WHY DO STRATEGIC WHY DO STRATEGIC MANAGEMENT PRACTICES MANAGEMENT PRACTICES

DIFFER?DIFFER?

National context - includes National context - includes national culture, the country’s national culture, the country’s available labor and other natural available labor and other natural resourcesresources

NationalCulture

andBusiness

Culture

NaturalFactor

Conditions

InstitutionsCreate

IsomorphicPressures

BusinessEnvironment

ResourcePool

StrategyFormulation

Strategy Content·Generic Strategies

·CompetitiveStrategies

Helps Create

National Differences in StrategyFormulation and Content

National Context

InducedFactor

Conditions

Influences

SOCIAL INSTITUTIONS SOCIAL INSTITUTIONS

Include the family, educational, Include the family, educational, economic, and the political and economic, and the political and legal systems legal systems

Closely linked with national and Closely linked with national and business culture business culture

THREE TYPES OF THREE TYPES OF ISOMORPHISMISOMORPHISM

CoerciveCoercive MimeticMimetic NormativeNormative

NATIONAL AND BUSINESS NATIONAL AND BUSINESS CULTURE CULTURE

Characteristics of national and Characteristics of national and business culture influence business culture influence strategic decision making both strategic decision making both directly and indirectly directly and indirectly

THE NATIONAL CONTEXT AND THE NATIONAL CONTEXT AND KEY BUSINESS PRACTICESKEY BUSINESS PRACTICES

Explanations for the existence of Explanations for the existence of companies companies

Capital markets/sources of funds Capital markets/sources of funds Government policies/legislation Government policies/legislation Labor markets Labor markets Top management characteristicsTop management characteristics

EXHIBIT 7-2 WHOSE EXHIBIT 7-2 WHOSE COMPANY IS IT?COMPANY IS IT?

0%10%20%30%40%50%60%70%80%90%

100%

Middle Managers Priorities

OtherStakeholders

Shareholders

RESOURCE POOLRESOURCE POOL

The resource pool represents all the The resource pool represents all the human and physical resources human and physical resources available in a country - both from available in a country - both from natural and induced factor natural and induced factor conditionsconditions

COMPARATIVE STRATEGY COMPARATIVE STRATEGY FORMULATION: FORMULATION:

EXAMPLES FROM AROUND EXAMPLES FROM AROUND THE WORLDTHE WORLD

US model: used as basis for US model: used as basis for comparison comparison –Represents the attempt of a Represents the attempt of a

rational decision making process rational decision making process

THE US MODEL OF STRATEGY THE US MODEL OF STRATEGY FORMULATIONFORMULATION

1--Define the business 1--Define the business 2--Develop a mission statement2--Develop a mission statement3--Define objectives3--Define objectives4--Assess the company's situation: 4--Assess the company's situation:

SWOT, competitors' actions SWOT, competitors' actions 5--Craft strategy content 5--Craft strategy content

DEFINING THE BUSINESS: DEFINING THE BUSINESS: US/KOREA COMPARISONUS/KOREA COMPARISON

US: Few limitationsUS: Few limitations Korea: More coercive institutions Korea: More coercive institutions Large corporations and national Large corporations and national

economic policyeconomic policy–A special status to engage in A special status to engage in

businessbusiness

DEVELOPING MISSION DEVELOPING MISSION STATEMENTS: DEFINING THE STATEMENTS: DEFINING THE

ORGANIZATIONAL DOMAINORGANIZATIONAL DOMAIN

The mission defines the domain The mission defines the domain of the organization of the organization

US MISSION STATEMENTSUS MISSION STATEMENTS

Often emphasize market issues Often emphasize market issues closely related to key elements of closely related to key elements of success in their respective success in their respective industriesindustries

EEXXHHIIBBIITT 77..33 KKEEYY SSUUCCCCEESSSS FFAACCTTOORRSS AANNDDEEXXAAMMPPLLEESS FFRROOMM UU..SS.. MMIISSSSIIOONN SSTTAATTEEMMEENNTTSS

KKeeyy SSuucccceessssrr

MMiissssiioonn CCoommppoonneenntt CCoommppaannyy

PPrroodduucctt oorree

““IIBBMM mmeeaannss sseerrvviiccee”” IIBBMM

TTeecchhnnoollooggyy ““BBeetttteerr tthhiinnggss ffoorr lliivviinngg tthhrroouugghhcchheemmiissttrryy

DDuu PPoonntt

OObbjjeeccttiivveess ““4488--hhoouurr ppaarrttss sseerrvviiccee aannyywwhheerree iinn

wwoorrlldd””

CCaatteerrppiillllaarr

SSeellff--CCoonncceepptt ““TThhoouu sshhaallll nnoott kkiillll aa nneeww pprroodduucctt 33MM

PPhhiilloossoopphhyy ““IInntteeggrriittyy,, ccoommppaassssiioonn aanndd aa tthhiirrsstt

eexxcceelllleennccee""

