International Business Strategy

      Mission Statement
      Goals
      SBU Portfolio Analysis
      Strategic Focus
  ...
Mission Statement
 Most difficult job
 Restricts Flexibility
 Answers the Question:What Business are We
 In?
 Other possib...
Mission Statements
Organization       Mission

  Goodyear         Our mission is constant improvement in products
        ...
Mission Statements
Organization         Mission

  Merck & Co., Inc. The mission of Merck & Co., Inc., is to
             ...
Goals
 Must be measurable
 Must be at a defined time
 Sales, ROI, share, new products,
 satisfaction ratings, awareness…
 ...
Portfolio Analysis
Used for Resource Allocation across
Strategic Business Units and/or across
Products:

  How does the ex...
Portfolio Analysis: BCG
The original model
Based on cash flow
Premise: in the long run cash
generation from operations mus...
BCG Portfolio Model


    High


Cash use


     Low


           High   Cash generation Low
BCG Portfolio Model


    High               Star      Question mark or
                                  Problem Child


...
BCG Portfolio Model—Long term strategy




    High               Star      Question mark or
                             ...
BCG Portfolio Model—Resource Allocation

Baht



    High               Star      Question mark or
                       ...
BCG Portfolio Model—Resource Allocation
   Requires a balanced portfolio

Baht



    High               Star      Questio...
BCG Portfolio Model—
    An Unbalanced Portfolio

$



     High               Star      Question mark or
                ...
BCG Portfolio Model: Disaster Trajectories




    High               Star      Question mark or
                         ...
Product Portfolio Management by BCG -
Limitations

 Requires constant supply of innovations that
 can be successfully turn...
GE Portfolio Model
 Similar logic to the internal-external
 framework of SWOT
 Generalization of BCG matrix: more
 informa...
GE Portfolio: Allocate more resources to attractive
                         markets where business has competitive streng...
GE Portfolio: Allocate more resources to attractive
                         markets where business has competitive streng...
Strategic Focus: Porter’s 3 generic types of
strategy

    Porter’s Contention: to be successful, a
      company must be ...
Strategic Focus: Porter’s 3 generic types of
strategy

Overall Cost Leadership
    Focus on reducing production and
    di...
Porter’s 3 generic types of strategy

Differentiation
    Build strength in an area that is important
    to many customer...
Porter’s 3 generic types of strategy

Focus
    Get to know narrow segment(s) intimately
    and serve their needs well, e...
Strengths and Weaknesses
 The company relative to the competition
 Competitor Strengths and Weaknesses

   Company Strengt...
Opportunities and Threats
  Customer Analysis: trends in
  behaviour, benefits desired and
  descriptive factors; segments...
Opportunities - positive factors in the
external environment that provide the
possibility of enhancing growth and/or
profi...
The Role of the Macro
environment
Sociocultural/Demographic                                  Technological
           Forc...
Important Variables
           in the Macroenvironment
Economic            Technological      Political-Legal    Sociocult...
Competitive Advantage
of Nations
                Strategy,
               structure,
               and rivalry




      ...
The Five Forces Model

             Risk of entry
             Risk of entry
             by potential
             by pot...
The Five Forces Model

                   Risk of entry
                   Risk of entry
                   by potential
 ...
Potential Competitors



• Definition: Companies that are not
  currently competing in an industry but
  have the ability ...
The Five Forces Model

                   Risk of entry
                   Risk of entry
                   by potential
 ...
Rivalry
          Among Established Companies



• Industry Competitive Structure

• Demand Conditions

• Height of Exit B...
Rivalry and Industry Life
          Cycle


 Demand



          Embryonic   Growth   Shakeout   Maturity   Decline




  ...
The Five Forces Model

                   Risk of entry
                   Risk of entry
                   by potential
 ...
Bargaining Power of Buyers
                    is highest when:




Many small sellers - few large buyers
Buyers purchase ...
The Five Forces Model

                   Risk of entry
                   Risk of entry
                   by potential
 ...
Bargaining Power of Suppliers
                     is highest when

