chapter thirteen

International Competitive Strat

egy

McGraw-Hill/Irwin
International Business, 11/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.
 Learning Objectives

 Explain international strategy and compete

ncies and international competitive advant
age

 Describe the steps in the global strategic pl

anning process

 Explain the purpose of mission statements,

objectives, goals, and strategies

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 Learning Objectives

 Describe the methods of and new directions in stra

tegic planning

 Explain home replication, multidomestic, regional,

global, and transnational strategies and when to u
se them

 Describe the sources of competitive information

 Understand the importance of industrial espionage

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 International Strategy

• The way firms make choices about acquiring a

nd using scarce resources in order to achieve t
heir international objectives
• Involves decisions that deal with all the various
functions, products and regional unit activities
of a company

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 International Strategy

• The goal is to achieve and maintain a uni

que and valuable position both within a n
ation and globally: competitive advantag
e
• Competitive advantage is the ability of a c
ompany to have higher rates of profits tha
n its competitors

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 Competitive Advantage

• To create a sustainable competitive adva

ntage, a company tries to develop skills t
hat
– 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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 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 strat
egies’ implementation
• Provides consistency of action
• Provides a thorough, systematic foundation f
or making decisions

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Global Strategic Planning Process

The process of strategic planning provides a

formal structure in which managers

• Analyze the compan • Define the company’

y’s external environ s business and missi
ments on
• Analyze the compan • Set corporate objecti
y’s internal environm ves
ent • Formulate strategies
• Quantify goals • Make tactical plans
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Global Planning Process

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 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?
– Figure 13.2

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Figure 13.2 – The Value Chain

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 Analyze Corporate
Controllable Variables

• Knowledge as a Controllable Corporate Resou

rce
– Capabilities of employees
– Structures, systems, organizational routines

• Build knowledge database and transfer best pr

actices

• Protect knowledge from competitors

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 Define the Corporate Business,
Vision, and Mission Statements
• These broad statements communicate to
the corporation’s stakeholders what the c
ompany is and where it is going and the
values that will guide the behavior of the
organization’s members
– Mission statement
• A broad statement that defines the orga
nization’s purpose and scope

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Define the Corporate Business,
Vision, and Mission Statements

– Vision Statement
• Description of the company’s desired futu
re position if it can acquire the necessary
competencies and successfully implemen
t its strategy
– Values Statement
• Clear and concise description of the fund
amental values, beliefs, and priorities of t
he organization’s members

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 Set Corporate Objectives

• Objectives
– Direct the firm’s course of action
– Maintain it within the boundaries of the missi
on
– Ensure its continuing existence

• In order to implement an effective strateg

y, it is important to quantify objectives

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 Formulate Competitive Strategies

• Competitive Strategies
– Action plans to enable organizations to reac
h their objectives
– Generally, participants in the strategic plann
ing process will formulate alternative compe
titive strategies along with action plans that
seem plausible

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Formulate Competitive Strategies

• In the international market companies confront

two opposing forces
– Reduction of costs
– Adaptation to local markets
• Basic strategies address these pressures
– Home Replication
– Multidomestic
– Regional
– Global
– Transnational

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Cost and Adaptation Pressures and Their I
mplications for International Strategies

13-19
 Home Replication Strategy

• Used when companies typically centraliz

e product development functions in their
home country
– Then transferred to foreign markets in order
to capture additional value
– Microsoft, McDonald’s

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 Multidomestic Strategy

• Used when there is strong pressure for a

daptation to local market
– Decision making decentralized to allow for q
uick change
– Increases cost structure
– Too much adaptation may take away from p
roduct
– Cost and complexity of coordination can be
substantial
– Schneider Electric

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 Global Strategy

• Used when a company faces strong pressure t

o reduce costs and limited pressure to adapt p
roducts for local markets
– Strategy and decision making centralized
– Company offers standardized products and service
s
– Value chain activities in only one or a few areas
– Results in limited ability to adjust to meet customer
needs and higher transportation costs
– Intel, Boeing

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 Transnational Strategy

• Used when a company confronts pressures for

both cost effectiveness and local adaptation
– Company locations based on where most beneficial
for each activity
• Upstream value chain activities will be more cent
ralized
• Downstream activities will be more decentralized
– Achieving an optimal balance is challenging
– Strategic decisions, structures and systems will be
complex

