Global Policy and Strategy

1
Global Policy and Strategy

• Week 5

2
Week 5 Learning Outcomes

• By the end of the session, you will
• Have a better understanding of the overall
  Strategic Management process and know how to
  structure your coursework so that it covers all
  aspects of the process
• Have completed our look at the various models
  used for strategic analysis and strategy
  formulation
• Have begun to apply these models in the context
  of a business case

3
Strategic Management
Strategic Analysis
Strategic Choice
Strategy Implementation
Johnson and Scholes 1997
4
Expectations and purposes
Resources, competences and capability
The environment
Strategic analysis
Organisation structure and design
Strategy Implementation
Strategic Choice
Bases of strategic choice
Resource allocation and control
Strategic Options
Strategy evaluation and selection
Managing strategic change
5
Target setting
Clarify corporate objectives Set target levels of
objectives
Gap analysis
Forecast future performance on future
strategies Identify gaps between forecasts and
targets

• External envirn. appraisal

• Internal appraisal

• Identify competitive advantage

Strategic appraisal
Re-define targets in the light of stage 3
information
Generate strategic options
Strategy formulation
Evaluate strategic options against targets and
appraisals
Take strategic decision
Strategy Implementation
Draw up action plans and budgets Monitor and
control
Argenti, 1980
6
Strategic Management and the teaching plan
Strategic Analysis
(Week 1 Overview) Weeks 2 -4 Environmental
scanning, Porter models
Weeks 5-6 International strategy
formulation Initiatives for global growth
Strategic Choice
Weeks 7-12 Implementation, market entry,
organisation structures, functional
strategies, evaluation and control
Strategy Implementation
Johnson and Scholes 1997
7
Strategic Management and coursework
Reasons for parent companys international
expansion (including an evaluation of the
companys historical performance,
products/service range, share of the market and
competitive position with in the
industry) Possible strategic choices available
to the parent company
Strategic Analysis
Strategic Choice
Reasons for choice of location for the
subsidiary Strategic methods of entry and the
possible consequences
The potential organisational and managerial
problems for the subsidiary operating in the new
international environment and You should provide
strategic advice for the subsidiary to overcome
the problems highlighted in v.
Strategy Implementation
Johnson and Scholes 1997
8
Strategic choice

• (Formulation)

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Domestic and International strategies

• Similarities
• What products?
• Where and how to make them?
• Where and how to sell them?
• Where and how to get the necessary resources?
• How to outperform the competition?

• Differences
• Global efficiencies (location efficiencies,
  economies of scale, economies of scope)
• Multinational Flexibility
• Worldwide Learning

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Strategic orientations (1)

• Geocentric
• Focus on profitability and local acceptance
• Profits redistributed globally
• Global products with local variations
• Regiocentric
• Focus on profitability and local acceptance
• Profits redistributed within the region
• Products standardised within the region

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Strategic orientations (2)

• Ethnocentric
• Focus on profitability
• Top-down style
• Profits brought back home
• Mass production
• Polycentric
• Focus on public acceptance
• Bottom-up style
• Profits kept in the host country
• Batch production

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Components of an International Strategy

• Distinctive competence
• What do we do exceptionally well?
• Scope of operations
• Where are we going to conduct business? (Applies
  both to geographical location and market niche)
• Resource deployment
• Synergy
• How can different elements of our business
  benefit each other?

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Levels of Strategy

• Corporate Strategy
• Single Business, Related Diversification,
  Unrelated Diversification
• Business Strategy
• Differentiation, Cost Leadership, Focus
• Functional Strategies
• Finance, Marketing, Operations, HRM, RD

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Corporate Strategies

• Single business
• Develops expertise but vulnerable to change
• Examples McDonalds, Dell
• Related Diversification
• Uses distinctive competence to strengthen
  competitiveness in related businesses
• Examples Casio, Accor SA, Pirelli
• Unrelated diversification
• Conglomerates (no longer fashionable)

15
Business strategies

• How to compete in each of the chosen markets?
• Establishment of Strategic Business Units (SBUs)
• Generic strategies differentiation, cost
  leadership, focus

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Porters international model
Extent of global centralisation/co-ordination
Global cost leadership
Global differentiation
Protected markets
Broad
Breadth of target segments within the industry
Global segmentation
National responsiveness
Narrow
Global strategy
Country-centred strategy
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Leontiades (1985) international portfolio model
Global High Share Strategy
Global Niche Strategy
Global
Scope
National High Share Strategy
National Niche Strategy
National
High
Low
Market Share Objectives
18
Four basic strategies
Sony
Global strategy
Transnational strategy
High
Ford
Pressures for global integration
Cadbury
International strategy
Multidomestic strategy
Toys R Us
Low
Low
High
Pressures for local responsiveness
Bartlett and Ghoshal, 1989
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International Strategy

• Transfer of valuable skills and products
  developed in the home market
• RD and control of product and marketing strategy
  tends to be centralised at home
• Examples McDonalds, Wal-Mart, Microsoft,
  Mercedes Benz

20
Multidomestic strategy

• Extensive customisation of products and marketing
  strategies to meet local conditions
• Corporation sees itself as a collection of
  relatively independent operating subsidiaries
• All activities established in each country,
  therefore high costs
• Example Phillips NV, Cadbury Schweppes

21
Global Strategy

• Taking advantage of experience curve and location
  economies
• The world is seen as a single marketplace
• Low cost strategy
• Standardised product worldwide
• Functions located in a small number of favourable
  
• countries
• Examples Intel, Texas Instruments, Sony

22
Transnational Strategy

• All ways of creating value are explored
• Experience curve and location economies
• Transferring core competencies within the firm
  (multi-directional) Global learning
• Paying attention to pressures for local
  responsiveness
• Authority not automatically centralised nor
  decentralised - placed where goals can best be
  achieved
• Examples Unilever, MTV, Ford