international strategic planning and market screening


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international strategic planning and market screening

  1. 1. International Business Management International Strategic Planning And Market ScreeningRespectable Lecturer:Dr. Hüda HüdaverdiPrepared By:Fatemeh Hashemi 093014007Fall 2010
  2. 2. What we will learn in this chapter ?
  3. 3. 1-1Introduction The meaning of International strategic planning : The process through which worldwide companies evaluate past results, assess their corporate strengths and weaknesses and map out future resource allocation and strategic based on marketplace opportunities and threats. Why International strategic planning is a complex process to manage? The organizational complexity of International corporations Geographically far-flung nature of their commercial empires Example: Unilever ,the Anglo-Dutch consumer product company,employs223000 people worldwide, and sell over 400 brands through subsidiaries in over 90 countries and sale over 70 other nation.
  4. 4. 1-The International Planning Process1-2 The changing environment ofinternational planning : Historical perspective •Since1945 as companies have internationalized their operations and integrated them on the world wide basis, strategic planning role and philosophy have changed. During 1950s and early 1960s international planning was a centralized activity: - production-oriented activities. - focus was on manufacturing level, expected revenues. - little strategy were needed . During 1960s and 1970s - Japanese &European companies entered the world market place. - competition heat up. - development in tools for assessing (SWOT). In1980s, global market expanded away from Triad to big emerging markets. In 1990s: - competition heightened - central planning departments were cut . - country subsidiaries were encouraged to “get close to customers”. - new role of head office :coordination among divisions and subsidiaries and monitoring global market.
  5. 5. 1- The International Planning Process1-3 The evolution of the international corporateplanning processes  International planning processes vary in complexity according to the degree of strategic analysis involved (Example: Japanese planning processes emphasized budgetary mechanism while American firms have tended to incorporate a wider variety of strategic elements in to their plans)  To understand evolution of planning processes, 4 stages of corporate planning development have identified as follow: 1. Financial planning 2. Long term (forecast-based) planning 3. Environmental planning 4. Integrative strategic planning
  6. 6. 2-Assessing Corporate position2-1 Internal AssessmentsEffective planning offer when firm havedefinite ideas about where they want to beand what has enabled them to get wherethey are, to this end , mission statementsand reviews of core competencies guidecompany efforts and provide continuitybetween past and future planning efforts.
  7. 7. 2-Assessing Corporate position2-1 Internal Assessments2-1-1The corporate missionMission statements of most of the international corporations encompass one or more following features: Description of the business Strategic intent Perceived organizational strength Strategic elements Organizational valuesThe challenge for international corporations is to make mission statements relevant to employees and stakeholders worldwide.McDonalds mission is: to be the worlds best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."
  8. 8. 2-Assessing Corporate position2-1Internal Assessments2-1-2 Corporate CompetenciesCore competencies are bundles of organizational skills andcorporate assets that produce winning marketplace formulas.Core competencies have 3 characteristics:1- They contribute to perceived customer benefits.2- They are difficult for competitors to imitate.3- They can be leveraged over variety of markets.Types of competencies:1- superior technological know-how and product innovation( Microsoft , Intel )2-reliable processes that produce consistent, efficient, quality productsand services in the world market. ( FedEx , Toyota )3- Close relationships with suppliers, regulators, professionalorganizations ,distributors and specially customers.( Unilever , Nestle)4- building sufficient flexibility into worldwide operations to appeal tolocal taste ( Unilever, IBM, Toshiba)
  9. 9. 2-Assessing Corporate position2-2 External Assessments( the marketplace situation)The front end of planning process involvesevaluating corporate performance from a strategicbusiness unit (SBU) and from geographicperspective.The managerial aim is to identify those SBUs andgeographic regions where the company is strong andthose where corporate performance is weak.
  10. 10. 2-Assessing Corporate position2-2 External Assessments2-2-1 SBU evaluation  Companies divide their businesses or product lines into strategic business units.  For example , GE has 13 business divisions worldwide and requires its SBUs to be in the top 2 in their industry sectors . how?  First step is to identify SBUs that contribute positively to group performance(by determining the above and below average financial performers).  And those that are competitive within their industry sectors (by finding the above and below average performers in their respective industries).
  11. 11. 2-Assessing Corporate position2-2 External Assessments2-2-1 SBU evaluationGroup assessments of SBUs ; Contribution to the group and performance in their industry
  12. 12. 2-Assessing Corporate position2-2 External Assessments2-2-2 Worldwide /regional evaluation  The assessment of geographic strategies is a key element in deciding where to allocate corporate resources on the worldwide basis.  The process begins with plotting regional corporate performances on a market size market growth matrix.
