The International Strategic Planning Process - Research Paper Example

Strategic Planning Introduction Multinational enterprises are known to have interest in many countries around the globe. But the manners in which these companies are managed differ from the style of management being practiced by a company. 'Multinational enterprises are businesses that are headquartered in one country but have operations in other countries. In such a complex environment, it is particularly important for these MNEs to have well-formulated strategic plans' (Rugman & Collinson 2006:225). This statement in a nutshell explains the importance of strategic planning in carrying out operations of a business enterprise in general and an MNE in particular. Strategic planning and management functions are all the more important in case of large organizations. Other functional management areas like Human Resources, Finance etc. deal with only a part of the organization or its activity. At times two or more such areas may need to take assistance from each other. But strategic planning and management relates to the management of the organization as a whole. Different set of persons may contribute in different proportions towards making strategic moves. Strategic decisions are concerned with the issue of setting a direction for the organization to move or the course the organization will follow Though very crucial, yet preparing 'strategic moves' for future often is not based on hard facts, but on presumptions. It involves past experience, forecasting and 'surround-effect'. The input from different sources are integrated into one comprehensive plan in order to manage the operations, marketing, production, human resources, marketing communications, technology implementation, diversification, mergers & acquisitions etc. Multinational Enterprises with stakes in many markets, different sets of individuals, cultures etc. need to take care of the variations in perceptions and practices in order to remain relevant to the desired areas of operations. The International Strategic Planning Process In general the planning process begins by taking stock of the strengths and weaknesses of the company, together with opportunities in emerging markets and threats from alternatives products and competitors. Subsequently, the market dynamics are taken into account to synchronise the plans with the requirements. International strategic planning is the process through which multinational enterprises are supposed to evaluate their performances in the past, make an objective assessment of their corporate strengths and weaknesses, and then chalk out strategies for future operations, which also involves processes like selection, recruitment, allocation of resources and assessing the market positions. Blaney (2001) for example, states that 'long-term planning is about making decisions. It is not about day dreaming. It is a practical exercise in decision-making to try to ensure that the organization goes from where it is now to where it wants to go in a given time-period'. Strategic planning and management can be therefore described as what Bernard (1962) called 'maintaining the organization in operation'. Strategic planning, in general, is carried out by the top management, with strategic inputs from different departments. For multinational enterprises, such a planning is done at corporate headquarters together with senior managers from domestic and foreign operating subsidiaries. In these competitive times, when market dynamics do not allow plans to last long enough, most of the MNEs try to keep permanent planning staff for providing timely inputs to top level managers in order to devise strategies. The planning staff is supposed to gather demographic data, economic data, marketing potential, remuneration statistics etc. to the top level executives; who in turn come out with strategic plans accordingly. The top executives responsible for devising international strategies for MNEs, must also be aware of different political systems, government structures, legal systems, multiple currencies, accounting systems besides the languages and cultures. While making strategic plans for future, the mission and objectives of the company are also taken into account. There are short-term objectives as well as long-term ones. Strategists are supposed to prioritize all such objectives, so that there is clarity and ease of decision making in situations where there is an apparent clash of objectives. While planning for long term objectives, the company will have to remain competitive. Porter's value chain (1985) provides an important tool for developing and sustaining competitive advantage for a company. It underlines the need for creating and retaining value for the organisation and all its stakeholders. Customers happen to be the key considerations while taking up strategic planning. Beckett-Camarata et al. (1998) present a conceptual overview of managing the relationship with customers in a rapidly changing global environment. It is stated that, "In a global economy, all system members are interdependent and are customers. Companies are restructuring (i.e. downsizing) to fund only those core competencies that are key to their profitability and long-term survival. Managing relationships with their customers - especially with employees, channel partners, and strategic alliance partners - is critical to the firm's long-term success" (p71) For the multinational companies to identify their sustainable competitive advantage, Michael Porter developed a generic value chain with inter-related activities which are common in many firms. Porter identifies primary and support activities. Primary activities are the ones which generate a profit margin by adding value. These activities can be instrumental in providing a sustainable competitive advantage for the organisation either collectively or individually. Porter's value chain framework (1985) in general is accepted as the language for