IP_314 International Management WEEK 6 Strategy choice in International Management What strategies do MNCs employ? Porter’s generic strategies as a basis, value chain, outsourcing Analysis of industry and competition Multinational strategies MNCs’ networks and strategic alliances Optional: Marketing strategy supporting the multinational strategy (in brief) Central European Study Programme Ilya Bolotov, Ph.D., MBA
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IP_314International ManagementWEEK 6 Strategy choice in International ManagementWhat strategies do MNCs employ?Porter’s generic strategies as a basis, value chain, outsourcingAnalysis of industry and competitionMultinational strategiesMNCs’ networks and strategic alliancesOptional: Marketing strategy supporting the multinational strategy (in brief)
CentralEuropeanStudyProgramme
Ilya Bolotov, Ph.D., MBA
Outline• Strategy in international business
– Generic strategies– Value chain and Outsourcing– Distinctive competencies– Competitive strategies and Diversification
• Strategy formulation– Porter’s Five Forces model– Key success Factors– Competitor and situation analysis– Corporate strategy selection– Impact of globalization
• Impacts of globalization• Networks and strategic alliances • Optional: Marketing strategy supporting business strategy
31
Strategy Formulation: Traditional Approaches• Strategy formulation: process by which managers
select the strategies to be used by their company.
• Popular analysis techniques:– Competitive dynamics of the industry,– Company’s competitive position in the industry,– Opportunities and threats faced by their company.– Company’s strengths and weaknesses.
Source: [C1]
32
Industry and Competitive Analysis
Porter’s five forces model: a popular technique that can help a multinational firm understand the major forces at work in the industry and the degree of attractivenessof the industry
Source: [C1]
33
Industry and Competitive Analysis
Porter’s Five Forces Model
1. The degree of competition among existing competitors in the industry.
2. The threat of new entrants.
3. The bargaining power of buyers.
4. The bargaining power of suppliers.
5. The threat of substitutes.
Source: [C1]
34
Industry and Competitive Analysis
• Managers must understand their industry wellto formulate good strategies.
• Must understand economic characteristicsof industries and driving forces.
• Economic characteristics include:– Market size,– Ease of entry,– Opportunities for economies of scale.
Source: [C1]
35
Driving Forces
• The important changes that have potential to affect an industry:
- Speed of new product innovations,
- Technological changes,
- Changing societal attitudes and lifestyles.
Source: [C1]
36
Key Success Factors (KSFs)• Important characteristics of a company or its
• Profiles of competitor’s strategies and objectives,
• Four steps:1. Identify strategic intent of competitors,2. Identify current and anticipated generic
strategies,3. Identify current and anticipated offensive and
defensive competitive strategies,4. Assess current positions of competitors.
Source: [C1]
40
Competitor Analysis (2)
1. Strategic intent:
– Broad objectives of competitors.
2. Current and anticipated generic strategies:
– Helps determine key KSF.
3. Current and anticipated offensive and defensive competitive strategies.
4. Current positions.
Source: [C1]
41
Exhibit: Hypothetical Competitive Profiles of Four Companiesin Different Countries (1)
Source: [C1]
42
Exhibit: Hypothetical Competitive Profiles of Four Companiesin Different Countries (2)
Source: [C1]
43
Company-Situation Analysis: SWOT
• Strengths: distinctive capability, resource or skill.
• Weaknesses: competitive disadvantage compared to competitors.
• Opportunities: favorable conditions in the environment.
• Threats: unfavorable conditions in the environment.
Source: [C1]
44
Multinational SWOT Analysis
• More complex than for domestic firms.
• Multinationals face more complex generaland operating environments.
• Environments vary by country.
Source: [C1]
45
Corporate Strategy Selection
• Diversified corporation has a portfolio of businesses.
• Major issue is which businesses to investin and which businesses to divest.
• The basic tool: matrix analyses.
• The most popular is the growth-share matrixof the Boston Consulting Group (BCG).
Source: [C1]
46
BCG Share Matrix• Division into four categories based on market
share and relative market share.
– Stars: the most successful firm.
– Dogs: businesses with low market sharesin low growth industries.
– Cash cows: businesses in slow-growth industries where company has strong market-share position.
– Problem children: businesses in high-growth industries where company has a poor market share.
Source: [C1]
47
Exhibit: The BCG Growth Share Matrix
Source: [C1]
48
Matrices• All matrices help answer basic strategy formulation
question such as:
– Are businesses in attractive industries?
– Are most businesses growing?
– Are there sufficient cash cows to financeother businesses?
– Is business portfolio well positioned for the future?
– Is the some strategic synergiesamong businesses?
Source: [C1]
49
Organizations Alike: Globalization and Convergence (1)• Convergence: increasing similarity
of management practices.
• Convergence is most apparent with transnational firms.
• Multinational firms competing in the same industry tend to have similar structures and strategies regardless of the location of the company’s headquarters.
