International Strategic

Management
Dr. Harish Kumar Purohit

contents
1. Strategic Management
2. Approaches to Strategic Planning
3. Global vs. Regional Strategies
4. Elements of Strategic Planning
5. Specialized Strategies

Strategic Management
Strategic management
Determining the firms basic mission and long-term
objectives, and developing and implementing an
appropriate plan of action
Where are we going?
How are we going to get there?

Strategic management growing in importance

because of the need to coordinate and
integrate diverse operations

Strategic Management
the conduct of drafting, implementing and evaluating
cross-functional decisions that will enable an
organization to achieve its long-term objectives.
It is the process of specifying the organization's
mission, vision and objectives, developing policies and
plans, often in terms of projects and programs, which
are designed to achieve these objectives, and then
allocating resources to implement the policies and
plans, projects and programs.

Strategic Management
Strategic management is an ongoing process

that evaluates and controls the business and the

industries in which the company is involved;
assesses its competitors and sets goals and
strategies to meet all existing and potential
competitors; and then reassesses each strategy
annually or quarterly [i.e. regularly] to determine
how it has been implemented and whether it has
succeeded or needs replacement by a new
strategy to meet changed circumstances, new
technology, new competitors, a new economic
environment, or a new social, financial, or
political environment.

Strategic Planning Process

Mission and Objectives

Environmental Analysis /
Scanning
Formulate international
strategies

Strategy Implementation

Evaluation of the performance

and Control

Strategic Planning Process

In today's highly competitive business environment,
budget-oriented planning or forecast-based planning
methods are insufficient for a large corporation to
survive and prosper.
The firm must engage in strategic planning that
clearly defines objectives and assesses both the
internal and external situation to formulate strategy,
implement the strategy, evaluate the progress, and
make adjustments as necessary to stay on track.

Group Assessment of SBUs

Evaluation Corporate Regional

Performance on a Market Size-Growth
Matrix

Benefits of Strategic Planning

Perceived benefits
Coordinate and monitor operations
Streamline product lines and supply chains
Manage political, currency, and competitive risks

Potential costs
Micromanagement of subsidiary operations
Misallocation of time and staff resources
Over-planning and lower profitability

Benefits of Strategic Planning

Economic
Economic
Imperative
Imperative

Administrative
Administrative
Coordination
Coordination

Political
PoliticalImperative
Imperative

Quality
Quality
Imperative
Imperative

Economic Imperative
Strategy based on cost leadership,
differentiation, and segmentation
Product mix
Value added in the upstream activities of the
industrys value chain
generic good (not name brand or support service
dependent)

Global sourcing to shorten the production or

buying cycle

Political Imperative
Strategy country- responsive and designed to
protect local market niches
Success of the product or service depends
heavily on marketing, sales or service
Customer or client-focused

Approach most often used by MNCs pursuing

a country-centered or multidomestic strategy.

Quality Imperative
Two possible paths
Change in attitudes to raise expectation for
service quality
Implementation of practices to make quality
improvement an ongoing process

Total quality management (TQM)

Cross-training personnel
Process re-engineering
Reward systems designed to reinforce quality

Administrative Coordination
Decision making based on the merits of the
individual situation rather than a
predetermined economic or political strategy
Coordination of global supply chains
Localized marketing of products and services

Least common approach given the pressures

on MNCs to coordinate strategy both
regionally and globally

Global vs. Regional Strategies

Global Integration

Products and services homogeneous in terms of

type and quality
Customers have common taste preferences

National Responsiveness

Segmented regional markets

Need to respond to differing national standards
and regulations
Adaptation of tools and techniques to manage
local workforces

Four Strategic Options

Global integration

National responsiveness
Low

High

High

Global
Global
strategy
strategy

Transnational
Transnational
strategy
strategy

Low

International
International trade
trade
strategy
strategy

Multi-domestic
Multi-domestic
strategy
strategy

Adapted from Figure 81: Global Integration vs. National Responsiveness

Choosing an Option
The right strategy is tailored to particular country
and industry characteristics
Reasons to choose each strategy
Global: low-cost strategy, commodification
Multi-domestic: products and services differentiated
by market
International: core competencies set the MNC apart
from local competitors
Transnational:
Require management of contradictory pressures for cost
reductions and differentiation
Successful firms engage in glocalization, localizing their
activities while maintaining a global focus

Elements of Strategic Planning for

International Management
Internal
InternalResource
Resource
Analysis
Analysisof
ofMNC
MNC
Strengths
Strengthsand
and
Weaknesses
Weaknesses

External
ExternalEnvironmental
Environmental
Scanning
Scanningfor
forMNC
MNC
Opportunities
Opportunitiesand
andThreats
Threats

Strategic
StrategicPlanning
Planning
Goals
Goals

IMPLEMENTATION
IMPLEMENTATION

Adapted from Figure 82: Basic Elements of Strategic Planning for International Management

Environmental Scanning
Provide management with accurate

forecasts of trends that relate to external

changes in geographic areas where the
firm is currently doing business or
considering setting up operations
These changes relate to the economy,
competition, political stability, technology,
and demographic consumer data

Internal Resource Analysis

Evaluate managerial, technical, material, and

financial strengths and weaknesses

Determine ability to take advantage of

international market opportunities

Match external opportunities (environmental
scan) with internal capabilities (internal
resource analysis)
Key question: Do we have the people and

resources that can help us to develop and

sustain the necessary KFSs, or can we acquire
them?

Strategic Planning Goals

Goal formulation often precedes the first

two steps
However, more specific goals come out of
external scanning and internal analysis
Typically serve as an umbrella for subsidiaries

and international operations

Profitability and marketing goals almost
always dominate
Once set, the MNC will develop specific
operational goals and controls for the
subsidiary or affiliate level

Implementation
Selecting a country and location
Country factors: market openness, infrastructure,
labor market flexibility
Location: incentives, workforce, costs

Functional areas
Marketing: usually country specific
Production: domestic to foreign, foreign to domestic,
or foreign to foreign, dispersed or coordinated
Finance: local sources, centralized control,
international markets, or barter trade

SPECIALIZED STRATEGIES
1. First-Mover Strategies
2. Bottom of the Pyramid
Strategies
3. Born-Global Strategies

First-Mover Strategies
Useful in rapidly changing markets
Market opening in developing economies
Market reforms in transition economies
Privatization of state-operated enterprises

Advantages and risks

Capture benefits of learning

Form alliances with attractive local partners
Uncertain pace of reform
Opportunity costs of premature entry

Base of the Pyramid Strategies

Targeting emerging market
People making less than $2,000 p/year (4
billion)

Marketing requires smaller-scale strategies

Building relationships with local governments,
small entrepreneurs, and nonprofits
Less dependence on central governments and
large local companies

Born-Global Firms
Engage in significant international
activity a short time after being
established
Successful firms leverage a distinctive
mix of orientations and strategies
Global technological competence
Unique-products development
Quality focus
Leveraging of foreign distributor
competences

Implications for Managers

The complexity and interdependence of the
global economy increases the need for firms to
plan strategically
Effective strategies must balance tensions
between
Top-down and bottom-up strategies
Economies of scale and differentiation

Managers need to anticipate the future

evolution of the firm and global markets

References..
Chapters 8, Hodgetts, Luthans and Doh, International
Management: Culture, Strategy and Behavior , 6th edition
(New York: McGraw-Hill Irwin, 2006).
Prof. Ashwathapa, International Business, TATA
McGrahHill.