International Management By Helen Deresky, Cap 6 - 8

International Management by Helen Deresky

Chapter 6:
Formulating Strategy

Opening Profile: Wal-Mart’s Formula Doesn’t Fit

■ Wal-Mart’s attempts to apply its strategy internationally have not all been successful
■ Germany, South Korea
■ Difficulty dealing with labor unions
■ Lack of scale
■ Inability to compete with established discounters■ Wal-Mart is learning from its mistakes
■ Greater acquisitions
■ Asda, Seiyu, Bompreço
■ Smiling clerks in Germany
■ 12% growth internationally

Strategic Planning and Strategy

■ Strategic planning: The process by which a firm’s managers evaluate the future prospects of the firm and decide on appropriate strategies to achieve long-term objectives■ Strategy: The basic means by which the firm competes

Reasons for Going International

Reactive (defensive) reasons

■ Globalization of competitors
■ Trade barriers
■ Regulations and restrictions
■ Customer demands

■ Proactive (aggressive) reasons
■ Economies of scale
■ Growth opportunities
■ Resourceaccess and cost savings
■ Incentives

Management Focus: Mexico’s Cemex

■ Is aggressively growing via worldwide acquisitions
■ Bid $12.8 billion in 2006 for the Rinker Group of Australia
■ Has operations on five continents with 2005 sales of $15.3 billion

Mission and Objectives

■ Marketing
■ Worldwide, regional, national market share
■ Production■ Production volume
■ Economies of scale
■ Finance
■ Tax burden
■ Capital structure
■ Profitability
■ ROA, ROE, ROI
■ R & D
■ Global patents

Environmental Assessment

■ Environmental scanning: The process of gathering information and forecasting trends, competitive actions, and circumstances that willaffect operations
■ Global, regional, national

Environmental Scanning

■ Political instability
■ Example: Upheaval in the Middle East
■ Currency instability
■ Example: 1998 devaluation of the Mexican Peso
■ Nationalism
■ International competition

Sources of Environmental Information

■ In the US there are more than 2000 business informationdatabases
■ Clipping services
■ Internal sources
■ Mitsubishi employees 60,000 market analysts

Internal Analysis

■ Key success factors:
■ Technological capability: Microsoft
■ Distribution channels: Wal-Mart
■ Promotion capabilities: Disney

Competitive Analysis

■ Distinctive competencies
■ Example: Sony’s ability tominiaturize
■ SWOT analysis
■ Competitive position analysis

Global Strategy

■ Treating the world as an undifferentiated worldwide marketplace
■ The impetus:
■ Regional trading blocs
■ Declining tariffs
■ Information technology explosion

Regionalization/Localization

■ Local markets are linked together within a region, allowing localresponsiveness
■ The impetus:
■ Unique consumer preferences
■ Domestic subsidies
■ New production technologies

Global Integrative Strategies

■ Full vertical and horizontal integration
■ Example: Dell
■ Factories in Ireland, Brazil, China, etc.
■ Assembly and delivery system from 47 locations around the world
■ Littleinventory, ability to change operations quickly

E-global or E-local?

■ Going e-global makes sense when:
■ Trade is global in scope
■ Business does not involve delivering orders
■ When the business model can be easily hijacked by local competitors
■ Going e-local makes sense when:
■ Production and consumption are regional in scope
■...