  13. 13. 2-Assessing Corporate position2-2 External Assessments2-2-2Worldwide /regional evaluationEvaluating corporate regional performance on a market size –growth matrix
  14. 14. 2-Assessing Corporate position2-2 External Assessments2-2-3Regional / country assessmentsManaging similar product lines across regionsand markets has become increasingly importantfor international corporations.Executives can consolidate data from nationalsubsidiaries into regional and worldwide contextand giving them critical yardsticks such as marketshares, sales, costs and margins.
  15. 15. 2-Assessing Corporate position2-2 External Assessments2-2-3 Regional / country assessmentsProduct division Analysis across countries and regions
  16. 16. 2-Assessing Corporate position2-2 External Assessments2-2-4 Assessing subsidiary contributionto group performance Subsidiary performance within product or regional SBUs must also be evaluated to identify above average contributors to SBU profitability and those that are competitive in their national markets.
  17. 17. 2-Assessing Corporate position2-2 External Assessments2-2-4 Assessing subsidiary contributionto group performanceAssessing SBUs geographic performance: SBU ROI and national industry ROI
  18. 18. 2-Assessing Corporate position2-2 External Assessments2-2-5 Individual subsidiary analysis Once management has assessed the relative performance of its subsidiaries ,executive attention can be focused on factors contributing to success and failure at the national market level. Two analysis contribute to this determination: 1- market share/momentum analysis 2- competitive benchmarking
  19. 19. 2-Assessing Corporate position2-2 External Assessments2-2-5 Individual subsidiary analysis2-2-5-1 market share/momentum analysis  Plot product performance against market performance to ascertain which products are underperforming market trends ( and losing market share momentum) and which are out performing market trends ( gaining market share momentum)
  20. 20. 2-Assessing Corporate position2-2 External Assessments2-2-5 Individual subsidiary analysis2-2-5-1 market share/momentum analysis
  21. 21. 2-Assessing Corporate position2-2 External Assessments2-2-5 Individual subsidiary analysis2-2-5-2 competitive benchmarking Profiles the characteristics and strategies of rival companies and their performances along key competitive dimensions.
  22. 22. 2-Assessing Corporate position2-2 External Assessments2-2-5 Individual subsidiary analysis2-2-5-2 competitive benchmarking
  23. 23. 2-Assessing Corporate position2-2 External Assessments2-3 corporate and industry resource deployments  Industry behaviors are important reference points for individual firms and company industry comparisons of worldwide resource deployments give key insights for strategic decision makers.  using information derived from the global industry analysis , corporate sales & manufacturing can be mapped against global industry consumption and production patterns to provide insights for market expansion strategies and the sitting of manufacturing and other facilities.
  24. 24. 2-Assessing Corporate position2-2 External Assessments2-3 corporate and industry resource deployments
  25. 25. 3-Formulation of strategic plan Once management has assessed the current situation and has evaluated competitors and environmental trends ,it is time to formulate plans for the future . For most international corporations ,planning is done with 3-5 year projection in future. The process is involves making assumptions about economic growth at the global ,regional and national levels. The role of senior management is : To evaluate current and future plans against past performances and expected future conditions.
  26. 26. 3-Formulation of strategic plan3-1 subsidiary-level planningPlanning at the subsidiary level starts withhistorical analyses of product line sales, costs andmargins being projected into the future .To place results into perspective , market size ,growth , and market share trends are taken intoaccount. Managerial assessments about effectiveness ofpast strategies ,competitors , influential factors oncosts are added in this section
  27. 27. 3-Formulation of strategic plan3-1 subsidiary-level planning with 3 years projection
  28. 28. 3-Formulation of strategic plan3-2 Integrating national plans intoregional and global strategiesOnce subsidiary managements have completedtheir preliminary forecasts , discussions are heldwith regional or head office executives to put theseplans into regional or global contexts.In these plans , critical assumptions are laid out(economic growth rates , industry market sizes , keycompetitor responses , etc) are major strategicdecisions are outlined.
