AD753 International Commerce Strategic Business Planning

Instructor: Jungwan Lee Date: March 19, 2003

Study Questions


What is the best entry strategy to use in reaching the Asian markets?


What type of entry and ownership approach would you recommend?

What type of marketing strategy will be most effective?



How could you use the four Ps of marketing to help implement strategy?

Strategic planning


The process of determining an organizations basic mission and longlong-term objectives, then implementing a plan of action for attaining this goal. What are the needs for strategic planning?

What is strategy?


Concept designed to help a company gain competitive advantage. The implicit definition of strategy:
 

  

Plan: provides information of intention Position: focus on competitive environment Pattern: Ploy: Perspective:

Strategic management process



A management process designed to spearhead strategic imperatives. 4 step process approach:

Analysis  Formulation  Implementation  Adjustment/Evaluation


CitiBank in China
   

1902 open offices in China 1949 withdraw their business from China when communists took power. 1984 return to China market


(Restricted to making local currency loans) (Making local currency loans, but limitation to the number of branches, the amount of loan..)

After joining China to WTO



  

New opportunity for B2B commerce (Hooked up with Commerce One to run Net-based Netpayment system) However, 70% of all financial assets in China controlled by the four commercial banks, which owned by government. 30% of all their loans are uncollectible) Nevertheless, Citibank sees China as a major market and is developing strategies to increase its presence there and ride out any financial storms.

Benefits of strategic planning



The plan helps an MNC to coordinate and monitor its far-flung faroperations. The plan helps an MNC to deal with political risk, competition. MNCs that earned a high percentage of their total sales in overseas markets, they did best with high intensity planning process.(22 German MNCs; 71%)

Approaches to Strategic planning



Four common approaches; Focusing on the economic imperative Addressing the political imperative Emphasizing the quality imperative Implementing an administrative coordination strategy

  

Economic imperative


A worldwide strategy based on cost leadership, differentiation, and segmentation. When the product is basically homogeneous and requires no alteration to fit the needs of the specific country, management uses a worldwide strategy that is consistent on a country-to-country basis. country-toWhen the product is regarded as a generic good and therefore does not have to be sold based on name brand or support service. EX) PC It is benefits from global outsourcing.


Ex) Columbia sportswear

Political imperative


Strategic formulation and implementation utilizing strategies that are countrycountryresponsive and designed to protect local market niches. Ex) Coca-Cola company Coca-

Quality imperative


Strategic formulation and implementation utilizing strategies of total quality management (TQM) to meet or exceed customers expectations and continuously improve products and services. *TQM is the management practices that are designed to make quality improvement an ongoing process. It takes a wide number of forms, such as crosscross-training personnel, process re-engineering, rereward systems, statistical quality control, selfselfmanaging and empowerment. Ex) automakers

Administrative coordination


Strategic formulation and implementation 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. Ex) Wal-Mart Wal-

Strategic predispositions


Ethnocentric predisposition Polycentric predisposition Regiocentric predisposition Geocentric predisposition

Ethnocentric


A nationalistic philosophy of management whereby the values and interests of the parent company guide the strategic decisions.

    

TopTop-down governance Global integration strategy Mass production technology Home country culture Repatriation of profits to home country

Polycentric


A philosophy of management whereby strategic decisions are tailed to suit the cultures of the countries where the MNC operates.

    

BottomBottom-up governance National responsiveness strategy Host country culture Batch production Retention of profits in host country

Regiocentric


A philosophy of management whereby the firm tries to blend its own interests with those of its subsidiaries on a regional basis.

    

Mutually negotiated governance (between region and subsidiaries) Regional integration strategy Regional culture Flexible manufacturing Redistribution within region

Geocentric


A philosophy of management whereby the companies try to integrate a global systems approach to decision making.

 

Mutually negotiated governance (within corporation) Global integration and national responsiveness Global products with local variations Redistributed globally

Basic steps in formulation



Internal resources analysis;



External environment analysis;



Identify a key factor for success

 

Assess risks and opportunities

 

Strengths Weaknesses

Opportunities Threats

Formulation of MNC goals 1



Profitability Level of profit ROI Profit growth Earnings per share growth

Marketing Total sales volume Market share Growth in sales volume Growth in market share

   

 

Formulation of MNC goals 2



Operations Ratio of foreign to domestic production volume Economic of scale via international production integration Quality and cost control

Finance Financing of foreign affiliates Taxation minimizing Optimum capital structure Foreign exchange management

Strategy implementation
  

Location The country Local issue

Ownership and entry Alliance: Licensing, Franchising, Export/Import Joint venture Mergers and acquisitions Expand facilities New facilities Wholly owned subsidiary

    

Functions in implementation
Marketing Production Finance

Product Price Promotion Place

Host country Home country Multi domestic Global outsourcing

Financing Taxation Foreign exchange Management

Summary of key points

   

There is a growing need for strategic planning among MNCs. A Company can use a combination of strategic planning. Strategy formulation consists of several steps. But based on SWOT analysis. Strategy implementation is the process of providing goods and services in accord with the predetermined plan of action.


With deciding location, entry ownership, functional strategies-marketing, production, strategiesfinance.

Discussion Questions


What is the best entry strategy of Ford to use in reaching China markets?


What type of entry and ownership approach would you recommend?

What type of marketing strategy will be most effective?



How could you use the four Ps of marketing to help implement strategy?