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Global Issues in

Strategic Management

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Global Operations

International Operations cannot be looked atas a set of independent decisions of theDomestic Operations. There is a trade off taking into account* Multiple Products

* Country Environments* Resource Options* Corporate / SBUs Capabilities* Strategic Options

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Globalization

Two more important trends in todays context* Globalization of Industries* Increased activism of Stake Holders

Globalization is a Strategy of approachingthe Global Markets with StandardizedProducts.

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Why Company wants to go

Global than Local?

International Business is not new and hasbeen in existence for centuries.There are two reasons for going Global thanLocal

1. Fundamental Reasons2. Collateral Reasons

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1. Fundamental Reasons

* Market Saturation

* Threat of Trade Deficit* Fierce Foreign Competition* Rise of New Markets

* Opportunities through ForeignPrograms

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2. Collateral Reasons

* To Utilize Full Capacity* To Offset the Business Down-Turns* To Effect Savings in Costs* To take advantage of Tax Concessions* To develop and test New Products

* To have access to InternationalTechnology, Raw Materials andEconomic Groups

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Global Business Environment

Global Environment is made up of 1. Cultural Variables

Culture is the sum total of LearnedBehavioral Traits that manifestedand shared by the members of a Society.

Culture of a Nation is made up of broadlysix elements, namely * Material Culture,Language, Aesthetics, Education, Religion

& Social Organizations

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2. Economic Variables These are strongest factors which effect the

decisions in Global Business.* Global Economy - Economic Relationship

between the countries of the World

* Individual Economy3. Legal or Political Variables - Indian Law

and International law

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Global Strategic Decisions

With respect to Strategic Decisions of Marketing in Global Markets

* Strategic Marketing Decision* Strategic Market Selection Decision* Strategic Market Entry Decision

* Strategic Marketing Mix Decision* Strategic Marketing OrganizationDecision

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Basic Issues in Global Business

1. Resource Allocation : Financial, Humanand Technological Resources

2. Organization : Part of DomesticCompany or a Separate Entity3. Plans and Policies : Finance, Marketing,

R&D, Operations and HR4. Leadership : Related to Leadership Style

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Mid Term Paper - Answers

Answer 1.How Competitive Five Forces Shape Strategy?

Porter, Michael E - Page 61 figure 3-3Five Competitive Forces that Shape Strategy are :1.Threat of New Entrants2. Bargaining Power of Customers3. Bargaining Power of Suppliers4. Rivalry or Jockeying for Position amongCurrent Players5. Threat from Substitutes

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1. Threat of New Entrants

* New entrants are a powerful source of Competition

* New Capacity & Product Range - NewCompetitive Pressure* New Economies of Scale / Investment -

Cost Advantage-Severe Competitive Effect* Developed Channels of distribution* New Limit on Prices - affects profitabilityof existing player

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2. Bargaining Power of Customers Buyer Cartels on price, quality and delivery results

in influence in Costs and Investments. PowerfulBuyers bargain for better services which will costmore for Producer.3. Bargaining Power of Suppliers The more specialized the offering the morebargaining power for Supplier.The limited in number of Suppliers the morebargaining power.

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4. Rivalry among the Current PlayersThis is nothing but Competition.

The Competitors influence price as well as thecost of competing in Industry, in ProductionFacilities, Product development, Advertising,Sales Force etc5. Threat from SubstitutesSubstitutes are latent and major source of competition. Substitutes Offering Price advantageand / or performance improvement

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* The five forces together determine IndustryAttractiveness / Profitability.

* Sizing up the Competition Proper is notenough; all forces Shaping Competitionmust be sized up.

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Answer 2 Value Chain approach in Competitors

Analysis by Micheal Porter - Page 86 Figure 4-3Value Chain is basically a tool for identifyingways in which value could be created / enhancedby a Firm. Firms can use the concept for assessing

the competitive position within the Industry, bycomparing their own value with those of theircompetitors.

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The Value Chain Approach

Basis : Every firm is a collection of activities and can be disaggregated in terms

of the activities

Porter identifies nine distinct activities as

the ones which create value in a firm; theywould, of course, create cost as well

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Five Primary Activities

1. Inbound Logistics (bringing materialsinto business)

2. Operations (product design,manufacturing etc)

3. Outbound Logistics (sending productsout)

4. Marketing and sales5. Service

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Four Support Activities

1. Firms Infrastructure2. Human Resources

3. Technology Development (R&Dincluded)

4. Procurement

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* The four support activities occur through allPrimary Activities

* The Primary and Support Activities together generate a vastmatrix of value-creating activities in the Firm.* This matrix of value-creating activities along with their

interacting effects, constitutes the Value Chain of the Firm

* Value creation depends on the each departmentsperformance as well the coordination of all departments ina Firm. Value Chain also covers the coordination aspect.

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* All Business Process is basically a Value-creating and valuedelivering process. Buyers patronize the Firm that offersthe highest delivered value.

* Hence, the name of the game is to locate the activities inwhich value could be created, and create maximumpossible in each of them.

* Firm examines the costs and performance in its ValueChain - the total value chain as well as in each link in thechain vis a vis Competitors.

* Firm will achieve a position of superiority / distinctionrelative to Competitor.

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Answer 3TOWS Matrix (SWOT Matrix) Analysis

Page 115 Figure 5-2

Strengths Weaknesses

Opportunities (1)High Internal (2) Internal WeaknessStrength & Good But Better MarketOpportunities Opportunities

Threats (3)High Internal (4) Internal WeaknessStrength with External Threats

Accompanied by

Certain Threats(a)Strategy - Aggressive of Growth and Expansion - Can take Risk (b)Strategy to Rationalisation of Product Items/Production Turnaround(c)Strategy of Expansion by cautious Product and Market Verification(4)Strategy of Divestment or Retrenchment or Liquidation

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1. Reliance Industries

Vertical Integrated Diversification Vertical Growth (Backward and Forward Integration)-Acquiring Suppliers and Distributing own Products Benefits * reduce costs * gain control over a scarce resource* guarantee quality * obtain access to potential customersWhen used? * Firm with a strong competitive position in a highlyattractive industry* Technology is predicable and markets are growing

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2. Eureka Forbes

Concentric (Related) DiversificationThis is done when strong competitive position but IndustryAttractiveness is low. The distinctive competence is usedas its very strength as a means for diversification.The Firm attempts to secure strategic fit in a new industrywhere the firms product knowledge, its manufacturingcapabilities, marketing skills is used so effectively in theoriginal industry can be put to good use

The firms Products or Processes are related in some wayand some common thread. The Search is for synergy, theconcept that two businesses will generate more profitstogether than they could separately. The point of Commonality may be similar technology, customer usage,distribution, managerial skills or product similarity

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3. Ponds India

Conglomerate (Unrelated) Diversification

When current industry is unattractive andfirm lacks outstanding abilities or skills that

it could easily transfer to related products orservices in other industries, then most likelystrategy will be Conglomerate

Diversification - diversifying into anIndustry unrelated to its current one whichmainly concerns financial considerations of cash flow or risk reduction