Global Policy and Strategy :Global Policy and Strategy Week 5


Week 5 – Learning Outcomes :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


Strategic Management :Strategic Management Strategic Analysis Johnson and Scholes 1997 Strategic Choice Strategy Implementation


Slide 4:Strategic analysis Strategic Choice Strategy Implementation Bases of strategic choice Strategic Options Strategy evaluation and selection The environment Expectations and purposes Resources, competences and capability Managing strategic change Resource allocation and control Organisation structure and design


Slide 5:Argenti, 1980 Target setting Gap analysis Clarify corporate objectives Set target levels of objectives Draw up action plans and budgets Monitor and control Forecast future performance on future strategies Identify gaps between forecasts and targets Generate strategic options Take strategic decision Evaluate strategic options against targets and appraisals External envirn. appraisal Internal appraisal Identify competitive advantage Re-define targets in the light of stage 3 information Strategic appraisal Strategy formulation Strategy Implementation


Strategic Management and the teaching plan :Strategic Management and the teaching plan Strategic Analysis Johnson and Scholes 1997 Strategic Choice Strategy Implementation (Week 1 Overview) Weeks 2 -4 Environmental scanning, Porter models Weeks 5-6 International strategy formulation Initiatives for global growth Weeks 7-12 Implementation, market entry, organisation structures, functional strategies, evaluation and control


Strategic Management and coursework :Strategic Management and coursework Strategic Analysis Johnson and Scholes 1997 Strategic Choice Strategy Implementation 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. Reasons for parent company’s international expansion; (including an evaluation of the company’s historical performance, products/service range, share of the market and competitive position with in the industry); Possible strategic choices available to the parent company; Reasons for choice of location for the subsidiary; Strategic methods of entry and the possible consequences;


Strategic choice :Strategic choice (Formulation)


Domestic and International strategies :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


Strategic orientations (1) :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


Strategic orientations (2) :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


Components of an International Strategy :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?


Levels of Strategy :Levels of Strategy Corporate Strategy Single Business, Related Diversification, Unrelated Diversification Business Strategy Differentiation, Cost Leadership, Focus Functional Strategies Finance, Marketing, Operations, HRM, R&D


Corporate Strategies :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)


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


Porter’s international model :Porter’s international model Extent of global centralisation/co-ordination Breadth of target segments within the industry Global strategy Country-centred strategy Broad Narrow Global segmentation National responsiveness Global cost leadership Global differentiation Protected markets


Leontiades (1985) international portfolio model :Leontiades (1985) international portfolio model Global High Share Strategy Global Niche Strategy Market Share Objectives Scope Global National High Low National High Share Strategy National Niche Strategy


Four basic strategies :Four basic strategies High Low Pressures for global integration Low High Pressures for local responsiveness Bartlett and Ghoshal, 1989 Global strategy Transnational strategy International strategy Multidomestic strategy Sony Toys “R” Us Ford Cadbury


International Strategy :International Strategy Transfer of valuable skills and products developed in the home market R&D and control of product and marketing strategy tends to be centralised “at home” Examples – McDonalds, Wal-Mart, Microsoft, Mercedes Benz


Multidomestic strategy :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


Global Strategy :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


Transnational Strategy :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