STRATEGY & GLOBAL

ORGNIZATION
UNIT 5
STRATEGIC PLANNING
Process of determining an organizations
 Mission
 Long-term objectives & implementing plan
of action

Process of evaluating organizations

 Environment & its internal strengths
 Identifying long & short range objectives &
then implementing plan of action
STRATEGIC PLANNING PROVIDES
 General direction

 Specific guidance in carrying out their

activities
• To keep track of their operations in a continuously
changing international environment (FDI)
environment
• Ford Motor re-entered market in Thailand
• China-WTO membership-allow foreign banks to lend
Changing
loans to their local businesses (Citibank)
• SP coordinate & monitor far flung operations & deal
with problems of political risk, competition &
• currency instability
Operating in more than one area of business
• Toyota runs japans popular website
business
Gazoo.com,sells its own credit cards,
provides finance etc
Diverse
• Need SP to integrate diverse units
• Speed, innovation
• Customer pleasing products
focus
• Siemens' produces a phone in 5min to
Need to
beat GE & Nokia
PLANNING
NEED FOR STRATEGIC
APPROACHES TO STRATEGIC
PLANNING

 Economic imperative

 Political imperative

 Quality Imperative

 Administrative coordination

imperative
APPROACHES TO STRATEGIC
PLANNING
 Employ world wide strategy
 Economic imperative based on cost leadership,
differentiation &
 Political imperative segmentation
 Used for Homogeneous
 Quality Imperative products which requires no
alteration to fit needs of
 Administrative specific country
 Value already created in
coordination the upstream activities
(R&D),manufacturing .
imperative  European PC market.
VALUE CHAIN COMPONENTS
APPROACHES TO STRATEGIC
PLANNING
 Country responsive
 Economic imperative
 Protect local market
 Political imperative
niches
 Insurance & consumer
 Quality Imperative packaged goods
 Value added in
 Administrative downstream activities
 Success of product relies
coordination on marketing, sales &
service
imperative  Thums-up
APPROACHES TO STRATEGIC
PLANNING
 Taking 2 interdependent paths
 Economic imperative  Change in consumer attitudes & a
raising service quality
 Political imperative expectations
 Quality improvement processes
 Quality Imperative being implemented on on-going
basis
 Administrative  Make quality major part of overall
strategy
coordination  TQM- end product as well as all
areas
imperative  Honda & Toyota
APPROACHES TO STRATEGIC
PLANNING
 Make strategic decisions based
 Economic imperative
on the merits of the individual
situations rather than using
 Political imperative predetermined economic or
political strategy
 Quality Imperative
 IBM relies on economic
 Administrative
imperative in LDC, political &
coordination
quality imperatives in European
countries & admin strategy
imperative when rapid , flexible decision
making t close the sale
STRATEGIC PREDISPOSITIONS(DOING
THINGS IN A PARTICULAR WAY)

 Ethnocentric

 Polycentric

 Regiocentric

 Geocentric
STRATEGIC PREDISPOSITIONS(DOING
THINGS IN A PARTICULAR WAY)

 Values & interests

 Ethnocentric of the parent
company guide the
strategic decisions
 Polycentric
 Products
developed for
 Regiocentric home markets sold
in foreign markets
 Geocentric
STRATEGIC PREDISPOSITIONS(DOING
THINGS IN A PARTICULAR WAY)

 Strategic decisions
 Ethnocentric are tailored to suit
cultures of hast
countries
 Polycentric
 Product
development
 Regiocentric based on local
needs
 Geocentric
STRATEGIC PREDISPOSITIONS(DOING
THINGS IN A PARTICULAR WAY)

 Firm tries to blend

 Ethnocentric its own interests
with those of its
subsidiaries on a
 Polycentric
regional basis
 Start exporting
 Regiocentric products to
neighbouring
countries from
 Geocentric their subsidiaries
STRATEGIC PREDISPOSITIONS(DOING
THINGS IN A PARTICULAR WAY)

 Integrate a global
 Ethnocentric systems approach to
decision making
 Methodologies &
 Polycentric techniques
developed in one
subsidiary used by
 Regiocentric units & headquarters
 Competencies &
 Geocentric skills shared globally
• Specific goals come out of external scanning &
internal analysis
• Serve as an umbrella under which the subsidiaries &
other international groups operate
Goal Setting
• Profitability & marketing goals dominate SP of
MNC’s
• Evaluate current managerial ,technical , material &
financial strengths & weaknesses
• Areas examined include : physical resources &
Analysis
personnel competencies Internal
• Using value chain to bring these together in the
most synergetic & profitable manner
• Forecast of trends external changes like economy ,
competition, political stability, technology &
demographics
Scanning
Environmental
• 2 stage process: information gathering &
Information assessment
STRATEGY FORMULATION
STRATEGY IMPLEMENTATION
Process of attaining goals by using organizational
structure to properly execute formulated strategy.
Consider 3 general areas in strategy implementation

Implement
functional
Carry out entry &
Decide where to strategies in areas
ownership
locate operations like marketing,
strategies
production &
finance
 LOCATION
The country Specific locale
 Amount of Government within chosen
control
country
 Political turmoil & spill  Access to markets
over effect
 Proximity to competitors
 Restrictions on foreign
investment  Availability of
transportation, power ,
location desirability
facilities
 Cost of running small
enterprise is low
 Near sources of labour
OWNERSHIP DECISIONS

 Export  Joint venture

 Import  Strategic Alliances
 Licensing  Wholly owned
 Franchising subsidiary
FUNCTIONAL AREA
IMPLEMENTATION

 Marketing strategy
 Production
strategy

 Finance strategy
FUNCTIONAL AREA
IMPLEMENTATION

 Determined on a
 Marketing strategy
country-country
 Production basis
strategy  In 4P’s –the last 2
P’s promotion &
 Finance strategy place dictated by
local conditions
FUNCTIONAL AREA
IMPLEMENTATION

 Export – production
 Marketing strategy process handled by
domestic operations
 Production  Specialise in a product
strategy  Produce for a specific
locale
 Produce components &
 Finance strategy ship them to assembly
units
 Labour intensive- produce
at low cost site (Brazil)
FUNCTIONAL AREA
IMPLEMENTATION

 Past resources relied on

 Marketing strategy local areas for funds
 Production  Global financing
Problem with fluctuating
strategy

currencies
 To deal bought currency
options
 Finance strategy  PepsiCo receives vodka for
its products sold in Russia
 Popular in LDC’s
 STRUCTURE
 Formal relationships among various elements
 Relationship between parent company & its
various subsidiaries
 Strategies cannot be implemented without
an effective structure
 Influence each other
 Modified to accommodate each other
 Ford motors- Europe –turnaround strategy.