REVISION

FINAL EXAM
CHAPTER 6 : FORMULATING STRATEGY

1. What is strategy? What is strategic planning?

Strategy is its choice of business or businesses in which to operate and the
ways in which it differentiates itself from its competitors.
Strategic planning is the process a firms managers evaluate the future
prospects of the firm and decide on appropriate strategies to achive longterm
objectives.
Strategic planning is the process of determine an organizations basic mission
and long term objectives, then implementing a plan of action for attaining
these goals. Its also process takes on added dimensions when companies go
international.
a. List the reasons a company would have if it wants to operate
internationally.
Companies of all sizes go international for different reasons, some reactive
and some proactive. The threat of their own decreased competitiveness is the
overriding reason many large companies adopt an aggressive global strategy.
To remain competitive, these companies want to move fast to build strong
positions in key world markets with products tailored to the common needs of
customers.
1. Reactive / Defensive Reason
i.
Globalization of competitors
If left unchallenged, competitors who already have overseas
operations of investment may get so entrenched in foreign markets
that it becomes difficult for other companies to enter at a later time.
The lower costs and market power available to these competitors
operating globally may also give them an advantage domestically.
ii.

Trade barriers
Barries such as tariffs, quotas, buy local policies, and other
restrictive trade pratices can make exports to foreign markets too
expensive and too impractical to be competitive. Trade barriers
have been lessened in recent years as a result of trade
agreements, wich have led to increased exports, some countries
restrictive trade barriers do provide another reactive reason that
companies often switch from exporting to overseas manufacturing.

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iii.

Regulations and restrictions

Regulations and restrictions by a firms home government may
become so expensive that companies will seek out less restrictive
foreign operating environments.

iv.

Customer demands
Operations in foreign frequently start as a response to customer
demands or as a solution to logistical problems. For example,
certain foreign costumers, demand that their supplying company
operate in their local region so that they habe better control over
their supplies, forcing supplier to comply or lose the business.

2. Proactive / Aggressive Reason

i.

Economics of scale
The reason for many large firms to expand overseas is to achive
world-scale volume to make the fullest use of modern capitalintensive manufacturing equipment and to amortize staggering
research and development cost when facing brief product life
cycles.With the cost of keeping up with new technologies, can often
be recouped only through global sales.

ii.

Growth opportunities
companies in mature markets in developed countries experience a
growth imperative to look for new opportunities in emerging
markets. When expansion opportunities become limited at home,
firms are often driven to seek expansion through new international
markets. A mature product or service with restricted growth in its
domestic market often has new life in another country, where it will
be at an earlier stage of its life cycle. In addition, new markets
abroad provide a place to invest surplus profits as well as employ
underutilized resources in management, technology, and
machinery.

iii.

Resource access and cost savings

Resource access and cost savings entice many companies to
operate from overseas bases. The availability of raw materials and
other resources offers both greater control over inputs and lower
transportation costs. Lower labor costs (for production, service, and
technical personnel), another major consideration, lead to lower unit
costs and have proved a vital ingredient to competitiveness for
many companies.

iv.

Incentives

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FINAL EXAM
Governments in countries seeking new infusions of capital,
technology, and know how willingly provide incentives tax
exemptions, tax holidays, subsidies, loans, and the use of property.
Because they both decrease risk and increase profits, these
incentives are attractive to foreign companies.

b. List the seven steps in the strategic management process.

Strategic
Planning
Process

Implement
Process

1.

Define / clarify
Mission and objective

2.

Assess environtment for threats, apportunities

3.

Assess internal strengths And weaknesses

4.

Consider alternatives strategies Using competitive

analysis

5.

Choose strategy

6.

Implement strategy through Complementary

structure, systems and Operational processes

7.

Set up control and evaluation systems to ensure

success, Feedback to planning

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FINAL EXAM

2. What is environmental scanning? What areas are most commonly focused in

environmental scanning?
Environmental scanning is the process gathering information and forecasting
relevant trends, competitive actions and circumstances that will effect
operations in geographic areas of potential interest.
Scanning should focused in following major variables:
i.
Politicals instability
ii.
Currency instability
iii.
Nationalism
iv.
International competition
v.
Environmental scanning
a. What is the difference between environmental scanning at the
multinational level and the regional level?
Multinational level provides a broad assessment of significant worldwide
trends, trought indentification, forecasting and monitoring activities. These
trends would include the political and economic developments of nations
around the world, as well as global technological progress. From this
information, managers can choose certain appropriate regions of the world to
consider further.
In the other hand, at the regional level, the analysis should focus more on the
critical environmental factors that would generate threats or opportunities for
marketing the company's products, services, or technologies.
b. Describe the various sources of information that are available to managers.
The various sources of information that are available to managers are:
i.
ii.
iii.
iv.

Computer databases
- Having business information services that are tailored to specific
industries and regions.
Corporate Clipping services
Information packages
Alert field personnel
- with firsthand observations, can provide up to date and relevant
information for the firm

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FINAL EXAM

3. What is a SWOT analysis? How is it used in strategic planning?

A SWOT Analysis (STrenghts, Weaknesses, Opportunities and Threats) in
wich firms capabilities relative to those of its competitors are assessed as
pertinent to the opportunities and threats in the environtment for those firms.
In comparing their company with potential international competitors in host
market, it is useful for managers to draw up a competitive position matrix for
each potential location. This analysis is used after assessing the external and
internal environments to help firms determine their strategic direction.
a. What are the two levels of strategic alternatives that a firm must consider
when competing internationally?
i.

The first level:

Global strategic alternatives.
determines what overall approach to the global marketplace a firm
wishes to take.

ii.

The second level:

Entry strategy alternatives
Applies to firms of any size, these alternatives determine what specific
entry strategy is appropriate for each country in which the firm plans to
operate.

b. Compare and contrast globalization and regionalization.

Globalization is the strategy of treating the world as an undifferentiated
marketplace, and the establishment of worldwide operations and the
development of standardized products and marketing.
A regionalization strategy focuses more on certain regions of the world only
and their distinctiveness. With a regionalization strategy, local markets are
linked together within a region allowing more local responsiveness and
specialization. Globalization requires establishing worldwide economies of
scale meanwhile regionalization requires flexibility and adaptability.

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4. Describe the strategies of globalization and regionalization. When can each
strategy be used most effectively?
A globalization strategy is based on the premise that the world can be treated as
an undifferentiated marketplace and the firm can develop and market
standardized products. The rationale is to compete by establishing worldwide
economies of scale, offshore manufacturing, and international cash flows.
A regionalization strategy is more effective for those firms that are in
multidomestic industries. In such cases, local markets are linked together within a
region, allowing more local responsiveness and specialization. Top managers
within each region decide on their own investment locations, product mixes, and
competitive positioning, thus running their subsidiaries as quasi-independent
organizations. Such a strategy often reduces environmental risk and allows for
more adaptation to the local market. Samsung Tesco is an example of a firm that
has successfully used the regionalization strategy

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FINAL EXAM