Video Transcript: Lecture 9

Hello, hello. So here we are. We are on lecture number nine. So if you think  about it, we just have four short lectures left to go, and that's it for international  business. So how exciting, right? I mean, think about where we were when we  started this class, and where we are now, and just just we've learned. We've  learned quite a bit. I've learned quite a bit talking to you. So I just want to thank  you for the opportunity to to guide you on this journey to understanding  international business as we now transition to to lecture number nine,  international competitive strategy. And for this one, we're gonna be talking about Hilton. So you have that to look forward to when we get to our international  brand. So let's talk about international strategy. So what is international  strategy? And I alluded to this as I concluded lecture number eight, that it's  concerned with the way that firms make choices in developing and deploying  their scarce resources International, internationally. So strategy must be  consistent amongst the various functions. So HR, marketing, et cetera, et  cetera, products in regional units, which also must have internal consistency. So  the overall strategy has to be consistent, then the internal strategy and the  regional strategy also has to be consistent. In other words, you don't want to  have radically different values for each of your brands, or else the company is  going to fall apart. So the goal of international strategy is to achieve competitive  advantage. That's what it's all about. It's having a competitive advantage, and  that's the ability to have a unique and valuable competitive position within the  nation and globally, which generates higher rates of profit than its competitors.  So you must have a few competencies to do that. We'll talk about those in a  second. But if we look at Apple for a second, you can see that Apple has a  competitive advantage, which allows them to charge a little bit of a higher price  for their products than than other companies. So they have a competitive  advantage, so you have to create value for which customers are willing to pay.  You do that through offering something that is rare. So that's one way to have a  competitive advantage. You have something that's difficult to imitate or  substitute for, or you add something that has a feature that people want as well,  like Apple is known as products for good design. So allowing while a firm to be  organized, to fully exploit the competitive potential from these competencies is  radically important. So the organizing of the company to take advantage of their  competitive advantage is important, otherwise they're not maximizing their  profits and they're not doing what that business is seeking to do. So there are  several challenges for international companies, obviously, when we're talking  about competitive advantage, one of them is that resources are always scarce.  So there's not enough people, there's not enough money, there's not enough  whatever to do your job effectively. So where are these where? Where are the  alternatives for the scarce resources? Where the alternatives where these  resources are not equally attractive, and managers and leaders must make  decisions on what to do. So if you have scarce resources, you have to decide 

what you're willing to give up to get the resources you need. So say you had a  $1,000 and where do you put that $1,000 if you have four or five or six different  needs, managers have to decide where to put those scarce resources and how  to use them effectively. So part of that is strategic planning, and that's the  process that organization uses to determine where it's going in the future, how it  will get there, and to what extent is it has achieved its goals. You are maybe you have worked for a company, or you've heard of companies doing strategic plans. Certainly, company that I'm involved with is doing strategic planning right now.  So you know those kind of questions that I just mentioned are questions that we  are grappling with. So formal global strategic planning provides managers a way to identify opportunities and threats, to formulate those strategies, to handle  them, and stipulate how to finance their implementation. So it gives consistency  and makes sure everybody is rowing in the same boat. So you have a strategic  plan, let's say you want to have 20% of market share or whatever. I know that's  not a larger goal, but you want 20% of market share, well then everybody knows the target is 20% of market share, and they can then work toward that goal.  Strategic planning is intended to increase the likelihood of innovation, promote  promotes the development, capture an application of new ideas. And really does this in a competitive environment. And the way that works is because if you're  going through strategic planning, and you got to find ways to do things within  reduced resources and the scarcity of resources and things like that, then you  innovate in order to meet those goals. So if you have that 20% goal, but you  only have one salesman, and that person has to operate around the country,  then maybe you find other ways to innovate to be able to make your product  known for everybody else. So those are all reasons to to do strategic planning,  and that's why it's the most commonly used management tool that executives  use on a global level, and it has the highest levels of satisfaction as well. So  there is always a process, right? So there is a process for strategic planning,  and there's a formal structure that's provided for analyzing external  environments in analyzing the internal environments. Because, remember, you  got to look at internally and you got to look at externally as well defining the  business and the mission and setting corporate objectives, formulating  strategies, making tactical plans, qualifying goals. There's a process for all this.  So the step one is to analyze domestic, international and foreign environments.  So you got to understand those forces. And we've talked about all those forces,  right, the political forces, the economic forces, the legal forces, all those forces  that we've talked about, all those things that make up the environment. And  analysis has to be done. And and you need to understand how to implement  appropriate responses to those environmental sources. For instance, say you  open up in a country tomorrow that's a democracy, and then they become a  social socialist, and they take your business and nationalize it. What are you  going to do? You know that that's some of the questions. Or what if they change 