  29. 29. 3-Formulation of strategic plan3-2 Integrating national plans into regional and global strategies
  30. 30. 3-Formulation of strategic plan Setting objectives : for many firms ,financial objectives are emphasized and employee behaviors are oriented toward satisfying share – holders and the expectations of financial community
  31. 31. 3-Formulation of strategic planSetting objectives : for many firms ,financialobjectives are emphasized and employee behaviors areoriented toward satisfying share – holders and theexpectations of financial community1-Financial perspective: are traditional businessmeasures that show how firms look to shareholders andthe financial community.2-Customer perspective: concern how companies lookto their customers, and are measured by: lead times , quality levels , performance/service level3-Internal perspective: involve how firms are adaptingtheir organizations and procedures to maintain andimprove cycle times , quality levels, product/servicecosts , technological capabilities and employees skilllevels
  32. 32. 3-Formulation of strategic planThe benefits of well- executed planning processes1. External benefits: good resource-deployment decisions. once management has evaluated corporate performance, market trends, and projections , and has set goals, decision about resource deployments must be finalized and market priorities established.
  33. 33. 3-Formulation of strategic planThe benefits of well- executed planning processesThis figure illustrates the process for the Asian divisionof a hypothetical international corporation
  34. 34. 3-Formulation of strategic planThe benefits of well- executed planning processes2 . Internal benefits:1-Defining the strategic direction of the corporation.2-Providing insights into competitors strategies andhow to compete against industry rivals.3-Systematic incorporation of political , economic ,societal , and technological industry change driversinto global , regional, and national strategies.4-Concise guidance for geographic strategies andinternational resource commitments.5-providing direction at the subsidiary level byidentifying performance criteria for product lines bybenchmarking competitor strengths and weaknesses.
  35. 35. 4- Market Screening and risk assessments Once managements have assessed past and present company performances and looked at future opportunities within their given industries, they must assess the relative risks of operating in different countries.  This involves evaluating country risks on a comparative basis(using the same criteria)and for individual markets , to gain critical insights about how to operate and manage risk in those countries.
  36. 36. 4- Market Screening and risk assessments4-1 Seven types of risks :4-1 Political Risks:• fractionalization of the political spectrum•Numerous linguistic, ethic , and religiousfactions•Restrictive means of retaining power•Evidence of xenophobia , nepotism , orcorruption•Poor social conditions•Existence of radical , especially leftist, politicalmovements
  37. 37. 4- Market Screening and risk assessments4-1 Seven types of risks : 4-2 Economic Risks: Economic risk assessment involves evaluating the stability , openness , and market forces orientations of national. 4-3 Financial and Foreign Currency Risks: Legal frame works for profit , dividend , fees and capital repatriation Balance of payments analyses as a currency movements into and out of a country determine its ability to generate foreign exchange. International reserves are countries stocks of foreign currencies accumulated from exports and capital inflows and their gold holding. Foreign debt assessments are evaluations of foreign debt relative to country gross domestic product, with creditor nations receiving the highest rating.
  38. 38. 4- Market Screening and risk assessments4-1 Seven types of risks : 4-4 Operations Risks: Political policy continuity Attitude towards foreign investors Degree of nationalization Bureaucratic delays Use and enforceability of contract Labor cost and availability , including inclusiveness or exclusiveness of education opportunities Availability of professional services and contractors Quality and cost of local communication Infrastructure availability: road, rail, water system, energy sources Caliber of local managers , partners Financial institutions and availability of short, medium , and long term financing
  39. 39. 4- Market Screening and risk assessments4-1 Seven types of risks : 4-5 Legal Risks: Legal risks are important where companies rely heavily on contracts (military , industrial , commodity markets) and when legal recourse may be necessary ( medical products , counterfeit goods) 4-6 Taxation Risks: Companies that move financial assets , money , and components extensively through out world markets are aware of needs to satisfy national tax authorities. 4-7 Security Risks: For firms that depend on expatriates in their management of local subsidiaries , personal security must be evaluated
  40. 40. 4- Market Screening and risk assessments4-2 Business risk evaluation methodologies • Two commercial services, business risk services(BRS) and world markets online (WMO) , are constructed. •Market covered: BRS covers about 50 markets ; WMO takes in about 150 countries. BRS:  assesses15 factors in its operations risk index and weights them differentially 105 experts rates country conditions from 0 (unacceptable conditions) to 4 (superior conditions) to total 100,the perfect operating environment WMO: Provides measurement of 6 dimensions: political, economic, legal, tax, operations, and security. The sum and average of all six dimensions yields an overall assessment of country risk, varying from 1-1.99(insignificant to low risk) to 4 -5(very high to extreme risk)
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