international strategic planning and market screening

International Business Management

International Strategic Planning And Market Screening

Respectable Lecturer:Dr. Hüda Hüdaverdi

Prepared By:Fatemeh Hashemi 093014007

Fall 2010

What we will learn in this chapter ?

1-1Introduction

The meaning of International strategic planning : The process

through which worldwide companies evaluate past results, assess

their corporate strengths and weaknesses and map out future

resource allocation and strategic based on marketplace

opportunities and threats.

Why International strategic planning is a complex process to

manage?

The organizational complexity of International corporations

Geographically far-flung nature of their commercial empires

Example: Unilever ,the Anglo-Dutch consumer product

company,employs223000 people worldwide, and sell over 400

brands through subsidiaries in over 90 countries and sale over 70

other nation.

1-The International Planning Process

•Since1945 as companies have internationalized their operations and integrated

them on the world wide basis, strategic planning role and philosophy have

changed.

During 1950s and early 1960s international planning was a centralized

activity:

- production-oriented activities.

- focus was on manufacturing level, expected revenues.

- little strategy were needed .

During 1960s and 1970s

- Japanese &European companies entered the world market place.

- competition heat up.

- development in tools for assessing (SWOT).

In1980s, global market expanded away from Triad to big emerging markets.

In 1990s:

- competition heightened

- central planning departments were cut .

- country subsidiaries were encouraged to “get close to customers”.

- new role of head office :coordination among divisions and subsidiaries and

monitoring global market.

1-2 The changing environment of

international planning : Historical perspective

1- The International Planning Process

International planning processes vary in complexity

according to the degree of strategic analysis involved

(Example: Japanese planning processes emphasized

budgetary mechanism while American firms have tended

to incorporate a wider variety of strategic elements in to

their plans)

To understand evolution of planning processes, 4 stages of

corporate planning development have identified as

follow:

1. Financial planning

2. Long term (forecast-based) planning

3. Environmental planning

4. Integrative strategic planning

1-3 The evolution of the international corporate

planning processes

2-Assessing Corporate position

2-1 Internal Assessments

Effective planning offer when firm have

definite ideas about where they want to be

and what has enabled them to get where

they are, to this end , mission statements

and reviews of core competencies guide

company efforts and provide continuity

between past and future planning efforts.

2-1 Internal Assessments2-1-1The corporate mission

Mission statements of most of the international

corporations encompass one or more following

features:

Description of the business

Strategic intent

Perceived organizational strength

Strategic elements

Organizational values

The challenge for international corporations is to make

mission statements relevant to employees and

stakeholders worldwide.

McDonald's mission is: to be the world's best quick service

restaurant experience. Being the best means providing

outstanding quality, service, cleanliness, and value, so

that we make every customer in every restaurant smile."


2-1-2 Corporate CompetenciesCore competencies are bundles of organizational skills and

corporate assets that produce winning marketplace formulas.

Core competencies have 3 characteristics:

1- They contribute to perceived customer benefits.

2- They are difficult for competitors to imitate.

3- They can be leveraged over variety of markets.

Types of competencies:

1- superior technological know-how and product innovation

( Microsoft , Intel )

2-reliable processes that produce consistent, efficient, quality products

and services in the world market.

( FedEx , Toyota )

3- Close relationships with suppliers, regulators, professional

organizations ,distributors and specially customers.( Unilever , Nestle)

4- building sufficient flexibility into worldwide operations to appeal to

local taste ( Unilever, IBM, Toshiba)


2-1Internal Assessments


2-2 External Assessments( the marketplace situation)

The front end of planning process involves

evaluating corporate performance from a strategic

business unit (SBU) and from geographic

perspective.

The managerial aim is to identify those SBUs and

geographic regions where the company is strong and

those where corporate performance is weak.

Companies divide their businesses or product lines into

strategic business units.

For example , GE has 13 business divisions worldwide

and requires its SBUs to be in the top 2 in their industry

sectors . how?

