An Analysis of the International Strategic
Developing a strategy for global companies is far more complex than developing a domestic strategy. International companies must deal with multiple governments, multiple currencies, multiple accounting systems, multiple political and legal systems and a variety of cultures with different languages, different behaviour, and different values. International companies need to implement a strategic management which can be seen as a comprehensive framework for achieving the company’s fundamental goals in this complex environment.
Strategy means the theory about how to gain competitive advantage in markets. The strategic management process includes a company’s mission, an external and internal nalysis, a strategic choice, strategic objectives and an implementation of the strategy. Every step of this process is aimed at one goal: competitive advantage. Competitive advantage can be defined as conditions which enable a company to operate in a more efficient or otherwise higher-quality manner -than its competitors and which result in benefits for the company because it can create more economic value than the competition.
This process is not undertaken a single time; instead it is a constant, comprehensive and repeating process of analyzing the environment, the company and adjusting the strategy to the conditions.
The mission statement clarifies the purpose of doing business. Moreover, it defines the values and the direction of the business. According to Caravantes, Panno, & Kloeckner (2005) it should define three basis questions: Who are we? Why do we exist? Which is our reason of being? The mission statement is used as a way of communicating with internal and external stakeholders about the strategic direction of the company.
It may specify aspects such as the firm’s products, the target customers, the markets where to compete, the core technologies used, concerns for survival, plans for growth and profitability, hilosophy of doing business and corporate social responsibility. Multinational corporations (MNCs) may have several mission statement, one for the holding company and one for each subsidiary or business unit. The next step of the strategic strengths and weaknesses of a company and the environmental opportunities and threats facing that firm.
It is technique through which strategic managers can create a quick overview of a company’s strategic situation. In the external environment the company obtains data about economic, financial, political, legal, social, cultural and ompetitive changes in the various markets the company is engaged or might want to serve. In the firm’s internal analysis the strategic manager assess the organizational strengths and weaknesses of the company in comparison to major competitors. Potential strengths might include a strong financial position, a great competence in process engineering, a cutting-edge technology or an abundance of managerial talent.
Weaknesses reflect deficiencies in skills, resources or other factors that impede the firm’s competitiveness such as a lack of skilled employees, high capital costs or a negative public image. With the SWOT analysis and the mission statement as context, companies undertake strategic choices: how do we want to interact successfully in our business environment and generate competitive advantage? At the corporate level companies decide whether they want to pursue a singlebusiness strategy, a related diversification or an unrelated diversification.
Companies who are convinced that businesses forming the corporate entity are worth more than they would be under independent ownership and decide against a single-business strategy have the strategic choice between vertical integration, the acquisition of irms that are suppliers or customers, or diversification, a strategy which involves the acquisition of businesses because of promising investment opportunities. A corporate level strategy has the goal to create synergies, on the one hand through economies of scope (diversification) or through an improvement of value chain economies (vertical integration).
At the business level companies have to decide how they want to compete in each market. Companies who follow a differentiation strategy strive to create and market unique products and services for varied customers and to build customer loyalty. Another approach is the overall cost leadership: Low-cost leaders focus on achieving highly efficient processes and economies of scale so that it is able to use its cost advantage and charge lower 2 prices or enjoy high profit margins. A focus strategy attempts to attend to the need of a particular market segment with specific types of products in a certain region.
Doing so allows the company to match the specific needs of the customers better than competitors. Functional level strategies are developed to manage the different corporate functions (Marketing, Operations, Finance… ) consistent with the nternational corporate and business strategy.
The international strategic planning process is largely framed by defining strategic goals. Strategic goals are major objectives the firm wants to accomplish through pursuing a particular plan of action. should be measurable, feasible, and time-limited.
The implementation of the strategic choice is accomplished by tactical goals and plans. They are detailed goals and statements of the means or activities that will be used by the firm to achieve the strategic goals. Tactics usually involve middle managers and focus on the details of implementing.
They translate the strategy into action designed to accomplish specific short-term goals. The final aspect of international strategy management is the development of a control framework, a set of managerial and organizational processes keeping the company moving towards its strategic goals.