Class10_StrategicBusinessPlanning

8/6/2019 Class10_StrategicBusinessPlanning

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AD753 InternationalAD753 InternationalCommerceCommerce

Strategic BusinessStrategic Business

PlanningPlanning

Instructor: Jungwan LeeInstructor: Jungwan Lee

Date: March 19, 2003Date: March 19, 2003


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Study QuestionsStudy Questions

What is the best entry strategyWhat is the best entry strategyto use in reaching the Asianto use in reaching the Asianmarkets?markets?

What type of entry and ownershipWhat type of entry and ownershipapproach would you recommend?approach would you recommend?

What type of marketing strategyWhat type of marketing strategy

will be most effective?will be most effective? How could you use the four Ps ofHow could you use the four Ps of

marketing to help implementmarketing to help implementstrategy?strategy?


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Strategic planningStrategic planning

The process of determining anThe process of determining an

organizations basic mission andorganizations basic mission and

longlong--term objectives, thenterm objectives, thenimplementing a plan of action forimplementing a plan of action for

attaining this goal.attaining this goal.

What are the needs for strategicWhat are the needs for strategic

planning?planning?


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What is strategy?What is strategy?

Concept designed to help aConcept designed to help a

company gain competitivecompany gain competitive

advantage.advantage.

The implicit definition of strategy:The implicit definition of strategy:

Plan: provides information of intentionPlan: provides information of intention

Position: focus on competitivePosition: focus on competitive

environmentenvironment

Pattern:Pattern:

Ploy:Ploy:

Perspective:Perspective:


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Strategic managementStrategic management

processprocess

A management processA management processdesigned to spearhead strategicdesigned to spearhead strategicimperatives.imperatives.

4 step process approach:4 step process approach:

AnalysisAnalysis

FormulationFormulation ImplementationImplementation

Adjustment/EvaluationAdjustment/Evaluation


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CitiBank in ChinaCitiBank in China

1902 open offices in China1902 open offices in China

1949 withdraw their business from China when1949 withdraw their business from China whencommunists took power.communists took power.

1984 return to China market1984 return to China market (Restricted to making local currency loans)(Restricted to making local currency loans)

After joining China to WTOAfter joining China to WTO (Making local currency loans, but limitation to the number of(Making local currency loans, but limitation to the number of

branches, the amount of loan..)branches, the amount of loan..)

New opportunity for B2B commerceNew opportunity for B2B commerce

(Hooked up with Commerce One to run Net(Hooked up with Commerce One to run Net--basedbasedpayment system)payment system)

However, 70% of all financial assets in China controlledHowever, 70% of all financial assets in China controlled

by the four commercial banks, which owned byby the four commercial banks, which owned bygovernment. 30% of all their loans are uncollectible)government. 30% of all their loans are uncollectible)

Nevertheless, Citibank sees China as a major market andNevertheless, Citibank sees China as a major market andis developing strategies to increase its presence thereis developing strategies to increase its presence thereand ride out any financial storms.and ride out any financial storms.


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Benefits of strategic planningBenefits of strategic planning

The plan helps an MNC toThe plan helps an MNC tocoordinate and monitor its farcoordinate and monitor its far--flungflungoperations.operations.

The plan helps an MNC to deal withThe plan helps an MNC to deal withpolitical risk, competition.political risk, competition.

MNCs that earned a high percentageMNCs that earned a high percentageof their total sales in overseasof their total sales in overseas

markets, they did best with highmarkets, they did best with highintensity planning process.(22intensity planning process.(22German MNCs; 71%)German MNCs; 71%)


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Approaches to StrategicApproaches to Strategic

planningplanning

Four common approaches;Four common approaches;

Focusing on the economicFocusing on the economic

imperativeimperative

Addressing the political imperativeAddressing the political imperative

Emphasizing the quality imperativeEmphasizing the quality imperative

Implementing an administrativeImplementing an administrativecoordination strategycoordination strategy


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Economic imperativeEconomic imperative

A worldwide strategy based on cost leadership,A worldwide strategy based on cost leadership,differentiation, and segmentation.differentiation, and segmentation.

When the product is basically homogeneous andWhen the product is basically homogeneous andrequires no alteration to fit the needs of the specificrequires no alteration to fit the needs of the specific

country, management uses a worldwide strategycountry, management uses a worldwide strategythat is consistent on a countrythat is consistent on a country--toto--country basis.country basis.

When the product is regarded as a generic goodWhen the product is regarded as a generic goodand therefore does not have to be sold based onand therefore does not have to be sold based onname brand or support service. EX) PCname brand or support service. EX) PC

It is benefits from global outsourcing.It is benefits from global outsourcing.

Ex) Columbia sportswearEx) Columbia sportswear


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Political imperativePolitical imperative

Strategic formulation andStrategic formulation and

implementation utilizingimplementation utilizing

strategies that are countrystrategies that are country--

responsive and designed toresponsive and designed to

protect local market niches.protect local market niches.

Ex) CocaEx) Coca--Cola companyCola company


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Quality imperativeQuality imperative

Strategic formulation and implementation utilizingStrategic formulation and implementation utilizingstrategies of total quality management (TQM) tostrategies of total quality management (TQM) tomeet or exceed customers expectations andmeet or exceed customers expectations andcontinuously improve products and services.continuously improve products and services.

*TQM is the management practices that are*TQM is the management practices that aredesigned to make quality improvement an ongoingdesigned to make quality improvement an ongoingprocess. It takes a wide number of forms, such asprocess. It takes a wide number of forms, such ascrosscross--training personnel, process retraining personnel, process re--engineering,engineering,reward systems, statistical quality control, selfreward systems, statistical quality control, self--managing and empowerment.managing and empowerment.

