International
Competitive Strategy
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
12-2
1-2
Learning Objectives
12-3
1-3
Motivations For Companies
To Pursue IB Opportunities
LO1
12-4
1-4
The Competitive Challenge Facing
Managers of International Business
Managers must
quickly identify and exploit opportunities wherever
they occur, domestically and internationally
fully understand why, how, where, and when to do
business in specific world markets
know the company’s strategic mission, its
strengths and its weaknesses
LO1
12-5
1-5
What is International Strategy?
1-6
International Strategy
LO1
12-7
1-7
Competitive Advantage
LO1
12-8
1-8
Why Plan Globally?
LO1
12-9
1-9
Why is Global Strategic
Planning Important?
1-10
Global Strategic Planning Process
1-11
Global Strategic Planning Process
LO2
12-12
1-12
Uncontrollable Forces Assessment
LO2
12-13
1-13
Analyze Corporate
Controllable Variables
A controllable forces analysis
is a situational analysis
involves forecasting
involves a value chain analysis of firm’s activities
from raw materials to end products to final
customer delivery
Who are the target customers?
What value do we deliver to them?
How will we create this value?
LO2
12-14
1-14
The Value Chain
Adapted from M. E. Porter, Competitive Advantage, New York: Free Press, 1985
LO2
12-15
1-15
Analyze Corporate
Controllable Variables
Competitive advantage can be gained through
leveraging organizational knowledge across national
borders
Knowledge as a Controllable Corporate Resource
Capabilities of employees
Structures, systems, organizational routines
Build knowledge database and transfer best
practices
Protect tacit and explicit knowledge from competitors
LO2
12-16
1-16
Tacit - Explicit Knowledge
Tacit Knowledge
Embedded in individuals
Difficult to express in words, pictures, formulas
Difficult to transmit to others
Lost when a valued manager leaves
Explicit knowledge
Easy to communicate with words, pictures,
formulas, etc.
Can be documented in company-wide knowledge
bases
LO2
12-17
1-17
Vision and Mission Statements
LO3
12-18
1-18
Define the Corporate Business,
Vision, and Mission Statements
LO3
12-19
1-19
Set Corporate Objectives
Objectives
Direct the firm’s course of action
Maintain action within the mission’s boundaries
Ensure the mission’s continuing existence
To implement an effective strategy quantifiable
objectives are important
LO3
12-20
1-20
Formulate Competitive Strategies
LO3
12-21
1-21
Formulate Competitive Strategies
For the International Market Place
Formulation of international strategy must consider two
opposing forces
Reduction of costs: achieved best through standardization
and global integration of operations
Adaptation to local markets: achieved best through more
local autonomy
Basic strategy types address pressures for cost reduction and
local adaptation
Home Replication
Multidomestic
Regional
Global
Transnational
LO4
12-22
1-22
Cost and Adaptation Pressures and Their
Implications for International Strategies
Adapted from C. Bartlett and S. Ghoshal. Managing Across Borders: The Transnational Solution, 2002
2nd ed., Cambridge: Harvard Business Press LO4
12-23
1-23
Home Replication Strategy
The home replication strategy centralizes product
development functions in the home country
developed products are then transferred to
foreign markets in order to capture additional
value
microsoft, mcdonald’s
The company has to possess a distinctive
competence that local companies lack
Headquarters maintains control over marketing and
product strategy
Subsidiaries leverage the home country capabilities
LO4
12-24
1-24
Multidomestic Strategy
LO4
12-25
1-25
Global Strategy
LO4
12-26
1-26
Transnational Strategy
The transnational strategy is used when pressures for
cost effectiveness and local adaptation are equally
important
Company locates activities where most beneficial for
the firm globally
Upstream value chain activities will be more
centralized
Downstream activities will be more localized
Achieving an optimal balance is challenging
Strategic decisions, structures and systems will be
complex
LO4
12-27
1-27
Standardization and Planning
LO4
12-28
1-28
Scenarios
LO4
12-29
1-29
Types of Plans That Can
Result From Scenarios
Contingency Plans
For the best-or-worst-case scenarios
For critical events that could have a severe impact
on the firm
Tactical Plans (Operational)
Spell out in detail how objectives will be reached in
each case
Short-term
LO4
12-30
1-30
Strategic Plan Features: Sales
Forecast and Budget
Sales Forecast
Provides management with an estimate of the
revenue to be received and the units to be sold
Provides assumptions for cost and capital
requirements
Budget
During planning, budgets coordinate the functions
within the firm and provide management with a
detailed statement of future operating results
LO4
12-31
1-31
Plan Implementation Facilitators:
Policies
LO4
12-32
1-32
Plan Implementation Facilitators:
Procedures
LO4
12-33
1-33
Performance Measures
LO4
12-34
1-34
Kinds of Strategic Plans
Time Horizon
Strategic plans may be classified as short,
medium, or long term
Level in the Organization
Each organizational level will have its level of
plan
Functional area
LO4
12-35
1-35
Methods of Planning
Top-down planning
Begins at the highest level in the
organization and continues downward
definition of the business
mission statement
company objectives
financial assumptions
content of the plan
special issues
LO4
12-36
1-36
Methods of Planning
Bottom-Up Planning
Begins at the lowest level in the organization and
continues upward
Iterative Planning
Repetition of the bottom-up or top-down planning
process until all differences are reconciled
LO4
12-37
1-37
New Directions in Planning
LO5
12-38
1-38
New Directions in Planning
LO5
12-39
1-39
Summary: New International
Planning Process
Top management assumes explicit strategic
decision-making role, decides how things ought to
be, does not focus on analyses of how things are
Planning changes from forecasting to creativity
Processes and tools that assume a future much like
the past must be replaced by a mind-set focused on
change as a source of competitive advantage
Planners change from purveyors of incrementalism
to crusaders for action
Strategic planning restored to core of line
management responsibilities
LO5
12-40
1-40
Competitor Analysis
Competitor Analysis
Process in which principal competitors are
identified and their objectives, strengths,
weaknesses, and product lines are assessed
Industrial Espionage
Act of spying on competitors to learn secrets about
strategy and operations
LO6
12-41
1-41
Competitor Intelligence Systems
LO6
12-42
1-42
Sources of Information
Source of information within the firm include sales
representatives, librarians, and technical and R&D
people
Information can also be sourced from published
material including technical journals, databases, the
internet, industry reports, and public documents
Suppliers and customers can be information sources
The employees of competitors’ can provide
information
Direct observation or analysis of physical evidence is
another way to gain information
Technical people
LO6
Reverse engineering 12-43
1-43
Benchmarking
Benchmarking measures a firm’s performance
against the performance of others
Internal: compares firm’s operations amongst
each other
Competitive: compares firm with a direct
competitor
Functional: compares similar functions of firms
in industry
Generic: compares operations in unrelated
industries
LO6
12-44
1-44