Source: [C1]
50
Organizations Alike: Globalization and convergence (2)• How Globalization pushes organizations
to be more similar:
– Global customers and products,
– Growing levels of industrialization and economic development,
– Global competition and global trade,
– Gross-border mergers, acquisitions, and alliances,
– Cross-national mobility of managers,
– Internationalization of business education.
Source: [C1]
51
Organizations Alike: Globalization and convergence (3)
• National differences still affect the way many firms compete via their choices of strategies.
• Three important reasons to understand the national differences:– Managers in successful multinational firms must
understand and anticipate the strategies of rivals from other countries.
– Managers in successful multinational firms must understand the strategies of potential business partners.
– Strategies developed in one national context might be copied and modified to fit another national context.
Source: [C1]
52
The National Context and Organizational Strategy: Overview and Observations• The national context affects organizational design
and strategy formulation and content throughthe following processes:
– The social institutions and national and business cultures encourage or discourage certain forms of businesses and strategies in each nation.
– Social institutions and national culture serveas barriers to the easy transfer of competitive advantages among countries.
Source: [C1]
53
The National Context and Organizational Strategy: Overview and Observations
• Each nation must rely on its available factor conditions for developing industries andthe firms within industries.
• Social institutions and culture determinewhich resources are used, how they are used,and which resources are developed.
Source: [C1]
54
Indian MOFA Arun Jaitley promises corruption free, fair business environment
• Impacts of globalization• Networks and strategic alliances • Optional: Marketing strategy supporting business strategy
87
Marketing and Management
• Management ≈ running the company.• Marketing ≈ responding to customer’s needs / wants.
• Marketing is part of Management and at the same time Management should be based on marketing analyses.
• Management and marketing are interconnected.
• Both on B2C (Business to Consumer) andB2B (Business to Business) markets.
88
The evolution of strategic focus
• Production orientation
• Product orientation
• Sales orientation
• Marketing orientation
Source: [E]
89
Production orientation• Characteristics:
– Produce as cheaply as possible.– Keep prices low.– “People will buy anything as long as it’s cheap
enough”.
• Example: Dodge/GM’s and Ford’s first cars.
Source: [E]
90
Product orientation• Characteristics:
– Products are designed to have a lot of features that meet the needs of a large numberof customers.
– Take the view that if the product is right it will sell itself.
– Ultimately the cost of the product becomes too high as customers don’t want to pay for features they won’t use.
• Example: Ford’s T-model.
Source: [E]
91
Sales orientation• Characteristics:
– People will buy only if they are sold to.– High pressure sales pitches.– Often result in cancelled orders once the sales rep
has left the room!– Generally supply exceeds demand
so the organization has to sell what it’s made rather than what the customer wants.
• Example: Used cars.
Source: [E]
92
Marketing orientation• Characteristics:
– Look at what the customer wants/needs.– Act accordingly.– The customer is at the centre of everything
the organisation does- activities are co-ordinated around customer needs.
• Example: Toyota car.
• Market orientation is fundamental to the continuation and competitiveness of an organisation.
Source: [E]
93
International Marketing
“The marketing of goods and services across national frontiers, could also be Marketingin an internationally competitive environment, no matter whether the market is homeor foreign.”
American Marketing Association
Source: [M]
94
EP(R)G Model – Characteristics (1)Ethnocentric Polycentric Geocentric
Approach International operations are secondary
Each country is relatively independent
The world is one common market
Vision Centered on the domestic market
Each market is unique
Global vision of the world
Priority Searching for identical segments in foreign markets
Taking into consideration differences in foreign markets
Unifying differences in the world market
Planning center National headquarters
Subsidiary in each country
World headquarters
Structure International division
Division for each zone
Matrix structure
Source: [D]
95
EP(R)G Model – Characteristics (2)Ethnocentric Polycentric Geocentric
Design a productor service to meeta segment’s needsand developa marketing mix that will create a competitive advantage in the minds of the selected target market
Market research Policy / Strategy
Marketing processSource: [M]
97
Thank you for your attention!Questions?
The slides are available athttp://cesp.vse.cz/academics/materials/
Sources:• CULLEN, J. B. – PARBOTEEAH, P. Multinational management :
a strategic approach. 6th edition. Cincinnati, OH: South-Western/Cengage Learning, 2014. ISBN 978-1-285-09622-3.
• MACHKOVÁ, H. Mezinárodní marketing. Strategické trendy a příkladyz praxe. 4th edition. Prague : Grada Publishing, a.s, 2015. 200 pages. ISBN 978-80-247-5366-9.
• ACHKOVÁ, H., KRÁL, P., LHOTÁKOVÁ, M. et al. International Marketing. 1st ed. Prague: Nakladatelství Oeconomica, 2010. 192 pages. ISBN 978-80-245-1643-1.
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Alliances: Design and Management. 2005. [C3]– Katie Underhill. The Evolution of Marketing. 2010. [E]– Neeraj Bali. Introduction to International Marketing. 2011. [M]– Sine autor. Marketing Research Process. [R]– Maya Humbatova. Marketing Segmentation: Segmenting