Ch.8 International Strategies and Strategies for Entrepreneurial Ventures and Not-For-Profits

1. Ch.8International Strategies and Strategies for Entrepreneurial Ventures and Not-For-Profits Group 1 John Menth Brent Gafford Timothy Loveland Zachary Mayor

2. When Organizations Go Global • What are the issues that arise? • The Wine Industry • U.S. will overtake France as largest wine market. • Consumption and value of wine will increase • Russia and China are in the top-ten for consumption • What organizations will be interested in this forecast? • What are their opportunities and threats?

3. The International Environment • The Legal-Political Environment • The U.S. is stable • Changes are slow • Legal procedures are well-established • Stability Categories of Political Risk • Maximum (U.S., Germany, and Japan) • High • Moderate • Low (Bosnia, Nigeria, and North Korea) • Failed States (Haiti, Somalia, and Sudan)

4. The International Environment • The Economic Environment • Currency Exchange Rates • B2B in different countries • For example: If U.S exports goods to Japan, U.S. exporter will be paid in Yen. The Yen must be converted to Dollars. • Timing of Conversion is Important • A currency's value changes • For Example: If U.S. Dollar is strong, imports seem less expensive. Likewise, this will decrease U.S. exports because it will appear more expensive to foreign consumers. • Inflation rates change • Prices are rising • Tax policies should be monitored • This differs from country to country

5. The International Environment • The Cultural Environment • Not easy to see • For example: • A large global oil company found on of its Mexican plant’s productivity down 20% • They used to have a monthly fiesta. • It was cancelled because it was a waste of time and money. • The employees felt the company didn’t care about their families. • The fiesta was reinstated. Productivity and employee morale soared. • National Culture- the values and attitudes shared by individuals from a specific country that shape their behavior and their beliefs about what is important.

6. The International Environment • The Cultural Environment • International Marketing (Dr. Duhan) • Low context culture (U.S and Germany) • Much more is explained through words or verbalization (contracts) • High context culture (Spain and Japan) • Many things are left unsaid and are implicit • The culture itself explains them

7. Multicountry Approach Vs. Global Approach • A multicountry approach is one in which an organization’s strategies vary according to the countries in which it does business. • Based on developing a differentiation advantage • Products are tailored to fit consumer tastes and preferences. • Marketing and distribution are adapted to local customs and cultures. • A Global approach is one in which the strategies are basically the same in all countries in which the organization does business. • Helps develop a low-cost advantage • Emphasis on global market • Minor variations of the product.

8. International Strategy Alternatives • There are 5 ISA’s • Exporting- and organization makes products in its home country and then transports those products to other countries. • Importing- involves selling products at home that are make in another country • Licensing- is an arrangement in which a foreign licensee buys the rights to manufacture and market a company’s product in that country for a negotiated fee.

9. International Strategy Alternatives Cont. Franchising- the company sells franchisees in other countries limited rights to use its brand name in return for a lump-sum payment and share of the profit. Direct Investment- An organization actually owns assets, such as a manufacturing facility or a sales office, in another country.

10. Born Global Firm • Definition • An organization that chooses to go international from founding • Logitech International

11. Entrepreneurial Ventures vs. Small Businesses • Entrepreneurial Venture: Organizations that have innovative practices, and have growth and profitability as their main goals. • Innovative strategic practices • Seeking new opportunities • Willingness to take new risks • Small Business: Independent business with less than 500 workers. Doesn’t engage in innovative practices, and has little or no impact on its industry • Independently owned, operated, and financed • Fewer than 500 employees • Doesn’t emphasize new or innovative practices • Little Impact on Industry

12. Why Are These Types of Organizations Important? • Job Creation:Small businesses create 60 to 80 percent of all net new jobs annually • Number of New Start Ups:From 2005 – 2007 The U.S. averaged 640,000 entrepreneurial ventures. Add that to the over 5 million small businesses and the economic impact is enormous. • Innovation: Entrepreneurial firms create 24x more innovation per R&D dollar spent than Fortune 500 companies. They account for over 95% of new and “radical” product developments.

