strategic planning

Strategic
Planning
Chapter 9
Prepared By:
Ruquia Batool
Lubna Mueen Arbi
Yasmeen
Jamshaid

Islamia University Bahawalpur Chapter 9
Learning Objectives
1. Globalization
2. Strategy planning
3. Strategy orientation
4. Strategic orientations
5. Strategic formulation
6. Strategic implementation
7. Control and evaluation.

CHAPTER 9
Strategic planning:
The process of evaluating the enterprise’s
environment and its internal strengths,
identifying long- and short-range objectives
and implementing a plan of action for
attaining these goals.

Globalization
“ Globalization reflects a business orientation
based on the belief that the world is becoming more
homogenous and that distinctions between national
markets are not only fading, but may eventually
disappear”(challenges & hindrance removed by
doing swot )
Growing scale and mobility
Abilities to leveraging the knowledge and talent
Emerging market _____to______Mega Market
china is obvious example
Partnering with global companies (Merger ,Acquisition,
synergies)

Evolution of Global
Strategy
Core Business Strategy
Develop Core
Business Strategy
Internationalize
the Strategy
Globalize
the Strategy
Country
A
Country
B
Country
C
Country
D
Country
E
Here the MNCs expand business all around the
world

Globalization drivers
These are the factors / forces both internal and external forces will create
favorable
Conditions for the development of strategy and the resources allocation on
the global basis
 Market factors
 Cost factors
 Environmental
factors
 Competitive factors

Market Factors
Level of demand (spending
habits, educational
background,aspiraation)
Purchasing power
Newest technology
Cross border retail alliance
Channel of distribution
E – Business Strategy
 The cost inefficiencies
Avoiding duplication of effort
Size is a major asset
Make research and development

Companies take action to match
competitors’ moves
Companies look for less
competitive markets
Market presence necessary to
execute global strategies
Companies take action to match
competitors’ moves
Companies look for less
competitive markets
Market presence necessary to
execute global strategies
Rapid technological evaluation
Focus on niche market
Take idea and solution
Solve problems of customers

Strategic orientations
1. Ethnocentric predisposition: The tendency of a manager
or multinational company to rely on the values and
interests of the parent company in formulating and
implementing the strategic plan(people do not needed
skill expertise to make best their business).
2. Polycentric predisposition: The tendency of a
multinational to tailor its strategic plan to meet the needs
of the local culture.(every foreign operation is different
hard to understand )
3. Regiocentric predisposition: The tendency of a
multinational to use a strategy that addresses both local
and regional needs.
4. Geocentric predisposition: The tendency of a
multinational to construct its strategic plan with a global
view of operations
a. produce products with local variation, according to regional
need
b. best staff hired to run the operationIslamia University Bahawalpur Chapter 9

Strategy formulation
Strategic formulation:
the process of evaluating the external
arena and its internal strengths
(resources).
External environmental assessment:
 information gathering;
 information assessment.
Internal environmental assessment:
 physical resources and personnel
competencies;
 value chain analysis.

External environmental
assessment:
 Information gathering:
Environmental scan is conducted to identify
competitor strengths and weaknesses and
to target areas for attack.
 Information assessment:
After gathering information on the
competition and the industry, MNEs then
evaluate the data. Five force model is used
to make an overall assessment.

Conducting an Environmental Scan
 Four of the most common methods for
conducting an environmental scan are:
 Asking experts in the industry to discuss industry
trends and to make projections about the future.
 Using historical industry trends to forecast future
developments.
 Asking knowledgeable managers to write scenarios
describing what they foresee for the industry over
the next two to three years.
 Using computers to simulate the industry
environment and to generate likely future
developments.

Examining the five forces that
determine industry competitiveness
 One of the most common approaches to
make an overall evaluation is based on
the five forces that determine industry
competitiveness:
 buyers
 suppliers
 potential new entrants to the industry
 the availability of substitute goods and
services
 rivalry among the competitors.

