment
Quantify goals

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Define the companys

business and mission
Set corporate
objectives
Formulate strategies
Make tactical plans

Elements of Strategic Planning for

International Management
Environmental scanning
Provide management with accurate forecasts of trends that

relate to external changes in geographic areas where the firm is

currently doing business or considering setting up operations
These changes relate to the economy, competition, political
stability, technology, and demographic consumer data

Analyze Corporate
Controllable Variables

Situational analysis
Forecast
Value Chain Analysis
Who are the target customers?
What value do we deliver?
How will customer value be created?

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Figure 13.2 The Value Chain

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Value Chain Coordination

Value chain coordination may be influenced by:
operational obstacles [communication challenges,

currencies, and measurement systems]

national cultural differences [information sharing, time,
etc.]
learning effects [cost savings via performance and quality
improvements]
subsidiary networks [real-time connectivity and functional
integration]
Coordination [the balanced movement of different parts
same time] should be optimized in ways
a firms core competencies.

at the
that leverage
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Strategic Alternatives:
The
International Strategy
International strategy: opportunistic expansion into
foreign operations that leverages the firms core
(domestic) competencies
Ultimate control and decision-making reside at headquarters.
Value is created by transferring core competencies and unique
offerings from headquarters into foreign markets where rivals
are unable to develop, match, or sustain them.
International activities are generally secondary to the
priorities of the domestic market.
Headquarters ethnocentric orientation, i.e., its home country focus, may
lead to significant missed market opportunities.

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International Corporate-Level Strategy

Focuses on the scope of operations:
Product diversification
Geographic diversification

Required when the firm operates in:

Multiple industries, and
Multiple countries or regions

Headquarters unit guides the strategy

But business or country-level managers can have
substantial strategic input.

Define the Corporate Business,

Vision, and Mission Statements

These broad statements communicate to the

corporations stakeholders what the company
is and where it is going and the values that will
guide the behavior of the organizations
members
Mission statement
A broad statement that defines the
organizations purpose and scope
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Define the Corporate Business,

Vision, and Mission Statements
Vision Statement
Description of the companys desired future position if
it can acquire the necessary competencies and
successfully implement its strategy

Values Statement
Clear and concise description of the fundamental
values, beliefs, and priorities of the organizations
members

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Set Corporate Objectives

Objectives
Direct the firms course of action
Maintain it within the boundaries of the mission
Ensure its continuing existence

In order to implement an effective strategy, it

is important to quantify objectives

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Elements of Strategic Planning for

International Management
Internal Resource Analysis
Evaluate the MNCs current managerial, technical, material,

and financial strengths and weaknesses

Assessment then is used to determine its ability to take
advantage of international market opportunities
Match external opportunities (gained through the
environmental scan) with internal capabilities (gained
through the internal resource analysis
Key factors for success
The key question for the MNC is: Do we have the people and
resources that can help us to develop and sustain the necessary
KFSs, or can we acquire them?

Elements of Strategic Planning for

International Management
External Environmental
Scanning for MNC Opportunities
and Threats

Internal Resource Analysis of

MNC Strengths and Weaknesses

Strategic Planning
Goals

IMPLEMENTATION

Adapted from Figure 82: Basic Elements of Strategic Planning for International Management

Elements of Strategic Planning for

International Management
Strategic Planning Goals
Goal formulation often precedes the first two steps of

environmental scanning and internal resource analysis

However, more specific goals for the strategic plan come out
of external scanning and internal analysis
These goals typically serve as an umbrella beneath which
the subsidiaries and other international groups operate
Profitability and marketing goals almost always dominate
the strategic plans of todays MNCs
Once the strategic goals are set, the MNC will develop
specific operational goals and controls for the subsidiary
or affiliate level

Formulation of MNC Goals

Adapted from Table 81: Areas for Formulation of MNC Goals

Formulation of MNC Goals

Adapted from Table 81: Areas for Formulation of MNC Goals