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International Business Strategy, Management

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Chapter 11 Global Strategy and Organization International Business Strategy, Management & the New Realities by Cavusgil, Knight and Riesenberger – PowerPoint PPT presentation

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Title: International Business Strategy, Management


1
International BusinessStrategy, Management the
New Realities by Cavusgil, Knight and
Riesenberger
  • Chapter 11
  • Global Strategy and Organization

2
What Is Strategy?
  • A plan of action that channels an organizations
  • resources so that it can effectively
    differentiate itself
  • from competitors, accomplish distinctive goals,
    and
  • achieve superior performance.
  • Managers develop strategies based on the
    organizations strengths and weaknesses, and
    evaluation of opportunities and threats.
  • Managers primarily make decisions about the
    firms production and marketing activities, and
    the development and allocation of resources
    devoted to these.

3
Strategy Should Pinpoint to Actions
  • Formulate a strong international vision
  • Allocate scarce resources on a worldwide basis
  • Participate in major markets
  • Implement global partnerships
  • Engage in global competitive moves
  • Configure value-adding activities on a global
    scale

4
Four Strategic Objectives
  • Efficiency minimize the cost of operations and
    activities
  • Effectiveness maximize revenues
  • Flexibility tap local resources and
    opportunities to maximize options for the firm
  • Learning add to proprietary technology, brand
    name and management capabilities by internalizing
    knowledge gained from international ventures.

5
Multidomestic and Global Industries
  • Multidomestic industries. Firms apply a
    country-by-country approach to product
    development and marketing, as dictated by
    specific needs, tastes, laws, and economic
    situation. Competition is on a
    country-by-country basis. E.g., food and
    beverage, consumer products, clothing and fashion
    industries.
  • Global industries. Firms devise products and
    marketing appropriate for an entire region or for
    the world. Competition takes place on a regional
    or worldwide scale. E.g., aerospace, automobiles,
    telecommunications, computers, chemicals, and
    industrial equipment industries.

6

7
Global Integration
  • A characteristic of global industries in which
    firms coordinate their value-chain activities
    across many countries in order to maximize
    efficiency, effectiveness, flexibility, and
    learning.
  • Global integration promotes learning and
    cross-fertilization, as well as reduction of
    wasteful duplication (redundancy), across the
    firms operations worldwide.

8
Pressures for Global Integration
  • Economies of Scale. Concentrating manufacturing
    in a few select locations to achieve economies of
    mass production.
  • Capitalize on converging consumer trends and
    universal needs. Companies such as Nike, Dell,
    ING, and Coca-Cola offer products that appeal to
    customers everywhere.
  • Uniform service to global customers. Services are
    easier to standardize when their creation and
    delivery are centralized
  • Global sourcing of raw materials, components,
    energy, and labor. Sourcing from large-scale,
    centralized suppliers provides economies of scale
    and consistent performance.
  • Global competitors. Global coordination is
    necessary to monitor and respond to global
    competitive threats.
  • Availability of media that reaches customers in
    multiple markets. Firms now take advantage of
    the Internet and cross-national television to
    promote offerings in many countries
    simultaneously.

9
Local Responsiveness
  • A characteristic of multidomestic industries in
    which firms attempt to meet the specific needs of
    buyers in individual countries, as well as adapt
    to the local competitive environment and
    distribution structure.
  • Although most firms prefer a global integration
    approach, some degree of local responsiveness is
    necessary due to differences in individual
    markets.
  • For example, given distinctive local conditions,
    Wal-Mart store managers in Mexico had to adjust
    store hours, the merchandise mix, marketing
    approaches, and employee training.

10
Pressures for Local Responsiveness
  • Diversity of local customer needs. E.g., products
    in the food and furniture industries require much
    adaptation.
  • Differences in distribution channels. E.g.,
    systems in Japan, China, India, and Eastern
    Europe vary greatly.
  • Local competition. Where many local rivals are
    present, it is best to offer carefully adapted
    products and have a local presence to maximize
    knowledge of competitors.
  • Cultural differences. For products where cultural
    differences are important, such as books and
    kitchen appliances, products and marketing need
    to be substantially adapted.
  • Host government requirements and regulations.
    The firm must follow local laws and regulations.