key legal environments to make your product illegal in that country? What are  you going to do? So environmental, social and business trends are more critical  to strategy than in the past five years, although few companies are prepared for  them. That's again, because we work in and live in a hyper turbulent, complex  world, and that complexity and that hyper turbulence make it difficult to plan for.  But you need to plan, have strategies to respond to crisis and to affect  effectively change that will keep your company successful. Only so many  examples of that during COVID, where people had to change their model in  order to be successful, you got to analyze corporate controllable variables. So  that's a situational analysis and forecast. So you provide input to the planning  staff, who then provide input to a planning committee. So the committee wants  to know where the company is heading, what its strengths and weaknesses are, who are the customers, what value does it deliver, and how is value created? So the value chain is important, because you need to understand the value of your  company, to understand your customers. So, you know, I talked about closet  organizer in an earlier lecture that when I was talking about disposable income,  and this person organizes your life, organizes closets, organize their space to  make the most effective use of them. Now, there is incredible value in that. But if she, in this case, is she, if she doesn't sell what she's and shows people what  the value of that is, then her business may eventually die, like she needs to  show people that her business can save, you know, 20% off of your morning  chores in the morning, or living in An efficient workspace makes you 10% more  productive or 30% happier, whatever that value is, firms need to understand,  and want to understand what value they bring and what value they provide. So  that is very, very, very important. So you know that management will look at  various value chain. Because parts of the value chain will look at linkages, and  they will manage their relationships with both internal and external people,  external being suppliers, distributors, customers, and that happens not only  within their host country, but other countries as well. So you know, as as we've  talked about, and as we continue to talk about as we build competitive  advantage, you know, there's a lot of complexity that is involved in establishing  the value of your product or service and the value of your company, and then  also the competitive the complexity of getting a competitive advantage when  you're competing on a global stage. Another one is, is knowledge as a  controllable corporate resource? So understanding that knowledge is important,  knowledge management is important. Sometimes you'll hear this called  institutional knowledge, and you know, I've been with a place for the last eight  years. I've been there longer than my boss has been there four years. So I'm  able to give him history background and bring in other factors that he may not  have considered before, which gives him incredible institutional knowledge and  helps him to make decisions and to be effective at his job. So, you know,  knowing that valuable knowledge is tactic. That means it's it's known, but it's 

difficult to express in a written document, is important as well. So you have to  foster that knowledge. You have to give people a way to share that knowledge.  You have to give people a way to build on institutional knowledge and  understand the value of it. So if you have very, very, very high turnover, that's  not going to be good for your company, because ultimately, with that kind of  turnover, you're losing all that institutional knowledge. You're losing all that  knowledge management and that knowledge transfer that needs to occur. For  example, a place I work just lost somebody with incredible knowledge. This  person was the go to. So you would go to her if you had a question, and then  she either knew the answer or knew where the find the answer. So she saved a  lot of time she left, the new person wasn't identified, and there was a lot of  institutional and knowledge that was knowledge transfer, that was lost, that the  company is contending with now. And to be honest with you, they're quite behind the power curve. So understanding that and mechanizing that is important.  You're going to define the corporate mission, vision and values, and remember  this is going to communicate to the stakeholders, not just the shareholders, but  the stakeholders, what the what the company is, where it expects to go, where  it's operating, what it values, all those things, and that's why I was saying earlier. With your competitive environment, your competitive your values, cannot be  different across the different nations that you operate in. You need to  fundamentally Be true to yourself. Remember that a mission statement defines  the purpose and scope. A vision statement is aspirational, and it describes,  describes where you want to be in the future. And then a value statement is the  fundamental values, beliefs and priorities of the organizational members you  want to set corporate objectives. So that's the directs a firms course of action.  Maintain it within the boundaries of the state of mission ensure its continued  existence. So corporate objective that I talked about earlier might be to have  20% market share, or whatever. You got to quantify those objectives. So if you  can't quantify the objectives, there's a pretty hard target to meet, right? So if I  say I want to increase my chart, my market share, well, if I go from 3 to 4% Oh, I increase my market share, I met an objective. But was that a good, quantifiable  goal? When, if, if that was my target, to increase by 1% maybe I could have  increased by 10% or maybe I could have increased by 5% the point is, is that  you need to have quantifiable terms so people know what targets that they're  trying to achieve. You got to formulate competitive strategies so managers will  formulate alternative competitive strategies and action plans that seem  plausible, that take in consideration external forces as well as the strengths, the  weaknesses, the opportunities and the threats of the organization. So you  should always have a way to go, but you should always have contingencies as  well. Companies that compete internationally confront two opposing forces and.  That's adaptation to local markets. We've talked a little bit about that. When you  go into a local market, from a marketing standpoint, you got to understand, like 

