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Strategy Formulation
and Implementation
McGraw-Hill/Irwin
Strategy Formulation
and Implementation
Strategic Management
Strategic Management
The process of determining an organizations basic
mission and long-term objectives, then
implementing a plan of action for pursuing the
mission and attaining objectives.
8-4
8-5
Approaches to Formulating
and Implementing Strategy
1.
2.
3.
4.
Economic Imperative
Political Imperative
Quality Imperative
Administrative Coordination
8-6
Approaches to Formulating
and Implementing Strategy
Economic Imperative
Economic imperative
Worldwide strategy based on cost leadership, differentiation,
and segmentation.
8-7
Approaches to Formulating
and Implementing Strategy
Political Imperative
Political imperative
Strategy formulation and implementation utilizing
strategies that are country-responsive and
designed to protect local market niches.
These MNCs often use country-centered or multidomestic strategy
Approaches to Formulating
and Implementing Strategy
Quality Imperative
Quality imperative
Has two paths
Change in attitudes and a raising of expectations
for service quality.
The implementation of management practices
designed to make quality improvement an ongoing
process.
TQM Total Quality Management
8-9
8-10
Approaches to Formulating
and Implementing Strategy
Administrative Coordination
Administrative coordination
MNC makes strategic decisions based on the
merits of the individual situation rather than a
predetermined economic or political strategy.
8-11
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.
8-12
8-13
8-14
8-15
Environmental Factors
Affecting Organizations
8-16
8-17
Areas of Formulation
of MNC Goals
8-20
Strategy Implementation
Strategy implementation
Provides goods and services in accord with plan of
action.
Plan often will have overall philosophy or guidelines
to direct process
Strategy Implementation
Location Considerations
Two primary considerations
1. The country
2. 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 becoming more
attractive
The amount of government control and restrictions is a factor
Specific benefits offered by host countries
Low tax rates, low interest loans, subsidies , but this
trend is changing
8-22
Strategy Implementation
Location Considerations
Local Issues
Once country has been decided, firm must choose
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
8-23
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, and place
8-24
Strategy Implementation
The Role of the Functional Areas
Production
When exporting goods to foreign markets,
production has usually been handled through
domestic operations
More recently MNCs have found that whether they
export or produce goods locally in host country,
consideration of worldwide production is important
Recent trend away from multi-domestic approach
and toward global coordination of operations
If product labor intensive, farm out product to lowcost sites (e.g., Mexico)
8-25
Strategy Implementation
The Role of the Functional Areas
Finance
Transfer funds from once 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
Privatization
8-26
Specialized Strategies
Some circumstances may require specialized
strategies:
Strategies for developing and emerging markets
Strategies for international entrepreneurship and
new ventures
8-27
Specialized Strategies
Strategies for Emerging Markets
The big emerging markets have captured the
bulk of investment and business interest from
MNCs and their managers in recent years
Mexico, Brazil Argentina, South Africa, Poland,
Turkey, India, Indonesia, China, South Korea
8-28
Specialized Strategies
Strategies for Emerging Markets
First Mover Strategies
Significant economies associated with early entry
and first-mover positioning
May be a narrow window of opportunity within
which these opportunities can be best exploited
8-29
Specialized Strategies
Strategies for Emerging Markets
Strategies for Base of Pyramid (BOP)
4-5 billion potential customers around the globe heretofore
ignored by global business
BOP forces global business to rethink their strategies
Must consider relationships with local governments, small
entrepreneurs, and nonprofits rather than depending on
established partners such as central government
BOP strategies are challenging to implement
Represents opportunity to incubate new, leapfrog technologies
Successful BOP strategies can travel profitably to higher
income markets
Marketing at BOP forces consideration of smaller-scale
strategies
8-30
8-31
Specialized Strategies
Entrepreneurship Strategy
and New Ventures
Increasingly small and medium size enterprises, often
in the form of new ventures, are becoming involved in
international management.
The earlier in its existence an innovative firm
internationalizes, the faster it is likely to grow both
overall and in foreign markets.
Venture performance (growth and ROE) is improved
by technological learning gained from international
environments
8-32
Specialized Strategies
International Entrepreneurship
International entrepreneurship
A combination of innovative proactive, and riskseeking behavior that crosses national borders and
is intended to create value in organizations.
8-33
Specialized Strategies
International New Ventures
and Born Global Firms
International new ventures or born global firms
Firms that engage in significant international activity a
short time after being established.
Successful born-global firms leverage a distinctive
mix of orientations and strategies
Global technological competence
Unique product development
Quality focus
Leveraging of foreign distributor competencies
5.