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Chapter 08 - Strategy Formulation and Implementation
2. When MNCs scan the environment, what are two key areas of consideration that
MNCs must address?
Answer: There are a number of areas that warrant consideration when scanning the
environment. Examples include the competition, political stability, technology, and
demographic consumer data. The competition is important because of the threat of
3. Choose one of the pharma companies mentioned in the chapter’s opening World of
International Management. How would you characterize its strategy within the
globalization-national responsiveness framework?
Answer: Responses to this question will vary depending on the company selected
by the student. Many will probably choose one of the larger companies like Pfizer
4. Which FSAs and CSAs does it primarily rely upon? To what extent does the
company use a “base-of-pyramid” approach? How would it affect the company if
low-income markets turned out to be a bust?
Answer: The base of the pyramid approach involves focusing on the 5 billion plus
potential customers around the world who have heretofore been mostly ignored by
international businesses. Researchers feel that the base-of-pyramid may be an ideal
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Chapter 08 - Strategy Formulation and Implementation
Key Terms
Administrative coordination―Strategic formulation and implementation in which the MNC
makes strategic decisions based on the merits of the individual situation rather than using a
predetermined economically or politically driven strategy
Base of pyramid strategy―Strategy targeting low-income customers in developing countries
Born-global firms―Firms that engage in significant international activities a short time after
being established
Economic imperative―A worldwide strategy based on cost leadership, differentiation, and
segmentation
Environmental scanning―The process of providing management with accurate forecasts of
trends related to external changes in geographic areas where the firm currently is doing
business or is considering setting up operations
Global integration―The production and distribution of products and services of a
homogeneous type and quality on a worldwide basis
Global strategy― Integrated strategy based primarily on price competition
International entrepreneurship―A combination of innovative, proactive, and risk-seeking
behavior that crosses national boundaries and is intended to create value in organizations
International strategy―Mixed strategy combining low demand for integration and
responsiveness
Key success factor (KSF)―A factor necessary for a firm to effectively compete in a market
niche
Multi-domestic strategy―Differentiated strategy emphasizing local adaptation
National responsiveness―The need to understand the different consumer tastes in segmented
regional markets and respond to different national standards and regulations imposed by
autonomous governments and agencies
Political imperative―Strategic formulation and implementation utilizing strategies that are
country-responsive and designed to protect local market niches
Quality imperative―Strategic formulation and implementation utilizing strategies of total
quality management to meet or exceed customers’ expectations and continuously improve
products or services
Strategic management―The process of determining an organization’s basic mission and long-
term objectives, then implementing a plan of action for attaining these goals
Strategy implementation―The process of providing goods and services in accord with a plan
of action
Transnational strategy―Integrated strategy emphasizing both global integration and local
responsiveness
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Chapter 08 - Strategy Formulation and Implementation
Review and Discussion Questions
1. Of the four imperatives discussed in this chapter ―economic, political, quality, and
administration―which would be most important to IBM in its efforts to make
inroads in the Pacific Rim market? Would this emphasis be the same as that in the
United States, or would IBM be giving primary attention to one of the other
imperatives? Explain.
Answer: In an effort to make inroads in the Pacific Rim market IBM would
probably give primary attention to the economic imperative. In the Pacific Rim
market, computers are beginning to be regarded as a generic good. In years past,
close a sale, then IBM might use an administrative coordination strategy. The most
common approaches used by IBM are the economic and political imperatives
because of the desire to coordinate strategy both regionally and globally.
2. Define global integration as used in strategic international management. In what
way might globalization be a problem for a successful national organization that is
intent on going international? In your answer, provide an example of the problem.
Answer: Global integration is the production and distribution of products and
services of a homogeneous type and quality on a worldwide basis. Global
integration can be a problem for the international firm if it causes the firm to
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Chapter 08 - Strategy Formulation and Implementation
3. Some international management experts contend that globalization and national
responsiveness are diametrically opposed forces, and that to accommodate one, a
multinational must relax its efforts in the other. In what way is this an accurate
statement? In what way is it incomplete or inaccurate?
Answer: This statement is accurate in the sense that a firm concentrating
completely on one strategy will not be able to concentrate on the other. This
national responsiveness.
4. Consider that both a retail chain and a manufacturing company want to expand
overseas. What environmental factors would have the most impact on these
companies? What ratio of environmental scanning to internal analysis should each
employ? What key factors of success differentiate the two?
