Strategic Management: January 2015
Strategic Management: January 2015
Strategic Management: January 2015
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Strategic Management
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Strategic plans
Business strategy
Corporate strategy
Competitive
strategy International
strategy
Collaboration Phase 4
strategy Outcome of
Mergers and strategic action:
acquisitions Phase 3 Competitiveness,
Implementation market shares,
of strategic profits and growth
activity
Phase 2
Planning
strategic
Leadership
activity
Phase 1
Strategic Corporate governance
evaluation
Figure 1 Components of strategic management. Source: Adapted from McGee, Thomas, and Wilson (2010) and Hitt,
Ireland, and Hosskisson (2012).
2. Corporate strategy defines how the firm National strategy is created for each country
can widen its scale of operation from a single in which the firm operates. The strategy is
business to a portfolio of businesses, oper- sensitive to the national context and builds
ating in international markets. The strategy on the knowledge of the local competitive
helps companies with strategic positioning landscape. It defines the products, pricing
of their products and brand. policies, distribution strategies, and adver-
3. Competitive strategy focuses on how the tising campaigns for each country. National
firm will defend and protect its resources, strategies may include country-specific
capabilities, and core competences that have procurement policies, manufacturing, and
created its current competitive advantage. human resource management. National
This part of the plan includes reactive stra- strategies are instrumental in creating the
tegies that preserve the current core compe- core competences of a firm which are later
tences, and proactive responses that develop aggregated into global and transnational
the firm’s competences even further. strategies. When a firm operates in several
4. International strategy defines which countries, the complexity of handling too
products and businesses are assigned to many national strategies would lead the
different geographic regions and countries. firm to introduce a more harmonized global
International corporations are observed to approach.
use three types of international strategies: Global strategy determines the standard-
national, global, and transnational. ization of products and processes across
strategic management 3
geographic boundaries and harmonizes In the communications industry, Vodafone,
national strategies into a more homoge- T Mobile, and Orange, among others, coop-
neous format. The objective is to reduce the erate to maintain interconnected telephony
complexity of managing diverse markets, platforms, which in turn generate a larger
lower the need for local responsiveness, subscriber base for the industry. Coopera-
and gain economies of scale. With a global tion in telecommunications is ubiquitous.
strategy in place, best practices are easier to It created compatible communications
replicate across different locations. Global networks, uniform technology standards
strategies work when the customer needs (such as global system for mobile (GSM),
are similar across the different markets. universal mobile telecommunications
Another prerequisite for a global strategy to system (UMTS), and 3G), and facilitated
work is the standardization of operational the coordination of complex subscriber
and financial reporting, which provides billing across networks and borders.
head office with the tools of analysis and 6. Mergers and acquisitions strategies are
control. carried out to improve a firm’s competitive
Transnational strategy integrates the bene- position through two main venues. First,
fits of both national strategies and global economies of scale and synergies are gained
strategies. It aims to emphasize local sensi- from combining similar operations and
tivity and increasing local responsiveness overhead costs. Second, core competences
while standardizing operations in different are bought in, which are otherwise difficult
regions in order to gain from economies of to replicate. Firms would gain access to
scale. The duality of the strategy makes it new products, new distribution networks,
difficult to conceptualize and implement. established customer bases, and financial
resources.
Successful transnational strategies are built
International mergers and acquisitions were
around a strong common vision for local
dominant strategies in the 1990s. In more
orientation and an equally strong oper-
recent corporate history, firms are favoring
ational infrastructure which is common
the more flexible and adaptive collaborative
across different countries. It requires a
strategies over the high cost and commit-
substantial investment in infrastructure and
ment of mergers and acquisitions.
managerial resources.
In international mergers and acquisitions,
HSBC has embraced the role of “world’s the inefficient integration and develop-
local bank,” which epitomizes the essence ment of the incumbent cultures may cause
of transnational strategy. However, post strategic challenges. During the integration
the recession in 2011 the bank declared it process of the two firms, much attention
would have to abandon the concept as costs is given to drawing synergies through cost
to maintain an intensive local sensitivity was reduction at the expense of developing new
spiraling. Lower profit margins were placing strategies. The leading party in a merger
pressure on the firm to focus more on oper- tends to force its managerial culture and
ational efficiency and standardization across mode of operation on the target organiza-
all geographic regions. tion. Managers assume that the methods
5. Collaboration strategy is based on both deployed to run the original organization
competition and cooperation between a will function equally well in creating a new
firm and its competitors, suppliers, distrib- strategy involving new corporate partners.
utors, partners, and regulators. The most The misplaced paradigm often leads to the
common motives for firms to engage in inefficient distribution of physical resources
collaboration are to develop larger markets, and tacit capabilities, and eventually leads
improve industry standards, spread the to strategic drift.
costs of research and development, and
increase consumer awareness for the benefit Phase 3: Implementation of strategic activity. It
of all the industry players. requires two main capabilities: leadership and
4 strategic management
corporate governance. Strategic leadership is shares, profits, and return on investment for
necessary to communicate the vision of the firm stakeholders. The outcomes create a feedback
and objectives of the strategic plans (outlined loop, which in turn affects the external and
above) to the management level. Leadership internal environment of the organization.
captures the cognitive side of management
which goes beyond financial performance
measurement. It can be the source of motiva- See also strategic management
tion, empowerment creativity, and innovation,
which often are required to steer firms out of Bibliography
challenging situations. Corporate governance
is a firm’s underlying infrastructure that facil-
Angwin, D.N. (2007) Motive archetypes in Mergers and
itates and controls strategic action. It provides
Acquisitions (M&A): the implications of a configura-
a monitor for ethical behavior and regulatory tional approach to performance, Advances in Mergers
compliance. Corporate governance determines and Acquisitions, Vol. 6, JAI Press, pp. 77–106.
the relationships among the shareholders, the Hitt, M.A., Ireland, R.D. and Hoskisson, R.E. (2012)
board of directors, and the company’s manage- Strategic Management Cases: Competitiveness and
ment. The traditional mechanisms of corporate Globalization, South-Western Pub.
governance were the stakeholders, the board Karaevli, A. and Zajac, E. (2009) When does CEO
of directors, and executive compensation. The Outsiderness Generate Strategic Change? When
triad of control mechanisms has come under paradox and irony meet.
criticism and scrutiny. Trends in corporate McGee, J., Thomas, H. and Wilson, D.C. (2010) Strategy:
governance are to include business performance Analysis and Practice, McGraw-Hill.
measurement and stakeholder feedback with Sammut-Bonnici, T. (2010) Information economy strate-
traditional financial measures of control. gies in the mobile telecommunications industry, in
Understanding Global Strategy (eds S. Segal-Horn and
Phase 4: Outcomes of strategic activity. These D. Faulkner), Thomson Learning.
are visible in increases in revenues, market