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Chapter 12

Strategic Planning

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Learning ObjectivesOutline the process of strategic planning in the context of the global marketplace.Examine both the external and internal factors that determine the conditions for development of strategy and resource allocation.Illustrate how best to utilize the environmental conditions within the competitive challenges and resources of the firm to develop effective programs.Suggest how to achieve a balance between local and regional/global priorities and concerns in the implementation of strategy.

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Strategic Planning

GlobalizationThe Strategic Planning Process

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Globalization

Globalization reflects a business orientation based on the belief that the world is becoming more homogeneous and that distinctions between national markets are not only fading but, for some products, will eventually disappear.

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Globalization DriversBoth internal and external factors will create favorable conditions for development of strategy and resource allocation on a global basis.

These factors can be divided into: Market Factors Cost Factors Environmental Factors Competitive Factors

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Market FactorsThe world customer gains new meaning.Developed infrastructures lead to attractive markets for other products.Similarities in demand conditions facilitates product design.Channels of distribution are becoming more global.Technology changes the landscape of markets.

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Cost Factors

Two powerful cost-related globalization drivers.

Cost inefficienciesDuplication of effort

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Environmental FactorsRemoval of physical, fiscal, and technical barriers to further facilitate globalization of markets.Rapid technological evolution contributes to globalization efforts.Smaller bureaucracies of mininationals facilitates new product development and allows for opportunities to seize new markets.

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Competitive Factors

Companies may have to be the first to do something new, or to preempt competitors’ moves.

Market presence may be necessary.

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The Strategic Planning ProcessFormal strategic planning

contributes to:

Financial Performance

Non-financialObjectives

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The Strategic Planning Process Involves:

Adjusting the core strategy.

Formulating global marketing strategy.

Developing global programs.

Implementing global programs.

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Core StrategyAssessing and Adjusting:

Necessary Participants:Executives from marketing,

production, finance, logisticsand procurement.

Forces determining business success are common to

different countries.

Companies must assess their own

readiness fornecessary

moves

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Formulating Global Strategy

The choices:Cost LeadershipCost Leadership

DifferentiationDifferentiation

FocusFocus

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Country-Market Choice

Three factors should determine country selection:

The stand-alone attractiveness of a market. Global strategic importance. Possible synergies

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Segmentation

The recognition that groups within markets differ sufficiently to warrant individual approaches.Allows global companies to take advantage of the benefits of standardization.Involves looking at markets on a global or regional basis.

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Developing Global Programs

Decisions involved in developing a global program.

The degree of standardization in the

product offering. The marketing program beyond the

product variable. Location and extent of value-adding

activities. Competitive moves to be made.

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Product Offering

Product standardization may result in significant cost savings.

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Marketing Approach

Uniformity is sought especially in elements that are strategic in nature, whereas care is taken to localize necessary tactical elements.

Glocalization

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Location of Value-Added Activities

Cost Reduction:Pool ProductionPool Production

Exploit Factor CostsExploit Factor Costs

Concentrate ActivitiesConcentrate Activities

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Competitive Moves

Global companies may have to respond to competitive moves a variety of markets.Cross-subsidization may offer competitive advantage.

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Implementing Global Programs

Successful companies strive to balance local and global concerns.

Too much local production may reduce

import positioning. Too little planning involvement by the

country organization may lead to NIH.

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Avoiding TheNot-Invented-Here Syndrome

Ensure that local managers participate in the development of strategies and programs.Encourage local managers to generate ideas.Maintain local and global product portfolios.Allow local managers to control budget.

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Localizing Global MovesThe role of headquarters staff should be one of coordination, and leveraging the resources of the corporation.Globalization calls for the centralization of decision-making authority beyond that of the multidomestic approach.Executing global account management programs builds relationships with customers and allows for development of internal systems and interaction.Decision-making in global companies supports the goal of treating the world as a single market.