Download International Competitive Strategy

chapter thirteen
International Competitive
Strategy
McGraw-Hill/Irwin
International Business, 11/e
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
 Explain international strategy and
competencies and international
competitive advantage
 Describe the steps in the global strategic
planning process
 Explain the purpose of mission statements,
objectives, goals, and strategies
13-3
Learning Objectives
 Describe the methods of and new directions in
strategic planning
 Explain home replication, multidomestic, regional,
global, and transnational strategies and when to
use them
 Describe the sources of competitive information
 Understand the importance of industrial espionage
13-4
International Strategy
• 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
13-5
International Strategy
• 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
13-7
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
13-8
Global Strategic Planning Process
The process of strategic planning provides a
formal structure in which managers
• Analyze the
company’s external
environments
• Analyze the
company’s internal
environment
• Quantify goals
• Define the
company’s business
and mission
• Set corporate
objectives
• Formulate strategies
• Make tactical plans
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Global Planning Process
13-10
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
13-11
Figure 13.2 – The Value Chain
13-12
Analyze Corporate
Controllable Variables
• Knowledge as a Controllable Corporate
Resource
– Capabilities of employees
– Structures, systems, organizational routines
• Build knowledge database and transfer best
practices
• 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
company 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
organization’s purpose and scope
13-14
Define the Corporate Business,
Vision, and Mission Statements
– Vision Statement
• Description of the company’s 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 organization’s members
13-15
Set Corporate Objectives
• Objectives
– Direct the firm’s 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
13-16
Formulate Competitive Strategies
• Competitive Strategies
– Action plans to enable organizations to
reach their objectives
– Generally, participants in the strategic
planning process will formulate alternative
competitive strategies along with action
plans that seem plausible
13-17
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
Implications for International Strategies
13-19
Home Replication Strategy
• Used when companies typically
centralize product development functions
in their home country
– Then transferred to foreign markets in order
to capture additional value
– Microsoft, McDonald’s
13-20
Multidomestic Strategy
• Used when there is strong pressure for
adaptation to local market
– Decision making decentralized to allow for
quick change
– Increases cost structure
– Too much adaptation may take away from
product
– Cost and complexity of coordination can be
substantial
– Schneider Electric
13-21
Global Strategy
• Used when a company faces strong pressure
to reduce costs and limited pressure to adapt
products for local markets
– Strategy and decision making centralized
– Company offers standardized products and
services
– 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
centralized
• 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
weaknesses in present strategies
– Types of subjects for scenarios include
• large and sudden changes in sales (up or
down)
• 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
or for critical events that could have a
severe impact on the firm
• Tactical Plans (Operational)
– Spell out in detail how objectives will be
reached
– Short-term
13-25
Strategic Plan Features
• Sales Forecast and Budget
– Sales Forecast
• Provides management with an estimate
of the revenue to be received and the
units to be sold
– Budget
• During planning, budgets coordinate the
functions within the firm and provide
management with a detailed statement of
future operating results
13-26
Plan Implementation Facilitators
• Policies and Procedures
• Policies
– Broad guidelines to assist lower-level managers in
handling recurring problems
– Permit discretionary action and interpretation
– The object is to economize managerial time and
promote consistency among the various operating
units
13-27
Plan Implementation Facilitators
• Procedures
– Prescribe how certain activities will be carried
out
– Ensure uniform action on the part of all
corporate members
– Facilitate comparison among operational units
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Performance Measures
• Assess if the strategy and its
implementation are proceeding
successfully and what modifications may
be needed
– Measures of the company’s success
• Financial, technological, and human
resources
– Measures of the effectiveness
– Measures of the company’s progress
13-29
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
13-30
Methods of Planning
• Top-down planning
– Begins at the highest level in the
organization and continues downward
• definition of the business
• mission statement
• company objectives
• financial assumptions
• content of the plan
• special issues
13-31
Methods of Planning
• Bottom-Up Planning
– Begins at the lowest level in the
organization and continues upward
• Iterative Planning
– Repetition of the bottom-up or top-down
planning process until all differences are
reconciled
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New Directions in Planning
• Who Does the Planning?
– Many firms have introduced innovation to
the planning process
• Bring in customers and suppliers
who 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
structured formats and much shorter
documents
• Contents of the Plan
– Top managers much more concerned with
issues, strategies, and implementation
13-34
Summary Changes in the
International Planning Process
• Top management must assume more explicit
strategic decision-making role, decide how
things ought to be, not listen to analyses of
how they are
• The nature of planning must change from
forecasting to creativity
• Planning processes and tools that assume a
future much like the past must be replaced by
a mind-set obsessed with recognizing change
and using it to build competitive advantage
13-35
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
core of line management responsibilities
13-36
Competitor Analysis
• Competitor Analysis
– Process in which principal competitors are
identified and their objectives, strengths,
weaknesses, and product lines are
assessed
• Industrial Espionage
– Act of spying on a competitors to learn
secrets about strategy and operations
13-37
Competitor Intelligence Systems
• Procedure for gathering, analyzing, and
disseminating 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
and processes
13-38
Sources of Information
• Within the Firm
– Sales representatives
– Librarians
– Technical and R&D
people
• Suppliers/Customers
• Published Material
– Technical journals
– Databases
– Internet
– Industry reports
– Public documents
• Direct Observation or
Analysis of Physical
Evidence
– Technical people
– Reverse engineering
• Competitors’
Employees
13-39
Benchmarking
• A technique for measuring a firm’s
performance against the performance of
others
13-40
Benchmarking
• Four types
– Internal: comparing one operation in the firm with
another
– Competitive: comparing the firm’s operation with a
direct competitor
– Functional: comparing similar functions of firms in
your industry
– Generic: comparing operations in totally unrelated
industries
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