Essay Examples - Management Essays
International Strategic Management is a planning process of developing international strategy in the direction of achieving strategic-fit between the organisation's competence & resources and the global environment under which it tends to operate. It is an ongoing process that adhere an organisation to compete in an international scenario.
Any strategy management involves 3 elements, namely analysis, choice and implementation. The analysis part is related to the environment of the organisation, organisations resources & capabilities, the purpose of the organisation and the expectations of the stakeholders involved. Strategic choice is related to considering various alternatives, evaluating them and selecting the best suited. Implementation part on the other hand refers to actually bringing the strategy into practice, by means of structuring the organisation, allocation of the resources and managing strategy change.
International Strategic planning that constitutes of developing international strategy is a core part of International Strategic management. Strategy basically refers to the direction and scope of any organisation in the long run and is involved with tailoring the organisation's resources and competence to the opportunities in its environment. International strategy involves strategy formulation for an organisation in foreign country. Many things have to be considered when formulating a strategy in foreign country like multiple governments, multiple currencies, different cultures and their respective languages, the different accounting systems, the legal and political systems etc. Thus developing an international strategy is more tedious than developing a domestic strategy.
Suppose, a major retail chain of UK, say, Marks & Spencer wants to invest in one of the Eastern European countries to have more opportunities and increased revenue, they would have to follow the process and models of international strategic management involving the above three elements- Strategic analysis, choice and implementation. Basically, the process of strategic management consists of strategic position of organisation, strategic choices it possess and finally how these choices can be implemented into action. In my paper, I will discuss various models, which will broadly come under these three elements.
International Strategic Management Concept and Models
Strategic management is about the management in ambiguous, uncertain and complex situations where the objective of the organisation may be explicitly defined but the ways & means to achieve these objectives may not be clear. Thus strategic management involves a proper insight into all functions of the management as a whole for example finance, accounts, marketing, human resource etc. So that by keeping an overview of all, strategy can be developed. Strategies should be carefully designed as they have got long-term implications and provides a sense of direction to the organisation.
Strategic Analysis
An effective international strategy can be derived from strategic analysis of organisation's position in the global world i.e. by assessing the environment, competitors, internal competence and resources, customers and the purpose of the organisation.
Assessing the environment in which the organisation exists is vital for its strategic management. The PESTEL framework can be used to assess the environment.
PESTEL Framework
The framework consists of six main types of environmental influences; they are political, economic, social, technological, environmental and legal. Political influence comprises of the standing of the government in the country, the policies and rules for governing business in the country, its domestic and foreign trade regulations, taxation and other licensing requirements etc. Economic influence includes the market and interest rates of any particular country, inflation and employment policies, business and product life cycle etc. Social factors on the other hand includes the demographics, attitudes of the people in the country, education levels etc. Technological influence consists of pace of research and development in the country, innovations, rate of obsolescence, etc. Environmental Influence mainly refers to the social laws of the community around for instance disposal of the waste, protection of the environment around etc. Legal influence comprises of the health and safety rules of any country, essential quality standards, regulation of monopolies etc. Thus PESTEL framework is particularly important for any organisation for its international strategic management. In fact it is not necessary that all the environmental forces are vital for all organisations. For instance, a multinational bank will give more emphasis on political and economic factors of a country since bank rates and political stability directly affects their business. Whereas an international junk food chain will consider political, social and legal factors more than other things.
Second aspect of strategic analysis is assessment of competition in the market. Porter's Five Forces model can be used to get an insight into the competitiveness of the market. The logic behind this model is that there are five forces in an industry that influences the profitability of the firm. Thus through effective strategic management, the firm can influence the forces and achieve its objectives.
Porter's Five Forces model
Threat of Entry refers to the ease of new firms entering the market. Thus if it is very easy to get entry into the market then it will surely influence the demand and the profitability of the existing firms in the industry. Threat of substitutes on the other hand refers to the threats caused to the particular class of products as the customer can switch to the substitutes. Power of buyers implies to the sweeping away of the profits and revenues from the firms in the market by the buyers as they have the bargaining power through which they can extract the benefits out of the firm. Power of suppliers refers to the suppliers of the essential resources who can dominate the market upon their own terms. Competitive rivalry is the competition arising amongst the competitive rivals. They are the organisation targeting at the same customers and with the same goods and services.
Thus weakness in any of the five forces will result into more favourable competitiveness to any firm in global market.
Third aspect of the strategic analysis is assessing organisation's customers. The driving force for any strategic plan is that what the customer desires form the organisation as a supplier. So the strategy should be designed only after considering the customer's buying & prioritising criteria, customer believes and values, segmenting the market, etc.
Fourth aspect of Strategic analysis is Organisation's internal resources and competence. For any organisation to survive in global world, it is very important to analyse its strategic capability. For that the organisation must follow that what product features and critical success factors does the customer values. The organisation must make a clear assessment of the resources and competence it possess. Resources can be financial, human, physical, intellectual etc. To work upon this, an organisation can undertake SWOT analysis. It refers to Strength, weakness, opportunities and weakness.
Fifth aspect of strategic analysis is about Organisation's purpose and expectations of the stakeholders who have their interest in the organisation. To effectively survive in a global competitive world it is vital for any organisation to determine its stakeholders and the extent to which they can influence it. The purpose of the organisation should be clear and should fall into the lines of corporate social responsibility and ethical considerations for that region. The purpose of the organisation should be prioritised and the cultural context of the country should be followed.
Strategic choices
Strategic choices are related to the choices of alternatives and decisions for an organisation and the channel it needs to follow in the future, as it needs to respond to many pressures and influences arising out of strategic analysis. The rationale behind these choices could be creating value, outperform competition, satisfy the expectations of the stakeholders involved and above all, survive successfully in the competitive global world. There are three dimensions of Strategic choices. They are Corporate Strategy, Business strategy, Directions of development i.e. strategic alliances.