the Kentucky Fried Chicken eat your fingers off or whatever it was that was  obviously the wrong move, and also the way your workforce force will operate in a competitive market, and then reduction of cost. So you have to do what you  can to lower the cost, because you don't want people to think your products are  too expensive. So you get competitive advantage by reducing your cost, which  you can accomplish through gaining efficiencies. That's why concepts like six  sigma and other concepts that, that, that that try to teach you to be more  efficient are critical. They really give you an advantage over over other firms,  and then also understanding your market and also understanding that  sometimes you're gonna have to modify your product to meet local demands.  For instance, if you do a burger shop in a place where people don't eat meat,  obviously your products gonna have to make some major revisions before  people will purchase the product. Thankfully, there's things like impossible meat, which is delicious as a vegetarian, I can tell you so a consequence of two  opposing pressures, which is the local adaptation we just talked about, and the  reduction in cost. There's different strategies that companies can use to  compete internationally. And there's, there's quite a few, I'm not going to go  through them all, but I will make mention to a few of them. So home replication  strategy that centralizes product development in their home country. So All  products are developed in their home country, and then they create  differentiated products after that, and then they're transferred abroad. So, you  know, think about a product that is come up within the United States, and then it  sold overseas. A there's reason for this choice, and that's if there is weak  pressure for local responsiveness and cost reduction, because you gotta, you  gotta worry about high operating costs, and that in that instance, multi domestic  strategy is when there's strong pressure to adopt products or services for local  markets. So decision making is decentralized, to allow people in that home  market to adapt to what the home market wants. And they'll make changes on  the fly, on, you know, I say that, but on the fly and adapt their strategy to make  sure that they're meeting the local market and maintaining competitive  advantage over local competition as well. If you adapt products too much, then  you take away the distinctiveness of those products, and that is a fear as well.  So you gotta it's balancing act like everything. You adapt to meet the local, local  demands, but you don't adapt too much and lose your identity and go away from that mission, vision and core values that you have sales for forecasts and  budgets help with strategic plan planning. They're used as a control technique  and also as a planning technique. So you know, if you have a budget of  $100,000 you're gonna have to make some choices that would be different than  if you somebody gave you $20 million and asked you to to create a budget. So  you are a creative strategic plan. So you gotta, you gotta understand your  priorities and your your budget and then how it relates to what you're trying to  accomplish. When we're talking about other tools that are used to create a 

