INTERNATIONAL BUSINESS STRATEGY

INTERNATIONAL BUSINESS
STRATEGY
UNIT 3
Prepared By
Ms.Jissy.C
Assistant Professor
1
Ms.Jissy.C,Assistant Professor

 Human resource management (HRM) focuses on recruiting
and hiring the best employees and providing them with the
compensation, benefits, training, and development they need to
be successful within an organization.
 Strategic human resource management is the practice of
attracting, developing, rewarding, and retaining employees for
the benefit of both the employees as individuals and the
organization as a whole
 Strategic human resource management can be defined as the
linking of human resources with strategic goals and objectives in
order to improve business performance and develop
organizational culture that foster innovation, flexibility and
competitive advantage. In an organisation SHRM means
accepting and involving the HR function as a strategic partner in
the formulation and implementation of the company's strategies
through HR activities such as recruiting, selecting, training and
rewarding personnel 2

Key Features of Strategic Human Resource
Management
 There is an explicit linkage between HR policy and
practices and overall organizational strategic aims
and the organizational environment
 There is some organizing schema linking individual
HR interventions so that they are mutually
supportive.
 Much of the responsibility for the management of
human resources is devolved down the line
Approaches of the SHRM,
 attempts to link Human Resource activities with
competency based performance measures
 attempts to link Human Resource activities with
business surpluses or profit
3

 Benefits of SHRM
 Identifying and analyzing external opportunities and
threats that may be crucial to the company's success.
 Provides a clear business strategy and vision for the
future.
 To supply competitive intelligence that may be useful
in the strategic planning process.
 To recruit, retain and motivate people.
 To develop and retain of highly competent people.
 To ensure that people development issues are
addressed systematically.
 To supply information regarding the company's
internal strengths and weaknesses.
 To meet the expectations of the customers
effectively.
 To ensure high productivity.
 To ensure business surplus thorough competency 4

 Barriers of SHRM
Inducing the vision and mission of the change effort.
High resistance due to lack of cooperation from the bottom line.
Interdepartmental conflict.
The commitment of the entire senior management team
Plans that integrate internal resource with external requirements.
Limited time, money and the resources.
The statusquo approach of employees
Fear of incompetency of senior level managers to take up strategic
steps.
Diverse work-force with competitive skill sets.
Fear towards victimisation in the wake of failures
Resistance that comes through the legitimate labour institutions.
Presence of an active labour union.
Rapid structural changes.
Economic and market pressures influenced the adoption of strategic
HRM.
5

 GLOBAL SOURCING
 Global sourcing refers to seeking goods and
services beyond one’s borders, i.e., from the
global market. It is a procurement strategy in
which companies try to find the most cost-
efficient place globally for manufacturing goods.
According to purchasing and procurement
professionals, companies should be able to
source both inside and outside their national
borders. They are then subsequently better able
to compete.
 Global sourcing is a procurement strategy that
aims to take advantage of global efficiencies for
the delivery of goods and services 6

Managerial Issues Associated With Global
Sourcing
 Quality Control
 Building relationships with vendors
Problems Related to Global Sourcing:
 Language barrier
 Cultural difference
 Climate/time difference
 Distance issue
7

 Advantages of Global Sourcing:
 (i) Low cost manufacturing
 (ii) Tapping skills and resources that are not
available in the home nation
 (iii) Seeking the benefit of alternate suppliers
 (iv) Utilizing an efficient supply chain
management systems
 (v) Learning global business skills
 (vi) Meeting competition prudently and
efficiently
8

 Disadvantages of Global Sourcing:
 i) No exposure of international culture, traditions
and beliefs
 (ii) Hidden costs related to different time zones
and languages
 (iii) Financial and political risks associated with
emerging economies
 (iv) Risk of losing intellectual properties, patents
and copyrights
 (v) Long lead times
 (vi) Labor problems and labor related issues
 (vii) Unnecessary shutdowns and supply
interruptions
 (viii) Difficulty in supervision
 (ix) Difficulty of monitoring goods and services
quality 9

 INTERNATIONAL FINANCIAL MANAGEMENT
 International financial management, also known
as international finance is the management of
finance in an international business environment;
that is, trading and making money through the
exchange of foreign currency. The international
financial activities help the organizations to
connect with international dealings with overseas
business partners- customers, suppliers, lenders
etc. It is also used by government organization
and non-profit institutions
Difference Between International and
Domestic Financial Management
 Foreign exchange risk
 Political risk
 Extended opportunity
 Market imperfections
10

 SCOPE OF INTERNATIONAL FINANCIAL
MANAGEMENT
International finance is subject to several
external forces.
 Foreign exchange market
 Currency convertibility
 International monetary system
 Balance of payments
 International financial system
 International Accounting & Taxation Decisions
11

