international business, 5th edition

chapter 11
international
strategic management
 Chapter Objectives 1

• Characterize the challenges of

international strategic management
• Assess the basic strategic
alternatives available to firms
• Distinguish and analyze the
components of international strategy

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 Chapter Objectives 2

• Describe the international strategic

management process
• Identify and characterize the levels
of international strategies

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 International Strategic Management

International strategic management

is a comprehensive and ongoing
management planning process aimed
at formulating and implementing
strategies that enable a firm to
compete effectively internationally.

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 Strategic Planning

The process of developing a

particular international strategy is
often referred to as strategic
planning.

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 Fundamental Questions

• What products and/or services does the firm

intend to sell?
• Where and how will it make those products or
services?
• Where and how will it sell them?
• Where and how will it acquire the necessary
resources?
• How does it expect to outperform its
competitors?

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 Factors Affecting International
Strategic Management

• Language • Financing
• Culture • Market research
• Politics • Advertising
• Economy • Money
• Governmental • Transportation/
interference communication
• Labor • Control
• Labor relations • Contracts

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 Sources of Competitive Advantage

Global
efficiencies

Multinational
flexibility

Worldwide
learning

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 Global Efficiencies

Location
efficiencies

Economies Economies
of scale of scope

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 Location Efficiencies

Mercedes-Benz
has achieved
economies of
scale by focusing
production of its
M-class at its
assembly plant in
Vance, Alabama.

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 Strategic Alternatives

Home replication strategy

Multidomestic strategy

Global strategy

Transnational strategy

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 Figure 11.1 Strategic Alternatives

Global Strategy Transnational Strategy

Firm views the world as Firm combines benefits
High single marketplace. Goal of global scale
is to create standardized efficiencies with benefits
products. of local responsiveness
Multidomestic Strategy
Home Replication
Firm operates as a
Firm uses core
Low competency or firm-
collection of relatively
independent subsidiaries
specific advantage

Low High
f s er uss er P

Pressures for Local Responsiveness/Flexibility

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 Components of International Strategy

Distinctive Scope of
competence operations

Resource
Synergy
deployment

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 Distinctive Competence

• Answers the question

– What do we do exceptionally well,
especially as compared to our
competitors?
• Represents important resource to
the firm

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 Scope of Operations

• Answers the question

– Where are we going to conduct
business?
• Aspects of scope
– Geographical region
– Market or product niches within regions
– Specialized market niches

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 Resource Deployment

• Answers the question

– Given that we are going to compete in
these markets, how will we allocate our
resources to them?

• Resource specifics
– Product lines
– Geographical lines

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 Synergy

• Answers the question

– How can different elements of our
business benefit each other?
• Goal is to create a situation where the
whole is greater than the sum of the parts

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 Developing International Strategies

Strategy
formulation

Strategy
implementation

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 Figure 11.2 Steps in International
Strategy Formulation

Develop a mission statement

Perform a SWOT analysis

Set strategic goals

Develop tactical goals and plans

Develop a control framework

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 Mission Statements

• Clarifies the organization’s purpose,

values, direction
• Communicates firm’s strategic direction
• Specifies firm’s target customers and
markets, principal products, geographical
domain, core technologies, concerns for
survival, plans for growth and profitability,
basic philosophy, and desired public
image

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 Mission Statements

• Wells Fargo
– Satisfy all our customers’ financial needs,
help them succeed financially, be known as
one of America’s great companies and the
number-one financial services provider in
each of our markets
• Carpenter Technology
– Major, profitable, and growing international
producer and distributor of specialty alloys,
materials, and components

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 SWOT Analysis

• Strengths
• Weaknesses
• Opportunities
• Threats

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 Environmental Scanning

An environmental scan is a
systematic collection of data about all
elements of the firm's external and
internal environments, including
markets, regulatory issues,
competitors' actions, production costs,
and labor productivity.

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 Figure 11.3 The Value Chain

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 Strategic Goals

Strategic goals are the major

objectives the firm wants to
accomplish through pursuing a
particular course of action.

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 Tactical Goals and Plans

• Middle • Examples
management – Hiring
issues
– Compensation
• Details of
– Career paths
implementation
– Distribution and
logistics

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 Control Framework

A control framework is the set of

managerial and organizational
processes that keep the firm moving
toward its strategic goals.

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 Figure 11. 4 Levels of
International Strategy

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 Corporate Strategy

• Single-Business Strategy
• Related Diversification
• Unrelated Diversification

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 Advantages of Related Diversification

• Less dependence on single product

• Greater economies of scale
• Entry into additional markets more
efficient and effective

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 Business Strategy

Differentiation

Overall cost leadership

Focus

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 Functional Strategies

Financial

Human
Marketing
resources

R&D Operations

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