First step is to identify SBUs that contribute positively to

group performance(by determining the above and below

average financial performers).

And those that are competitive within their industry

sectors (by finding the above and below average

performers in their respective industries).


2-2 External Assessments2-2-1 SBU evaluation


2-2 External Assessments

2-2-1 SBU evaluationGroup assessments of SBUs ; Contribution to the group and performance in their industry


The assessment of geographic strategies is a key

element in deciding where to allocate corporate

resources on the worldwide basis.

The process begins with plotting regional

corporate performances on a market size market

growth matrix.


2-2-2 Worldwide /regional evaluation



2-2-2Worldwide /regional evaluationEvaluating corporate regional performance on a market size –growth matrix

Managing similar product lines across regions

and markets has become increasingly important

for international corporations.

Executives can consolidate data from national

subsidiaries into regional and worldwide context

and giving them critical yardsticks such as market

shares, sales, costs and margins.



2-2-3Regional / country assessments

2-Assessing Corporate position2-2 External Assessments

2-2-3 Regional / country assessmentsProduct division Analysis across countries and regions

Subsidiary performance within product or

regional SBUs must also be evaluated to

identify above average contributors to SBU

profitability and those that are competitive

in their national markets.



2-2-4 Assessing subsidiary contribution

to group performance



2-2-4 Assessing subsidiary contribution

to group performanceAssessing SBUs geographic performance: SBU ROI and national industry ROI

Once management has assessed the relative

performance of its subsidiaries ,executive attention

can be focused on factors contributing to success

and failure at the national market level.

Two analysis contribute to this determination:

1- market share/momentum analysis

2- competitive benchmarking



2-2-5 Individual subsidiary analysis

2-2-5-1 market share/momentum analysis




Plot product performance against market

performance to ascertain which products are

underperforming market trends ( and losing market

share momentum) and which are out performing

market trends ( gaining market share momentum)



2-2-5-1 market share/momentum analysis

Profiles the characteristics and strategies

of rival companies and their performances

along key competitive dimensions.




2-2-5-2 competitive benchmarking



2-2-5-2 competitive benchmarking

Industry behaviors are important reference points for

individual firms and company industry comparisons of

worldwide resource deployments give key insights for

strategic decision makers.

using information derived from the global industry

analysis , corporate sales & manufacturing can be

mapped against global industry consumption and

production patterns to provide insights for market

expansion strategies and the sitting of manufacturing

and other facilities.



2-3 corporate and industry resource deployments



2-3 corporate and industry resource deployments

3-Formulation of strategic plan

Once management has assessed the current situation

and has evaluated competitors and environmental trends

,it is time to formulate plans for the future .

For most international corporations ,planning is done

with 3-5 year projection in future.

The process is involves making assumptions about

economic growth at the global ,regional and national

levels.

The role of senior management is :

To evaluate current and future plans against past

performances and expected future conditions.


3-1 subsidiary-level planning

Planning at the subsidiary level starts with

historical analyses of product line sales, costs and

margins being projected into the future .

To place results into perspective , market size ,

growth , and market share trends are taken into

account.

Managerial assessments about effectiveness of

past strategies ,competitors , influential factors on

costs are added in this section

3-Formulation of strategic plan3-1 subsidiary-level planning with 3 years projection


3-2 Integrating national plans into

regional and global strategies

Once subsidiary managements have completed

their preliminary forecasts , discussions are held

with regional or head office executives to put these

plans into regional or global contexts.

In these plans , critical assumptions are laid out

(economic growth rates , industry market sizes , key

competitor responses , etc) are major strategic

decisions are outlined.


3-2 Integrating national plans into

regional and global strategies


Setting objectives : for many

firms ,financial objectives are

emphasized and employee

behaviors are oriented toward

satisfying share – holders and the

expectations of financial

community


Setting objectives : for many firms ,financial

objectives are emphasized and employee behaviors are

oriented toward satisfying share – holders and the

expectations of financial community

1-Financial perspective: are traditional business

measures that show how firms look to shareholders and

the financial community.