Ex) automakersEx) automakers


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Administrative coordination Administrative coordination

Strategic formulation andStrategic formulation and

implementation in which the MNCimplementation in which the MNC

makes strategic decisions based onmakes strategic decisions based on

the merits of the individual situationthe merits of the individual situationrather than using a predeterminedrather than using a predetermined

economically or politically driveneconomically or politically driven

strategy.strategy.

Ex) WalEx) Wal--MartMart


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Strategic predispositionsStrategic predispositions

Ethnocentric predispositionEthnocentric predisposition

Polycentric predispositionPolycentric predisposition

Regiocentric predispositionRegiocentric predisposition

Geocentric predispositionGeocentric predisposition


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EthnocentricEthnocentric

A nationalistic philosophy ofA nationalistic philosophy ofmanagement whereby the values andmanagement whereby the values andinterests of the parent company guideinterests of the parent company guidethe strategic decisions.the strategic decisions.

TopTop--down governancedown governance

Global integration strategyGlobal integration strategy

Mass production technologyMass production technology

Home country cultureHome country culture Repatriation of profits to homeRepatriation of profits to home

countrycountry


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PolycentricPolycentric

A philosophy of management wherebyA philosophy of management whereby

strategic decisions are tailed to suit thestrategic decisions are tailed to suit the

cultures of the countries where the MNCcultures of the countries where the MNC

operates.operates.

BottomBottom--up governanceup governance

National responsiveness strategyNational responsiveness strategy

Host country cultureHost country culture

Batch productionBatch production

Retention of profits in host countryRetention of profits in host country


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RegiocentricRegiocentric

A philosophy of management wherebyA philosophy of management wherebythe firm tries to blend its own intereststhe firm tries to blend its own interestswith those of its subsidiaries on awith those of its subsidiaries on aregional basis.regional basis.

Mutually negotiated governanceMutually negotiated governance(between region and subsidiaries)(between region and subsidiaries)

Regional integration strategyRegional integration strategy

Regional cultureRegional culture

Flexible manufacturingFlexible manufacturing

Redistribution within regionRedistribution within region


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GeocentricGeocentric

A philosophy of management wherebyA philosophy of management whereby

the companies try to integrate a globalthe companies try to integrate a global

systems approach to decision making.systems approach to decision making.

Mutually negotiated governanceMutually negotiated governance(within corporation)(within corporation)

Global integration and nationalGlobal integration and national

responsivenessresponsiveness

Global products with local variationsGlobal products with local variations

Redistributed globallyRedistributed globally


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Basic steps in formulationBasic steps in formulation

InternalInternal

resourcesresources

analysis;analysis;

Identify a keyIdentify a keyfactor forfactor for

successsuccess

StrengthsStrengths

WeaknessesWeaknesses

ExternalExternal

environmentenvironment

analysis;analysis;

Assess risksAssess risksandand

opportunitiesopportunities

OpportunitiesOpportunities ThreatsThreats


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Formulation of MNC goals 1Formulation of MNC goals 1

ProfitabilityProfitability

Level of profitLevel of profit

ROIROI

Profit growthProfit growth

Earnings perEarnings per

share growthshare growth

MarketingMarketing

Total salesTotal sales

volumevolume

Market shareMarket share

Growth in salesGrowth in sales

volumevolume Growth inGrowth in

market sharemarket share


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Formulation of MNC goals 2Formulation of MNC goals 2

OperationsOperations

Ratio of foreign toRatio of foreign to

domesticdomesticproduction volumeproduction volume

Economic of scaleEconomic of scale

via internationalvia international

productionproduction

integrationintegration

Quality and costQuality and cost

controlcontrol

FinanceFinance

Financing ofFinancing of

foreign affiliatesforeign affiliates TaxationTaxation

minimizingminimizing

Optimum capitalOptimum capital

structurestructure Foreign exchangeForeign exchange

managementmanagement


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Strategy implementationStrategy implementation

LocationLocation

The countryThe country

Local issueLocal issue

Ownership andOwnership andentryentry

Alliance: Licensing,Alliance: Licensing,

Franchising,Franchising,Export/ImportExport/Import

Joint ventureJoint venture

Mergers andMergers andacquisitionsacquisitions

Expand facilitiesExpand facilities New facilitiesNew facilities

Wholly ownedWholly ownedsubsidiarysubsidiary


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Functions in implementationFunctions in implementation

Marketing

Product

Price

Promotion

Place

Production

Host country

Home country

Multi domestic

Global

outsourcing

Finance

Financing

Taxation

Foreign

exchange

Management


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Summary of key pointsSummary of key points

There is a growing need for strategicThere is a growing need for strategicplanning among MNCs.planning among MNCs.

A Company can use a combination ofA Company can use a combination ofstrategic planning.strategic planning.

Strategy formulation consists of severalStrategy formulation consists of severalsteps. But based onsteps. But based on SWOT analysis.SWOT analysis.

Strategy implementation is the process ofStrategy implementation is the process ofproviding goods and services in accordproviding goods and services in accord

with the predetermined plan of action.with the predetermined plan of action. With deciding location, entry ownership,With deciding location, entry ownership,

functional strategiesfunctional strategies--marketing, production,marketing, production,finance.finance.


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Discussion QuestionsDiscussion Questions

What is the best entry strategyWhat is the best entry strategyof Ford to use in reaching Chinaof Ford to use in reaching Chinamarkets?markets?

What type of entry and ownershipWhat type of entry and ownershipapproach would you recommend?approach would you recommend?

What type of marketing strategyWhat type of marketing strategywill be most effective?will be most effective?

How could you use the four Ps ofHow could you use the four Ps ofmarketing to help implementmarketing to help implementstrategy?strategy?

Class10_StrategicBusinessPlanning

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