1. 1-1 12-1 Motivations For Companies To Pursue IB Opportunities  Increase profits and sales  Access new markets  Protect existing markets, profits, and sales  Satisfy overall desire for growth LO1

2. 1-2 12-2 The Competitive Challenge Facing Managers of International Business  Managers must  quickly identify and exploit opportunities wherever they occur, domestically and internationally  fully understand why, how, where, and when to do business in specific world markets  know the company’s strategic mission, its strengths and its weaknesses LO1

3. 1-3 12-3 What is International Strategy?  International strategy refers to the way firms make choices about acquiring and using scarce resources in order to achieve their international objectives  It involves  decisions about which markets to enter with which products, when and how  all the various functions and activities of the company and how they interact  ensuring that strategy is consistent across functions, products, and regional units  a variety of unique demands associated with operating internationally LO1

4. 1-4 12-4 Competitive Advantage  To create a sustainable competitive advantage, a company tries to develop skills that  create value for customers  are rare  are difficult to imitate or substitute for  are organized in a way that the company can fully exploit LO1

5. 1-5 12-5 Why Plan Globally?  Companies face forces that are increasingly complex, global and subject to rapid change  Political  Economic  Social  Technological  Legal  Environmental LO1

6. 1-6 12-6 Global Strategic Planning Process   The global strategic planning process provides a formal structure with which managers   define company’s business and mission   analyze the company’s internal and external environments   set corporate objectives   quantify goals   formulate strategies   make a tactical plan LO2

7. 1-7 12-7 Global Strategic Planning Process LO2

8. 1-8 12-8 Uncontrollable Forces Assessment  The uncontrollable forces assessment involves an  analysis of domestic, international and foreign environments  recognition of current and future implications  strategy design to navigate major global trends LO2

9. 1-9 12-9 Analyze Corporate Controllable Variables  A controllable forces analysis  is a situational analysis  involves forecasting  involves a value chain analysis of firm’s activities from raw materials to end products to final customer delivery  Who are the target customers?  What value do we deliver to them?  How will we create this value? LO2

10. 1-10 12-10 The Value Chain Adapted from M. E. Porter, Competitive Advantage, New York: Free Press, 1985 LO2

11. 1-11 12-11 Analyze Corporate Controllable Variables  Competitive advantage can be gained through leveraging organizational knowledge across national borders  Knowledge as a Controllable Corporate Resource  Capabilities of employees  Structures, systems, organizational routines  Build knowledge database and transfer best practices  Protect tacit and explicit knowledge from competitors LO2

12. 1-12 12-12 Tacit - Explicit Knowledge  Tacit Knowledge  Embedded in individuals  Difficult to express in words, pictures, formulas  Difficult to transmit to others  Lost when a valued manager leaves  Explicit knowledge  Easy to communicate with words, pictures, formulas, etc.  Can be documented in company-wide knowledge bases LO2

13. 1-13 12-13 Vision and Mission Statements Vision and Mission Statements  Broad statements that communicate to the corporation’s stakeholders  what the company is  where it is going  the values that will guide the organization’s members behavior LO3

14. 1-14 12-14 Define the Corporate Business, Vision, and Mission Statements  The mission statement refers to a road statement that defines the organization’s purpose and scope  The vision statement describes the company’s desired future position if it can acquire the necessary competencies and successfully implement its strategy  The values statement is a clear and concise description of the fundamental values, beliefs, and priorities of the organization’s members LO3

15. 1-15 12-15 Set Corporate Objectives  Objectives  Direct the firm’s course of action  Maintain action within the mission’s boundaries  Ensure the mission’s continuing existence  To implement an effective strategy quantifiable objectives are important LO3

16. 1-16 12-16 Formulate Competitive Strategies  Competitive strategies and corresponding action plans enable organizations to reach their objectives  The strategic planning process will formulate alternative competitive strategies along with plausible action plans  Conscious choice of the course to be followed LO3

17. 1-17 12-17 Formulate Competitive Strategies For the International Market Place  Formulation of international strategy must consider two opposing forces  Reduction of costs: achieved best through standardization and global integration of operations  Adaptation to local markets: achieved best through more local autonomy  Basic strategy types address pressures for cost reduction and local adaptation  Home Replication  Multidomestic  Regional  Global  Transnational LO4

18. 1-18 12-18 Cost and Adaptation Pressures and Their Implications for International Strategies Adapted from C. Bartlett and S. Ghoshal. Managing Across Borders: The Transnational Solution, 2002 2nd ed., Cambridge: Harvard Business Press LO4

