Ch – 6

What are the steps in developing a strategy?

1. Establish Mission and Objectives

2. Assess External Environment
3. Analyze Internal Factors
4. Evaluate Global and International Strategic Alternatives
5. Evaluate Entry Strategy Alternatives
6. Decide on Strategy

Establish Mission and Objectives – The mission of an organization is the overall function it performs in
society.

A company's objectives flow from its missions and both guide the formulation of international corporate
strategy.

Each department has its objectives to fulfill and the overall mission will give direction to achieve them.
For example, Samsung's mission is to use talent and technology to make superior products and services
that contribute to a better global society. Based on this goal Samsung will carry out the different
objectives of their department.

Assess External Environment –

This step starts with risk screening at different levels.

Global risk – Such as looking at the political or war status, for example, doing business in Ukraine in the
time of the Russia vs Ukraine war.

Regional Risk – Such as looking at the regional economic status.

National Risk – Such as looking at the trade restrictions local laws and local economic statutes. For
example, during a time of economic crisis in Sri Lanka doing business there won’t be a wise decision.

Institution effects on international competition –

Attractiveness of Overseas Markets: In countries where there are strong institutions that ensure laws
are fair, consistently enforced, and protect businesses and their investments, it creates a more stable and
attractive environment for outside investors.

Entry Barriers and Industry Attractiveness: Institutions create barriers to entry in certain industries
making them attractive to powerful firms

Antidumping as an Entry Barrier: The anti-dumping laws put foreign entrants at an advantage if they are
accused of dumping.

The competitive position of the organization can be assessed by the Poster Five forces model –

Find out the level of competition

Find the relative ease with which a new organization can enter the market
Find the buyer’s power

Find the level of Suppliers' power

Find the level of treats of substitute products.

Analyze Internal Factors –

This step analyses the current or potential strengths and weaknesses of the organization so that it can
create better strategies and get a competitive advantage.

The internal analysis focuses on the company's resources and operations and global synergies.

It also looks the financial and managerial expertise. As well as the functional capabilities that will help
the business exploit foreign opportunities.

Evaluate Global and International Strategic Alternatives

Certainly, let's simplify these global and international strategic alternatives:

Global Strategy:

What it is: Going global! This strategy involves treating the world as one big market. Companies focus on
offering a standardized product or service that suits the needs of customers worldwide.

Example: Think of a tech company that designs one version of a smartphone that is sold and marketed
the same way everywhere, without much customization for different regions.

Localization/Regionalization:

What it is: Going local! This strategy is about tailoring products or services to the specific needs and
preferences of each local market or region.

Example: A fast-food chain adapting its menu to include regional specialties in different countries. In
India, it might offer a curry-flavored burger, while in Japan, it might have a sushi-inspired option.

Transnational Strategy:

What it is: Finding a balance! This strategy combines elements of both global and local approaches.
Companies aim to be globally efficient while also being responsive to local needs.

Example: An automobile company that produces certain standardized car components globally for cost
efficiency but adjusts the design and features to suit the preferences and regulations of different
markets.

Evaluating entry strategy alternatives involves assessing the various ways a company can enter a new
market. Here are key entry strategies explained:

 Exporting:

What it is: Selling products or services to a foreign market from the home country.

Advantages: Low risk, minimal investment.

Disadvantages: Limited control, transportation costs.

Example: A small clothing brand in the United States exports its products to European retailers.

 Licensing and Franchising:

What it is: Allowing a foreign entity to use intellectual property, brand, or business model in exchange for
fees.

Advantages: Low investment, quick market entry.

Disadvantages: Limited control, dependency on licensee/franchisee.

Example: A fast-food chain licensing its brand to local entrepreneurs in a new country.

 Strategic Alliances and Joint Ventures:

What it is: Collaborating with a local partner or another company for market entry.

Advantages: Shared risk, local expertise.

Disadvantages: Shared control, and potential cultural clashes.

Example: An American technology company forming a joint venture with a local firm in China to develop
and sell products together.

 Wholly Owned Subsidiaries:

What it is: Establishing a new business entity in the foreign market, either through acquisition or starting
from scratch.

Advantages: Full control, better coordination.

Disadvantages: High investment, higher risk.

Example: An automaker building its manufacturing plant in a foreign country to serve the local market.

6. Decide on Strategy

Timing Entry and Scheduling Expansions

Foreign Direct Investment Decisions under High Uncertainty

The Influence of Culture on Strategic Choices

CH – 7

Challenges in Implementing Global Alliances:

 Problems with Shared Ownership:

Issue: Disagreements may arise when two or more partners jointly own and operate a business.

