Topic: Strategic management in the globalized workplace

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  • 4 Marks

CSEG – May 2016 – L2 – Q4c – Strategic management in the globalised workplace

Explain two limitations associated with offshoring, focusing on potential drawbacks for firms engaging in this practice.

Explain TWO limitations that are associated with offshoring. (4 marks)

Limitations of Offshoring are:

i) It can affect the quality of a firm’s product or services offered since the use of third parties breaks the direct link between the firm and its customers.

ii) It can lead to bad publicity to the firm in the home market when consumers perceive moves to offshore operations as leading to domestic jobs losses.

iii) It could lead to loss of control since it increases the scope for third parties not to meet agreed service levels.

  • 8 Marks

CSEG – May 2016 – L2 – Q3b – Strategic management in the globalised workplace

Identify and explain four management orientations in the management of international business, focusing on their philosophies and key features.

Management perception about the global environment is an important factor in shaping its orientation or philosophy in developing a general strategic profile in the international arena.

Required: Identify and explain FOUR management orientations in the management of international business. (8 marks)

(i) Management orientation and organisation for engaging in international business are as follows:

  1. Ethnocentrism orientation
  2. Polycentrism orientation
  3. Regiocentrism orientation
  4. Geocentrism orientation
  5. Ethnocentrism orientation: This is a home country orientation and it’s based on the philosophy that the culture of the home country is superior to that of other countries. The approach, thus, ignores any inter-country differences which exist. Essentially, ethnocentric companies will tend to exhibit the following features:
  • Market the same products with the same marketing programmes in overseas countries as at home.
  • Centralize the marketing function in the home country
  • Standardize the marketing mix
  • Carry out no local market research or adaptation of promotion.

As a result of the above, market opportunities in the overseas markets may not be fully exploited and foreign customers may thus be alienated by the approach. Ethnocentric companies usually focus on its domestic market and sees exports as secondary to domestic marketing. One significant advantage in using this approach is the economies of scale that accrues to the company.

  1. Polycentrism orientation: The polycentrism orientation is based on a philosophy that is exactly in contrast with the ethnocentrism orientation. This orientation believes that each country’s culture is unique. Based on this philosophy, the following features of polycentric companies become evident:
  • It adapts totally the product and the marketing programme to each local environment
  • It establishes largely independent local subsidiaries who are free to formulate their own objectives and plans
  • It decentralizes its marketing management function
  • It invests massively in marketing research in order to be responsive to the local markets.

The result of the above is major increases in turnover. However, loss of economies of scale can seriously damage profitability. Ethnocentric companies tend to think of themselves as having multiple identities, what is usually referred to as multinational corporations.

  1. Regiocentrism orientation: This is a synthesis of ethnocentrism and polycentrism orientations. It is based on the philosophy that there are both similarities and differences between countries that can be incorporated into regional objectives and strategies. Thus, with the approach market segmentation is fulfilled on the basis of similarities in terms of regions. A regiocentric company will find economic, cultural or political similarities among regions in order to cover the similar needs of potential consumers. For instance, nations like India, Pakistan and Bangladesh possess a strong regional identity that can be exploited using same products and strategies. The significant features of regiocentric companies are:
  • It uses an integrated approach to marketing that is based on regional blocks.
  1. Geocentrism orientation: This orientation is similar to regiocentrism orientation. The only difference is that it fails to recognise similarities and differences among regional blocks. Thus, the target of geocentric companies, also known as global companies, is to target consumers who have similar tastes and preferences wherever they may be found on the globe. The main idea of this approach is to borrow from every country what is best. It treats the issues of standardization and adaptation on their merits so as to formulate objectives and strategies that exploit markets fully while minimizing company costs. The aim is to create a global strategy that is fully responsive to local market differences. The essential features of a global company are as follows:
  • It uses an integrated approach to marketing management.
  • It gives due consideration to each country’s condition without allowing any specific country’s culture or condition to dominate.
  • 12 Marks

CSEG – May 2017 – L2 – Q4b – Strategic management in the globalized workplace

Explain the four internationalization strategies and identify two associated risks with each strategy.

Explain the following internationalization strategies and identify TWO risks associated with each of the strategies:

i) International strategy
ii) Global strategy
iii) Multidomestic/Multinational strategy
iv) Transnational strategy

i) International Strategy:

An international strategy involves exporting products or services from the home country to international markets with minimal local customization. The focus is on maintaining a strong home base while leveraging core competencies globally.