representing as well as analyzing the logic of firm-level value creation. For a customer, value proposition include, access to products, need fulfilment, desire fulfilment, increased choice, new consumption patterns, Problem solving features, and interactivity. This proposition may not be similar for different regions around the world. Strategic planning helps in taking such variations into account and then come out with appropriate strategies. Customers will prefer to deal with the company which values its association with the customer. Multinational enterprises in general happen to be quite sensitive towards such association. This not only helps in widening the customer base, but it also helps in earning goodwill. The international planning process itself involves; i. Analysis of historic sales, costs, market sizes, share holding pattern, marketing communication strategies etc. ii. Analysis of supply and distribution chains for the entire product line of the company iii. Taking inputs from the regional markets iv. Taking into account the levels of competition and alternative products v. Consolidation into regional and global strategies and plans Strategy Implementation Once the plans are in place, then comes the all important task of implementing those plans at appropriate places. The objective of implementation process is to run the company and all its operations effectively. Three critical aspects to run an organisation effectively are; Eliciting the contribution from all concerned Organising the workforce by assigning them the responsibilities, and Developing an information system for monitoring and coordination activities. Contribution from the concerned helps in widening the thoughts, assigning responsibilities helps in implementing and constantly monitoring the results and feedback helps in devising a still better strategy. In fact organizations, per se are not passive components. They are live, full of activity and environment-responsive like living beings, depending upon the kind of environment provided by the management, the workforce, other related components and their mutual relations. In general the strategies for expansion abroad can be categorized as; a. A multi domestic strategy b. A global or international strategy c. A transnational strategy A multi domestic strategy enables individual subsidiaries of a multinational firm to compete independently in different domestic markets. Such strategies help the subsidiaries to develop an area of influence of their own in regional markets. Such an approach works with products and services for which strict internationals standard adherence is not required. For example, apparels, stationary items, domestic items etc. Pihl (2008) contends that when the dispersed unites are empowered to certain extent, it results in development of combinational possibilities. Pihl (2008) terms it a tendency on the part of MNEs to strive for a global distribution of specialized roles so that individual units become interdependent 'centers of excellence'. In such cases the roles of subsidiaries becomes strategically crucial for the company. Global strategy is a strategy that seeks competitive advantage with strategic moves that are highly interdependent across countries. Such an approach is suitable for products and services like IT equipment, computer peripherals, software etc. In case of companies like Intel, AMD, Microsoft etc. such strategy is a perfect fit. But in such cases also, the marketing strategies need to be devised in such a manner that the products are available to the prospective consumer during the peak demand seasons. For example, if the western world feels the urge to go for new products around Christmas or new year season, there are regional countries like Saudi Arabia, China and India which have their festivities and holiday periods during different months of the year. Therefore, even under global strategy, the company has to take good care for regional considerations. In transnational strategy a company often enters into strategic alliances with their customers, suppliers, and other business partners to save time and capital. Such alliances when they becomes long-term partnerships may bring to the firm specialized competencies, relatively stable and sophisticated market outlets that help in honing its products and services, or stable and flexible supply sources. For example in case of automobile, considerations like fuel efficiency could be of utmost importance in areas where fuel costs are higher, but for oil rich nations, this could be a trivial issue and instead oil rich nations might be interested in making the car more luxurious and spacious. The Control and Evaluation Process Multinational Enterprises have the advantage of leveraging their economies of scales and location specific efficiencies. This advantage can be put to good use for maintaining the efficiency standards of the company. While controlling the functioning of the company from national, regional or international headquarters, the company has to keep track of changing political conditions, legal and other environmental factors in order to remain relevant to the new dispensation. The controlling and monitoring mechanisms are set in place to keep track of such changing scenario on a regular basis and mould the strategies accordingly. The team of strategists is supposed to evaluate the current functioning vis--vis the planned moves; and if required this team brings in appropriate changes to the functioning of the company. Whenever new governments are elected, newer laws are passed, newer economic policies are implemented or more competitors enter the fray the MNE is supposed to actuate the requisite adjustments in plans and policies. The control mechanism works effectively with active support of managers as well as floor level workers. This calls for approaches aimed at motivating the workforce, keeping track on the resources and outputs. It should not be an exaggeration if we say that the