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GLOBAL STRATEGIC MANAGEMENT

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Title: INTERNATIONAL BUSINESS STRATEGY Author: IIFT Last modified by: IIFT Created Date: 6/24/2010 9:25:11 AM Document presentation format: On-screen Show (4:3) – PowerPoint PPT presentation

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Title: GLOBAL STRATEGIC MANAGEMENT


1
GLOBAL STRATEGIC MANAGEMENT
  • K.RANGARAJAN

2
Module 1
  • Fundamentals on Strategic Management Global
    Context
  • Strategy, Strategic Management Process
  • Levels of Management Strategy
  • Globalisation firm drivers
  • Globalisation Global Strategy?

3
A Few Points to ponder
  • India is rated as the second preferred
    destination for FDIs in the coming years.
  • Excess Capacity especially in the wake of WTO is
    becoming a strategic issue of top priority
    (Steel, Textile, Polyester etc.)
  • Greenfield Investments is the preferred form for
    investment in developing countries.
  • The No. of Parent Cos of TNCs operating in
    economy is around 82k (India-815)
  • Only 2 coys from India are ranked in the top 100
    non-financial TNCs by Foreign Assets from the
    Developing Countries.
  • The R D expenditure by Indian Business firms is
    around 0.32 of Sales
  • The downslide of Traditional business houses
    (Great Indian Churn)
  • Growing interdependence of global economies
  • Growing Economic Turbulence across the world
  • Crash of TNCs like Standard Oil, Union Carbide,
    Enron, Lehman

4
Indias Most Admired Companies
Rank11 Rank10 Company Growth()
1 1 RIL -14.3
2 NL CIL NA
3 2 ONGC -7.9
4 5 TCS 36.9
5 4 INFOSYS -1.6
6 10 ITC 32.8
7 6 SBI -6.2
8 9 BHARTI AIRTEL 27.7
9 3 NTPC -12.4
10 13 ICICI BANK 10.4
Based on BT ranking of most Valuable Companies
2011
5
Challenge of Strategic Management
Competitive success is transient...unless care is
taken to preserve competitive position
6
Sustained Competitive Advantage
Occurs when a firm develops a strategy that
competitors are not simultaneously
implementing Provides benefits which current and
potential competitors are unable to duplicate
7
The Strategic Management Process
Involves the full set of
which are required for firms to achieve
Strategic Competitiveness
Sustained Competitive Advantage
Above-Average Returns
8
21st Century Competitive Landscape
9
21st Century Competitive Landscape
  • The global economy is changing.
  • People, goods, services and ideas move freely
    across geographic boundaries
  • New opportunities emerge in multiple global
    markets
  • Markets and industries become more
    internationalised.

10
Strategic Management Strategy
Strategic Management
  • Art science of formulating, implementing, and
    evaluating, cross-functional decisions that
    enable an organization to achieve its objectives.

Strategy
Means by which long-term objectives are achieved
11
Other views of Strategy
  • Strategy as Plan
  • Consciously intended course of action which may
    be in the form of guidelines/report guiding
    decision making.
  • Strategy as Ploy
  • Short-term tactic or a maneuver, intended to
    outwit a competitor.
  • Strategy as Pattern
  • It is after-the-fact view which emerges over a
    period of time.

12
Other views of Strategy
  • Strategy as Position
  • Managers see their firm as occupying a space
    within an environment in terms of Market share,
    Profits, Assets etc.
  • Strategy as Perspective
  • This is a way of perceiving the world, and
    individuals in an organization are united by
    common thinking and behaviour.

13
Elements of Strategy

14
Elements of Strategy

15
Elements of Strategy

16
Levels of Strategy
  •  
  • Corporate Level Choice of business, dividend
    policies, sources of long term financing and
    priorities for growth
  • Business Level Plant location, marketing
    segmentation and geographic coverage, and
    distribution channels
  • Functional Level Levels of Inventory, degree of
    supervision, selection of production equipment
    etc.

17
Managerial Decisions (Vs) Strategic Levels
Features Corporate Business Functional
Measurability Subjective Semi Quantifiable
Frequency Periodic/Sporadic Periodic/Sporadic Periodic
Relation to present act Innovative Mixed Supplement
Risk Wide Moderate Low
Profit Potential Large Medium Small
Cost Major Medium Modest
Time Horizon Long-range Medium Short
Flexibility High Medium Low
Cooperation Reqd. Considerable Moderate Little
18
Achieving Sustained Competitive Advantage
  • 1. Adapting to change in external trends,
    internal capabilities and resources

2. Effectively formulating, implementing
evaluating strategies
19
Adapting to Change Key Strategic Management
Questions
  • What kind of business should we become?
  • Are we in the right fields?
  • Are there new competitors?
  • What strategies should we pursue?
  • How are our customers changing?

20
A Companys Actual Strategy Is Partly Planned
and Partly Reactive
21
Recent Changes in General Globalization Drivers
  • Some of the widespread changes include the
    following
  • Market Drivers
  • Per capita income converging among
    industrialized nations
  • Convergence of lifestyles and tastes (e.g.,
    McDonalds in India and Stolichnaya vodka in
    America)
  • Increasing travel creating global consumers
  • Organizations beginning to behave as global
    customer
  • Growth of global and regional channels
    (e.g.,Walmart (US) in 10 Countries, Carrefour
    (France) in 31, Metro (Ger.) in21, 7-eleven
    (Jap.) in 21 )
  • Establishment of world brands (e.g., Coca-Cola,
    Levis, Microsoft)
  • Push to develop global advertising (e.g.
    McCann's for Nestle Gillette Saatchi
    Saatchis commercials for British Airways.
  • Spread of Global regional media
    (CNN,MTV,Star TV in Asia)

