Formulation of Strategy

Presented by:Barkha Jha Chandni Sharma

2006 Prentice Hall

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Strategic Planning and Strategy

The process by which a firms managers evaluate the future prospects of the firm and decide on appropriate strategies to achieve long-term objectives is called strategic planning. The basic means by which the company competes its choice of business or businesses in which to operate and the ways in which it differentiates itself from its competitors is its strategy.

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Strategic planning Process of determining an organizations basic mission and long-term objectives, then implementing a plan of action for attaining these goals Process takes on added dimensions when companies go international Growing Need for Strategic Planning MNC must keep track of diversified operations Continually changing international environment FDI has grown faster than both trade and world gross domestic product Benefits of Strategic Planning Evidence is mixed

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Approaches to Formulating Strategy

Economic Imperative
Worldwide strategy based on cost leadership, differentiation, and segmentation

Political Imperative
Strategic formulation utilizing strategies that are country-responsive and designed to protect local market niches

Quality Imperative
Strategic formulation utilizing strategies of total quality management to meet or exceed customers expectations and continuously improve products and/or services

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Approaches to Formulating Strategy (cont.)

Administrative Coordination Strategic formulation in which the MNC makes strategic decisions based on the merits of the individual situation rather than using a predetermined economically or politically driven strategy Large MNCs try to combine the economic, political, quality, and administrative approaches to strategic planning

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Strategic Formulation Process

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Strategic Formulation Process

First phase is the planning phase company establishes (or clarifies) its mission and overall objective Second part is the implementation phase requires the establishment of the structure, systems, processes suitable to make the strategy work

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Mission and Objective

Mission is the statement of the role by which an organization intends to serve its stakeholder. Objectives flow from mission and guide the formulation of international strategy
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Environmental Assessment
Gathering information and forecasting relevant trends, competitive actions and circumstances that will affect operations in a geographic area; should include:
Political instability Currency instability Nationalism home govern. Policies: import duties, protectionism International competition (conducting a global competitor analysis industry structure) Environmental scanning who are current competitors?: positions, goals, strategies
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Basic Steps in Formulating Strategy

Environmental Scanning
Process of providing management with accurate forecasts of trends related to external changes in geographic areas where the firm currently is doing business and/or is considering setting up operations

Internal Resource Analysis

Helps a firm to evaluate its current managerial, technical, material, and financial strengths and weaknesses- Mitsubishi Trading Co. employs >6,000 market analysts worldwide to gather, feed & analyse market info to parent co. KS)
Factor necessary to effectively compete in a market niche Must have people and resources to develop and sustain the necessary KFSs
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Internal Analysis
Internal analysis determines which areas of the firms operations represent strengths or weaknesses (currently or potentially) compared to competitors, so that the firm may use that information to its strategic advantage It focuses on the companys resources and operations, and global synergies Strengths and weaknesses of the firms financial and managerial expertise and functional capabilities are evaluated to determine the key success factors
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Competitive Analysis
Assess the firms capabilities and key success factors compared to those of its competitors Enables strategic planners to determine where the firm has distinctive competencies that will give it an advantage Most companies develop strategies around key strengths or core competencies This stage is often called a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis

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Global/International Strategic Alternatives

Global Strategic Alternatives determines the overall approach to the global marketplace Entry Strategy Alternatives determine what specific entry strategy is appropriate for each country the firm plans to operate in

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