Chapter
8
Strategy Formulation and
Implementation
1. IDENTIFY the basic steps in strategic planning, including
environment...
Chapter
8
Strategy Formulation and
Implementation
4. DESCRIBE how an MNC implements the strategic plan,
such as how it cho...
3
Strategic Management
 Strategic management
 Process of determining an organization’s basic mission and
long-term objec...
4
Approaches to Strategic Planning
Economic
Imperative
Economic
Imperative
Quality
Imperative
Quality
Imperative
Political...
5
Approaches to Strategic Planning
 Economic imperative focused MNCs
employ a worldwide strategy based on cost
leadership...
6
Approaches to Strategic Planning
 MNCs using the political imperative
approach to strategic planning are country-
respo...
7
Approaches to Strategic Planning
 Two paths of quality imperative
 Change in attitudes and a raising of
expectation fo...
8
Total Quality Management
 Quality is operationalized by meeting or exceeding
customer expectations
 The quality strate...
9
Approaches to Strategic Planning
 Administrative coordination approach
 MNC makes strategic decisions based on
merits ...
10
Approaches to Strategic Planning
 Globalization
 Production and distribution of products and services of a
homogeneou...
11
Global Integration vs. National
Responsiveness
Global
strategy
Global
strategy
International
strategy
International
str...
12
Summary of Approaches to
Strategic Planning
 The appropriateness of each strategy depends on pressures for cost
reduct...
13
Elements of Strategic Planning for
International Management
External Environmental
Scanning for MNC
Opportunities and T...
14
Elements of Strategic Planning for
International Management
 Environmental scanning
External Environmental
Scanning fo...
15
Elements of Strategic Planning for
International Management
 Internal Resource Analysis
Internal Resource Analysis of
...
16
Elements of Strategic Planning for
International Management
 Strategic Planning Goals
 Goal formulation often precede...
17
Formulation of MNC Goals
Adapted from Table 8–1: Areas for Formulation of MNC Goals
18
Formulation of MNC Goals
Adapted from Table 8–1: Areas for Formulation of MNC Goals
19
Elements of Strategic Planning for
International Management
 Implementation
 Provides goods and services in accord wi...
20
Elements of Strategic Planning for
International Management
 Implementation
 Local issues
 Once the country has been...
21
Elements of Strategic Planning for
International Management
 Implementation
 Production
 When exporting goods to a f...
22
Elements of Strategic Planning for
International Management
 Implementation
 Finance
 Transferring funds from one pl...
23
Elements of Strategic Planning for
International Management
 Implementation
 Strategies for the “base of the pyramid”...
24
Elements of Strategic Planning for
International Management
 Implementation
 International New Ventures and “Born-Glo...
25
Cases
 Poland (p. 258)
 KNP (p. 345)
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Stratgy formultn and implemntatn

  1. 1. Chapter 8 Strategy Formulation and Implementation 1. IDENTIFY the basic steps in strategic planning, including environmental scanning, internal resource analysis of the MNC’s strengths and weaknesses, and goal formulation. 2. DESCRIBE how an MNC implements the strategic plan, such as how it chooses a site for overseas operations. 3. REVIEW the three major functions of marketing, production, and finance that are used in implementing a strategic plan. The specific objectives of this chapter are:
  2. 2. Chapter 8 Strategy Formulation and Implementation 4. DESCRIBE how an MNC implements the strategic plan, such as how it chooses a site for overseas operations. 5. REVIEW the three major functions of marketing, production, and finance that are used in implementing a strategic plan. 6. EXPLAIN specialized strategies appropriate for emerging markets and international new ventures. The specific objectives of this chapter are:
  3. 3. 3 Strategic Management  Strategic management  Process of determining an organization’s basic mission and long-term objectives, and then implementing a plan of action for pursuing this mission and attaining these objectives  How to allocate finite resources to achieve long-term objectives  Growing need for strategic management  Increasingly diversified operations in a continuously changing international environment.  More resources, more places to allocate them  Increased complexity
  4. 4. 4 Approaches to Strategic Planning Economic Imperative Economic Imperative Quality Imperative Quality Imperative Political Imperative Political Imperative Administrative Coordination Administrative Coordination
  5. 5. 5 Approaches to Strategic Planning  Economic imperative focused MNCs employ a worldwide strategy based on cost leadership, differentiation, and segmentation  They often sell products for which a large portion of value is added in the upstream activities of the industry’s value chain  Research and development  Manufacturing  Distribution  Strategy also used when the product is regarded as a generic good and therefore does not have to be sold based on name brand or support service Economic Imperative Economic Imperative