22
Recent Changes in General Globalization Drivers
  • Cost Drivers
  • Continuing push for economies of scale (but
    offset by flexible manufacturing)
  • Accelerating technological innovation
  • Advances in transportation (e.g., use of Federal
    Express to deliver urgent supplies from one
    continent to another)
  • Emergence of newly industrializing countries with
    productive capabilities and low labor costs
    (e.g.., China, India, Indonesia etc.)
  • Increasing cost of product development relative
    to market life

23
Recent Changes in General Globalization Drivers
  • Government Drivers
  • Reduction of tariff barriers (e.g., NAFTA,FTAs)
  • Reduction of non-tariff barriers (e.g., Japans
    gradual opening of its markets)
  • Creation of trading blocs (e.g., EU etc)
  • Decline in role of governments as producers and
    customers (e.g., denationalization of many
    industries in Europe, China, India etc.)
  • Privatization in previously state-dominated
    economies, particularly in Latin America
  • Shift to open market economies from closed
    communist systems in Eastern Europe Soviet
  • Increasing participation of China and India in
    the global economy

24
Recent Changes in General Globalization Drivers
  • Competitive Drivers
  • Continuing increase in level of world trade
  • More countries becoming key competitive
    battlegrounds (e.g., rise of Japan to become a
    lead country)
  • Increased ownership of corporations by foreign
    acquirers
  • Rise of new competitors intent upon becoming
    global competitors(e.g.,Japanese(70s),Koreans(80s)
    ,Taiwanese (90s),Chinese(00s), Indian Russian
    (10s).
  • Rise of born global companies.
  • Growth of global networks making countries
    interdependent in particular industries (
    eg.,electronics)

25
Recent Changes in General Globalization Drivers
  • Other Drivers
  • Revolution in information and communications
    (e.g.,personalcomputers,mobiletelephony, internet
    etc.)
  • Globalization of financial markets (e.g., listing
    of corporations on multiple exchanges, and
    issuing debt in multiple currencies)
  • Improvements in business travel (e.g., improved
    air travel and rise of international hotel chains)

26
Historically Corporate Globalization took place
in 3 stages
Global Integration (Global)
Internationalisation (Multinational)
Export (Trade)
27
ELEVATORS in EUROPE
M
R
M
M
P
P
P
M
M
M
P
R
M
M
M
GIS 4
28
Why Companies Globalize?
  • Increase Size (V) Capture market opportunities

Customer Value CV
  • Increase Size benefit from Economies of Scale (C)
  • Get Access to resources and procurement(S)

Price
PROFIT
Costs
  • Get access to low cost labor and infrastructure
    (C)

Internal Costs C
  • Get access to knowledge (CV and C)

Supplies (S)
  • Serve global customers (CV)

Volume (V)
  • Reduce risks through geographical diversification

29
Globalisation Push Factors
Political Factors GATT EEC FDI Reduce
trade barriers
Social Factors Convergence of customers
needs Travel, TV, movies Favour
standardisation and global branding
Technological Factors
Transport Manufacturing
Telecommunication RD Reduce the cost of
co-ordination Increase economies of scale
Globalisation
Competitive Factors Japanese and Korean
Multinational Customers Induce integration and
co-ordination
30
Localisation Push Factors
Cultural Factors Attitudes, tastes
Behaviour Social Codes Reduce the benefits of
standardisation
Technical Factors
Standards Transportation
Spatial presence Languages Reduce the
benefits of economies of scale, centralisation
and standardisation
Commercial Factors Distribution
networks Customisation Responsiveness
Require differentiated approaches to sales
and marketing
Localisation
Legal Factors Regulations National
security Limit free flow of people, goods, data,
cash Impose localisation constraints
31
GLOBAL INDUSTRIES
LOCAL INDUSTRIES
  • Local industries are industries
  • in which firms can sustain competitive within the
    boundaries of countries.
  • Firm competing in multilocal industries
  • Are either
  • Domestic firms within each country
  • Subsidiaries of multinational companies operating
    independently of each others in the respective
    countries
  • Global industries are industries
  • in which firms can sustain competitive
    advantages only if
  • They are present in the key countries of the
    world
  • and
  • They integrate and coordinate their activities
    across the world on a centralized manner.

32
Industries Global or Local ?
  • Different Needs Customers Behavior
  • Customized Products/services
  • Low economies of scale
  • Complex distribution
  • Transferability of experience
  • Local customers
  • High transport costs
  • Similar Needs Customers Behavior
  • Standardized Products
  • Beyond country economies of scale
  • Speed of Innovation
  • Transferability of experience
  • Global customers
  • Global pricing
  • Global competitors

33
DIFFERENT INDUSTRIES HAVE DIFFERENT COMPETITIVE
REQUIREMENTS
HIGH
GLOBAL FORCES
LOW
LOW
HIGH
LOCAL FORCES
34
WITHIN BUSINESSES DIFFERENT SEGMENTS HAVE
DIFFERENT COMPETITIVE REQUIREMENTS
PAINTS
HIGH
AUTOMOTIVE
MARINE
AIRCRAFT
CAR
GLOBAL FORCES
INDUSTRIAL
DO IT YOURSELF
LOW
LOW
HIGH
LOCAL FORCES
35
WITHIN BUSINESSES DIFFERENT FUNCTIONS HAVE
DIFFERENT BENEFITS OF BEING "GLOBAL" or "LOCAL"
HIGH
GLOBAL FORCES
LOW
LOW
HIGH
LOCAL FORCES
36
Domestic (vs.) Global Strategy
  • Greater scale and scope of activities
  • More alternatives for configuration Of VA
    Activities
  • More scope for competitive advantage
  • More subjected to cultural and lingual
    activities
  • Wider economic and factor conditions

37
Thank You !
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