Main Steps in the Process of International Strategic Management - Essay Example

International Business AFFILIATION: International Business Main steps in the process of international strategic management The steps are as follows: 1. Making a mission statement depicting the aims and tactics of the business: The statement should be short and concise and should reveal the values of the business. 2. Carrying out an evaluation of the external environment of the business: This will give an idea about the factors which can affect the goals, objectives and strategies of the business. Presence of a lot of uncertainties means that the achievement of goals would be difficult. This will give an idea about the threats and opportunities that the business would face. 3. Carrying out an internal evaluation of the business: This would give an idea about the strengths and weaknesses of the business. 4. Making strategic goals encompassing the mission statements, goals and objectives of the firm. 5. Setting up mechanisms for control: this would entail monitoring and evaluation. 6. Putting strategic plans into actions: this would entail identifying the areas where the goals are to be implemented and developing the employees to carry out these plans. Main problems faced by firms in undertaking this process There are various aspects which need to be considered during planning and implementation of a strategic plan. This becomes quite a daunting task when the planning is being done for the local market about which the planner has an idea as to what competition will be faced and what social, economic and the political factors influencing the decision. Some of the problems are as follows: The degree of availability of the reliable and detailed data contains various changes among the different countries leading to difficulty in what the market has to offer. The risk factor also increases due to the political and economic changes. The level of interaction between the local environment and the multinational companies is not simple. For strategic planning to take place, analysis particular to a country are needed. The local discrepancy within a host country is significant The interaction between the various geographical offices and the head office is hindered due to a large distance, national difference and cultural variation. Due to the differences in the national business structure of some countries, it might become difficult to judge the level of competition that might be faced in the current and future time. Corporate Social Responsibility (CSR) A set of duties through which organizations had to guard and play their part in the betterment of the society where they operate is called Corporate Social Responsibility (CSR). This can include charity work or environmental conservation. CSR helps the organizations in increasing their profit base and increases their good will among the stakeholders (Prieto-Carron et al., 2006). Corporate Social Responsibility deals with environmental conversation like creating parks and planting trees. For mining companies, it can include improving the landscape of the area from which the minerals were extracted. Similarly, for oil and chemical companies, it would include purifying the nearby water supply. Moreover, it can be related to social activities like helping the disaster stricken people, educating the children, developing infrastructure in the remote area, building schools and hospitals etc. it can also be related to creating awareness about social or environmental issues. Range of issues taken into consideration in formulating CSR strategies The broad range of issues which must be kept in mind while developing the CSR strategies are as follows: CSR creates a political environment which gives rise to a situation where the government and the organization are competing for power. It calls for the involvement of all the stakeholders. The underrepresented stakeholders should also be given a say in the affairs of the organization. Another problem is of a technical nature. Developing CSR requires the use of soft skills which may not be present in managers belonging to various engineering related firms. Obligation to comply with the auditing rules may create an unfavorable environment in which the plight of the labor cannot be changed. A governance related issue is also attached to the development of CSR. Governance refers to maintaining proper communication among the various players having different aims like civil society, political actors and other organizations. Privatizing the government means that the role of government is weak which can hinder the development of CSR. For instance, in Brazil, dearth of leadership hinders the making of CSR strategy dealing with developmental works (Prieto-Carron et al., 2006). Approaches used by different authors to explain the stages of export development used by international businesses. Different authors have made use of different models to explain the stages of export development. Nicholas Kaldor’s model is widely used. Ways in which firms could overcome the mistakes often made by exporters The ways are as follows: Make use of an organized research to point out the appropriate target market. This means identify the countries and then narrow down your research to the most appropriate ones. Target one market after the previous one has been fully captured. Do not capture all markets at once. Ensure that all the relevant research on a particular market has been done before placing the product in the market. Develop a concise and brief marketing plan. It should not be very