Corporate strategy refers to the strategy made at the corporate level of the organisations. These decisions are about the key strategic issues like what should be the line of business, how the resources are to be allocated between different business units etc. It is basically for a diversified multi-business organisation structure. The level of management above the business unit is referred to as corporate management. A corporate strategy could be aimed at different things. For example, for adding value to some business unit through its own expertise, investment& competence building, resource sharing, setting standards, etc.
A corporate has to manage a number of strategic business units, so it has to create and manage its portfolio. A portfolio of all business in their respective positions is created and different strategies are used to manage each of them. For this assessment Growth Share Matrix developed by Boston Consulting group can be used. In this, all the businesses are evaluated under two aspects, Market share and market growth.
Market growth
Stars Question marks
Market Share
High Low
The Growth Share Matrix
Stars are business unit that is growing fastly with high market share. So here the corporate strategy could be to invest more in this business unit or spend more on advertising etc. Cash cows are business unit where market share is high but the growth is low. So here a strategy in a matured market could be to generate investment, build upon etc. Question marks on the other hand are a business unit with high growth but low market share. So heavy investments are required to increase the market share and gain dominance or should be liquidated completely. Dogs refer to those business units who are functioning in declining markets and have very low share. Thus the corporate strategy here could be to divest and use these funds in other business units.
Thus in this way the corporate strategies are devised to manage business units within the portfolio of the corporate.
The other dimension of Strategic choice is Business level strategy. These are the strategies formulated at business level to survive in the global world. These are basically aimed towards how effectively the organisation can compete in the global market. It determines the competitive advantage of the organisation over others and the image of the organisation in the minds of its stakeholders. To capitalise on the competitive advantage several competitive strategies like price based, differentiation and focus strategies are adopted.
The third dimension of strategic choices is that what directions and methods of development are open to an organisation. For any organisation to succeed, continuous development is vital. Directions of development can be exercised with a present or a new product, with a present or a new market, or through diversification. It is basically dependant of the organisation's environment, its resources and competence. For example if any organisation has significant critical success factor than it may need to enter a new market with the same product.
Thus to develop in any particular direction some methods of development are even needed to follow. There can be three methods of development. First method could be internal development of organisation. Second method could be through mergers and acquisitions of organisations. And lastly, development can take place in form of some strategic alliances like joint ventures, consortia, sub-contracting, franchising, etc.
Strategy Implementation
Once the strategic position of the organisation is analysed, the strategic choices are determined, then it becomes inevitable for an organisation to implement the strategy formulated. The strategy should be enforced into action and should be managed efficiently. To manage a desirable strategy, three aspects should be looked upon. They are the organisation itself, resources capable of enabling strategies and the managing strategic change, if it occurs.
The organisation consists of the broad structural designs (which defines the hierarchy, roles, authorities and responsibilities), formal and informal processes (lines of control and communication), and relationships & boundaries between the stakeholders involved. In this era of globalisation, many organisations have redefined their structures, processes and relationship patterns. The pursuit of this is mainly characterised to have a balance between the global uniformity and domestic responsiveness of the market.
For enabling success of the strategy formulated, resources and competences of the organisation play an important role. Resources could be human, information, technology, finance, and physical. The middle and lower level of management is crucial to enable the strategies, as they are the ones who actually brings the strategy into action and are more knowledgeable to the environment they are interfacing. These people develop their competences and resources in accordance with the strategy and also do they help in success of the new strategy formulation as they are adapted to develop new core competences and resources.
Change is the most permanent thing in this globalise scenario. It is inevitable for any organisation. There may be many reasons for this change, they could be due to change in the international or domestic or internal environment of the organisation, any new business association like joint ventures, acquisition etc., technological changes, etc. Thus carrying out new or changed strategies that involves further non-routine changes is referred to as strategic change. Strategic change takes place in the following way:
Process of strategic change
Equilibrium is the balancing stage between the forces of change and the resistance to change. Unfreezing is that state where the people loosen grip on their established behaviours. Refreezing on the other hand is acceptance of new changes and achieving the new equilibrium. Thus, the process of strategic change is all about unfreezing the existing equilibrium and refreezing the new equilibrium.
It is very significant for any organisation to manage its strategic change in an organised manner with the help of communication, collaboration, intervention, direction and coercion.Therefore by adopting strategic changes, an organisation can walk on the path of global success.
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Conclusion
International strategic management is lot more difficult than strategic management in your own country. Various management gurus have devised different theories for international strategic management, which are helping compaies to grow and survive in different countries. I have explained various theories and models in this paper, but there are many other models which are important and are not covered above. It is evident that models are not tailor made for any particular company but have evolved during a course of time and have changed as per needs of new business world.
In this era of globalisation, when trade barriers are reducing and international trade is growing, need for international strategic management has emerged. In order to compete and operate profitably, companies now need to have sound international strategy. With the help of international strategic management, organisations can use domestic resources and competencies to gain competitve advantage in overseas market.
Bibliography
Johnson, Gerry & Scholes, Kevan (2002). Exploring Corporate Strategy, Prentice Hall, London.
Hannagan, Tim (2002). Mastering Strategic Management, Palgrave, New York.
Bowman, Cliff (1990). The Essence of Strategic Management, Prentice Hall, UK.
Bruce, Andy & Langdon, Ken (2000). Strategic Thinking, Dorling Kindersley, London.
Adapted from Exploring Corporate Strategy by Gerry Johnson and Kevan Scholes, sixth edition, Page 16.
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