The sellers’ product has few substitutes and is import...
The Five Forces Model

                   Risk of entry
                   Risk of entry
                   by potential
 ...
Threat of Substitute Products


Forms of substitution:
• Product-for-product
• Substitution of need
• Generic substitution...
Strategic Groups
• The Concept of Strategic Groups

• Implications of Strategic Groups

• Mobility Barriers
Strategic Groups
                  in the Pharmaceutical Industry


High
                                           Propri...
Strategic Groups
in the U.S. Airline Industry
           (1996)
High

                                  American
         ...
Limitations of the Five Forces and Strategic Group
                      Models




• Innovation and industry structure

•...
International Business Plan Example Format
               Executive Summary
               Mission Statement
             ...
Executive Summary
     The executive summary is not
       an introduction to the plan.
       a preface.
       a random ...
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Microsoft PowerPoint - Inter Business Strategy

  1. 1. International Business Strategy Mission Statement Goals SBU Portfolio Analysis Strategic Focus SWOT 5 Forces Model Vorravee Pattaravongvisut
  2. 2. Mission Statement Most difficult job Restricts Flexibility Answers the Question:What Business are We In? Other possible questions: –Who are our –What business do customers? we want to be in? –How do we provide –How will we get them with value? there? –What is our competitive scope? (industry, technology, competency, segments, channels, geography)
  3. 3. Mission Statements Organization Mission Goodyear Our mission is constant improvement in products and services to meet our customers’ needs. This is the only means to business success for Goodyear and prosperity for its investors and employees. Intel Corporation Do a great job for our customers, employees, and stockholders by being the preeminent building block supplier to the computing industry. (continued)
  4. 4. Mission Statements Organization Mission Merck & Co., Inc. The mission of Merck & Co., Inc., is to provide society with superior products and services— innovations and solutions that satisfy customer needs and improve their quality of life—to provide employees with meaningful work and advancement opportunities and investors with a superior rate of return. Marriott Grow a worldwide lodging business using total quality management (TQM) principles to continuously improve preference and profitability. Our commitment is that every guest leaves satisfied.
  5. 5. Goals Must be measurable Must be at a defined time Sales, ROI, share, new products, satisfaction ratings, awareness… May involve sales forecast
  6. 6. Portfolio Analysis Used for Resource Allocation across Strategic Business Units and/or across Products: How does the existing portfolio of SBU’s (or products) fit together? Should elements be added or dropped? Where should investment be made?
  7. 7. Portfolio Analysis: BCG The original model Based on cash flow Premise: in the long run cash generation from operations must exceed cash usage. Where does each product in the product line sit on the generation / usage dimensions?
  8. 8. BCG Portfolio Model High Cash use Low High Cash generation Low
  9. 9. BCG Portfolio Model High Star Question mark or Problem Child Market Growth Cash Cow Dog Low High Market Share Low
  10. 10. BCG Portfolio Model—Long term strategy High Star Question mark or Problem Child Market Growth Cash Cow Dog Low High Market Share Low
  11. 11. BCG Portfolio Model—Resource Allocation Baht High Star Question mark or Problem Child Market Growth Baht Baht Cash Cow Dog Low High Market Share Low
  12. 12. BCG Portfolio Model—Resource Allocation Requires a balanced portfolio Baht High Star Question mark or Problem Child Market Growth Baht Baht Cash Cow Dog Low High Market Share Low
  13. 13. BCG Portfolio Model— An Unbalanced Portfolio $ High Star Question mark or Problem Child Market Growth Baht Cash Cow Dog Low High Market Share Low
  14. 14. BCG Portfolio Model: Disaster Trajectories High Star Question mark or Problem Child Market Growth Cash Cow Dog Low High Market Share Low
  15. 15. Product Portfolio Management by BCG - Limitations Requires constant supply of innovations that can be successfully turned into cash cows with less investment than existing cash cows generate Assumes reasonably well-behaved Product Lifecycles Assumes market share = profitability
