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Chapter 6 Strategy Formulation and Implementation - Part 1

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89 views13 pages

Chapter 6 Strategy Formulation and Implementation - Part 1

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© © All Rights Reserved
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Because learning changes everything.

International
Management:
Culture, Strategy, and
Behavior

Part Three: International


Strategic Management

Chapter 8: Strategy Formulation and


Implementation

© McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education.
Strategic Management

Strategic management is the process of determining an organization's


basic mission and long-term objectives and then implementing a plan of
action for pursuing this mission and attaining these objectives.
• In most companies, the top management team sets strategy.
• As companies go international, strategic processes take on added dimensions.
• It is important to remember that all stages of organizational change incorporate levels of
strategy from planning to implementation.
• One of the primary reasons that MNCs such as Citibank need strategic management is
to keep track of their increasingly diversified operations in a continuously changing
international environment.
• Ford is an example of a company doing just that. Ford Motor entered Thailand with a
strategic plan based on offering the right combination of price and financing to carefully
identified market segments.

© McGraw-Hill Education 2
Approaches to Formulating and Implementing Strategy

Four common approaches.


• Focusing on the economic imperative.
• Addressing the political imperative.
• Emphasizing the quality imperative.
• Implementing an administrative coordination strategy.

© McGraw-Hill Education 3
Economic Imperative

MNCs that focus on the economic imperative employ a worldwide


strategy based on cost leadership, differentiation, and segmentation.

• Products have a large portion of value added in the upstream in the


industry’s value chain.
• Industries include automobiles, chemicals, heavy electrical systems,
motorcycles, steel.
• Products are homogeneous and require no alteration to fit the needs
of the country.
• Management uses a worldwide strategy consistent on a country-
to-country basis.
• Also used when the product is a generic good and does not need a
brand or support service.

© McGraw-Hill Education 4
Economic Imperative

MNCs that focus on the economic imperative employ a worldwide


strategy based on cost leadership, differentiation, and segmentation.

• The European computer market was initially dominated by IBM, Apple,


and Compaq but today, price has emerged a major purchasing
decision.
• Customers are more computer literate, and realize many computers
offer identical quality performance.
• As a result, the economic imperative dominates the strategic plans of
computer manufacturers.

© McGraw-Hill Education 5
Political Imperative

The political imperative approach to strategic planning is country-


responsive; the approach is designed to protect local market niches.
• Used when products sold have a large portion of their value added in
the downstream activities of the value chain.
• Industries such as insurance and consumer packaged goods (food,
beverages, clothes, tobacco, makeup, and household products).
A good example of a country-centered strategy is provided by Thums Up,
a local drink that Coca-Cola bought from an Indian bottler in 1993.
• Coca-Cola planned to push their products over Thums Up when it
returned to India—local buyers were uninterested, and Coke relented.
• In 2018, Coke launched an energy drink variant called Thums Up
Charged, leading to strong sales growth.

© McGraw-Hill Education 6
Quality Imperative

A quality imperative takes two interdependent paths.


• A change in attitudes and a raising of expectation for service quality.
• Management practices designed to make quality improvement ongoing.
Commonly called total quality management, or simply TQM.
• TQM covers from strategy formulation to implementation.
• Quality is operationalized by meeting/exceeding customer expectations.
• Customers are both internal and external.
• Strategy is formulated at the top and diffused throughout the firm.
• TQM techniques include inspection and statistical quality control, but
also HR techniques, such as self-managing teams and empowerment.
• MNCs must continually revise their strategies and make renewed
commitment to the quality imperative.

© McGraw-Hill Education 7
Quality Imperative

• Many MNCs make quality a major part of their overall strategy because
they have learned this is the way to increase market share and profitability.
Consider the game console industry.
 In the early 2000s, Sony’s PlayStation 2 left Nintendo fighting for
market share with its less popular GameCube.
 A few years later, Nintendo introduced the Wii, leaving Sony scrambling
with its less successful PlayStation 3.
 By 2017, Sony successfully launched PlayStation 4, outpacing sales of
both the WiiU and Switch consoles.

© McGraw-Hill Education 8
Quality Imperative

Apple Inc. experiences rave quality reviews from customers and


electronics analysts for its line of Mac products.
 These devices have global appeal and Apple’s stock has soared.
 Apple introduced the iPhone X concurrently in over 50 countries and
made it available in over 20 additional countries within the first six weeks of
launch.
 More than 29 million phones were sold in the first two months alone.

© McGraw-Hill Education 9
Administrative Coordination

Administrative coordination involves strategic formulation and implementation in which decisions


are based on the merits of the individual situation rather than a predetermined strategy.
It links between employees, internal departments, and external parties, including vendors, lenders,
and customers. They handle clerical and administrative duties, analyze and improve processes
and policies, and ensure that the organization operates smoothly.

When Walmart expanded into Latin Many large MNCs work to combine the
economic, political, quality, and administrative
America, they faced local tastes approaches to strategic planning.
differed and stiff competition. For example, IBM relies on the economic imperative when
it has strong market power—especially in less developed
• Timely deliveries were difficult. countries.
It relies on political and quality imperatives when the
• Suppliers could not produce market requires a calculated response—such as European
products to Walmart’s countries.

specifications. It uses an administrative coordination strategy


when rapid, flexible decision making is needed
• They had to adapt to the culture. to close the sale.

© McGraw-Hill Education 10
Global and Regional Strategies

Global integration is the National responsiveness is the


production/distribution of need to understand the different
homogeneous quality products consumer tastes in segmented
and services worldwide. regional markets and respond to
different national standards and
• Growing acceptance of
regulations imposed by autonomous
standardized yet increasingly governments and agencies.
customized goods such as
automobiles and computers. • When designing/building cars,
international manufacturers
• Throughout North American, carefully tailor their offerings in
the EU, and Japan, there is the American market.
growing acceptance of
• National responsiveness also
standardized yet increasingly
relates to the need to adapt tools
personally customized goods
and techniques for managing the
such as automobiles and
local workforce.
computers.

© McGraw-Hill Education 11
Figure 8-1: Global Integration vs. National Responsiveness

Access the text alternative for this image.

Source: Bartlett, Christopher A., and Sumantra Ghoshal. Managing Across Borders: The Transnational Solution. Cambridge, MA: Harvard Business
© McGraw-Hill Education School Press, 1998. 12
Figure 8-1: Global Integration vs. National Responsiveness

This four-square matrix compares global integration from low to high on the
vertical axis and national responsiveness from low to high on the horizontal axis,
breaking the space into four quadrants.
Quadrant one is in the upper left corner—high on global integration and low on
national responsiveness. In terms of economies of scale, this situation leads to
global strategy based on price competition.
Quadrant two is in the lower left corner, low on both global integration and
national responsiveness. This mixed approach is often referred to as international
strategy and it combines low demand for integration and responsiveness.
Quadrant three is in the upper right corner, high on both global integration and
national responsiveness. Transnational strategy refers to integrated strategy
emphasizing both global integration and local responsiveness.
Quadrant four is in the lower right corner, low on global integration but high on
national responsiveness. This quadrant is referred to as multi-domestic strategy
which is defined as a differentiated strategy emphasizing local adaptation.

Access the text alternative for this image.

Source: Bartlett, Christopher A., and Sumantra Ghoshal. Managing Across Borders: The Transnational Solution. Cambridge, MA: Harvard Business
© McGraw-Hill Education School Press, 1998. 13

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