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M08 rugm 6563_05_ppw_ch08

international business Alan. M. Rugman

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M08 rugm 6563_05_ppw_ch08

  1. 1. Slide 8.1 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Multinational strategy Chapter 8
  2. 2. Slide 8.2 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Multinational strategy • Objectives • Introduction • Strategic orientations • Strategic formulation • Strategic implementation • Control and evaluation.
  3. 3. Slide 8.3 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Objectives • Define the term strategic planning and discuss the strategic orientations that affect this planning process. • Explain how strategy is formulated, giving particular emphasis to external and internal environmental assessment. • Describe how strategy is implemented, with particular attention to location, ownership decisions and functional area implementation. • Discuss the ways in which MNEs control and evaluate their strategies.
  4. 4. Slide 8.4 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Introduction • The FSA and CSA framework is related to the special nature of strategic management. – Cell 1 will build competitive advantages due to its home country CSAs. – Cell 4 can best be described by the resource- based view (RBV) of strategy. – Cell 3 is where country and firm effects are combined requiring the integration of firm and country advantages in a sustainable and long- run manner.
  5. 5. Slide 8.5 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 • Strategic planning: the process of evaluating the enterprise’s environment and its internal strengths, identifying long- and short-range objectives and implementing a plan of action for attaining these goals. Introduction (Continued)
  6. 6. Slide 8.6 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Strategic orientations
  7. 7. Slide 8.7 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 • Ethnocentric predisposition: the tendency of a manager or multinational company to rely on the values and interests of the parent company in formulating and implementing the strategic plan. • Polycentric predisposition: the tendency of a multinational to tailor its strategic plan to meet the needs of the local culture. • Regiocentric predisposition: the tendency of a multinational to use a strategy that addresses both local and regional needs. • Geocentric predisposition: the tendency of a multinational to construct its strategic plan with a global view of operations. Strategic orientations
  8. 8. Slide 8.8 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Table 8.1 Typical strategic orientations of MNEs Source: Adapted from “Strategic Planning for a Global Business” Columbia Journal of World Business, Summer 1985 Copyright © Elsevier Science & Technology Journals, permission conveyed through Copyright Clearance Center, Inc (Chakravarthy, B.S and Perlmutter, H.V)
  9. 9. Slide 8.9 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Strategic formulation
  10. 10. Slide 8.10 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Strategy formulation • Strategic formulation: the process of evaluating the enterprise’s environment (opportunities) and its internal strengths (resources). • External environmental assessment: – information gathering; – information assessment. • Internal environmental assessment: – physical resources and personnel competencies; – value chain analysis.
  11. 11. Slide 8.11 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Conducting an environmental scan • Four of the most common methods for conducting an environmental scan are: – Asking experts in the industry to discuss industry trends and to make projections about the future. – Using historical industry trends to forecast future developments. – Asking knowledgeable managers to write scenarios describing what they foresee for the industry over the next two to three years. – Using computers to simulate the industry environment and to generate likely future developments.
  12. 12. Slide 8.12 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Examining the five forces that determine industry competitiveness • One of the most common approaches to make an overall evaluation is based on the five forces that determine industry competitiveness: – buyers – suppliers – potential new entrants to the industry – the availability of substitute goods and services – rivalry among the competitors.
  13. 13. Slide 8.13 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Figure 8.2 The five-forces model applied to the semiconductor industry Source: Scott Beardsley and Kinji Sakagami, “Advanced Micro Devices: Poised for Chip Greatness,” Unpublished student paper, Sloan School of Management, MIT, 1988. Reported in Arnoldo C. Hax and Nicolas S. Majluf, The Strategy Concept and Process: A Pragmatic Approach (Englewood Cliffs, NJ: Prentice Hall, 1991), p. 46
  14. 14. Slide 8.14 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Internal environmental assessment • Internal environmental assessment helps to pinpoint MNE strengths and weaknesses. • There are two specific areas the MNE will examine in this assessment: – physical resources and personnel competitiveness; – the way in which value chain analysis can be used to bring these resources together in the most synergistic and profitable manner.
  15. 15. Slide 8.15 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Physical resources and personnel competencies • The physical resources are the assets the MNE will use to carry out its strategic plan. • The degree of integration that exists within the operating units of the MNE. – Vertical integration: To obtain control over the supply and to reduce costs. – Virtual integration: A networking strategy based on cooperation. • Personnel competencies are the abilities and talents of the people.
  16. 16. Slide 8.16 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Value chain analysis • Value chain: The way in which primary and support activities are combined. – Primary activities: inbound logistics, operations, outbound logistics, marketing & sales and service. – Support activities: firm infrastructure, HRM, technology management and procurement. • Analysis of the value chain can also help a company to determine the type of strategy that will be most effective.
  17. 17. Slide 8.17 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Figure 8.4 The value chain for IBM Source: Reported in Arnoldo C. Hax and Nicolas S. Majluf, The Strategy Concept and Process: A Pragmatic Approach (Englewood Cliffs, NJ: Prentice Hall, 1991), p. 82
  18. 18. Slide 8.18 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Three generic strategies • Cost strategy: A strategy that relies on low price through the pursuit of cost reductions • Differentiation strategy: A strategy directed toward creating something that is perceived as being unique • Focus strategy: A strategy that concentrates on a particular buyer group and segments
  19. 19. Slide 8.19 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Strategy implementation
  20. 20. Slide 8.20 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Strategy implementation • Strategy implementation is the process of attaining goals by using the organizational structure to execute the formulated strategy properly.
  21. 21. Slide 8.21 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 • There are many areas of focus in this process, some of the most important are: – Location – Ownership decisions  A strategic alliance is an agreement between two or more competitive MNEs for the purpose of serving a global market.  An international joint venture (IJV) is an agreement between two or more partners to own and control an overseas business (setting up a new business entity). – Functional area implementation  Marketing, manufacturing, finance, procurement, technology and human resources. Strategy implementation (Continued)
  22. 22. Slide 8.22 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Control and evaluation
  23. 23. Slide 8.23 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 • The strategy formulation and implementation processes are a prelude to control and evaluation. • This process involves an examination of the MNE’s performance for the purpose of determining: – how well the organization has done; – what actions should be taken in the light of this performance. Control and evaluation
  24. 24. Slide 8.24 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Common methods of measurement • Six of the most common methods of measurement used for control and evaluation purposes: – return on investment (ROI) – sales growth and/or market share – costs – new product development – MNE/host-country relations – management performance.
  25. 25. Slide 8.25 Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009 Figure 8.6 The control and evaluation process

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