  16. 16. GE Portfolio Model Similar logic to the internal-external framework of SWOT Generalization of BCG matrix: more information used and presented Matches market attractiveness with business strengths evaluate many factors for each dimension and develop a composite index for both strengths (internal) and attractiveness (external)
  17. 17. GE Portfolio: Allocate more resources to attractive markets where business has competitive strengths BUSINESS STRENGTH Strong Medium Weak MARKET ATTRACTIVENESS 100 75 25 0 100 Joints Low Medium High Hydraulic Aerospace pumps fittings 75 Clutches Fuel pumps Flexible 25 diaphragms Relief valve 0 Invest/grow Selectivity/earnings Harvest/divest
  18. 18. GE Portfolio: Allocate more resources to attractive markets where business has competitive strengths BUSINESS STRENGTH Strong Medium Weak MARKET ATTRACTIVENESS 100 75 25 0 100 Low Medium High Invest to Protect 75 And Grow Selectively Invest/harvest 25 Harvest or Divest 0
  19. 19. Strategic Focus: Porter’s 3 generic types of strategy Porter’s Contention: to be successful, a company must be very a good at least one of Overall Cost Leadership Differentiation Focus Invest resources according to strategy
  20. 20. Strategic Focus: Porter’s 3 generic types of strategy Overall Cost Leadership Focus on reducing production and distribution costs Need to be good at engineering, purchasing, manufacturing, distribution Compete on price Difficult competitive advantage to sustain
  21. 21. Porter’s 3 generic types of strategy Differentiation Build strength in an area that is important to many customers: (e.g.,service, quality, style, technology) and which is difficult for competitors to copy Easy Jet
  22. 22. Porter’s 3 generic types of strategy Focus Get to know narrow segment(s) intimately and serve their needs well, either by differentiation or price—a niche strategy. Chartered flight
  23. 23. Strengths and Weaknesses The company relative to the competition Competitor Strengths and Weaknesses Company Strengths & Weaknesses are the “internal” part of SWOT analysis
  24. 24. Opportunities and Threats Customer Analysis: trends in behaviour, benefits desired and descriptive factors; segments Environmental: changes in PEST factors Competitor Analysis: Identification, S&W, Behaviour ; Actions-Likelihood- Consequences
  25. 25. Opportunities - positive factors in the external environment that provide the possibility of enhancing growth and/or profitability. Threats - negative factors in the external environment that create barriers to future growth or profitability.
  26. 26. The Role of the Macro environment Sociocultural/Demographic Technological Forces Forces Industry Environment Competitors Stockholders Employees Firm Suppliers Customers Creditors Communities Political- Economic Governments Legal Forces Forces
  27. 27. Important Variables in the Macroenvironment Economic Technological Political-Legal Sociocultural / Demographic • GNP trends • Government • Antitrust • Lifestyle • Interest rates R&D regulation changes • Money supply expenditures • Environmental • Career • Inflation rates • Industry R&D protection expectations • Employment expenditures • Tax laws • Consumer levels • Patent • Foreign trade activism • Wage/price protection regulation • Cultural values controls • New products • Laws on hiring • Social mobility • Currency • Technology and promotion • Regional shifts valuation transfer • Stability of in population • Energy cost/ • Productivity government • Education levels availability improvements • Rate of family • Disposable and • Rates of formation discretionary obsolescence • Growth rate of income • Technology population infrastructure •Age distribution
  28. 28. Competitive Advantage of Nations Strategy, structure, and rivalry National Factor Demand competitive endowments conditions advantage Related and supporting industries
  29. 29. The Five Forces Model Risk of entry Risk of entry by potential by potential competitors competitors Rivalry Rivalry Bargaining Bargaining Bargaining Bargaining among among power of power of power of power of established established suppliers suppliers buyers buyers firms firms Threat of Threat of substitute substitute products products
