Strategy Formulation and Implementation

TERMS

• Strategic Management – The process of determining a organisations basic mission and

long term objectives, then implementing a plan of action for attaining these goals.

• Economic Imperative – A worldwide strategy based on cost leadership, differentiation

and segmentation.

• Political Imperative – Strategic formulation and implementation utilising strategies

that are country responsive and designed to protect local market niches.

• Quality Imperative – Strategic formulation and implementation utilising strategies of

total quality management to meet or exceed customers’ expectations and continuously
improve products or services.

• Administrative Coordination – Strategic formulation and implementation in which the

MNC makes strategic decisions based on the merits of the individual situation rather
than using a predetermined economically or politically driven strategy.

• Global Integration – The production and distribution of products and services of a

homogenous type and quality on a worldwide basis.

• National Responsiveness – The need to understand the different consumer tastes in

segmented regional markets and respond to different national standards and
regulations imposed by autonomous governments and agencies.

• Global Strategy – Integrated based primarily on price competition.

• Multi Domestic Strategy – Differentiated strategy emphasising local adaptation.

• International Strategy – Mixed strategy combining low demand for integration and
responsiveness.

• Transnational Strategy – Integrated strategy emphasising both global integration and

local responsiveness.

• Environmental Scanning – The process of providing management with accurate

forecasts of trends related to external changes in geographic areas where the firm
currently is doing business or is considering setting up operations.

• Strategy Implementation – The process of providing goods and services in accord

with a plan of action.

• Base of Pyramid Strategy – Strategy targeting low income customers in developing

countries.
 • International Entrepreneurship – A combination of innovative, proactive and risk
seeking behaviour that crosses national boundaries and is intended to create value in
organisations.

• Born Global Firms – Firms that engage in significant international activities a short
time after being established.

STRATEGIC MANAGEMENT

• For most companies, regardless of how decentralised. The top management team is
responsible for setting the strategy.

• Middle management has sometimes been viewed as primarily responsible for the
strategic implementation process but now companies are realising how imperative all
levels of management are to the entire process.

• As companies go international, strategic process take on an added dimension.

The Growing Need For Strategic Management

• One of the primary reasons that MNC’s need strategic performance is to keep track
of their increasingly diversified operations in a constantly changing international
environment.

• This need is particularly obvious when one considers the amount of foreign direct
investment that has occurred in recent years.

• These developments are resulting in a need to coordinate and integrate diverse

operations with a unified and agreed on focus.

Benefits of Strategic Planning

• Many MNC’s are convinced that strategic planning is critical to their success and
their efforts are being conducted both at home and in the subsidiaries.

• There is no definitive evidence that strategic planning in the international arena

always results in higher profitability, especially when MNC’s try to use home
strategies across different cultures.

• The planning intensity is an important variable in determining performance.

• Although strategic planning usually seems to pay off, as with most aspects of
international management, the specifics of the situation will dictate the success of the
process.
Approaches to Formulating and Implementing Strategy

• Four common approaches to formulating and implementing strategy exist:

o Economic Imperative

 Middle managers are the key to stimulating profit growth within a

company so expanding these efforts on an international level is a
necessary tool to learn for today’s new managers.

 Many of these companies typically sell products for which a large

portion of value is added in the upstream activities of the industry’s
value chain.

 By the time the product is ready to be sold, much of its value has
already been created through research and development,
manufacturing and distribution.

 Because the product is basically homogenous and requires no

alteration to fit the needs of the specific country, management uses a
worldwide strategy that is consistent on a country to country basis.

 The strategy is also used when the product is regarded as a generic

good and therefore does not have to be sold based on a name brand
or support services.

 Another economic imperative concept that has gained prominence in

recent years is global sourcing, which is proving very useful in
formulating and implementing strategy.

o Political Imperative

 The products sold by MNC’s often have a large portion of their value
added in downstream activities of the value chain.

 The success of the product or service generally depends heavily on

marketing, sales and service.

 Typically these industries use a country centred or multi domestic

strategy.

o Quality Imperative

 A quality imperative takes two independent paths. Firstly a change in

attitudes and a raising of expectation for service quality. Secondly the
implementation of management practices that are designed to make
quality improvement an on-going process.

 Total quality management, the approach takes a wide number of

forms, including cross training personnel to do the jobs of al members
 in their work group, process re-engineering designed to help identify
and eliminate redundant tasks and wasteful effort and reward systems
designed to reinforce quality performance.

 TQM covers a lot, from strategy formulation to implementation and

can be summarised as follows:

• Quality is operationalized by meeting or exceeding customer

expectations. Customers include not only the buyer or external
user of the product or service, but also the support personnel
both insider and outside the organisation who are associated
with the good or service.

• The quality strategy is formulated at top management level and

is diffused throughout the organisation. From top executives to
hourly employees, everyone operates under a TQM strategy of
delivering quality products or services to internal and external
customers.

• Middle managers will better understand and implement these

strategies as they are a part of the process.

 Many MNC’s make quality a part of their overall strategy as they have
learned that this is the way to increase market share and profitability.

 A growing number of MNC’s are finding that they have to continually

revise their strategies and make renewed commitment to the quality
imperative because they are being bested by emerging markets.

o Administrative Coordination

 Many large MNC’s work to combine the economic, political, quality

and administrative approaches to strategic planning

 Of the four approaches, however, the first three approaches are much
more common because of the firms desire to coordinate its strategy
both regionally and globally.

Global and Regional Strategies

• The fundamental tension in international strategic management is the question of

when to pursue global or regional strategies.

• This is commonly referred to as the globalisation vs. national responsiveness conflict.

• To a growing extent, the customers of MNC’s have homogenised tastes and this has
helped to spread international consumerism.