ADVANTAGES OF INTERNATIONAL FINANCIAL MANAGEMENT
 Access to capital markets across the world enables a country to
borrow during tough times and lend during good times
 It promotes domestic investment and growth through capital
import
 Worldwide cash flows can exert a corrective force against bad
government policies
 It prevents excessive domestic regulation through global
financial institutions
 International Finance leads to healthy competition and hence a
more effective banking system
 It provides information on the vital areas of investment and
leads to effective capital allocation
12

RISKS OF INTERNATIONAL
FINANCIAL MANAGEMENT
 Currency Risks
 Political/Country Risks
 Financial Risks
 Interest Rate Risk
 Commercial Risks
 Liquidity Risk
13

 ORGANIZATIONAL STRATEGY
 Organizational strategy is the sum of the actions a
company intends to take to achieve long-term goals.
Together, these actions make up a
company's strategic plan. Strategic plans take at
least a year to complete, requiring involvement from
all company levels
It can be divided into three categories
 Corporate level strategy
 Business level strategy
 Functional level strategy
14

 CORPORATE LEVEL STRATEGY
 Top management’s overall plan for the entire
organization and its strategic business units.
 Corporate level strategy occupies the heights
level of DECISION MAKING.
 the nature of the decisions tends to be value
oriented, conceptual than the Business level,
and Operational or Functional level.
15

 Types of Corporate Level Strategy
16
Growth:expansion
into new products
and markets.
Stability: maintenance
of the status of the
organization.
Renewal:redirection of the firm
into new markets.

 Growth Strategy
 Seeking to increase the organization’s
business by expansion into new products and
markets.
 Types of Growth Strategies
 Concentration
 Vertical integration
 Horizontal integration
 Diversification
17

 Concentration: Focusing on a primary line of
business and increasing the number of products
offered or markets served.
 Vertical Integration: When an organization starts
making new products that serve its own needs,
vertical integration takes place.
 Any new activity undertaken with the purpose of
either supplying inputs(such as raw materials) or
serving as a customer for outputs (such as marketing
of firm”s product) is vertical integration.
 Horizontal Integration: Combining operations with
another competitor in the same industry to increase
competitive strengths.
 Diversification:
 1). Related Diversification: Expanding by merging
with firms in different, but related industries.
 2). Unrelated Diversification: Growing by merging
with firms in unrelated industries where higher
financial returns are possible
18

 Stability Strategy: A strategy that seeks to
maintain the status with the uncertainty of
the environment, when the industry is
experiencing slow- or no-growth conditions.
 Renewal Strategy: Developing strategies to
counter organization weaknesses that are
leading to performance declines.
19

 BUSINESS LEVEL STRATEGY
 A strategy that seeks to determine how an
organization should compete in each of its
SBUs (strategic business units).
 At Business-level ALLOCATION of resources
among Functional-level an COORDINATE with
the Corporate level to the ACHIEVEMENT of
the Corporate level OBJECTIVES.
20

 Cost leadership: Attaining, then using the
lowest total cost basis as a competitive
advantage.
 Differentiation: Using product features or
services to distinguish the firm’s offerings
from its competitors.
 Market focus: Concentrating competitively
on a specific market segment.
21

FUNCTIONAL LEVEL STRATEGY
 Focus is on improving the effectiveness of
operations within a company.
Which is done by:
◦ Manufacturing
◦ Marketing
◦ Materials management
◦ Research and development
◦ Human resources
22

 PRODUCTION STRATEGY
Production strategies are broad long term action plans. They
made for the achieving the main objectives of organization.
Production strategies tell us what the production department
must do to achieve top aims of the organization. it provides
road map for the production department. So production
strategies are long-term action plans of the organization, for the
production of goods and services
 Generally the two types of strategies:
 BUSINESS STRATEGIES and strategies made for the entire
organization it covers all departments of the organization these
are made by the top level management.
 FUNCTIONAL FOR DEPARTMENTAL STRATEGIES and strategies
made for a particular department each department has it won
strategy such as production and marketing strategy these
strategies support the business strategy to achieve the main
objective of the organization they are made by middle level
management ie, by Departmental Heads so production
strategies a functional strategy.
23

GLOBAL SUPPLY-CHAIN MANAGEMENT
 It is defined as the distribution of goods and
services throughout a trans-national companies'
global network to maximize profit and
minimize waste. Essentially, global supply chain-
management is the same as supply-chain
management, but it focuses on companies and
organizations that are trans-national.
 Its an integrated process where all business
entities such as suppliers, manufacturers,
distributors & retailers work together to plan, co-
ordinate and control materials, parts and finished
goods from suppliers to consumers. One or more
of these business entities operate in different
countries
24