lengthy. Take care while choosing the export partners. Devote time and efforts to find and maintain relations with honest vendors, retailers and agents in the country whose market you are targeting. Hold meetings with your partners and treat them in a nice manner. If possible, invite them to your head office. Give them incentives. You cannot do everything by yourself. Try to seek the help of those who are the masters of this field. Seek the help from the non-governmental and governmental agencies to get good partners and export guidance. Assign one employee from the senior management to the new market. Let him manage this all. This challenge would give him a chance to prove his worth thereby allowing him to apply all his capabilities. Make sure that you actually want to work in a particular country, prior to filling the order form and finalizing the details related to insurance, transportation and customs. Give your partners a chance to meet you. Contact the services offered by the government. Make sure that whatever drives the international trade must also drive the domestic trade. Before entering a market, make sure that you know everything about their culture. Try to search some books which can give you an idea about the various customs and cultures of the country which is targeted. Take into account the cultural differences while planning and launching a product. While dealing with the natives of a country, make sure that you take their opinion. Inform them about the developments you will make, doing so, will make them happy. Carry out the competitor analysis and set the prices of your products accordingly. Find out the total market share that you want to acquire and decide your strategy accordingly. Make sure that the entry strategy works. Set the price in a way which allows profit gain. Ensure that you have enough stock of the raw materials and finished products to cater to the needs of the market. Treat the export customer in the same way as you treat the domestic customer. Introduce product having low range and then diversify your portfolio as the previous products gain popularity. Visit a trade show and try to assess which products are in demand. Whoever is calculating costs and setting prices, keep a margin to adjust the additional costs. Direct your resources to finding out about the product demand and market trend or else your efforts will result in nothing. Team up with people belonging to various cultures. This would bring in new ideas and will help you gain acceptance among the locals. Form partnerships with companies belonging to other countries. Ensure that you have the assistance of a partner who can fund your venture. Try to be consistent. Profits will not come easily. Effort would be required on a long term basis. Lastly, analyze thoroughly the country you want to do business in, assess its position in the world market in order to understand what the country wants to achieve in the future. Take help from the various websites (Baker, n.d). Modes of internationalization Modes of internationalization are as follows: Licensing, giving accessibility to one’s technology, patents and secrets by receiving a certain amount of money is termed as licensing. These entail: Trade marks Advertising processes Production procedures The advantage is that money is generated through the fee of the license. Franchising is the type of licensing in which a contract is signed to run a company under a particular name under some regulations. It is helpful in expanding the brand image by increasing competitiveness. The franchiser gets funds for issuing a franchise. Carrying out joint ventures or strategic alliances is one of the modes of internationalization. This is coordinated effort on part of the companies having the same interests in a venture. Risks involved in the above modes The risks are as follows: In case of licensing, when the contract expires, the company which had obtained the license becomes the competitor. In the case of franchising, it becomes difficult for the franchiser to monitor and ensure the same standards in all the franchises. In case of joint ventures, the risk include: sharing of revenue, restriction in sending the revenue home, having different aims than the other partner organization. Advantages of alliances The advantages are as follows: Assist in evading tariffs, Help in getting the expert opinion and support Mitigate the risk Offer subsidies Make the local competition negligible or non-existent Guard the company against the acquisition by the local company.  International Business Organizational Design  The organizational designs are as follows: Corollary approach is one in which the local structure is expanded needs to be used. It is suitable for companies having little international activity. Export department which looks after international happenings like managing funds, advertising and taking orders International division is one where the international actions are clustered to form a separate department. This department has a head. It is appropriate for businesses which have just started internationalization. Global product division is one in which individual divisions are given the responsibility to manage one product. This is suitable for companies having a broad range of products. Global Area Design where the area or the region is given the most importance. It is suitable for firms having narrow product lines and capability to attain economies of scale. Global Functional Design in which divisions are given main functions. It is suitable for firms having narrow product lines. The global