Invest Invest protect
Invest protect harvest
protect harvest harvest
Market portfolio matrix
Business position
High Medium lowC
o
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y
A
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a
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e
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e
ss
H
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g
h
M
e
d
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L
o
w

Internal environmental
assessment
 It helps to pinpoint MNE strengths and
weaknesses.
 There are two specific areas the MNE will
examine in this assessment:
 physical resources and personnel
competitiveness;
 the way in which value chain analysis can
be used to bring these resources together
in the most synergistic and profitable
manner.

Value chain analysis
 Value chain: The way in which primary and support
activities are combined.
 Primary activities: inbound logistics, operations,
outbound logistics, marketing & sales and service.
 Support activities: firm infrastructure, HRM,
technology management and procurement.
 Analysis of the value chain can also help a company
to determine the type of strategy that will be most
effective.

Three generic strategies
 Cost strategy: A strategy that relies on low price
through the pursuit of cost reductions
 Differentiation strategy: A strategy directed
toward creating something that is perceived as
being unique
 Focus strategy: A strategy that concentrates on
a particular buyer group and segments

Goal Setting
External and internal environmental analyses
provide an MNE with the information
needed for setting goals. Some of these goals will
be determined during the external analysis,
as the company identifies opportunities it wants to
exploit. Others will be finalized after
the value chain analysis is complete.

Strategy implementation

Strategy implementation
 Strategy implementation is the process of
attaining goals by using the organizational
structure to execute the formulated strategy
properly.

 There are many areas of focus in this process,
some of the most important are:
 Location
 Ownership decisions
 A strategic alliance is an agreement between two or
more competitive MNEs for the purpose of serving a
global market.
 An international joint venture (IJV) is an agreement
between two or more partners to own and control an
overseas business (setting up a new business entity).
 Functional area implementation
 Marketing, manufacturing, finance, procurement,
technology and human resources.
Strategy implementation (Continued)

Control and evaluation

 The strategy formulation and implementation processes
are a prelude to control and evaluation.
 This process involves an examination of the MNE’s
performance for the purpose of determining:
 how well the organization has done;
 what actions should be taken in the light of this
performance.
Control and evaluation

Common Methods of Measurement
 Six of the most common methods of measurement
used for control and evaluation purposes:
 return on investment (ROI)
 sales growth and/or market share
 costs
 new product development
 MNE/host-country relations
 management performance.

Localizing Global Moves
Balancing what country managers do and
what global product managers do
 Management Processes
 Transfer of information
 Personnel interchange to facilitate philosophy, strategy,
actions
 Headquarters should coordinate and leverage resources
 Centralized decision making authority
 Develop a strategy jointly
 Permit local managers to develop own programs within
specified parameters and with approval
 Motivate by participation and autonomyIslamia University Bahawalpur Chapter 9

Organizational Structures
 Various organizational structures have emerged to
support the globalization effort:
 Global or regional product managers and their support
groups at headquarters
 Matrix structure – Effective system for managing today’s
global marketplace
 Global account management – Builds relationships with
important customers and allows for the development of
internal systems and interaction

Two Dimensions of
Corporate Culture
 Dimension One – The overall way a company
holds its operations together making them a
single entity
 Dimension Two – Commitment to the global
marketplace
30 Czinkota: International Business, 8e

Focus on Culture:
Staffing Creatively
Companies are trying to reduce their reliance on the traditional
expatriate to keep costs down and maintain effectiveness. Many
expatriates are charged with finding their replacements as quickly
as possible. However, promising local candidates become
expatriates themselves when they are asked to work in the head
office to gain experience. Some companies have successfully
encouraged local executives to step up to important roles.

Local Company in a Global
Environment
 The global marketplace presents significant
challenges and opportunities for local firms
 Strategies depend on both external and internal
realities
 Liberalization may mean hardship for some
companies as a result of economic integration or
WTO membership

Competitive Strategies for Local Companies
 A local company that sells out to a
global player or becomes part of an
alliance
 A local company that has assets that
give it a competitive advantage only
in its home market
 A local company whose assets are
transferable, allowing it to compete
head-on with established global
players worldwide
 A local company whose assets are
transferable, allowing it to compete
head-on with established global
players worldwide
Dodger
Defender
Contender
Extender

strategic planning

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