GM - Chapter 8 - Strategy Formulation and Implementation Flashcards
Strategic Management:
the process of determining an organization’s basic mission and long-term objectives, then implementing a plan of action for pursuing the mission and attaining objectives
- Growing need for strategic management related to increasingly diversified operations in continuously changing international environment
Benefits of Strategic Planning
- 70 percent of 56 U.S. MNC subsidiaries had comprehensive 5 to 10-year plans according to one study
- Evidence for effectiveness of planning is mixed. Strategic planning does not always result in higher profitability
4 Approaches to Strategic Planning
- Economic Imperative
- Administrative Coordination
- Political Imperative
- Quality Imperative
Economic imperative
- focused MNCs employ worldwide strategy based on cost leadership, differentiation, and segmentation
- Strategy also used when product is regarded as generic and therefore is not sold on name brand or support service
- Often sell products for which large portion of value is added in upstream activities of industry value chain
- –Research and development
- –Manufacturing
- –Distribution
political imperative
- are country-responsive; approach designed to protect local market niches
- These MNCs often use country-centered or multi-domestic strategy
- Success of product or service depends heavily on Marketing, Sales, and Service
Quality Imperative
has 2 paths:
- Change in attitudes and raising of expectations for service quality
- Implementation of management practices designed to make quality improvement an ongoing process
- –TQM Total Quality Management (see next slide)
Total Quality Management
- Cross-train personnel to do jobs of all members in work group
- Process re-engineering designed to help identify/eliminate redundant tasks
- Reward system designed to reinforce quality performance
- Quality operationalized by meeting or exceeding customer expectations
- Quality strategy formulated at top management level and diffused through organization
- techniques: traditional inspection and statistical quality control; cutting edge Human Resource Management techniques such as self-managing teams and empowerment
Administrative Coordination Imperative
- MNC makes strategic decisions based on merits of individual situation rather than predetermined economic or political strategy
- Least common approach to formulation and implementation of strategy
- Many large MNCs work to combine all 4 of the approaches to strategic planning
Fundamental Tension:
The globalization vs. national responsiveness conflict.
Global integration:
Production and distribution of products and services of a homogenous type and quality on a worldwide basis
National responsiveness:
need to understand different consumer tastes in segmented regional markets and respond to different national standards and regulations imposed by autonomous governments and agencies
Global Integration vs. National Responsiveness
4 box grid: Y-axis - Global responsiveness; X-axis - National Responsiveness
- upper left quadrant: Global strategy (high GI, Low NR)
- upper right quadrant: Transnational (high, high)
- lower left quandrant: International Strategy (low, low)
- lower right quandrant: Multi-domestic (low GI, High NR)
Approaches to Strategic Planning
Appropriateness of each strategy depends on pressures for cost reduction and local responsiveness in each country served:
- -Global strategy is low-cost strategy attempting to benefit from scale economies in production, distribution, marketing
- -Transnational strategy pursued when high cost pressures and high demand for local responsiveness
Basic Elements in Strategic Planning for International Management
- External Environmental Scanning for Opportunities and Threats
- Internal Resource Analysis of Strengths and Weaknesses
- Strategic Planning GOALs
- Implementation
Environmental Scanning
- Regulatory, Social, Political, Ecomomical, Technological, Industry/Market
- Provides management with accurate forecasts of trends relating to external changes in geographic areas where firm is doing business or considering doing business
- Changes relate to economy, competition, political stability, technology, demographic and consumer data