  30. 30. The Five Forces Model Risk of entry Risk of entry by potential by potential competitors competitors Rivalry Rivalry Bargaining Bargaining Bargaining Bargaining among among power of power of power of power of established established suppliers suppliers buyers buyers firms firms Threat of Threat of substitute substitute products products
  31. 31. Potential Competitors • Definition: Companies that are not currently competing in an industry but have the ability to do so. • Barriers to Entry • Brand Loyalty • Absolute Cost Advantages • Economies of Scale • Government Regulation
  32. 32. The Five Forces Model Risk of entry Risk of entry by potential by potential competitors competitors Rivalry Rivalry Bargaining Bargaining Bargaining Bargaining among among power of power of power of power of established established suppliers suppliers buyers buyers firms firms Threat of Threat of substitute substitute products products
  33. 33. Rivalry Among Established Companies • Industry Competitive Structure • Demand Conditions • Height of Exit Barriers in the Industry
  34. 34. Rivalry and Industry Life Cycle Demand Embryonic Growth Shakeout Maturity Decline Time
  35. 35. The Five Forces Model Risk of entry Risk of entry by potential by potential competitors competitors Rivalry Rivalry Bargaining Bargaining Bargaining Bargaining among among power of power of power of power of established established suppliers suppliers buyers buyers firms firms Threat of Threat of substitute substitute products products
  36. 36. Bargaining Power of Buyers is highest when: Many small sellers - few large buyers Buyers purchase in large quantities Buyer accounts for large percentage of sellers’ total orders Buyers can switch suppliers at low cost Buyers purchase from several sellers at once Buyers can vertically integrate
  37. 37. The Five Forces Model Risk of entry Risk of entry by potential by potential competitors competitors Rivalry Rivalry Bargaining Bargaining Bargaining Bargaining among among power of power of power of power of established established suppliers suppliers buyers buyers firms firms Threat of Threat of substitute substitute products products
  38. 38. Bargaining Power of Suppliers is highest when The sellers’ product has few substitutes and is important to buyer The buyers’ industry is not an important customer to the suppliers Differentiation makes it costly for buyers to switch suppliers Suppliers can vertically integrate and compete with buyer Buyers can’t vertically integrate backward and supply their own needs
  39. 39. The Five Forces Model Risk of entry Risk of entry by potential by potential competitors competitors Rivalry Rivalry Bargaining Bargaining Bargaining Bargaining among among power of power of power of power of established established suppliers suppliers buyers buyers firms firms Threat of Threat of substitute substitute products products
  40. 40. Threat of Substitute Products Forms of substitution: • Product-for-product • Substitution of need • Generic substitution • Doing without
  41. 41. Strategic Groups • The Concept of Strategic Groups • Implications of Strategic Groups • Mobility Barriers
  42. 42. Strategic Groups in the Pharmaceutical Industry High Proprietary Group Merck Prices Charged Pfizer Eli Lilly Generic Group Marion Labs Carter Wallace ICN Low Low High R&D Spending
  43. 43. Strategic Groups in the U.S. Airline Industry (1996) High American Southwest United Delta Quality USAir Am. West Northwest Continental TWA Low Low High Cost
  44. 44. Limitations of the Five Forces and Strategic Group Models • Innovation and industry structure • Industry structure and company differences
  45. 45. International Business Plan Example Format Executive Summary Mission Statement Business Profile products, markets, performance(financial, production, quality, customer satisfaction), strengths and weaknesses Industry Structure recent history, sales & profits, major players(suppliers, competitors, customers),industry opportunities and threats Environmental and Competitive Analysis Political, Economic, Social-Cultural,Technological, Competitive Marketing Strategy and Plan Specific Objectives, Major Assumptions, Strategy and Tactics, Timetable, Budget Financial Results and Forecasts Risk Assessment Contingency Plans Evaluation Measurement, Evaluation timetable
  46. 46. Executive Summary The executive summary is not an introduction to the plan. a preface. a random collection of highlights. The executive summary is the plan in miniature. is logical, clear, interesting. Leaves the reader saying “I get it”

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