Example: Deciding on investment priorities or how profits are distributed can be sources of tension.

 Differences in National Cultures:

Issue: Varied cultural norms and ways of doing business can lead to misunderstandings.

Example: Different communication styles or decision-making approaches based on cultural backgrounds.

 Integration of Vastly Different Structures and Systems:

Issue: Merging organizations with different structures and systems can be complex.

Example: Combining a hierarchical corporate culture with a more decentralized approach may pose
challenges.

 Distribution of Power:

Issue: Determining how decision-making power is shared can be a contentious issue.

Example: Disputes over who has the final say on key strategic decisions.

 Conflicts in Decision Making and Control:

Issue: Conflicts may arise over control of operations and decision-making authority.

Example: Disagreements on pricing strategies or marketing approaches.

Guidelines for Successful Alliances:

Choose a Partner with Compatible Strategic Goals and Objectives:

Advice: Find a partner whose overall goals align with yours for a smoother collaboration.

Example: If one company prioritizes innovation while the other focuses on cost efficiency, it might lead to
conflicts.

Seek Complementary Skills, Products, and Markets:

Advice: Look for a partner that brings something valuable to the table that complements your strengths.

Example: A technology company partnering with a logistics expert to enhance their combined service
offerings.

Work Out How Each Partner Will Deal with Proprietary Knowledge:

Advice: Clearly define how sensitive information will be handled to avoid trust issues.
Example: Agree on protocols for sharing trade secrets or proprietary technologies.

Recognize that Most Alliances Only Last a Few Years:

Advice: Be aware that many alliances are temporary, and plan accordingly.

Example: Businesses might form an alliance to jointly launch a new product, but each may go their
separate ways afterward.

Implementing strategy

Successful implementation requires creating a “system of fits”

The structure, systems, and processes of the firm are coordinated and set into motion by

a system of management by objectives (MBO) whose primary objective is the fulfillment of

strategy.

Allocate resources to make the strategy work, budgeting money, facilities,

equipment, people, and other support.

A unified technology infrastructure to coordinate diverse businesses around

the world and satisfy the need for current and reliable information.

The firm’s leaders must skillfully guide employees and processes in the

desired direction.

Challenges in Implementing Strategies in Emerging Markets

Poor infrastructures, supply chains, and distribution networks

Personnel challenges, especially at management levels.

Direct coordinating mechanisms

- Setting appropriate structures

- Appropriate staffing approaches
- Regular visits by head-office personal
- Regular communication with global employees to consult and trouble shoot

Certainly! Let's discuss how individuals in various roles can maximize leadership effectiveness within an
international context:

Representative of the Parent Firm:

Maximizing Leadership Effectiveness: Focus on aligning local operations with the overall goals and values
of the parent company. Ensure effective communication between the parent firm and the local team to
maintain consistency in strategy and mission.

Manager of the Local Firm:

Maximizing Leadership Effectiveness: Understand the local market dynamics, culture, and customer
needs. Foster a positive work environment by integrating local perspectives into decision-making.
Encourage collaboration between local and global teams for a harmonious and productive work
atmosphere.

Resident of the Local Community:

Maximizing Leadership Effectiveness: Build strong relationships within the local community. Contribute
to community development initiatives and show corporate social responsibility. Being aware of and
respecting local customs and traditions can enhance leadership credibility.

Citizen of the Host Country:

Maximizing Leadership Effectiveness: Actively engage with the broader society beyond the business
realm. Understand the political landscape and regulatory environment. Advocate for corporate practices
that contribute positively to the host country's development and well-being.

Member of a Profession:

Maximizing Leadership Effectiveness: Stay updated on industry trends and best practices. Share
knowledge and experiences with peers locally and globally. Encourage continuous learning within the
organization and contribute to the professional growth of team members.

Family Member:

Maximizing Leadership Effectiveness: If part of a family-owned business, balance family dynamics with
professional responsibilities. Promote a healthy work-life balance for family and non-family employees.
Implement transparent communication and succession planning to ensure the long-term sustainability of
the business.

In essence, maximizing leadership effectiveness in an international context involves a nuanced

understanding of various roles. Leaders need to navigate the complexities of both the global and local
environments, fostering collaboration, respecting cultural nuances, and contributing positively to the
overall well-being of the organization and its stakeholders.