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INTERNATIONAL BUSINESS MANAGEMENT

UNIT 3: INTERNATIONAL STRATEGIC MANAGEMENT

Prepared and presented by,

N. Ganesha Pandian,Assistant Professor,Madurai School of Management,Madurai.

References:1. International Business : K

Aswathappa2. International Business-

competing in the global market : Charles W L Hill and Arun K Jain

Year : II Semester : IV

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Strategic Compulsions – Standardization vs. Differentiation

Strategic Options Global Portfolio Management Global Entry Strategy Different Forms of International Business – Advantages Organizational Issues of International Business Organizational Structures Controlling of International Business – Approaches to

Control Performance of Global Business Performance Evaluation System.

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Nature of international strategic management

Strategic management is concerned with the process of formulating, implementing and evaluating strategies to achieve a firm’s objectives

Geographic differences, cultural and national differences and variations in business practices and different norms makes it difficult

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Framework for international strategic management

Five phase of planning and analysis 1. Recognizing antecedents2. External and internal analysis3. Strategic analysis and choice4. Leveraging competitive advantage and

process5. Implementation and integration

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International strategic planning

International strategic planning is a process of evaluating the internal and external environment by multinational organizations, through which they set their long term and short term goals and then they implement a specific plan of action in order to achieve those objectives

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Area of strategic compulsionsOrientation of globalization Emerging e-commerce and cultureCut throat competitionDiversificationActive pressure group Motive for CSR Corporate social

responsibility and ethics

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International strategic management process

Four dispositions of strategic management process in international business

Ethnocentric orientationPolycentric orientation Regio centric predispositionGeocentric

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Steps in Strategic management process

Scanning of global environment Formulation of strategiesImplementation of strategiesMeasure and evaluate performance

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Environmental scanningExternal environment 1. SBU assessment 2. Regional evaluation Internal environment 1. Mission statement 2. Physical resources and personnel

competencies3. Value chain analysis

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Strategy formulation

Major strategic optionsWorldwide integrationNational responsivenessRegional responsivenessMultifocal emphasis

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Strategy implementation Location Ownership Functional strategiesEvaluation and control Return on investment Return on equity Profit margin Market share Debt to equity Earnings per share Sales growth Assets growth

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Standardization Vs DifferentiationAccording to Levitt, represents local marketing Vs

global marketing and focus on the central question of whether a standardized (global) or a differentiated (local), country specific marketing approach

1. Regional perspective2. Marketing process perspective3. Marketing components/marketing mix perspective

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Strategic Options

Global strategyInternational strategyTrans-national strategyMulti-domestic strategy

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Factors affecting strategic optionsExternal constraintsIntra-organizational forces and managerial power-

relationsValues and preferences and managerial attitudes riskImpact of past strategyTime constraints in choice of strategyInformation constraints Competitors’ reaction

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Global portfolio investmentGlobal portfolio investment means the purchase

of stocks, bonds and money market instrument by foreigners for the purpose of realizing financial return which does not result in foreign management, ownership or control

Portfolio investment is part of the capital account on the balance of payment statistics

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Factors affecting Global portfolio investment

Tax rates on interest and dividendsInterest rates Exchange rates

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Problems of Global portfolio investmentUnfavorable exchange rate movement Frictions in international financial marketManipulation of security pricesUnequal access to information

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Global entry strategiesLevel of

involvement:1. Wholly owned

subsidiary2. Company

acquisitions 3. Assembly

operations4. Joint venture 5. Strategic

alliances

6. Contract Manufacture

7. Licensing 8. Direct marketing 9. Distribution and

agents10. Sales force 11. Trading

companies12. Export

management companies

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Global Entry StrategiesExporting as an entry strategies1. Indirect exporting 2. Direct exporting Manufacturing strategies without FDI1.Licensing 2. Franchising3. Contract manufacture4. Turnkey projects 5. Management contracts

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Contd…Manufacturing strategies with FDI1. Joint ventures 2. Strategic alliances3. Merger 4. Acquisition5. Wholly owned subsidiary6. Assembly operations

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Factors affecting the entry modeExternal factors1. Market size2. Market growth3. Government regulations4. Level of competition 5. Level of risk Internal factors1. Company objectives2. Availability of company resources3. Level of commitment 4. International experience 5. Flexibility

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Organizational structure

An organizational structure defines how activities such as task allocation, co-ordination and supervision are directed towards the achievement of organizational aims.

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Designing organization structure

Includes the analysis of following aspects:1. External environment 2. Overall aims and purpose of the enterprise 3. Objectives4. Activities5. Decisions6. Relationships7. Organization structure8. Job structure9. Organization climate10. Management style 11. Human resource

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Types of organization structure

International division’s structureFunctional division’s structureProduct division structureGeographic (Area) structureMatrix division structureMixed structure

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Methods of control systemPersonal controlsBureaucratic controlsOutput controlsCultural controls

Approaches tocontrol Market approach Rules approachCorporate culture approach

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Process of performance measurement

Establishing standards of performanceMeasure actual performanceAnalyze performance and compare it with

standardsConstruct and implement an action plan Review and revise standards

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Performance evaluation systemDefined as “Periodic review of operations to

ensure that the objectives of the enterprises are being accomplished”

Various performance indicators:1. Financial measures a, Return on investment (ROI) b, Budget as a success indicator2. Non Financial measures

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Types of performance evaluation system

Budget programming Management Audit PERT (Program evaluation review

technique)Management information system

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Organization design Organizational design is a step-by-step methodology which

identifies dysfunctional aspects of work flow, procedures, structures and systems, realigns them to fit current business realities/goals.

The following can be achieved: Excellent customer service Increased profitability  Reduced operating costs Improved efficiency and cycle time A culture of committed and engaged employees A clear strategy for managing and growing your business

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Five Approaches to Organizational Design

Five common approaches – 1. Functional approaches2. Divisional approaches 3. Matrix approaches4. Team approaches5. Networking approaches

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CONTROLLING OF INTERNATIONAL BUSINESS

These three key levels of control are as follows:

Strategic control Organizational control Operational control

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Organizational control Three types of organizational control systems

are:1. Responsibility Centre Control2. Generic Organizational Control3. Planning Process Control

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Establishing International Control Systems

Control systems in international business are established through four basic steps:

 1. Set Control standards for performance 2. Measure actual performance 3. Compare performance against standards 4. Respond to deviations

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Essential Controlling TechniquesSome of controlling techniques as below:1. Accounting systems2. Procedures 3. Performance ratios

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Quality dimensionsQuality consist of eight dimensions:1. Performance 2. Features3. Reliability4. Conformance5. Durability6. Serviceability7. Aesthetics8. Perceived quality

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PERFORMANCE OF GLOBAL BUSINESS

Global Business Performance is a flexible, web based solution that provides the key components to support global decision making.

It offers the integration and management of multiple, cross-country data sources including POS, retailer direct, syndicated and consumer data.

Global Business Performance identifies trends and opportunities and delivers sales and performance insights across regions, countries and categories, only days after data is available.

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The End