Risks:

  1. Limited Responsiveness: There is a risk of not meeting the specific needs of local markets due to the lack of customization, which can lead to a loss of market share.
  2. Logistics and Distribution Challenges: Managing logistics and distribution from a central home base can be complex and costly, leading to potential delays and increased expenses.

ii) Global Strategy:

A global strategy involves treating the world as a single market, standardizing products and services across all markets to achieve economies of scale and cost advantages.

Risks:

  1. Cultural Insensitivity: The standardized approach may fail to address cultural differences in various markets, leading to a lack of acceptance of the product or service.
  2. High Coordination Costs: Implementing a global strategy requires significant coordination across different countries, which can be expensive and difficult to manage.

iii) Multidomestic/Multinational Strategy:

A multidomestic strategy focuses on adapting products and services to fit the unique needs of each local market. The strategy emphasizes local responsiveness over global efficiency.

Risks:

  1. Higher Costs: Customizing products and services for each market can be costly, reducing the potential for economies of scale.
  2. Complex Management: Managing a diverse portfolio of customized offerings across different markets can be complex, leading to potential inefficiencies and management challenges.

iv) Transnational Strategy:

A transnational strategy seeks to combine the benefits of global integration and local responsiveness. Companies adopting this strategy aim to achieve both global efficiency and local adaptation.

Risks:

  1. Balancing Act: The need to balance global standardization with local adaptation can be challenging, leading to potential conflicts and compromises that may weaken the overall strategy.
  2. Resource Intensive: Implementing a transnational strategy requires significant resources and investment, which can strain the organization and lead to operational difficulties.
  • 8 Marks

CSEG – May 2017 – L2 – Q4a – Strategic management in the globalized workplace

Discuss the factors in Porter’s Diamond of national advantage that determine the competitiveness of West African countries.

Persiba IT Limited (PIL) started operations 10 years ago in Ghana providing a wide range of information technology solutions to diverse clientele. Mr. Quainoo, the chief executive officer (CEO) of the company, recently has been contemplating venturing into other West African markets to take advantage of untapped opportunities. This is also to strengthen the competitive position of PIL since Ghanaian market growth is beginning to slow down and competition is getting keener.

At the 2016 second quarter Board meeting, the CEO tabled his proposal for consideration and board’s input before the document was finalized. During the Board discussions Prof Amartey, who lectures Corporate Strategy, suggested to the CEO to use Porter’s Diamond of national advantage to assess competitive advantage of the other West African countries the company intends to enter. Prof. Amartey also mentioned to the CEO that companies that compete in the global marketplace typically face two types of competitive pressures: pressures for cost reductions or global integration and pressures to be locally responsive.

The cost reduction-local responsiveness dilemma shapes and results in four basic international strategies – international, global, multidomestic, and transnational – which the CEO should consider in making the choice.

Required:

Discuss how the FOUR factors in the Porter’s Diamond of national advantage determine competitiveness of the other West African countries on the global stage. (8 marks)

1. Factor Conditions: Factor conditions refer to the nation’s position in factors of production such as skilled labor, infrastructure, and natural resources. For West African countries, the availability of skilled IT professionals, modern infrastructure, and access to natural resources can significantly enhance the competitive advantage of a company like Persiba IT Limited when expanding into these markets.

2. Demand Conditions: Demand conditions pertain to the nature of home-market demand for the industry’s products or services. Strong and sophisticated demand in West African markets for IT solutions can push companies to innovate and improve, thereby strengthening their competitiveness on a global stage. Understanding the specific needs and expectations of local customers in these markets is crucial.

3. Related and Supporting Industries: The presence of related and supporting industries provides companies with cost-effective inputs and innovation opportunities. In West Africa, the existence of a strong network of suppliers, IT-related firms, and educational institutions can support Persiba IT Limited in maintaining competitive advantages as it expands. Collaborative efforts with these industries can lead to better product offerings and services.

4. Firm Strategy, Structure, and Rivalry: The way companies are organized and managed, along with the nature of domestic competition, influences their ability to compete internationally. A high level of competition within the West African IT industry can drive Persiba IT Limited to continually innovate and enhance its efficiency. The company’s internal strategies and the level of rivalry it faces will determine its long-term success in these new markets.

