1. 1. Strategic Planning Chapter 9 Prepared By: Ruquia Batool Lubna Mueen Arbi Yasmeen Jamshaid
2. 2. Islamia University Bahawalpur Chapter 9 Learning Objectives 1. Globalization 2. Strategy planning 3. Strategy orientation 4. Strategic orientations 5. Strategic formulation 6. Strategic implementation 7. Control and evaluation.
3. 3. CHAPTER 9 Strategic planning: The process of evaluating the enterprises environment and its internal strengths, identifying long- and short-range objectives and implementing a plan of action for attaining these goals. Islamia University Bahawalpur Chapter 9
4. 4. Globalization Islamia University Bahawalpur Chapter 9 Globalization reflects a business orientation based on the belief that the world is becoming more homogenous and that distinctions between national markets are not only fading, but may eventually disappear(challenges & hindrance removed by doing swot ) Growing scale and mobility Abilities to leveraging the knowledge and talent Emerging market _____to______Mega Market china is obvious example Partnering with global companies (Merger ,Acquisition, synergies)
5. 5. Evolution of Global Strategy Core Business Strategy Develop Core Business Strategy Internationalize the Strategy Globalize the Strategy Country A Country B Country C Country D Country E Islamia University Bahawalpur Chapter 9 Here the MNCs expand business all around the world
6. 6. Globalization drivers Islamia University Bahawalpur Chapter 9 These are the factors / forces both internal and external forces will create favorable Conditions for the development of strategy and the resources allocation on the global basis Market factors Cost factors Environmental factors Competitive factors
7. 7. Islamia University Bahawalpur Chapter 9 Market Factors Level of demand (spending habits, educational background,aspiraation) Purchasing power Newest technology Cross border retail alliance Channel of distribution E Business Strategy The cost inefficiencies Avoiding duplication of effort Size is a major asset Make research and development
8. 8. Companies take action to match competitors moves Companies look for less competitive markets Market presence necessary to execute global strategies Companies take action to match competitors moves Companies look for less competitive markets Market presence necessary to execute global strategies Rapid technological evaluation Focus on niche market Take idea and solution Solve problems of customers Islamia University Bahawalpur Chapter 9
9. 9. Strategic orientations 1. Ethnocentric predisposition: The tendency of a manager or multinational company to rely on the values and interests of the parent company in formulating and implementing the strategic plan(people do not needed skill expertise to make best their business). 2. Polycentric predisposition: The tendency of a multinational to tailor its strategic plan to meet the needs of the local culture.(every foreign operation is different hard to understand ) 3. Regiocentric predisposition: The tendency of a multinational to use a strategy that addresses both local and regional needs. 4. Geocentric predisposition: The tendency of a multinational to construct its strategic plan with a global view of operations a. produce products with local variation, according to regional need b. best staff hired to run the operationIslamia University Bahawalpur Chapter 9
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11. 11. Strategy formulation Strategic formulation: the process of evaluating the external arena and its internal strengths (resources). External environmental assessment: information gathering; information assessment. Internal environmental assessment: physical resources and personnel competencies; value chain analysis. Islamia University Bahawalpur Chapter 9
12. 12. External environmental assessment: Information gathering: Environmental scan is conducted to identify competitor strengths and weaknesses and to target areas for attack. Information assessment: After gathering information on the competition and the industry, MNEs then evaluate the data. Five force model is used to make an overall assessment. Islamia University Bahawalpur Chapter 9
13. 13. Conducting an Environmental Scan Four of the most common methods for conducting an environmental scan are: Asking experts in the industry to discuss industry trends and to make projections about the future. Using historical industry trends to forecast future developments. Asking knowledgeable managers to write scenarios describing what they foresee for the industry over the next two to three years. Using computers to simulate the industry environment and to generate likely future developments. Islamia University Bahawalpur Chapter 9
14. 14. Examining the five forces that determine industry competitiveness One of the most common approaches to make an overall evaluation is based on the five forces that determine industry competitiveness: buyers suppliers potential new entrants to the industry the availability of substitute goods and services rivalry among the competitors. Islamia University Bahawalpur Chapter 9
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16. 16. Invest Invest protect Invest protect harvest protect harvest harvest Islamia University Bahawalpur Chapter 9 Market portfolio matrix Business position High Medium lowC o u n tr y A tt r a c ti v e n e ss H i g h M e d i u m L o w
17. 17. Internal environmental assessment It helps to pinpoint MNE strengths and weaknesses. There are two specific areas the MNE will examine in this assessment: physical resources and personnel competitiveness; the way in which value chain analysis can be used to bring these resources together in the most synergistic and profitable manner. Islamia University Bahawalpur Chapter 9