customer design which is built around the customer. It is suitable for those firms which cater to the requirements of the customer Global Matrix Design in which two organizational designs are overlapped so that it has two chains of commands: for projects and for functions. It is suitable for companies where it is required to use equipment and experts. Hybrid Global Design which is designed to meet the needs of the business. It is suitable where no design is available for a firm. Control process in international business The process which ensures that there is a match between the actual and desired activities and goals is called the control process. This entails: Establishing standards Finding real working Matching the performance with the standards Making amends wherever needed. Three main levels of control include: Operational Strategic Organizational Control problems facing an international business Various aspects increase the difficulty level of the control process like: Distance The distance in the form of culture or the geography will raise the expenditure, time and probability of mistakes. The administration in the main office may not be aware of the local issues and might not be able to assess the intentions of the regional managers when they give some suggestions. Diversity Control is made difficult by discrepancies like: Cost of labor Product Size of market Currency Nature of competition Care should be taken on part of the MNC that no such skills are used which are not compatible with the skills possesses by the locals. A good example of this can be the use of advanced technology. Uncertainty Uncertainty due to availability of economic data or the sudden variation in economic and political conditions makes control a daunting task. This creates problems for the managers to predict the accurate results. The data collection becomes difficult if the government agencies do not provide the data. Key methods for dealing with control in international businesses The key methods for tackling the control in international businesses are as follows: Establishing the standards for quality Quality means dedicating yourself to making something better. It includes goal setting and establishing standards and making this practice better. Various MNCs use Total Quality Management to make the efficiency of their organization better. TQM is a procedure including every unit or section performing together to avoid mistakes and wastage. This approach is based on chalking out standards, pointing out mistakes and avoiding wastage. Making a Corporate Culture A corporate culture is the beliefs, attitudes, philosophies and the common values which regulate the working behavior of the workers. A strong culture will not be able to adapt well to the changes as it will be difficult to break their initial beliefs and incorporate new ideas. Building the structure of an organization The chain of command in an MNC determines the control process. The MNC majorly works on the directions from the head office. It has to make a decision whether it should hand over some matters to the regional offices or not. Decentralization or centralization will be dependent on the way MNC is internationalized. This can be varied according to the situation. Assessing the personal performance Most of the control related problems occur due to problems with human resource. Continuous evaluation of the employees will assist in decreasing issues in this field. Applying financial controls It is a common practice used by the MNCs to use accounting software to manage their financial information and to control the financial information. It helps to forecast the amount of funds that would be required. The various techniques for these kinds of controls include: financial audits, budgets and analysis. This helps an MNC to make sure that it stays in the business. This helps in keeping track of the expenses and the revenues and in pointing out the financial strengths and weaknesses of the firm in case an investment is to be made or a new venture is to be started. Exercising Control over Joint Ventures In instances, where the parent company is outside to where the venture is taking place, the focus is shifting to accomplishing strategic goals instead of trying to gain control of every action. In order to exercise control, it is important to devise a contract among the various partners. It can dictate the assortment of situations which should be included. The selection of the manager of joint venture will affect the comparative distribution of the control as that manager is bound to operate the entire venture and for interacting with link with every partner. References Baker, T. (n.d).Ten Mistakes Exporters Make and Ways to Avoid Them.Market Access Worldwide.Retrieved September 18, 2012 fromhttp://www.maww.com/Articles/MistakesReport-04-09-27.pdf Belu,M. andCargin, A.R. (2008). Strategies of Entering New Markets.The Romanian Economic Journal.No.27.Retrieved September 18, 2012 fromhttp://www.rejournal.eu/Portals/0/Arhiva/JE%2027/JE%2027%20-%20Belu%20Caragin.pdf Griffin, R.W., &Pustay, M.W. (2010).International business (7th ed). Upper Saddle River, NJ: Pearson Education. ISBN: 978-0-273-76586-8 Noble, C. (2012) International Business Management. Study Guide. Priet-Carron, M., Lund-Thomson, P., Chan, A., Muro, A. and Bhushan, C. (2006).Critical Perspectives on CSR and Development: What We Know, What We Don’t Know, and What We Need To Know.International Affairs 82: 5 (2006) 977–987. Retrieved September 18, 2012 from http://bdsnetwork.cbs.dk/publications/INTA82_5_09_p977-988.pdf Read More