  • 10 Marks

CSEG – Nov 2017 – L2 – Q6b – Strategic management in the globalized workplace

Advise on the most suitable foreign market entry strategies for Wuudin’s new business lines.

Asamoah Wuudin is a Ghanaian private company owned mainly by the Wuudin family. Most of its clothing and accessories are produced and marketed by the company (some are manufactured by outside contractors). For other products, notably fragrances, cosmetics, and eyewear, Wuudin licenses its brand names to other companies. The Board of Directors of Wuudin is considering expanding into new foreign markets with athletic clothing, hotels, and bridal shops.

Required:

Advise Wuudin on the most suitable foreign market entry strategy for each of the new lines of business. (10 marks)

In advising Wuudin on the most suitable foreign market entry strategy for each of the new lines of business, the key criterion is likely to be the opportunities for sharing or transferring Wuudin’s other resources and capabilities with or to the new businesses.

1. Athletic Clothing:

Recommended Strategy: Joint Venture

  • Rationale: Entering into a joint venture with an established foreign partner in the athletic clothing market is advisable. Wuudin may need to access technical capabilities for designing products for different sports. A joint venture allows Wuudin to combine its branding and production strengths with the local market knowledge and expertise of a partner. This collaboration can help Wuudin quickly establish a foothold in the new market while sharing risks and benefits with the partner.

2. Hotels:

Recommended Strategy: Licensing

  • Rationale: Licensing is the most suitable entry strategy for Wuudin in the hotel industry. Since Wuudin’s core capabilities do not directly relate to the design and operation of luxury hotels, licensing the Wuudin brand to an experienced hotel operator can allow the company to enter the market without having to develop the expertise needed to manage hotels. This strategy leverages the brand’s reputation while outsourcing the operational complexities to a partner with industry knowledge.

3. Bridal Shops:

Recommended Strategy: In-House Expansion

  • Rationale: Wuudin can utilize its existing design, manufacturing, marketing, and distribution capabilities to develop and expand the bridal shop business in-house. Since Wuudin already has expertise in clothing and accessories, this line of business aligns closely with its current operations. Expanding this business in-house allows Wuudin to maintain control over product quality, brand identity, and customer experience, while capitalizing on existing synergies.
  • 6 Marks

CSEG – Nov 2017 – L2 – Q4b -Strategic management in the globalized workplace

Explain the different levels of corporate strategy as it relates to Awilo Holdings.

Awilo Holdings began as a small company that operated in the financial services sector of Ghana’s economy. Within the last ten years, the Board, which is chaired by the founder, Ms. Abigail Kyerewaa, has incrementally expanded into three more sectors of the economy, namely: telecommunications, logistics, and real estate. Currently a conglomerate, Awilo Holdings has four different companies in its portfolio and has its corporate head office located within the capital city, Accra.

Required:

Explain the different levels of corporate strategy as it relates to Awilo Holdings.

The different levels of strategic management as it relates to Awilo Holdings are as follows:

1. Corporate Level Strategy:

At the apex level of strategic management in Awilo Holdings is the corporate head office located in Accra. The corporate level of strategy, which is the responsibility of the Board of Directors of Awilo Holdings, is concerned with the overall purpose and scope of the organization and how value will be added to the different strategic business units (SBUs). In Awilo, strategy and strategic management at the corporate level impact the entire organization. The Board of Awilo has the responsibility of determining which industries the organization will be involved in, managing the expectations of stakeholders, and allocating or obtaining corporate resources both for the present and the future.

2. Business Level Strategy:

Business level strategy represents the second tier of strategic management. In Awilo Holdings, business level strategy refers to each of the particular and distinct combinations of products and markets dealt with by each strategic business unit – in this case, the individual firms that operate in the different sectors such as telecommunications, logistics, and real estate. The corporate managers of each business unit are responsible for translating the statements of direction and intent generated at the corporate level into concrete objectives and strategies for their respective business units. They determine how their firms will compete in the product-market arena.

3. Functional or Operational Level Strategy:

This level is concerned with how the component parts of an organization deliver effectively the corporate and business level strategies in terms of resources, processes, and people. The functional level represents the third tier or the bottom of the decision-making hierarchy. The functional level in Awilo Holdings would be the operational areas for each of the business units, such as finance and accounting, human resources, marketing and sales, and research and development functions. The managers at the functional areas develop annual objectives and short-term strategies to implement the strategic plans of their respective business units, focusing on efficiency and doing things right.

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