13. Strategic Management Process in Entrepreneurial Ventures and Small Businesses • Value of Planning: Research has shown entrepreneurial ventures are better off writing a “back-of-the-envelope” business plan. • Plan basic financial projections, like cash flow, and fine tune the business model after launching the business • A recent study showed that firms who had formal business plans faired no better than those who did not. • Strategic planning is far more important…

14. The Overall Approach to the Strategic Planning Process • Smaller Organizations should be far less formal than larger ones. • If the process becomes too formal, rigid, and cumbersome a small business can lose the flexibility that’s a key to success • The value in strategic management lies more in the “doing” than the “planning” • The “doing” value comes from analyzing the external and internal environments – an important step in strategic planning

15. External & Internal Analysis • External Analysis: • External environment plays a huge role in an EV/SB’s performance. • Provides important information for developing or exploiting competition. • Internal Analysis: • “Boiled Frog Phenomenon” – Gradual negative changes in organizational performance don’t trigger a serious response to do something, at least until it’s too late. • Internal Analysis can show those changes. Don’t be like the frog!

16. Strategy Choices • EV/SB’s are often limited to focus strategies because of their small size and narrow competitive scope. • Corporate Strategies need to be made, no matter what size business, to give the organization an overall sense of direction. • Do they want to grow, stabilize, or reverse a decline by renewing? • The whole process comes down to industry choice. Chosen strategies need to be effective within that industry.

17. Strategy Evaluation • After having chosen a strategy, go back to square one and evaluate your environment all over again…

18. Specific Strategic Issues facing EV/SB’s • Human Resource Management: • Strategic decision makers have to recognize how important human resources are and commit to attracting and keeping good people • Get the right people on the bus… • Innovation and Flexibility Considerations: • EV/SB’s are much more able to change strategies when change comes about. Large organizations are often too committed to current strategies to react quickly to changes in the environment. • Creative Destruction: EV/SB’s have the ability to come up with real innovations, and in doing so can replace existing products, processes, and ideas being utilized by larger organizations

19. Strategic Management Issues Not-For-Profit Organizations Face • What are Not-for-Profit organizations? • An organization whose purpose is to provide some service or good with no intention of earning a profit in order to meet the requirements of U.S. tax code Section 501(c)(3) as an tax-exempt organization • Not-for-Profit does not mean no revenues • Public Sector Organization? • Created, funded, and regulated by the government • Provide public services that a society needs to exist and operate. For example: police protection, paved roads and other transportation needs, and recreation facilities • Federal, state, and local • Ex. Governmental units, offices, departments, and agencies.

20. Strategic Management Process in NFP • Why is a competitive advantage important for organizations not seeking a profit? • NFP compete for resources and customers, Ex: USPS • A positive link between strategic planning efforts in NFOs and organizational performance

21. What does the Strategic Management Process Involve for NFPS? • External and Internal Environmental Analysis • External: provides an assessment of the positive an negative trends that might affect the NFP’s strategic decisions • Economic trends • Tax revenues • Donations • Internal: provides an assessment of the organization’s resources and capabilities and its strengths and weaknesses in specific areas • Determine distinctive capabilities, core competencies, and competitive advantages a NFP may need to develop • How efficient and effective an organization is at doing these things?

22. Strategy Choices & Evaluation The main difference between the functional strategies of business organizations and NFPs is that NFPs don’t have the wide variety of alternatives from which to choose because of scarce and limited resources or because of external constraints Constraints may limit strategic decision makers’ discretion in choosing appropriate and feasible functional strategies Competition still exists even if an organization is not profit-oriented. Must form Competitive Advantage Performance measures differ primarily because there is not a profit measure to analyze Look instead to things such as membership growth or decline to evaluate strategy decisions

23. Specific Strategic Issues Facing NFPs • Multiple Stakeholders • Assumption about government is that individual citizens are the government. • Strategic managers find that their decisions and actions are more closely monitored, and “second-guessed” • Example: Acorn

24. Unique Strategies Used by Not-for-Profit Organizations • Cause-related marketing – the strategic practice in which for profit businesses link up with a social cause that fits well with their products. • Avon & Breast Cancer • Marketing Alliances- strategic partnerships between an NFP and one or more corporate partners in which the corporate partner agrees to do marketing actions that will benefit both the NFP and the Corporate partner. • Transaction based promotion- an alliance in which the corporate partner donates a specific amount of cash, food, or equipment in direct proportion to sales revenues. Example: Yoplait, Save lids to save lives • Joint-issue Promotion- alliance in which the partners agree to tackle a social problem through actions such as advertising and distributing products and promotional materials. • Glamour magazine & National Cancer Institute • Licensing names and logos of NFPs in return for a fee or percentage of revenues • Strategic Piggybacking- developing a new activity to generate revenue • Special Olympics organization sells clothing and other related merchandise • IRS watches these activities very closely