11
Four Strategies Emerging from the
Integration-Responsiveness Framework
  • Home replication strategy
  • Multidomestic strategy
  • Global strategy
  • Transnational strategy

12
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13
Home Replication Strategy
  • The firm views international business as separate
    from, and secondary to, its domestic business.
  • International business typically pursued to
    generate additional sales for domestic products
  • Products are designed with domestic customers in
    mind i.e., not adapted for foreign markets.
  • The firm expects little knowledge flows from
    foreign operations.
  • Usually based on simple exporting

14
Multidomestic Strategy(aka Multi-Local Strategy)
  • Headquarters delegates much autonomy to each
    country manager, allowing him/her to operate
    independently and pursue local responsiveness.
  • The managers substantially adapt products and
    practices to suit local conditions.
  • The managers function independently, with little
    incentive to share knowledge with managers
    elsewhere.
  • The firm ends up with a collection of
    disconnected markets, with no coordination or
    integration of national markets.

15
Global Strategy
  • Headquarters pursues global integration, seeking
    to control country operations in order to
    minimize duplication, and maximize efficiency,
    effectiveness, and learning worldwide.
  • Emphasizes centralized coordination and control
    of RD, production, marketing, and after-sales
    service
  • Management views the world as one large
    marketplace.
  • The firm offers standardized products, using
    standardized marketing
  • Main advantages lower costs easier to manage

16
Transnational Strategy
  • A tug of war the firm attempts to strike some
    ideal balance between global and multidomestic
    strategies.
  • Combines the major advantages of multidomestic
    and global strategies, while minimizing their
    disadvantages.
  • Applies the model standardize whenever possible
    adapt when necessary.

17
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18
IKEA Applies a Transnational Strategy
  • Some 90 of the product line is identical across
    more than two dozen countries. IKEA modifies some
    of its furniture to suit individual countries.
  • IKEAs marketing is centrally developed at
    company headquarters, but implemented with local
    adjustments (e.g., to suit language differences
    in catalogs).

19
Organizational Structure
  • The reporting relationships inside the firm
    the boxes and lines that specify the linkages
    among people, functions, and processes that allow
    the firm to carry out its operations.
  • In larger international firms, organizational
    structure includes subsidiaries, affiliates,
    suppliers, and various other partners.
  • A fundamental issue concerns the choice between
    centralization and decentralization of
    decision-making and value-chain activities.

20
An MNE Network
Subsidiary Level Network S Suppliers R
Regulatory institutions B Buyers C Customers
SE
BE
CE
RD
RE
SA
BA
E
RA
CA
D
SD
RB
A
BD
SB
B
CD
BB
RC
H
SF
BF
CB
CF
SC
F
RF
BC
C
A Home plant H Headquarters B F
Subsidiaries
CC
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22
Alternative Organizational Arrangements
  • The export department, with the international
    division as a variant.
  • The decentralized structure involves geographic
    area division
  • The centralized structure involve either product
    or functional division
  • A global matrix structure blends the geographic,
    product and functional structures although this
    is complex and difficult to achieve.

23
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28
Global Matrix Structure
  • An arrangement that blends the geographic area,
    product, and functional structures in an attempt
    to leverage the benefits of a purely global
    strategy and maximize global organizational
    learning, while remaining responsive to local
    needs.
  • It is an attempt to capture the benefits of the
    geographic area, product, and functional
    organization structures simultaneously, while
    minimizing their shortcomings.
  • Closely associated with Transnational Strategy

29
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30
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31
Examples of Visionary Leaders
  • Ratan N. Tata, the chairman of the Tata Group,
    transformed this Indian conglomerate into a
    transnational organization. Tata oversees a 22
    billion family conglomerate whose companies
    market a range of products from automobiles to
    watches.
  • Carlos Ghosn, the CEO of Nissan and Renault, has
    transformed a Japanese automotive firm from
    bankruptcy to profitable operations.
  • Toyota CEO Fujio Cho has led his firm to record
    sales in the intensely competitive global
    automobile industry.

32
Organizational Culture
  • The pattern of shared values, norms of behavior,
    systems, policies, and procedures that employees
    learn and adopt. The personality of the firm.
  • Leading MNEs attempt to instill a global
    culture in the firms operations worldwide, by
    emphasizing a borderless mindset, developing
    internationally sophisticated managers, and
    emphasizing the firms global performance. E.g.,
    Nestle, Nissan, Schlumberger, Unilever

33
Organizational Processes
  • Managerial routines, mechanisms, and
  • technologies that allow the firm to function as
  • intended.
  • Examples
  • GE digitizes all key documents and uses intranets
    and the Internet to automate many activities and
    reduce operating costs.
  • Schlumberger keeps a huge database of skilled
    individuals within the firm available to all
    subsidiaries on the corporate intranet.
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