Objectives of Global Supply Chain
 International manufacturing sources—whether
company-owned or external suppliers—have in recent
years been sought out by managers because of
reduced cost, increased revenues, and improved
reliability.
 Manufacturers typically set up foreign factories to
benefit from tariff and trade concessions, low cost
direct labor, capital subsidies, and reduced logistics
costs in foreign markets
Ms.Jissy.C,Assistant Professor 25

 Why do we need GLOBAL SUPPLY CHAIN
MANAGEMENT?
 GLOBAL MARKET FORCES
 TECHNOLOGICAL FORCES
 GLOBAL COST FACTORS
 POLITICAL AND ECONOMIC FACTORS
26

Global Market Forces
Foreign competition in local markets Growth
in foreign demand Global presence as a
defensive tool Companies forced to develop
and enhance leading- edge technologies and
products
Technological Forces
 Knowledge diffusion across national
boundaries, hence need for technology
sharing to be competitive
 Global location of R&D facilities:-
Close to production (as product cycles get
shorter)
Close to expertise (Indian programmers)
27

Global Cost Factors
 Availability of skilled/unskilled labor at lower
cost
 Integrated supplier infrastructure (as
suppliers become more involved in design)
 Capital intensive facilities like tax breaks,
price breaks etc.
Political And Economic Factors
 Trade protection mechanisms:-
Tariffs, Quotas, Voluntary export restrictions,
Local content requirements, Environmental
regulations, Government procurement policies
(discount for local)
 Exchange rate fluctuations and operating
flexibility 28

Global Supply Chain System Components
International distribution systems :
Manufacturing(domestically), Distribution (overseas)
International suppliers :
Raw materials and Components(foreign suppliers), Final
assembly/ Manufacturing(domestically)
Offshore manufacturing :
 Product is sourced & manufactured in a single foreign location,
 Shipped back to domestic warehouses for sale and distribution.
Fully integrated global supply chain :
 Products are supplied, manufactured and distributed from
factories located throughout the world
 In a truly global supply chain, it may appear that the supply
chain was designed without regard to national boundaries.
 The true value of a global supply chain is realized by taking
advantage of these national boundaries
29

 Global Supply Chain Management Factors
Costs:
 Local labor rates / International freight tariffs
 Currency exchange rates
Customs Duty:
 Duty rates differ by commodity and level of
assembly
 Impact of GATT/WTO: Changes over time
Export Regulations & Local Content:
 Denied parties list / Export licenses
 Local content requirement for government
purchases
Time:
 Lead time /Cycle time /Transit time /Customs
clearance
Taxes on Corporate Income :
 Tax havens and not havens
 Make vs. buy effect
30

 Advantages of GSCM
 The main reason for any business to exist is to
increase sales and profits.
 When you go global, then the likelihood of increasing
sales goes up as you open up your market to
consumers all over the world.
 This allows businesses to reduce dependence on
their local and national economies.
 With the number of Internet users on the rise, global
businesses are able to do business at all hours of the
day with consumers from every point on the globe.
 The potential for expansion for businesses increase
as they enter into more markets.
 Diversified business and trading
 Lower supply chain costs
 Reduced cycle time
 Competitive advantage
 Untapped markets
 Enhance speed and efficiency 31

 Disadvantage GSCM
 The biggest disadvantage of global supply chain management is
the heavy investment of time, money, and resources needed to
implement and overlook the supply chain.
 The decision to outsource a production facility or call center
lowers the cost of doing business for a company using global
supply chain management, but the decision to outsource or not
can lead to consumer backlash.
 Inefficient and undersized transportation and distribution
systems
 Market instability
 Integrating the supply chain and choosing the correct suppliers
is much more difficult than one can imagine.
 Not only do companies have to strongly consider price and
quality, but they also have to make sure that all the
organizations are willing to cooperate to benefit the group.

32

 Managerial styles, objectives, and goals must have a strategic fit
between all companies involved and power must be evenly
distributed throughout the supply chain or the businesses will not
benefit from the advantages of global supply chain management.
 When entering the global market, businesses need to be aware
that the gains may not be seen in the short term.
 It may be many years before they start reaping the rewards of
their efforts.
 Another disadvantage is that they have to hire additional staff to
help launch their companies in the global markets they expand into.
 Companies usually have to modify their products and packaging to
suit the local culture, preferences and language of the new market.
 Travel expenses are sure to increase for the administrative staff, as
they will now be expected to travel all over the world to oversee
their business outlets in other countries. 33

34

INTERNATIONAL BUSINESS STRATEGY

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