Answer: Both a retail chain and a manufacturing company are going to have to
observe and evaluate the role of all potential competitors and the relationships
surrounding those competitors. Regulations, laws, and guidelines will have to be
researched and abided by. Probably more important to the retail chain is the
observation of the social environment. Awareness of demographic shifts including
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5. Anheuser-Busch is attempting to expand in India, where beer is hardly ever
consumed and liquor dominates the market. What areas should be targeted for
strategic goals? What could be some marketing implications in the Indian market?
Answer: Anheuser-Busch would need to concentrate on profitability and marketing
when expanding into India. Profitability is so important because MNCs need higher
profitability from their overseas operations than they do from their domestic
operations. Setting up overseas operations involves greater risk and effort.
6. What are the particular conditions faced by MNCs in emerging markets may require
specialized strategies? What strategies might be most appropriate in response? How
might a company identify opportunities at the “base of the pyramid” (i.e., low-
income markets)?
Answer: In emerging markets, MNCs have tremendous potential for increased sales
and market share. Especially in countries undergoing rapid changes such as
privatization, MNCs have received extensive government support. However, there
7. What conditions have allowed some firms to be born global? What are some
examples of born-global companies?
Answer: Besides the increasing attractiveness of the global market and the
saturation and cut-throat competition in the mature markets of most developed
countries, firms that are “born global” capitalize on advances in telecommunication
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8. Mercedes recently changed its U.S. strategy by announcing that it is developing
cars for the $30,000 to $45,000 price range (as well as its typical upper-end
cars). What might have accounted for this change in strategy? In your
answer, include a discussion of the implications from the standpoints of
marketing, production, and finance.
Answer: Mercedes is clearly diversifying its product mix to reach a larger number
of potential buyers. By restricting itself to the extreme upper end of the price range,
it would be very difficult for Mercedes to sustain impressive growth rates.
cash flow generated by the increased sales helps Mercedes from a finance
standpoint also.
Internet Exercise: Infosys’s Global Strategy
Suggestion for Using the Exercise
1. After the students visit the Infosys Web site as instructed in the exercise, ask them
divide into two teams. Each team should answer the questions at the end of the
exercise. After completion, the teams should share their answers and evaluate each
team’s responses.
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Chapter 08 - Strategy Formulation and Implementation
In The International Spotlight: Poland
Questions & Suggested Answers
1. What are some current issues facing Poland? What is the climate for doing business
in Poland today?
Answer: Poland has currently experienced some economic success, especially in
preparation for accession into the EU. In 1992, Poland was the first former
communist bloc country to have a positive economic growth. During the global
recession of 2009–2010, its growth rate actually was better than the rest of Eastern
Europe. Poland was one of the first former communist countries to implement
2. Is the Canadian manufacturing firm using an economic, political, or quality
imperative approach to strategy?
Answer: The company is using an economic imperative. Among other things, it is
looking to develop a strategy based on cost leadership and segmentation. The costs
for making the product will be as low as possible. The targeted market for sales is
imperative.
3. How should the firm carry out the environmental scanning process? Would the
process be of any practical value?
Answer: The firm would begin the process by making a macro scan of the market in
general. Then there would be a micro scan aimed at looking for competitive
products being produced by the EU and Eastern European firms. This would help
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4. What are two key factors for success that will be important if this project is to be
successful?
Answer: There are two key factors for success (KFSs) that are mentioned in the
case. One is low price. The other is product quality (in this case, a product superior
International Management in Action: Point/Counterpoint: Boeing vs.
Airbus
Summary and Discussion
1. The longstanding dispute between Boing and Airbus is over the degree to which
government subsidies distort trade and contribute to unfair trade between the U.S.
and EU. In 2010 the WTO found Airbus guilty of receiving extensive European
government subsidies. Airbus accuses Boeing of receiving even more such aid. The
dispute has affected several commercial and defense contracts.
2. The questions in the text relate to how the dispute might play out. Specifically, the
role of the U.S. government regarding Boeing and the future of Airbus in the U.S.
are at issue.
International Management in Action: Can Internet and Mobile
Access Transform Poor Economies at the Base of the Pyramid?
Summary
1. Entrepreneurs are looking to shorten the gap between developed and developing
countries regarding Internet and wireless phone networks. Many consider Africa to
be the next great frontier for these enterprises, and that continent presently has the
highest mobile growth rate and the fastest Internet-use growth.
European companies have pursued the African cellular markets aggressively. The
availability of cables and access to newer satellites, as well as unkept promises.
Africa’s mobile and Internet revolution has a significant potential economic impact
that can improve food production and other development, as well as become a
means to economic empowerment.
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