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.
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.
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
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.
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."
2-Assessing Corporate position2-1Internal Assessments2-1-2 Corporate CompetenciesCore 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)
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.
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).
2-Assessing Corporate position2-2 External Assessments2-2-1 SBU evaluationGroup assessments of SBUs ; Contribution to the group and performance in their industry
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.
2-Assessing Corporate position2-2 External Assessments2-2-2Worldwide /regional evaluationEvaluating corporate regional performance on a market size –growth matrix
2-Assessing Corporate position2-2 External Assessments2-2-3Regional / country assessmentsManaging 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.
2-Assessing Corporate position2-2 External Assessments2-2-3 Regional / country assessmentsProduct division Analysis across countries and regions
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.
2-Assessing Corporate position2-2 External Assessments2-2-4 Assessing subsidiary contributionto group performanceAssessing SBUs geographic performance: SBU ROI and national industry ROI
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
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)
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.
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.
2-Assessing Corporate position2-2 External Assessments2-3 corporate and industry resource deployments
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.
3-Formulation of strategic plan3-1 subsidiary-level planningPlanning 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
3-Formulation of strategic plan3-1 subsidiary-level planning with 3 years projection
3-Formulation of strategic plan3-2 Integrating national plans intoregional and global strategiesOnce 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.
3-Formulation of strategic plan3-2 Integrating national plans into regional and global strategies
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
3-Formulation of strategic planSetting 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
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.
3-Formulation of strategic planThe benefits of well- executed planning processesThis figure illustrates the process for the Asian divisionof a hypothetical international corporation
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.
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.
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
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.
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
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
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)