strategic plan, there's facilitation tools. So you gotta, you gotta keep in mind that  that upper management will sometimes create policies that surround these  strategic plans, and that's the help assist people in the in the formulation of the  strategic plan and the implementation of that, and then procedures will ensure  uniformity when carrying out the strategic plan as well. So procedures are used,  obviously, policies are used to Budget, Sales Force, those kind of things. I'm  sorry, sales forecast performance measures so you can measure the success of your strategic plan, and you need to do that. You need to have periodic checks  to see if you need to modify your goals. For instance, say your target is to  capture 20% of the market and you end up with 40% of the market in month  four. Well, then you obviously need to adjust your forecasting, and you need to  go back and you need to figure out if your goals need to adjust it. So remember,  a strategic plan is set, but it always, you always have to add that feedback loop  to make sure that you are doing what is necessary to make it successful. Let's  see. So there's different kinds of strategic plans. There's the time horizon, which  is over next 10 years we will there is short, medium and long term ones.  Remember that time horizon is going to vary based on the age of the firm and  the stability of its market. So a very new company will their strategic plan will  look differently than it would if a company's been around for 100 years. And then keep in mind also that an organizational plan will be an overarching plan, but  then each unit will have their own individual goals and desires and outcomes as  well that are related to the strategic plan. So we are, we are getting there. So, so think about strategic planning competitive advantage, and how important this  strategic planning is to the competitive advantage. So it's critically important to  develop good strategic plans. So keep in mind that you can do top down  planning, which is corporate headquarters, develop these plans and then  pushes it down. The problem with this is that it restricts initiatives at the lower  level, sometimes you have hard to get buy in, and then the advantage is that  headquarters should be able to formulate plans that best use the firm's  resources. You could also do bottom up which the people who want to obtain the goals or most responsible for that are formulating the plan. The disadvantage is  that the plans may not coincide with headquarters. Iterative planning kind of  does both where the top does their plan, bottom does their plan, they come  together and they develop a strategic plan. So strategic planning in the more  traditional, bureaucratic form. It's practiced at some corporations. It's been  described as calendar driven ritual. It's not an exploration of the company's  potential. So if you think about that, there are some companies are like, great,  it's five years we have to go do our strategic plan now. You know, instead of  looking at it as a way to really set the direction of the firm. So that's something to keep in mind, is if you own a company, especially an international company, you  need to really, really, really think about your goals, your values and those kind of things. So obviously, if you approach it that way, then you're going to have 

failure to implement everything you want to do successfully. So that is a  common problem. There is a new approach, and that's a strategic mana  management approach, which combines strategic planning with strategic  thinking, strategic implement and implementation, and that lets functional line  managers really come up with a strategic plan and and takes the decision away  from career people whose job it is to do strategic planning, and really puts it into  the people who are on the bottom floor and can make those decisions. So who  does strategic planning? CEO, planning staff, senior managers. You know that  these teams, they have some junior members, but generally they're higher  leveled up they normally. You want, when you do a strategic plan committee,  you want people who are going to tell like it is people who are going to be very  honest in their feelings, but people who are committed to organizational success as well. So, you know, there's different obviously, there's different documents,  there's very long, convoluted strategic plans. And then there can be strategic  plans that are shorter and have a little bit less structure, probably the best  approach is to have something that somewhere in the middle, where you have a lot of detail for some parts, and then, you know, certainly you draw back so, you  know, well, I guess what I'm saying is make sure you define Each area of your  strategic plan, but don't be so prescriptive or restrictive. That it's trouble. People  have trouble having the freedom to do things within the strategic plan which  meet the strategic objectives and the strategic goals. So remember that a  strategic plan is concerned with the issues, strategies and implementations, and that their goal was to create a forward looking document that leads to  competitive success. So a company that has been really, really good at that is  Hilton, certainly they're an international brand. Certainly, they are a brand that  that has had much success. So here is a new Resort World in Las Vegas. But I  wanted to focus on the fact that Hilton is made up of several brands, which you  can find across the the world. Additionally, I also want to point out that that a lot  of these country companies like Hilton and Marriott, they they were, certainly,  they are focused on, like many of the companies we talked about, they are  focused on ensuring that they're have good corporate governance, and they're  doing the right things. In Hilton's case, they're big into helping with slavery and  human trafficking, and they have a commitment to human rights last couple  things I want to show you on Hilton is, I want to show you that they have things  like a global privacy statement, which is which is interesting. Of course, they  focus on corporate responsibility. And then I always found the Hilton hotline,  which talks about ethics in business and ethical conduct. I've always found that  interesting. So as a and then this is important. It's not 911 Hilton is a very  interesting company that runs very well and and really has a has a commitment  to the customer, and then also running their company. Well, when you see  something like your voice is important. That certainly indicates the importance of that practice for that company. Now, what I will say about Hilton also is that they 

do not just provide lip service to that. They take it very seriously. So anyway, that was the focus of this international business, and now we are moving into lecture  10, which is organizational design and control. So you know, what is, what do  organizations do, and how do people coordinate and collectively work together  to get things done? So before we get into that, let us pray, Heavenly Father.  Thank you so much for our time together, Lord. Thank you for giving us the  opportunity to talk about competitive advantage. Lord, thank you for giving us  the opportunity to discuss strategic planning and the importance of strategic  planning for international firms. Lord, thank you for just this day, and thank you  for this class. I pray that as we move into the waning hours of these lectures, we have three left, but as we move into the waning hours of these lectures, I pray  that you will be glorified and that you will help teach us what you need us to  learn in Jesus' name. Amen