PLANNING
PLANNING
Throughout this text we have emphasized the firm's need to adapt its unique resources and objectives to the different and changing foreign situations. This is the essence of planning. Without planning, it is only by luck that a company picks the best order and method of expansion by country. Without planning, it is again by chance that a company sets policies and practices in a given locale that result in the desired performance. Since planning has been both implicitly and explicitly discussed already, this section presents merely an overview of the process.
The Planning Loop
Figure 17.2 indicates that planning must involve the meshing of objectives with the internal and external environment. The details in each planning section include items discussed in the environmental and operational sections of this text. Note that the first step (A) is the development of a long-term strategic intent, an objective that will hold the organization together over a long period of time while building an ever-increasing global competitive viability.19 Although few firms start with such a vision, most develop them en route to significant international positions. Some, such as Honda and Canon, developed such intents long before it seemed they would ever have the capabilities to become important competitors. The next step (B) is a self-analysis of internal resources and constraints on the total corporation along with the environmental factors that affect each company differently. Only by taking this second step can a firm set the overall rationale for its international activities (step C). For instance, a company faced with rising domestic costs and expanded competition from imports may validly pursue one of several objectives, such as cost reduction, acquisition of resources the competition needs, or diversification into new markets or products. The analysis of the internal resources will help to determine which of these objectives is feasible and most important within a foreseeable planning period and will aid in selecting alternatives.
Since each country in which the firm is operating or contemplating operations also is unique, the local analysis (step D) also will have to be made before the final alternatives (step E) can be examined fully. For instance, local marketing factors will determine which product strategies can be considered. Priorities must be set among alternatives so that programs may be easily added or deleted to implement means of attaining target results (step F) as resource availability or situations change. A company may, for example, pre-
Figure 17.2
International Planning Process
The figure shows the setting of a firm's long-term strategic intent, followed in the loop by short- and medium-term steps necessary to achieve the intent.
fer and plan to remit dividends from one of its foreign subsidiaries back to the parent; however, this may not be possible. Management also should consider what it will do with earnings if exchange controls are put into effect. Furthermore, what alternatives will then exist for the parent, which has to do without the funds? It may be necessary to borrow more at home, remit more from other subsidiaries, forgo domestic expansion, or forgo domestic dividends. Without priorities, the firm may have to make hurried decisions to fulfill company objectives even partially.
Finally, very specific objectives should be set for each operating unit, along with ways of measuring both deviations from the plan and conditions that may cause a digression. Through timely evaluation, management may take corrective actions or at least move to contingency means to achieve the objectives. Note that there must be a constant loop from step F to step B to ensure that the company is making decisions based on currently relevant situations. Evaluation methods are discussed later in the chapter.
A distinction must be made between operating plans and strategic plans. Strategic plans are longer term and akin to step A, the strategic intent. They involve major commitments, such as the businesses the company will be in and where, and are less subject to reevaluation. Operating plans involve short-term objectives and means to carry them out. The relevant time horizon for operating plans is not clear-cut. For example, the chairman of Unilever pointed out the short-term needs for Unilever's consumer products (3 to 5 years) as compared with much longer needs for a project, such as the Anglo-French Channel Tunnel.20 Although input for a strategic plan may come from all parts of the organization, only at the corporate level can allocations be made to implement overall planned changes in geographic and product policies. Also, it is usual for members of the corporate staff to be the primary people concerned with making strategic plans, since they have information on the firm's worldwide activities, competition, and trends.
Uncertainties and Planning
The greater the amount of uncertainty, the more difficult it is to plan. It is generally agreed that operations in the international sphere involve more uncertainty than those in the domestic one because of the greater complexity of international operations. One type of complexity is caused by the increase in the number of operating environments (e.g., having to evaluate many subsidiaries); another is due to different requirements for different markets in terms of task, because of different products and how they are made within each of the subsidiaries.21
Generally, we would expect that greater complexity and uncertainty would lead to greater need and use for information. However, there is substantial evidence that the higher the uncertainty, the lower the amount of environmental scanning to collect information.22 This may be because of the relative inaccessibility of accurate information internationally.
