1. Strategy Formulation and Implementation
Chapter 8
Strategy Formulation and Implementation

2. Strategic Management Strategic Management
The process of determining an organization’s basic mission and long-term objectives and then implementing a plan of action for pursuing the mission and attaining these objectives.
Corporations need strategic management in order to keep track of their increasingly diversified operations in a continuously changing international environment.

3. Approaches to Formulating and Implementing Strategy
Economic reasons
Political reasons
Quality reasons
Administrative reasons

4. Economic imperative (unique product or service)
Approaches to Formulating and Implementing Strategy Economic Imperative
Economic imperative (unique product or service)
Worldwide strategy based on cost leadership, differentiation, and segmentation
Strategy is also used when the product is regarded as generic and therefore does not have to be sold based on name brand or support service.

5. Approaches to Formulating and Implementing Strategy Political Imperative
Strategy formulation and implementation utilizing strategies that are country-responsive and designed to protect local market niches.

6. Approaches to Formulating and Implementing Strategy Quality Imperative
The implementation of management practices designed to make quality improvement an ongoing process.

7. Approaches to Formulating and Implementing Strategy
Administrative Coordination
MNC makes strategic decisions based on the merits of the individual situation rather than using a predetermined economic or political strategy.
Used when rapid, flexible decision making is needed to close the sale

8. Basic Elements of Strategic Planning for International Management

9. Environmental Factors Affecting Organizations

10. Elements of Strategic Planning Environmental Scanning
Provides management with accurate forecasts of trends relating to external changes in geographic areas where the firm is doing business or considering doing business.
Changes relate to environment factors that can affect the company
Industry or market
Technology
Regulations
Economic aspects
Social aspects
Political aspects

11. Elements of Strategic Planning Internal Resource Analysis
Internal resource analysis is used to evaluate MNC’s current managerial, technical, material, and financial resources and capabilities to assess its strengths and weaknesses.
Key question for MNC: Do we have the people and resources that can help us to develop and sustain the necessary Key Success Factors (KSF), or can we acquire them?

12. Elements of Strategic Planning Strategic Planning Goals
Goal formulation often precedes first two steps (environmental scanning, internal analysis).
More specific goals for strategic plan come from external scanning and internal analysis.

13. Areas for Formulation of MNC Goals

14. Strategy Implementation
Considerations in selecting country
Advanced industrialized countries offer largest markets for goods/services
Amount of government control
Restrictions on foreign investment
Specific benefits offered by host countries

15. Strategy Implementation Location Considerations
Two primary considerations
The country
The specific locale within the chosen country
The Country
Traditionally MNCs invest in highly industrialized countries that offer the largest markets for goods and services.
Developing countries like Mexico are becoming more attractive.
The amount of government control and restrictions is a factor.
Specific benefits offered by host countries include low tax rates, low/no interest loans, subsidies, but this trend is changing.

16. Strategy Implementation Location Considerations
Local Issues
Once the country has been selected, the firm must choose a specific locale.
Important factors that influence this choice
Access to markets
Proximity to competitors
Availability of transportation and electric power
Desirability of location for employees coming in from outside

17. Strategy Implementation The Role of the Functional Areas
Marketing
What works in one market may not work in another
Marketing may be dictated by the overall strategic plan
Marketing strategy involves the four “Ps”
Product
Price
Promotion
Place

18. Strategy Implementation The Role of the Functional Areas
Production
When exporting goods to foreign markets, production has usually been handled through domestic operations.

19. Strategy Implementation The Role of the Functional Areas
Finance
Transferring funds from one place in the world to another, or borrowing funds in international money markets, is often less expensive than relying on local sources.
Issues include
Reevaluation of currencies
Volatile monetary exchange rates

20. Specialized Strategies Strategies for Emerging Markets
Emerging markets will compose more than half of global economic output by midcentury.
“BRIC” economies: Brazil, Russia, India, and China
Emerging markets present exceptional risks due to political and economic volatility. These risks show up in:
Corruption
Failure to enforce contracts
Red tape and bureaucratic costs
General uncertainty in legal and political environment

21. Specialized Strategies International Entrepreneurship
A combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create value in organizations.