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 Scenarios

• Multiple, plausible stories about the future

– Often the “what if” questions reveal weaknesse
s in present strategies
– Types of subjects for scenarios include
• large and sudden changes in sales (up or do
wn)
• sudden increases in price of raw materials
• sudden tax increases
• a change in the political party in power

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 Types of Plans

• Contingency Plans
– Plans for the best-or-worst-case scenarios o
r for critical events that could have a severe
impact on the firm

• Tactical Plans (Operational)

– Spell out in detail how objectives will be rea
ched
– Short-term

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 Strategic Plan Features

• Sales Forecast and Budget

– Sales Forecast
• Provides management with an estimate o
f the revenue to be received and the units
to be sold

– Budget
• During planning, budgets coordinate the f
unctions within the firm and provide mana
gement with a detailed statement of futur
e operating results 13-26
Plan Implementation Facilitators

• Policies and Procedures

• Policies
– Broad guidelines to assist lower-level managers in han
dling recurring problems
– Permit discretionary action and interpretation
– The object is to economize managerial time and prom
ote consistency among the various operating units

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Plan Implementation Facilitators

• Procedures
– Prescribe how certain activities will be carried ou
t
– Ensure uniform action on the part of all corporat
e members
– Facilitate comparison among operational units

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 Performance Measures

• Assess if the strategy and its implementa

tion are proceeding successfully and wh
at modifications may be needed
– Measures of the company’s success
• Financial, technological, and human reso
urces
– Measures of the effectiveness
– Measures of the company’s progress

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 Kinds of Strategic Plans

• Time Horizon
– Strategic plans may be classified as short,
medium, or long term
• Level in the Organization
– Each organizational level will have its level
of plan
• Functional area

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 Methods of Planning

• Top-down planning
– Begins at the highest level in the organizatio
n and continues downward
• definition of the business
• mission statement
• company objectives
• financial assumptions
• content of the plan
• special issues

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 Methods of Planning

• Bottom-Up Planning
– Begins at the lowest level in the organizatio
n and continues upward
• Iterative Planning
– Repetition of the bottom-up or top-down pla
nning process until all differences are recon
ciled

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 New Directions in Planning

• Who Does the Planning?

– Many firms have introduced innovation to th
e planning process
• Bring in customers and suppliers wh
o have firsthand experience with the
firm’s markets

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 New Directions in Planning

• How Planning is Done

– Many firms have moved toward less structur
ed formats and much shorter documents
• Contents of the Plan
– Top managers much more concerned with i
ssues, strategies, and implementation

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Summary Changes in the Internationa
l Planning Process
• Top management must assume more explicit s
trategic decision-making role, decide how thin
gs ought to be, not listen to analyses of how th
ey are

• The nature of planning must change from fore

casting to creativity

• Planning processes and tools that assume a fu

ture much like the past must be replaced by a
mind-set obsessed with recognizing change a
nd using it to build competitive advantage
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Summary of Changes in International
Planning Process

• The planner must change from purveyor

of incrementalism to crusader for action

• Strategic planning must be restored to co

re of line management responsibilities

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 Competitor Analysis

• Competitor Analysis
– Process in which principal competitors are i
dentified and their objectives, strengths, we
aknesses, and product lines are assessed
• Industrial Espionage
– Act of spying on a competitors to learn secr
ets about strategy and operations

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Competitor Intelligence Systems

• Procedure for gathering, analyzing, and disse

minating information about competitors

• Benefits include ability to:

– Improve bidding success
– Identify competitor’s key customers
– Identify plant or other facility expansion plans
– Improve understanding of competitors’ products a
nd processes

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 Sources of Information

• Within the Firm • Suppliers/Customers

– Sales representatives
– Librarians • Competitors’ Employe
– Technical and R&D p es
eople

• Direct Observation or
• Published Material
Analysis of Physical E
– Technical journals vidence
– Databases
– Technical people
– Internet
– Reverse engineering
– Industry reports
– Public documents
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 Benchmarking

• A technique for measuring a firm’s perfor

mance against the performance of others

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 Benchmarking

• Four types
– Internal: comparing one operation in the firm with a
nother
– Competitive: comparing the firm’s operation with a
direct competitor
– Functional: comparing similar functions of firms in y
our industry
– Generic: comparing operations in totally unrelated i
ndustries

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