18. 18. Value chain analysis Value chain: The way in which primary and support activities are combined. Primary activities: inbound logistics, operations, outbound logistics, marketing & sales and service. Support activities: firm infrastructure, HRM, technology management and procurement. Analysis of the value chain can also help a company to determine the type of strategy that will be most effective. Islamia University Bahawalpur Chapter 9
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20. 20. Three generic strategies Cost strategy: A strategy that relies on low price through the pursuit of cost reductions Differentiation strategy: A strategy directed toward creating something that is perceived as being unique Focus strategy: A strategy that concentrates on a particular buyer group and segments Islamia University Bahawalpur Chapter 9
21. 21. Goal Setting External and internal environmental analyses provide an MNE with the information needed for setting goals. Some of these goals will be determined during the external analysis, as the company identifies opportunities it wants to exploit. Others will be finalized after the value chain analysis is complete. Islamia University Bahawalpur Chapter 9
22. 22. Strategy implementation Islamia University Bahawalpur Chapter 9
23. 23. Strategy implementation Strategy implementation is the process of attaining goals by using the organizational structure to execute the formulated strategy properly. Islamia University Bahawalpur Chapter 9
24. 24. There are many areas of focus in this process, some of the most important are: Location Ownership decisions A strategic alliance is an agreement between two or more competitive MNEs for the purpose of serving a global market. An international joint venture (IJV) is an agreement between two or more partners to own and control an overseas business (setting up a new business entity). Functional area implementation Marketing, manufacturing, finance, procurement, technology and human resources. Strategy implementation (Continued) Islamia University Bahawalpur Chapter 9
25. 25. Control and evaluation Islamia University Bahawalpur Chapter 9
26. 26. The strategy formulation and implementation processes are a prelude to control and evaluation. This process involves an examination of the MNEs performance for the purpose of determining: how well the organization has done; what actions should be taken in the light of this performance. Control and evaluation Islamia University Bahawalpur Chapter 9
27. 27. Common Methods of Measurement Six of the most common methods of measurement used for control and evaluation purposes: return on investment (ROI) sales growth and/or market share costs new product development MNE/host-country relations management performance. Islamia University Bahawalpur Chapter 9
28. 28. Localizing Global Moves Balancing what country managers do and what global product managers do Management Processes Transfer of information Personnel interchange to facilitate philosophy, strategy, actions Headquarters should coordinate and leverage resources Centralized decision making authority Develop a strategy jointly Permit local managers to develop own programs within specified parameters and with approval Motivate by participation and autonomyIslamia University Bahawalpur Chapter 9
29. 29. Organizational Structures Various organizational structures have emerged to support the globalization effort: Global or regional product managers and their support groups at headquarters Matrix structure Effective system for managing todays global marketplace Global account management Builds relationships with important customers and allows for the development of internal systems and interaction Islamia University Bahawalpur Chapter 9
30. 30. Two Dimensions of Corporate Culture Islamia University Bahawalpur Chapter 9 Dimension One The overall way a company holds its operations together making them a single entity Dimension Two Commitment to the global marketplace 30 Czinkota: International Business, 8e
31. 31. Focus on Culture: Staffing Creatively Companies are trying to reduce their reliance on the traditional expatriate to keep costs down and maintain effectiveness. Many expatriates are charged with finding their replacements as quickly as possible. However, promising local candidates become expatriates themselves when they are asked to work in the head office to gain experience. Some companies have successfully encouraged local executives to step up to important roles. Islamia University Bahawalpur Chapter 9
32. 32. Local Company in a Global Environment The global marketplace presents significant challenges and opportunities for local firms Strategies depend on both external and internal realities Liberalization may mean hardship for some companies as a result of economic integration or WTO membership Islamia University Bahawalpur Chapter 9
33. 33. Competitive Strategies for Local Companies A local company that sells out to a global player or becomes part of an alliance A local company that has assets that give it a competitive advantage only in its home market A local company whose assets are transferable, allowing it to compete head-on with established global players worldwide A local company whose assets are transferable, allowing it to compete head-on with established global players worldwide Islamia University Bahawalpur Chapter 9 Dodger Defender Contender Extender