  6. 6. 6 Approaches to Strategic Planning  MNCs using the political imperative approach to strategic planning are country- responsive; their approach is designed to protect local market niches  Success of the product or service depends heavily on  Marketing  Sales  Service  These MNCs often use a country-centered or multidomestic strategy. Political Imperative Political Imperative
  7. 7. 7 Approaches to Strategic Planning  Two paths of quality imperative  Change in attitudes and a raising of expectation for service quality  Implementation of management practices designed to make quality improvement an ongoing process  “Total quality management,” (TQM)  Cross-training personnel to do the jobs of all members in their work group  Process re-engineering designed to help identify and eliminate redundant tasks and wasteful effort  Reward systems designed to reinforce quality performance Quality Imperative Quality Imperative
  8. 8. 8 Total Quality Management  Quality is operationalized by meeting or exceeding customer expectations  The quality strategy is formulated at the top management level and is diffused throughout the organization  Deliver quality products or services to internal and external customers.  TQM techniques  Traditional inspection (no!) and statistical quality control  Cutting-edge human resource management techniques, such as self-managing teams and empowerment
  9. 9. 9 Approaches to Strategic Planning  Administrative coordination approach  MNC makes strategic decisions based on merits of the individual situation rather than using a predetermined economic or political strategy  Least common approach to formulation and implementation of strategy because of the firm’s desire to coordinate its strategy both regionally and globally Administrative Coordination Administrative Coordination
  10. 10. 10 Approaches to Strategic Planning  Globalization  Production and distribution of products and services of a homogeneous type and quality on a worldwide basis  Many customers of MNCs have homogenized tastes, which helps spread international consumerism  National responsiveness  Understand different consumer tastes in segmented regional markets  Respond to different national standards and regulations imposed by autonomous governments and agencies  Adapt tools and techniques for managing the local workforce
  11. 11. 11 Global Integration vs. National Responsiveness Global strategy Global strategy International strategy International strategy Transnational strategy Transnational strategy Multi-domestic strategy Multi-domestic strategy National responsiveness Low High Globalintegration Low High Adapted from Figure 8–1: Global Integration vs. National Responsiveness
  12. 12. 12 Summary of Approaches to Strategic Planning  The appropriateness of each strategy depends on pressures for cost reduction and local responsiveness in each country served  A global strategy is a low-cost strategy which attempts to benefit from scale economies in production, distribution, and marketing  A transnational strategy should be pursued when there are high cost pressures and high demands for local responsiveness  Pressures for cost reduction and local responsiveness put contradictory demands on a company because localized product offerings increase cost  Organizations that can find appropriate synergies in global corporate functions can leverage a transnational strategy effectively
  13. 13. 13 Elements of Strategic Planning for International Management External Environmental Scanning for MNC Opportunities and Threats External Environmental Scanning for MNC Opportunities and Threats Internal Resource Analysis of MNC Strengths and Weaknesses Internal Resource Analysis of MNC Strengths and Weaknesses Strategic Planning Goals Strategic Planning Goals IMPLEMENTATIONIMPLEMENTATION Adapted from Figure 8–2: Basic Elements of Strategic Planning for International Management
  14. 14. 14 Elements of Strategic Planning for International Management  Environmental scanning External Environmental Scanning for MNC Opportunities and Threats External Environmental Scanning for MNC Opportunities and Threats  Provide management with accurate forecasts of trends that relate to external changes in geographic areas where the firm is currently doing business or considering setting up operations  These changes relate to the economy, competition, political stability, technology, and demographic consumer data  ECLIPTER  Econography, Culture, Legal Systems, Income Profile, Political Risk, Tax Systems, and Exchange Rates
  15. 15. 15 Elements of Strategic Planning for International Management  Internal Resource Analysis Internal Resource Analysis of MNC Strengths and Weaknesses Internal Resource Analysis of MNC Strengths and Weaknesses  Evaluate the MNC’s current managerial, technical, material, and financial strengths and weaknesses  Assessment then is used to determine its ability to take advantage of international market opportunities  Match external opportunities (gained through the environmental scan) with internal capabilities (gained through the internal resource analysis  Key factors for success  The key question for the MNC is: Do we have the people and resources that can help us to develop and sustain the necessary KFSs, or can we acquire them?
