BBK3363 International Management Prepared by Dr Khairul Anuar. L4: Formulating Strategy

Transcription

1 BBK3363 International Management Prepared by Dr Khairul Anuar L4: Formulating Strategy 1

2 Chapter Learning Goals Understand why companies engage in international business. Learn the steps in global strategic planning and the models available to direct the analysis and decision making involved. Appreciate the techniques of environmental assessment, internal and competitive analysis, and how those results can be used to judge the relative opportunities and threats to be considered in international strategic plans. Profile the types of strategies available to international managers both on a global level and on the level of specific entry strategies for different markets. Gain insight into the issues managers face when strategic planning for the emerging market. 2

3 Strategic Planning and Strategy in International Business Strategic Planning More complex than domestic strategic planning because of more complex variables Strategy The basic means by which the firm competes 3

4 Reasons for Going International Reactive/Defensive Globalization of competitors Trade barriers Regulations and restrictions Customer demands Proactive/Aggressive Economies of scale Growth opportunities Resource access and cost savings Incentives 4

5 Management in Action: Mexico s Cemex Until 2009, aggressively grew through acquisitions; Rinker Group in Australia, RMC in Britain From expansion cost-cutting and retrenchment Selling assets, negotiating with creditors, cutting workforce As of August 2011, Cemex had secured a $15 billion restructuring deal and cut 11% of its workforce worldwide 5

6 Strategic Management Process EXHIBIT 6-1 The Strategic Management Process 6

7 Steps in Developing International and Global Strategies Mission and Objectives Environmental Assessment and Scanning Internal and Competitive Analysis Global Integrative and Entry Strategy Alternatives Strategic Choice, Implementation, Feedback, and Control 7

8 Step 1: Establish Mission and Objectives Marketing Worldwide, regional, national market share Production Production volume Economies of scale Finance Tax burden Capital structure 8

9 Step 1: Establish Mission and Objectives Profitability ROA ROE ROI R & D Global patents 9

10 Step 2: Assess External Environment 10

11 Environmental Scanning Variables Political and Economic Risk Technological, Legal, Physical Restraints International Competition Nationalism 11

12 Institutional Effects on International Competition Attractiveness of Overseas Markets The extent to which countries have institutions to promote the rule of law to outside investors Entry Barriers and Industry Attractiveness Creating barriers to entry in certain industries and making those industries more attractive (profitable) for incumbent firms 12

13 Institutional Effects on International Competition Antidumping as an Entry Barrier The current U.S. antidumping laws place a foreign entrant at a disadvantage if accused of dumping. 13

14 Step 3: Analyze Internal Factors Internal Analysis Key Success Factors: Technological capability: Apple Distribution channels: Wal-Mart Promotion capabilities: Disney Competitive Analysis Distinctive competencies SWOT analysis Comparative advantage E-Business 14

15 Strategic Decision-Making Models EXHIBIT 6-6 A Hierarchical Model of Strategic Decision Making 15

16 Step 4: Evaluate Global and International Strategic Alternatives Regionalization /Localization Global Global Integrative Alternative Strategies 16

17 Pressures to Globalize Increasing competitive clout resulting from regional trading blocs Declining tariffs Information Technology explosion 17

18 Regionalization/Localization Local markets are linked together within a region, allowing local responsiveness. The impetus: Unique consumer preferences Domestic subsidies New production technologies 18

19 Cage Distances Between Countries Cultural Distance Administrative Distance Geographical Distance Economic Distance 19

20 Global Integrative Strategies Full vertical and horizontal integration Example: Dell Factories in Ireland, Brazil, China, and so on Assembly and delivery system from 47 locations around the world Little inventory, ability to change operations quickly 20

21 Step 5: Evaluate Entry Strategy Alternatives Exporting Licensing Franchising Contract Manufacturing Offshoring Service Sector Outsourcing Turnkey Operations Management Contracts International Joint Ventures Fully Owned Subsidiaries 21

22 Comparative Management in Focus: Strategic Planning for Emerging Markets Increasing business opportunities for companies wanting to set up operations in or export to emerging markets Different countries are at different levels of development and have different risk/return profiles Usually entails higher risk 22

23 Emerging Market Attractiveness for Retail Strategies Country 2011 Rank 2010 Rank Brazil 1 5 Uruguay 2 8 Chile 3 6 India 4 3 Kuwait 5 2 China 6 1 Saudi Arabia 7 4 Peru 8 9 U.A.E. 9 7 Turkey Russia

24 Comparative Management in Focus: Strategic Planning for Emerging Markets One size does not fit all: different infrastructure, socio-economic and regulatory challenges, different environmental and geographic constraints Potential for innovation, not just new customers 24

25 Top Three Strategic Objectives 25

26 Number of Functions 26

27 New Strategies for Emerging Markets 27

28 Operating Model for Emerging Markets 28

29 Disconnected Governance Model 29

30 The Influence of Culture on Strategic Choice and Timing Entry China and Japan have longer-term time horizons than the United States. High uncertainty avoidance cultures (e.g., Latin American, African countries) prefer non-equity modes of entry. High power distance cultures (e.g., Arab countries and Japan) tend to use more equity modes of entry abroad. 30

31 Conclusion Proactive and reactive reasons for going international Rational planning; mission and objectives; threats and opportunities; internal strengths and weaknesses; entry strategies Competitive analysis Globalization vs. regionalization E-business 31

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