EEllllii LLiillllyy

JAPANESE MISSION JAPANESE MISSION STATEMENTSSTATEMENTS

Japanese managers prefer more Japanese managers prefer more abstract mission statements than abstract mission statements than do their US counterpartsdo their US counterparts

FRENCH AND BRITISH FRENCH AND BRITISH MISSION STATEMENTSMISSION STATEMENTS

British mission statements: focus British mission statements: focus on strategic issues emphasizing on strategic issues emphasizing shareholder returns shareholder returns

French mission statements: French mission statements: reflect a national context in a reflect a national context in a social democracy social democracy

CCoommppoonneennttss BBrriittiisshh FFrreenncchh

TTiimmeeOOrriieennttaattiioonn::

SShhoorrtt ((lleessss tthhaannaa yyeeaarr))

LLoonnggeerr ((mmoorreetthhaann aa yyeeaarr))

FFooccuuss:: SSttaatteeggiicc GGeenneerraall VVaalluueess

PPrriioorriittyySSttaakkeehhoollddeerrssaanndd IIssssuueess:: SShhaarreehhoollddeerrss

aannddIInnvveessttoorrss

CClliieennttss aannddEEmmppllooyyeeeess

CCuussttoommeerrss VVaalluuee ttoo SSoocciieettyyEEmmppllooyyeeeess SSeerrvviicceeSSeerrvviiccee SShhaarreedd DDeessttiinnyy

PPaarrttiicciippaattiioonnaanndd

OOwwnneerrsshhiipp::MMoossttllyy SSeenniioorrMMaannaaggeemmeenntt

MMaannaaggeemmeenntt aannddWWoorrkkeerrss

EX 7.4

DEFINING OBJECTIVESDEFINING OBJECTIVES

National differences exist mostly National differences exist mostly in priorities in priorities –Financial or strategic Financial or strategic

EEEXXXHHHIIIBBBIIITTT 777---555 EEEXXXAAAMMMPPPLLLEEE FFFIIINNNAAANNNCCCIIIAAALLLAAANNNDDD SSSTTTRRRAAATTTEEEGGGIIICCC OOOBBBJJJEEECCCTTTIIIVVVEEESSSSSStttrrraaattteeegggiiiccc OOObbbjjjeeeccctttiiivvveeesss FFFiiinnnaaannnccciiiaaalll OOObbbjjjeeeccctttiiivvveeesss

MMMaaarrrkkkeeettt SSShhhaaarrreee PPPrrrooofffiiitttPPPrrroooddduuucccttt IIInnnnnnooovvvaaatttiiiooonnn RRReeevvveeennnuuueee GGGrrrooowwwttthhh

OOOrrrgggaaannniiizzzaaatttiiiooonnnaaalll LLLeeeaaarrrnnniiinnnggg DDDiiivvviiidddeeennndddsss

NNNeeewww PPPrrroooddduuucccttt DDDeeevvveeelllooopppmmmeeennnttt BBBooonnnddd aaannnddd CCCrrreeedddiiitttRRRaaatttiiinnngggsss

PPPrrroooddduuucccttt QQQuuuaaallliiitttyyy RRRiiisssiiinnnggg SSStttoooccckkk PPPrrriiiccceeeRRReeepppuuutttaaatttiiiooonnn wwwiiittthhh

CCCuuussstttooommmeeerrrsssSSStttaaabbbllleee EEEaaarrrnnniiinnngggsss

LLLooowwweeerrr CCCooossstttsss CCCaaassshhh FFFlllooowwwsss

EX 7.6 U.S. AND JAPANESE EX 7.6 U.S. AND JAPANESE FINANCIAL AND STRATEGIC FINANCIAL AND STRATEGIC

OBJECTIVESOBJECTIVES

0 2 4 6 8 10

Market Share

Product Mix

New Products

Profit

Dividends

Stock Price

U.S.Japanese

Least Important Most Important

WHY?WHY?THE INSTITUTIONAL THE INSTITUTIONAL

ENVIRONMENTENVIRONMENT US: purpose of the corporation to US: purpose of the corporation to

maximize shareholder wealth maximize shareholder wealth US stockholders: emphasize short-US stockholders: emphasize short-

term transactions and dividends term transactions and dividends US: clear link between earnings per US: clear link between earnings per

share and stock prices share and stock prices

If managers fail to emphasize short If managers fail to emphasize short term profits and stock prices fall, term profits and stock prices fall, the managers loose personallythe managers loose personally

If companies are undervalued on If companies are undervalued on the stock market, they are the stock market, they are vulnerable to takeovers vulnerable to takeovers

JAPANESE SITUATIONJAPANESE SITUATION Japanese investors: less volatile Japanese investors: less volatile

than US investors than US investors Companies do not pay dividends Companies do not pay dividends

as a percentage of profitsas a percentage of profits Japanese managers do not have Japanese managers do not have

stock options compensation plans stock options compensation plans

Consistent dividends reassure the Consistent dividends reassure the Japanese stockholder of a company's Japanese stockholder of a company's health health

