Strategic Management Planning for Domestic and Global Competition - Assignment Example

? Assignment Chapter 5 5 Explain when and why it is important for a company to globalize Globalization describes the strategy used by business entities in pursuance of opportunities worldwide so as to optimize business functions in countries of operation. A majority of the firms would seek to globalize when faced with increased competition and thus adopt a proactive or reactive strategy of globalization. These companies could be at a point where they would need to leverage on high levels of technology, less costly raw materials or increased market share. The companies would adopt globalization strategies when seeking to strengthen their position in the global market by increasing their market share and brand awareness. The process of a firm going global begins with export-import activity, then minimal change in operation or management, then direct overseas investment to be followed by the most involved phase of substantially increasing foreign investment. Therefore, companies globalize so as to benefit from technologies and industries from abroad. These reasons have been categorized as proactive or reactive or both by Pearce and Robinson (2012). Proactive reasons for globalization are the reasons that a company initiates and later on followed by other players in the industry. These reasons include search for additional resources, economies of scale, power and prestige, synergy, attraction by incentives, need for new and expanded markets, protection of home market and to exploit firm-specific advantages. On the other hand, companies could be driven by reactive reasons to globalize where a trend set by a competitor would be adopted. The reactive reasons for firms going global include trade barriers, international customer demand, international competition, chance and regulation. In spite of both reasons being practiced in the modern business environment, proactive reasons have been noted to yield more beneficial long-term returns. 6.) Describe the four main strategic orientations of global firms. The four main strategic orientations in global firms as identified by Pearce and Robinson (2012) include ethnocentric, polycentric, regiocentric and geocentric orientations. In ethnocentric orientation, it would be postulated that the priorities and values upheld by the parent organization should inform the strategic decisions adopted for all of its operations. As such, plans to be adopted by the overseas markets would be developed at the home office using procedures and polices similar to those employed in the domestic market. Such firms would therefore have an international division or export department. When the culture of the country where strategy would be implemented dominates the decision making process, a polycentric orientation would be said to have applied. The domineering philosophy would be that the local techniques and personnel would be best suited to deal with the local market. Therefore, each subsidiary established in the overseas markets would operate independently with its own strategies. Thirdly, a regiocentric orientation perceives each region as a different market. It applies where the parent company attempts to blend its predispositions together with those of the region where the strategy would be implemented so as to reach a region-sensitive compromise. Objectives would be negotiated between the headquarters and the regional headquarters and also between this regional headquarters and its subsidiaries. Finally, a geocentric orientation would adopt an approach of global systems in the process of decision making with the aim of achieving global integration. This perception of the entire world as one market enhances the development of standardized strategies that would project a uniform image for the products of the company and the company itself. 7.) Explain the control problems that are faced by global firms. One of the major problems facing global firms would be the fact that the adopted financial policies aim at furthering the goals and objectives of the parent organization while it would least consider the host countries’ goals. There would always be difference in measurement and also in control systems. The difference in the financial environments would cause problems with regard to the normal standards in company behaviors. Therefore, there would be need for consistent planning strategies in the firm that would allow the headquarters to effectively review and evaluate its strategies. But Pearce and Robinson (2012) note that in global firms, there would be complications in planning due to the differences that exist in national attitudes towards measurement of work and also the difference in governments’ requirements with regard to disclosure of information. To reduce these problems, there would be need for managers to appreciate global operations, not as a band of independent decisions, but rather as trade-off decisions where country environments, multiple products, strategic options, subsidiary and corporate capabilities and resource sourcing options should be considered. This indicates the demand for significant attention to strategic planning approaches by global companies. 9.) Describe the market requirements and product characteristics in global competition. Business entities operating in global scale have come to appreciate the fact that their success in foreign markets would not just be pegged on shipment of their domestic products into the overseas markets. Pearce and Robinson (2012) identify additional dimensions with regard to customer demand: the acceptance of customers for the standardized products and the desired innovation rate for the product. Standardization refers to the entering into new global markets with unchanged products. This helps the company keep its image and products consistent. The number of customers interested in standardized products keeps increasing as people travelling to various countries seek to purchase products from such countries. Nonetheless, business entities should also be cautious of cultural and language differences, and thus the need to adopt diversification strategies where appropriate. Global products could be described in a continuum from those that would be prone to frequent innovations to those that do not have to be upgraded constantly. This postulate on continuum positioning stipulates on the interconnectivity of these products from the technical products to those considered to be emotional by nature. The technical products including computers, cars and audiovisual products would require constant innovation to ensure they conform to the required modern and sophisticated technologies. These also include products which respond to universal needs like cleanliness and entertainment. Both groups of products should aim at fulfilling the customers’ demands for a specific standard of life. Chapter 6 1.) Describe SWOT analysis as a way to guide internal analysis. How does this approach reflect the basic strategic management process? SWOT is an acronym that has been used to describe a firm’s internal Strengths and Weaknesses and the associated environmental Opportunities and Threats that face the firm. While a firm would have control of its strengths and weaknesses, it would have no control over the opportunities and threats presented by the environment. This analysis bases its significance on the fact that effective strategy would be dependent on a fit between the internal resources of the firm and the associated external conditions. Strength refers to resource advantage that a firm has relative to its competitors and the target market needs. It would be considered a distinctive competence if it provides the firm with comparative advantage in the market enabling it accomplish its objectives. These encompass the organizational beneficial aspects or capabilities that include process capabilities, human competencies, products and services, financial resources, brand loyalty and customer goodwill. A weakness refers to the deficiency or limitation in the competencies and resources that impede the effective performance of the firm and subsequently achievement of its objectives. These are the factors that do not meet the standards expected by the business entity. Examples include insufficient facilities for research and development and depreciating machinery. An opportunity refers to the main favorable situation in the environment of the firm. Opportunities become beneficial if organizations take up such to plan and execute appropriate strategies that would increase profitability. These could arise from technology, government policies and the market. A threat refers to the main unfavorable situation existing in the environment of the firm. Pearce and Robinson (2012) acknowledge threats as impediments to the realization of a firm’s goals and objectives, putting a firm’s stability at stake. These include employees’ unrest, rapidly changing technology and price wars among others. SWOT analysis reflects the basic process of strategic management as it could be employed in various ways to assist in analysis and audit of business strategy and environment. The most common way as argued by Pearce and Robinson (2012) would be to employ it as a logical framework which would guide systematic creation of firm specific model to align the resources and capabilities of an organization to the requirements of the environment of operation from this resource-based perspective. An effective analysis of the environment in which a firm operates would be critical in forecasting the changing trends and helps in their inclusion in the organization’s decision making process. 2.) What are the potential weaknesses of SWOT analysis? Despite the benefits associated with SWOT analysis, it also has limitations. It could result in organizations casually and simply viewing circumstances which results in classification of the environmental factors of the firm into categories that could fail to fit. Furthermore, the categorization of aspects as strengths or weaknesses and opportunities or threats could be subjective due to the great uncertainty in the marketplace. For instance, changes in technology could either be an opportunity or threat. The distinction between strengths and weaknesses, opportunities and threats has been largely elusive and SWOT provides no solution to drawing distinction between them. SWOT analysis points out to the significance of the four aspects but fails to recommend how organizations could identify the aspects. Other limitations have been considered to be out of the control of the management and include government legislation, price increase, economic environment and raw materials. Internal limitations include lack of skilled labor, poor industrial relations and insufficient facilities for research and development among others (Pearce & Robinson, 2012). Reference Pearce, J., & Robinson, R. (2012). Strategic management: Planning for domestic and global competition (13th ed.). New York, NY: McGraw Hill. Read More