Chapter 11: Strategy Formulation and Implementation

Summary of TQM

-Quality is operationalized by meeting or exceeding customer expectations -Quality Strategy is formulated at top management level and diffused throughout the organization -TQM techniques: Traditional inspection and statistical quality control; cutting edge HRM techniques such as self managing teams and empowerment

Key Success Factors

A factor necessary for a firm to effectively compete in a market niche

Basic elements of Strategic planning

1)Scanning the external environment for opportunities and threats 2) Conducting an internal resource analysis of company strengths and weaknesses 3) Formulating goals in light of the external scanning and internal analysis

Global integration vs National Responsiveness

2x2 Matrix on page 304: Quadrant 1: Global Strategy Quadrant 2: International Strategy Quadrant 3: Transnational Strategy Quadrant 4: Multi domestic strategy

International entrepreneurship

A combination of innovative, proactive, and risk-seeking behavior that crosses national borders and is intended to create wealth in organizations.

Economic Imperative

A worldwide strategy based on cost leadership, differentiation, and segmentation Value is added in upstream activities Industries include automobiles, chemicals, heavy electrical systems, motorcycles, and steel. Also used when the product is regarded as generic and therefore does not have to be sold based on name brand or support service. Management uses a world-wide strategy that is consistent on a country to country basis.

Frontier markets

AKA pre emerging markets a unique subset of emerging economies

BRIC nations

Brazil, Russia, India, China Will make up half of global economic output by midcentury

TQM

Can take different forms including -Cross-training personnel to do jobs of all members in work group -Process re-engineering designed to help identify/eliminate redundant tasks and wasteful efforts -Reward system designed to reinforce quality performance

Risks of emerging markets

Curruption Failure to enforce contracts Red tape and bureaucratic costs General uncertainty in legal and political environment

Specialized strategies

Developing and emerging markets International Entrepreneurship and new ventures

Multi-Domestic Strategy

Differentiated strategy emphasizing local adaptation Useful with high pressure for local responsiveness and low pressures for cost reductions.

Approaches to formulating and implementing strategy

Economic Imperative Political Imperative Quality Imperative Administrative Coordinationk

Develping and emerging markets strategies

First mover strategies Base of the Pyramid Strategies

More specific goals for strategic plan come from external scanning and internal analysis

Goals serve as an umbrella beneath which subsidiaries and other international groups operate. Profitability and marketing goals almost always dominate strategic plans. Once strategic goals are set, the MNC develops specific operational goals and controls, usually through a 2-way process at the subsidiary or affiliate level.

Local issues

Important factors Access to markets Proximity to competitors Availability of transportation and electric power Desirability of location for exployees coming in from outside

Global Strategy

Integrated strategy based primarily on price competition low-cost strategy when attempting to benefit from scale economies in production, distribution, marketing

Transnational Strategy

Integrated strategy emphasizing both global integration and local responsiveness pursued when there are high cost pressures and high demand for local responsiveness

Primary functional areas in strategy implementation

Marketing Production Finance

International Strategy

Mixed strategy combining low demand for integration and responsiveness make use of valuable core competencies that host-country competitors lack.

Global Integration

Production and distribution of products and services of a homogenous type and quality on a worldwide basis

Environmental factors affecting organizations

Regulatory, Social, political, economic, technological, industry/market

Top Managements responsibility

Setting the strategy

First mover strategy

Significant economies associated with early entry include learning effects, scale economies, opportunities for developing alliances, and advantages over competitors May be narrow window of opportunity within which these opportunities can be best exploited.

Quality Imperative

Strategic formulation and implementation utilizing strategies of total quality management to meet or exceed customers' expectations and continuously improve products or services Takes two interdependent paths: 1) a change in attitudes and a raising of expectations for service quality 2) The implementation of management practices designed to make quality improvement an ongoing process. Commonly called TQM (Total quality Management)

Political Imperative

Strategic formulation and implementation utilizing strategies that are country-responsive and designed to protect local market niches Value is added in the downstream activities of the value chain Examples include insurance and consumer packaged goods. Success depends on Marketing. Sales, Service Management use country centered or multi-domestic strategy.

Middle management responsibility

Strategic implementation process

Base of the pyramid strategy

Strategy targeting low-income customers in developing countries

National Responsiveness

The need to understand different consumer tastes in segmented regional markets and respond to different national standards and regulations imposed by autonomous governments and agencies

Strategic Management

The process of determining an organization's basic mission and long-term objectives, then implementing a plan of action for attaining these goals

strategy implementation

The process of providing goods and services in accord with a plan of action Will often have overall philosophy or guidelines that direct the process

Why do corporations need strategic management?

To keep track of their increasingly diversified operations in a continuously changing international environment.

Finance

Transferring funds from one place in the world to another or borrowing funds in international money markets, often less expensive than relying on local sources

Location Considerations

Two Primary considerations 1) The Country 2) The specific locale within the chosen country

Internal Resource Analysis

Used to evaluate MNC's current managerial, technical, material, and financial strengths and weaknesses Key Question: Do we have the people and resources that can help us to develop and sustain the necessary Key success factors, or can we acquire them?

Marketing

What works in one market may not work in another May be dictated by the overall strategic plan Involves the 4 Ps: Product, Price, Promotion, Place

Production

When exporting goods to foreign markets, usually been handled through domestic operations MNC's have found that whether they export of produce goods locally in the host country, consideration of worldwide production is important Trend towards a global coordination of operations Labor intensive products are outsourced to low cost sites

Born Global Firms

firms that engage in significant international activities a short time after being established

Administrative Coordination

strategic formulation and implementation in which the MNC makes strategic decisions based on the merits of the individual situation rather than using a predetermined economically or politically driven strategy Least common approach to formulation and implementation strategy

Environmental scanning

the process of providing management with accurate forecasts of trends related to external changes in geographic areas where the firm currently is doing business or is considering setting up operations