Stockholders are not the most Stockholders are not the most important stakeholders important stakeholders

Lack of outside directors to look out Lack of outside directors to look out for the welfare of the stockholder for the welfare of the stockholder

JAPANESE CULTURAL JAPANESE CULTURAL VALUESVALUES

A belief in substantial savings A belief in substantial savings Invest for the future Invest for the future Persistence to achieve goalsPersistence to achieve goals

ASSESSING THE COMPANY'S ASSESSING THE COMPANY'S SITUATIONSITUATION

Management's assessment of the Management's assessment of the situation faced by their situation faced by their companiescompanies

US managers favor techniques US managers favor techniques such as the SWOT and such as the SWOT and competitive analysescompetitive analyses

GERMAN AND BRITISH GERMAN AND BRITISH EXAMPLES EXAMPLES

Successful companies from both Successful companies from both countries identified the same key countries identified the same key success factors success factors

Differences: the organizational Differences: the organizational characteristics that managers characteristics that managers believe achieve the key success believe achieve the key success factors factors

EX 7.9 MOST IMPORTANT EX 7.9 MOST IMPORTANT PERFORMANCE CRITERIAPERFORMANCE CRITERIA

0% 20% 40% 60% 80% 100%

Profit

CashFlow

Sales BritishJapaneseU.S.

WHY?WHY?

Different resource poolsDifferent resource pools Different cultural values and Different cultural values and

normsnorms Different institutional biases Different institutional biases

regarding organizational regarding organizational strengths strengths

ASSESSING THE ASSESSING THE ENVIRONMENT: US AND ENVIRONMENT: US AND

JAPANESE APPROACHESJAPANESE APPROACHES Both seek information concerning Both seek information concerning

environmentsenvironments JapaneseJapanese–More informationMore information–Use information differentlyUse information differently–Opportunities a catalyst to action Opportunities a catalyst to action

CRAFTING STRATEGY CONTENT: CRAFTING STRATEGY CONTENT: US AND JAPANESE APPROACHSUS AND JAPANESE APPROACHS

US: Logical-deductiveUS: Logical-deductive Japanese: Incremental/inductiveJapanese: Incremental/inductive–Trial and error adjustments to Trial and error adjustments to

environmental and competitive environmental and competitive conditionsconditions

NATIONAL DIFFERENCES IN NATIONAL DIFFERENCES IN STRATEGY CONTENT: THREE STRATEGY CONTENT: THREE

EXAMPLES EXAMPLES

Examples of "typical" strategy Examples of "typical" strategy content or game plans of content or game plans of companies from various nations companies from various nations

JAPANESE STRATEGIES: JAPANESE STRATEGIES: GENERAL ORIENTATIONS GENERAL ORIENTATIONS

Compete with a high ratio of products Compete with a high ratio of products where the company can add value with where the company can add value with knowledge knowledge

Emphasize production to improve Emphasize production to improve productivity productivity

Use the resources of networksUse the resources of networks

JAPANESE PRODUCT/MARKET JAPANESE PRODUCT/MARKET STRATEGIESSTRATEGIES

Carefully select product market Carefully select product market Gain market share/customer Gain market share/customer

loyalty with low prices loyalty with low prices Create value with better products Create value with better products Move upscale and raise pricesMove upscale and raise prices

Export manufacturing expertiseExport manufacturing expertise Reinvest profits to go global or Reinvest profits to go global or

enter new marketsenter new markets

US, JAPANESE, AND BRITISH US, JAPANESE, AND BRITISH FIRMS IN THE UK FIRMS IN THE UK

British and US companies:British and US companies:–Both dominated by financial and Both dominated by financial and

efficiency concerns efficiency concerns –British firms focused on cost reduction British firms focused on cost reduction –British firms emphasized their brand British firms emphasized their brand

recognitionrecognition

Japanese companies:Japanese companies:–Dominant goals: enter new and Dominant goals: enter new and

growing market segmentsgrowing market segments–Entered the low end of the market, Entered the low end of the market,

moved to the mass market, then to moved to the mass market, then to high value-added segmenthigh value-added segment

EX 7.10 MARKET SHARE EX 7.10 MARKET SHARE STRATEGIESSTRATEGIES

0% 10% 20% 30% 40% 50% 60% 70%

Defend and Maintain

Steady Growth

Agressive Growth

Win and Dominate

Up-Scale Market

BritishJapaneseU.S.

KOREAN STRATEGIES: KOREAN STRATEGIES: Responses to a Changing National Responses to a Changing National

Context Context License a foreign technologyLicense a foreign technology Find ways to make the product Find ways to make the product

better and cheaperbetter and cheaper Enter the market late Enter the market late Be an OEM manufacturerBe an OEM manufacturer Move to own brand exportingMove to own brand exporting

CONCLUSIONSCONCLUSIONS

Understanding different Understanding different approaches to strategyapproaches to strategy–Helps to deal with Helps to deal with

international competitorsinternational competitors–Helps a company become Helps a company become

better collaboratorsbetter collaborators