  16. 16. 16 Elements of Strategic Planning for International Management  Strategic Planning Goals  Goal formulation often precedes the first two steps of environmental scanning and internal resource analysis  However, more specific goals for the strategic plan come out of external scanning and internal analysis  These goals typically serve as an umbrella beneath which the subsidiaries and other international groups operate  Profitability and marketing goals almost always dominate the strategic plans of today’s MNCs  Once the strategic goals are set, the MNC will develop specific operational goals and controls for the subsidiary or affiliate level Strategic Planning Goals Strategic Planning Goals
  17. 17. 17 Formulation of MNC Goals Adapted from Table 8–1: Areas for Formulation of MNC Goals
  18. 18. 18 Formulation of MNC Goals Adapted from Table 8–1: Areas for Formulation of MNC Goals
  19. 19. 19 Elements of Strategic Planning for International Management  Implementation  Provides goods and services in accord with a plan of action  Often, this plan will have an overall philosophy or series of guidelines that direct the process  Considerations in selecting a country  Advanced industrialized countries because they offer the largest markets for goods and services  Amount of government control.  Restrictions on foreign investment.  Specific benefits offered by host countries IMPLEMENTATIONIMPLEMENTATION
  20. 20. 20 Elements of Strategic Planning for International Management  Implementation  Local issues  Once the country has been decided, the firm must choose the specific locale  Important factors influencing this choice include  Access to markets  Proximity to competitors  Availability of transportation and electric power  Desirability of the location for employees coming in from the outside IMPLEMENTATIONIMPLEMENTATION
  21. 21. 21 Elements of Strategic Planning for International Management  Implementation  Production  When exporting goods to a foreign market, the production process traditionally has been handled through domestic operations.  More recently MNCs have found that whether they are exporting or producing the goods locally in the host country, consideration of worldwide production is important.  A recent trend has been away from multi-domestic approach and toward global coordination of operations IMPLEMENTATIONIMPLEMENTATION
  22. 22. 22 Elements of Strategic Planning for International Management  Implementation  Finance  Transferring funds from one place in the world to another, or borrowing funds in the international money markets, often is less expensive than relying on local sources  Issues include  Re-evaluation of currencies  Privatization  Strategies for the base of the pyramid  International New Ventures and “Born-Global” Firms IMPLEMENTATIONIMPLEMENTATION
  23. 23. 23 Elements of Strategic Planning for International Management  Implementation  Strategies for the “base of the pyramid” (BOP)  Emerging market customers  People at the bottom of the economic pyramid (4 billion)  Marketing at BOP forces consideration of smaller-scale strategies  Building relationships with local governments, small entrepreneurs, and nonprofits  Less dependence on established partners such as central governments and large local companies  International New Ventures and “Born-Global” Firms IMPLEMENTATIONIMPLEMENTATION
  24. 24. 24 Elements of Strategic Planning for International Management  Implementation  International New Ventures and “Born-Global” Firms  firms that engage in significant international activity a short time after being established  Successful born-global firms leverage a distinctive mix of orientations and strategies  Global technological competence  Unique-products development  Quality focus  Leveraging of foreign distributor competences IMPLEMENTATIONIMPLEMENTATION
  25. 25. 25 Cases  Poland (p. 258)  KNP (p. 345)

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