19. 1-19 12-19 Home Replication Strategy  The home replication strategy centralizes product development functions in the home country  developed products are then transferred to foreign markets in order to capture additional value  microsoft, mcdonald’s  The company has to possess a distinctive competence that local companies lack  Headquarters maintains control over marketing and product strategy  Subsidiaries leverage the home country capabilities LO4

20. 1-20 12-20 Multidomestic Strategy  The multidomestic strategy is used when there is strong pressure for adaptation to local market  Decision making is decentralized, allowing for quick change  Leads to an increased cost structure  Excessive adaptation may take away from product’s distinctiveness  Cost and complexity of coordination can be substantial LO4

21. 1-21 12-21 Global Strategy  The global strategy is used when a company faces strong pressure to reduce costs and limited pressure to adapt products for local markets  Strategy and decision making centralized  Company offers standardized products and services  Value chain activities are in only one or a few areas  Limited ability to adjust to meet customer needs  Higher transportation costs for physical products LO4

22. 1-22 12-22 Transnational Strategy  The transnational strategy is used when pressures for cost effectiveness and local adaptation are equally important  Company locates activities where most beneficial for the firm globally  Upstream value chain activities will be more centralized  Downstream activities will be more localized  Achieving an optimal balance is challenging  Strategic decisions, structures and systems will be complex LO4

23. 1-23 12-23 Scenarios  Scenarios refer to multiple, plausible stories about the future  “What if” questions can reveal weaknesses in present strategies  Types of subjects for scenarios include  Large and sudden changes in sales (up or down)  Sudden increases in price of raw materials  Sudden tax increases  Change in the political party in power LO4

24. 1-24 12-24 Types of Plans That Can Result From Scenarios  Contingency Plans  For the best-or-worst-case scenarios  For critical events that could have a severe impact on the firm  Tactical Plans (Operational)  Spell out in detail how objectives will be reached in each case  Short-term LO4

25. 1-25 12-25 Strategic Plan Features: Sales Forecast and Budget  Sales Forecast  Provides management with an estimate of the revenue to be received and the units to be sold  Provides assumptions for cost and capital requirements  Budget  During planning, budgets coordinate the functions within the firm and provide management with a detailed statement of future operating results LO4

26. 1-26 12-26 Performance Measures  Performance measures are used to assess strategy and its implementation  Successfully on track?  What modifications may be needed?  Measures of the company’s success  Financial, technological, and human resources  Measures of effectiveness  Measures of the company’s progress LO4

27. 1-27 12-27 Kinds of Strategic Plans  Time Horizon  Strategic plans may be classified as short, medium, or long term  Level in the Organization  Each organizational level will have its level of plan  Functional area LO4

28. 1-28 12-28 New Directions in Planning  Who does the strategic planning?  Top down? Regional input?  Firms have introduced innovation to the planning process  Firms consult with customers and suppliers who have firsthand experience with the firm’s markets LO5

29. 1-29 12-29 New Directions in Planning  How Planning is Done  Many firms have moved toward less structured formats and much shorter documents  Contents of the Plan  Top managers are much more concerned with issues, strategies, and implementation LO5

30. 1-30 12-30 Summary: New International Planning Process  Top management assumes explicit strategic decision-making role, decides how things ought to be, does not focus on analyses of how things are  Planning changes from forecasting to creativity  Processes and tools that assume a future much like the past must be replaced by a mind-set focused on change as a source of competitive advantage  Planners change from purveyors of incrementalism to crusaders for action  Strategic planning restored to core of line management responsibilities LO5

31. 1-31 12-31 Competitor Analysis  Competitor Analysis  Process in which principal competitors are identified and their objectives, strengths, weaknesses, and product lines are assessed  Industrial Espionage  Act of spying on competitors to learn secrets about strategy and operations LO6

32. 1-32 12-32 Competitor Intelligence Systems  Competitor intelligence systems are procedures for gathering, analyzing, and disseminating information about competitors  Benefits include ability to  improve bidding success  identify competitors’ key customers  identify plant or other facility expansion plans  improve understanding of competitors’ products and processes LO6

33. 1-33 12-33 Sources of Information  Source of information within the firm include sales representatives, librarians, and technical and R&D people  Information can also be sourced from published material including technical journals, databases, the internet, industry reports, and public documents  Suppliers and customers can be information sources  The employees of competitors’ can provide information  Direct observation or analysis of physical evidence is another way to gain information  Technical people  Reverse engineering LO6

34. 1-34 12-34 Benchmarking  Benchmarking measures a firm’s performance against the performance of others  Internal: compares firm’s operations amongst each other  Competitive: compares firm with a direct competitor  Functional: compares similar functions of firms in industry  Generic: compares operations in unrelated industries LO6