control mechanism works well when the company's top bosses get wholehearted support from the lower level officials. The lower and middle level employees will in turn extend their cooperation in managing the affairs if they feel themselves to be an integral component in the progress of the company i.e. they are motivated enough to come out with their best performances. Motivation in simplest terms can be defined as a means of providing motives. Motives can act towards making or marring the work, towards doing a job more efficiently or for distorting the work environment. The lack of any positive motivation by the managers often results in an automatic provisioning of negative motivation. Motivation may be defined as the state of an individual's perspective which represents the strength of his/ her natural inclination to exert efforts towards some particular behaviour. How somebody makes use of his/ her efforts towards a goal is determined by the motivating/ de-motivating factors. It is through their behaviour that employees give expression to their commitment to work, level of motivation and their attitudes. The control mechanism has to be devised in such a manner the employees do not feel unduly harassed or intruded. The evaluation process serves the purpose of having a deeper look into the performance delivered, strategies planned, implementation process and efforts applied by the employees. It provides an opportunity to the management to review the performances of the organisation as well as the workforce and take due corrective measures. If the performance of the company is found satisfactory and as per the projected targets, the policies are continued as per the plans, but if the variations are found to be extraordinary, the top management is required to set back and take stock of the functioning. Similarly, in case of worker's appraisal, rewards are offered to the deserving one's while providing opportunities for improvement to those lagging behind. There are a number of performance appraisal systems currently in use depending upon the working environment, nature of job, law of the land, the nature and size of the company etc. A typical performance appraisal system can be created as the 'Management by Objective (MBO) approach'. The MBO approach, also known as goal setting approach is one of the earliest methods through which performance of a company or an individual can be evaluated. To carry out the review and appraisal, we need to consider the following few points. The objectives must be clearly defined. Means of achieving those objectives must be within easy reach Objectives must be clearly communicated to all concerned The objectives must be quantifiable and measurable Objective should be challenging yet achievable The advantage of such a method is that the evaluation is based on actual performance of the company or the individual instead of relying on the background of the company, performance in some other domain or acquired qualifications/ skills required for the jobs. The process of setting objectives includes the steps like; i. Defining a clear statement about the objectives ii. Defining the action plan for achieving the targets/ objectives iii. Providing ample opportunities to implement the plan/s. iv. Appraisal process based on the performance towards attaining the desired objectives v. If required, communicating a corrective or adaptive plan to avoid shortfall in achievement of the objectives next time. vi. Rewarding the good performances vii. Setting up new objectives for the next year/ next quarter/ next month or next week etc. Conclusion Multinational Enterprises have acquired a distinctive character in today's context when globalisation has forced almost all nations to take the liberalisation route and implement policies and rules which help in facilitating the MNEs to a great extent. The opening up of economies has certainly tilted the balance in favour of market forces, which, to some extent, is helping the consumer by way of providing quality at reasonable prices. The high levels of competition have forced even the local manufacturers to come out with good quality products. But the increasing role of market forces has also forced the respective governments to become mute spectators in many cases. The glaring example is the recessionary trends set in motion by the sub-prime crisis in USA. The sub-prime crisis resulted in failure of couple of banks in US; the trend gradually spread over to other countries because other countries too had stakes in companies and banks of America - thanks to the process of globalization. The globalization regime called upon the economies around the world, to ease all restrictions and facilitate multinational enterprises and banks to invest in the companies and economies outside their country. Today we are in the middle of a global meltdown of share markets, failing banks, cash strapped economies, rising inflations, people committing suicides, family being destroyed, rising numbers of defaulting clients etc. Nobody is sure, where the trend is headed to. There is certainly a need to look into the functioning of many MNEs and their strategic planning processes. References 1. Beckett-Camarata, E. J., Camarata, R. C. and Barker, R. T. (1998), "Integrating Internal and External Customer Relationships through Relationship Management: A Strategic Response to a Changing Global Environment", Journal of Business Research, 41. 2. Bernard, C.I. (1962), Functions of Executives, Cambridge, Mass, Harvard University Press 3. Blaney, J. (2001), 'Long-term planning in international schools', Bunnell, Tristan (2005), 'Strategic marketing planning in international schools'. International Journal of Educational Management Vol. 19 No. 1. Emerald Group 4. Pihl, Hakan (2008). 'Transnational tendencies in multinational enterprises'. Baltic Journal of Management Vol. 3 No. 3, 2008. Emerald Group. 5. Porter, M. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press, New York. Read More