International Strategic Management

INTERNATIONAL
BUSINESS
A MANAGERIAL PERSPECTIVE
International Strategic Management

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Prentice Prentice Hall Hall 2002 International 2002 International Business Business 3e 3e
Chapter Objectives
After studying this chapter you should be able to:
Characterize the challenges of international strategic management. Assess the basic strategic alternatives available to firms. Distinguish and analyze the components of international strategy. Describe the international strategic management process. Identify and characterize the levels of international strategies.
Prentice Hall 2002 International Business 3e
Global Mickey
Tokyo Disneyland opened in 1984 and has been hugely successful. Encouraged with the success of this venture, Disney planned Euro Disney which would open outside Paris in 1992. This time, unlike the project in Japan, Disney participated more fully in the parks ownership and its profits. Unfortunately for Disney, a recession swept through Europe just as the park was opening. Disney also misjudged a number of factors, including average length of stays, amount visitors would spend on food, etc. Euro Disney was barely saved in 1994 by a costly financial restructuring, and it has only been in the last few years that the re-named Disneyland Paris has begun earning profits.
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International Strategic Management

International strategic management is a comprehensive and ongoing management planning process aimed at formulating and implementing strategies that enable a firm to compete effectively internationally.
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International Strategies
International strategies are comprehensive frameworks for achieving a firms fundamental goals. A firms strategic planners must answer the same fundamental questions: What products and/or services does the firm intend to sell? Where and how will it make those products or services? Where and how will it sell them? Where and how will it acquire the necessary resources? How does it expect to outperform its competitors?
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International Strategies (cont.)

International businesses have the ability to exploit three sources of competitive advantage unavailable to domestic firms:
Global efficiencies Multinational flexibility Worldwide learning
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Strategic Alternatives
Multinational corporations typically adopt one of four strategic alternatives in their attempt to balance the three goals of global efficiencies, multinational flexibility, and worldwide learning:
Home replication strategy Multidomestic strategy Global strategy Transnational strategy
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Home Replication Strategy

In this approach, a firm utilizes the core competency or firm-specific advantage it developed at home as its main competitive weapon in the foreign markets that it enters. That is, it takes what it does exceptionally well in its home market and attempts to duplicate it in foreign markets.
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The Multidomestic Strategy

A multidomestic corporation views itself as a collection of relatively independent operating subsidiaries, each of which focuses on a specific domestic market. In addition, each of these subsidiaries is free to customize its products, its marketing campaigns, and its operations techniques to best meet the needs of its local customers.
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The Global Strategy

A global corporation views the world as a single marketplace and has as its primary goal the creation of standardized goods and services that will address the needs of customers worldwide. The global strategy is almost the exact opposite of the multidomestic strategy.
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The Transnational Strategy

The transnational corporation attempts to combine the benefits of global scale efficiencies, such as those pursued by a global corporation, with the benefits and advantages of local responsiveness, which is the goal of a multidomestic corporation.
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Components of an International Strategy

Managers who engage in international strategic planning need to address the four basic components of strategy development:
Distinctive competence Scope of operations Resource deployment Synergy
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Distinctive Competence
Distinctive competence answers the question What do we do exceptionally well, especially as compared to our competitors? A firms distinctive competence may be cutting-edge technology, efficient distribution networks, superior organizational practices, or well-respected brand names.
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Scope of Operations
The scope of operations answers the question Where are we going to conduct business? Scope may be defined in terms of geographical regions, such as countries, regions within a country, and/or clusters of countries. Or it may focus on market or product niches within one or more regions, such as the premium-quality market niche, the low-cost market niche, or other specialized market niches.
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Resource Deployment
Resource deployment answers the question Given that we are going to compete in these markets, how will we allocate our resources to them? For example, even though Disney will soon have theme park operations in four countries, the firm does not have an equal resource commitment to each market.
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Synergy
Synergy answers the question How can different elements of our business benefit each other? The goal of synergy is to create a situation where the whole is greater than the sum of the parts.
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Developing International Strategies

Firms generally carry out international strategic management in two broad stages:
Strategy formulation Strategy implementation
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Strategy Formulation
In strategy formulation, the firm establishes its goals and the strategic plan that will lead to the achievement of those goals. In international strategy formulation, managers develop, refine, and agree on which markets to enter (or exit) and how best to compete in each.
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Strategy Implementation
In strategy implementation, the firm develops the tactics for achieving the formulated international strategies. Disneys decision to build Disneyland Paris was part of strategy formulation. But deciding which attractions to include, when to open, and what to charge for admission is part of strategy implementation.
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SWOT Analysis
A SWOT analysis consists of a firm looking at its strengths, weaknesses, opportunities, and threats.
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Strategic Goals
Strategic goals are the major objectives the firm wants to accomplish through pursuing a particular course of action. By definition, they should be measurable, feasible, and timelimited, answering the questions how much, how, and by when?
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Control Framework
A control framework is the set of managerial and organizational processes that keep the firm moving toward its strategic goals.
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Levels of International Strategy

Given the complexities of international strategic management, many international businesses find it useful to develop strategies for three distinct levels within the organization:
Corporate Business Functional
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Corporate Strategy
Corporate strategy attempts to define the domain of businesses the firm intends to operate. A firm might adopt any of three forms of corporate strategy:
Single business strategy Related diversification strategy Unrelated diversification strategy
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Business Strategy
Whereas corporate strategy deals with the overall organization, business strategy focuses on specific businesses, subsidiaries, or operating units within the firm. The three basic forms of business strategy are:
Differentiation Overall cost leadership Focus
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Functional Strategy
Functional strategies attempt to answer the question How will we manage the functions of finance, marketing, operations, human resources, and research and development in ways consistent with our international corporate strategies?
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Common Functional Strategies

Some common functional strategies are:
Financial strategy Marketing strategy Operations strategy Human resource strategy Research and development strategy
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Chapter Review
International strategic management is a comprehensive and ongoing management planning process aimed at formulating and implementing strategies that enable a firm to compete effectively in different markets. Firms participating in international business usually adopt one of four strategic alternatives: the home replication strategy, the multidomestic strategy, the global strategy, or the transnational strategy. A well-conceived strategy has four essential components: distinctive competence, scope of operations, resource deployment, and synergy.
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Chapter Review (cont.)

International strategy formulation is the process of creating a firms international strategies. There are three steps involved:
Develop a mission statement that specifies its values, purpose and direction. Thoroughly analyze its strengths and weaknesses, as well as the opportunities and threats that exist in its environment. Set strategic goals, outline tactical goals and plans, and develop a control framework.
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Chapter Review (conc.)

Most firms develop strategy at three levels:
Corporate strategy Business strategy Functional strategy
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INTERNATIONAL

International Strategic Management

International Strategic Management

International Strategies (cont.)

Home Replication Strategy

The Multidomestic Strategy

The Global Strategy

The Transnational Strategy

Components of an International Strategy

Developing International Strategies

Levels of International Strategy

Common Functional Strategies

Chapter Review (cont.)

Chapter Review (conc.)

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