2-Customer perspective: concern how companies look

to their customers, and are measured by:

lead times , quality levels , performance/service level

3-Internal perspective: involve how firms are adapting

their organizations and procedures to maintain and

improve cycle times , quality levels, product/service

costs , technological capabilities and employees skill

levels


The benefits of well- executed planning processes

1. External benefits: good resource-deployment

decisions. once management has evaluated

corporate performance, market trends, and

projections , and has set goals, decision about

resource deployments must be finalized and

market priorities established.



This figure illustrates the process for the Asian division

of a hypothetical international corporation



2 . Internal benefits:

1-Defining the strategic direction of the corporation.

2-Providing insights into competitors strategies and

how to compete against industry rivals.

3-Systematic incorporation of political , economic ,

societal , and technological industry change drivers

into global , regional, and national strategies.

4-Concise guidance for geographic strategies and

international resource commitments.

5-providing direction at the subsidiary level by

identifying performance criteria for product lines by

benchmarking competitor strengths and weaknesses.

4- Market Screening and risk assessments

Once managements have assessed past and

present company performances and looked at

future opportunities within their given industries,

they must assess the relative risks of operating in

different countries.

This involves evaluating country risks on a

comparative basis(using the same criteria)and for

individual markets , to gain critical insights about

how to operate and manage risk in those countries.


4-1 Seven types of risks :

4-1 Political Risks:

• fractionalization of the political spectrum

•Numerous linguistic, ethic , and religious

factions

•Restrictive means of retaining power

•Evidence of xenophobia , nepotism , or

corruption

•Poor social conditions

•Existence of radical , especially leftist, political

movements



4-2 Economic Risks:

Economic risk assessment involves evaluating the stability ,

openness , and market forces orientations of national.

4-3 Financial and Foreign Currency Risks:

Legal frame works for profit , dividend , fees and capital

repatriation

Balance of payments analyses as a currency movements into

and out of a country determine its ability to generate foreign

exchange.

International reserves are countries stocks of foreign

currencies accumulated from exports and capital inflows and

their gold holding.

Foreign debt assessments are evaluations of foreign debt

relative to country gross domestic product, with creditor

nations receiving the highest rating.

4-4 Operations Risks:

Political policy continuity

Attitude towards foreign investors

Degree of nationalization

Bureaucratic delays

Use and enforceability of contract

Labor cost and availability , including inclusiveness

or exclusiveness of education opportunities

Availability of professional services and contractors

Quality and cost of local communication

Infrastructure availability: road, rail, water system,

energy sources

Caliber of local managers , partners

Financial institutions and availability of short,

medium , and long term financing



4-5 Legal Risks:

Legal risks are important where companies rely

heavily on contracts (military , industrial , commodity

markets) and when legal recourse may be necessary

( medical products , counterfeit goods)

4-6 Taxation Risks:

Companies that move financial assets , money , and

components extensively through out world markets

are aware of needs to satisfy national tax authorities.

4-7 Security Risks:

For firms that depend on expatriates in their

management of local subsidiaries , personal security

must be evaluated



• Two commercial services, business risk services(BRS) and

world markets online (WMO) , are constructed.

•Market covered: BRS covers about 50 markets ; WMO

takes in about 150 countries.

BRS:

assesses15 factors in its operations risk index and weights

them differentially

105 experts rates country conditions from 0 (unacceptable

conditions) to 4 (superior conditions) to total 100,the perfect

operating environment

WMO:

Provides measurement of 6 dimensions: political, economic,

legal, tax, operations, and security.

The sum and average of all six dimensions yields an overall

assessment of country risk, varying from 1-1.99(insignificant to

low risk) to 4 -5(very high to extreme risk)


4-2 Business risk evaluation methodologies