Throughout this text we have emphasized the firm's need to adapt its unique resources and objectives to the different and changing foreign situations. This is the essence of planning. Without planning, it is only by luck that a company picks the best order and method of expansion by country. Without planning, it is again by chance that a company sets policies and practices in a given locale that result in the desired performance. Since planning has been both implicitly and explicitly discussed already, this section presents merely an overview of the process.
The Planning Loop
Figure 17.2 indicates that planning must involve the meshing of objectives with the internal and external environment. The details in each planning section include items discussed in the environmental and operational sections of this text. Note that the first step (A) is the development of a long-term strategic intent, an objective that will hold the organization together over a long period of time while building an ever-increasing global competitive viability.19 Although few firms start with such a vision, most develop them en route to significant international positions. Some, such as Honda and Canon, developed such intents long before it seemed they would ever have the capabilities to become important competitors. The next step (B) is a self-analysis of internal resources and constraints on the total corporation along with the environmental factors that affect each company differently. Only by taking this second step can a firm set the overall rationale for its international activities (step C). For instance, a company faced with rising domestic costs and expanded competition from imports may validly pursue one of several objectives, such as cost reduction, acquisition of resources the competition needs, or diversification into new markets or products. The analysis of the internal resources will help to determine which of these objectives is feasible and most important within a foreseeable planning period and will aid in selecting alternatives.
Since each country in which the firm is operating or contemplating operations also is unique, the local analysis (step D) also will have to be made before the final alternatives (step E) can be examined fully. For instance, local marketing factors will determine which product strategies can be considered. Priorities must be set among alternatives so that programs may be easily added or deleted to implement means of attaining target results (step F) as resource availability or situations change. A company may, for example, pre-
Figure 17.2
International Planning Process
The figure shows the setting of a firm's long-term strategic intent, followed in the loop by short- and medium-term steps necessary to achieve the intent.
fer and plan to remit dividends from one of its foreign subsidiaries back to the parent; however, this may not be possible. Management also should consider what it will do with earnings if exchange controls are put into effect. Furthermore, what alternatives will then exist for the parent, which has to do without the funds? It may be necessary to borrow more at home, remit more from other subsidiaries, forgo domestic expansion, or forgo domestic dividends. Without priorities, the firm may have to make hurried decisions to fulfill company objectives even partially.
Finally, very specific objectives should be set for each operating unit, along with ways of measuring both deviations from the plan and conditions that may cause a digression. Through timely evaluation, management may take corrective actions or at least move to contingency means to achieve the objectives. Note that there must be a constant loop from step F to step B to ensure that the company is making decisions based on currently relevant situations. Evaluation methods are discussed later in the chapter.
A distinction must be made between operating plans and strategic plans. Strategic plans are longer term and akin to step A, the strategic intent. They involve major commitments, such as the businesses the company will be in and where, and are less subject to reevaluation. Operating plans involve short-term objectives and means to carry them out. The relevant time horizon for operating plans is not clear-cut. For example, the chairman of Unilever pointed out the short-term needs for Unilever's consumer products (3 to 5 years) as compared with much longer needs for a project, such as the Anglo-French Channel Tunnel.20 Although input for a strategic plan may come from all parts of the organization, only at the corporate level can allocations be made to implement overall planned changes in geographic and product policies. Also, it is usual for members of the corporate staff to be the primary people concerned with making strategic plans, since they have information on the firm's worldwide activities, competition, and trends.
Uncertainties and Planning
The greater the amount of uncertainty, the more difficult it is to plan. It is generally agreed that operations in the international sphere involve more uncertainty than those in the domestic one because of the greater complexity of international operations. One type of complexity is caused by the increase in the number of operating environments (e.g., having to evaluate many subsidiaries); another is due to different requirements for different markets in terms of task, because of different products and how they are made within each of the subsidiaries.21
Generally, we would expect that greater complexity and uncertainty would lead to greater need and use for information. However, there is substantial evidence that the higher the uncertainty, the lower the amount of environmental scanning to collect information.22 This may be because of the relative inaccessibility of accurate information internationally.
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