The Strategy of The Strategy of International International

BusinessBusiness

&&

The Organization of The Organization of International International

BusinessBusiness

Chapter 12 & 13 - 2

Chapter PreviewChapter Preview

• Define core competency and value-chain analysis

• Explain multinational and global strategies

• Describe the four corporate-level strategies

• Discuss the three business-level strategies

• Identify what influences organizational structure

• Describe each type of international organizational

structure

Chapter 12 & 13 - 3

Planning and StrategyPlanning and Strategy

Planning Strategy

Identifying and selecting objectives and deciding how to achieve those objectives

Set of planned actions thatmanagers take to help a

company meet its objectives

Chapter 12 & 13 - 4

Strategy-Formulation ProcessStrategy-Formulation Process

Chapter 12 & 13 - 5

Identify Mission and GoalsIdentify Mission and Goals

Mission statements must consider:

Company activities Business objectives Stakeholders Stockholders Customers Residents Environment

and much more…

Chapter 12 & 13 - 6

Identify Core CompetencyIdentify Core CompetencyIdentify Core CompetencyIdentify Core Competency

Special ability of a company thatSpecial ability of a company thatcompetitors find extremely difficultcompetitors find extremely difficult

or impossible to equalor impossible to equal

Special ability of a company thatSpecial ability of a company thatcompetitors find extremely difficultcompetitors find extremely difficult

or impossible to equalor impossible to equal

Coordination of multiple skillsCoordination of multiple skills

Lengthy period to developLengthy period to develop

Difficult to teachDifficult to teach

Chapter 12 & 13 - 7

Value-Chain AnalysisValue-Chain Analysis

Each activity isa source of either

strength or weakness

Insights gained are fed into the strategy formulation process

Divide company activities into primary and support activities and identify those

that create value for customers

Chapter 12 & 13 - 8

Value Chain ComponentsValue Chain Components

Chapter 12 & 13 - 9

Business EnvironmentBusiness Environment

National differences are inherent in analyzing a

company’s unique abilities

Cultural differences

Political processes

Legal matters

Economic systems

Labor issues

Consumer forces

and much more…

Chapter 12 & 13 - 10

Small Firm StrategySmall Firm Strategy

Be sure company is ready to go international

Thoroughly understand your product

Examine your company’s internal activities

Ask important questions of strategy

Finally, create the strategic plan

Chapter 12 & 13 - 11

Multinational StrategyMultinational Strategy

Adapting products andtheir marketing strategies

in each national marketto suit local preferences

– Difficult to exploit economies of scale

+ Respond quickly to buyer preferences

Chapter 12 & 13 - 12

Global StrategyGlobal Strategy

Offering the sameproducts using the same

marketing strategy inall national markets

– May overlook varying buyer preferences

+ Cost savings from standardization

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Levels of Company StrategyLevels of Company Strategy

Chapter 12 & 13 - 14

Growth StrategyGrowth Strategy

Internally generated growth

Mergers and acquisitions

Joint ventures

Strategic alliances

Increase the scale (size of activities)or scope (kinds of activities) of operations

Chapter 12 & 13 - 15

Retrenchment StrategyRetrenchment Strategy

Reduce the scale or scopeof a corporation’s businesses

Conditions Actions

Poor economic conditions

Increased competition

Lay off workers

Close inefficient factories

Sell unprofitable businesses

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Stability StrategyStability Strategy

Guard against change and avoidgrowth or retrenchment

Guard against change and avoidgrowth or retrenchment

No opportunities or

threats

Strengths fully exploited

Weaknesses fully

protected

Stated objectives are

met

Chapter 12 & 13 - 17

Combination StrategyCombination Strategy

Invest inpromising units

Retrench forless exposure

Stabilizeother units

Mix of growth, retrenchment, and stability strategies across a corporation’s business

units

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Business-Level StrategiesBusiness-Level Strategies

Chapter 12 & 13 - 19

Low-Cost StrategyLow-Cost StrategyLow-Cost StrategyLow-Cost Strategy

Exploit economies of scale to have the lowestExploit economies of scale to have the lowestcost structure of any competitor in an industrycost structure of any competitor in an industryExploit economies of scale to have the lowestExploit economies of scale to have the lowestcost structure of any competitor in an industrycost structure of any competitor in an industry

Mantra is cutting costsMantra is cutting costsMantra is cutting costsMantra is cutting costs

Quality remains importantQuality remains importantQuality remains importantQuality remains important

Scale is barrier for new entrantsScale is barrier for new entrantsScale is barrier for new entrantsScale is barrier for new entrants

Perhaps low customer loyaltyPerhaps low customer loyaltyPerhaps low customer loyaltyPerhaps low customer loyalty

Chapter 12 & 13 - 20

Differentiation StrategyDifferentiation Strategy

DifferentiatorsDifferentiatorsDifferentiatorsDifferentiators

Brand imageBrand imageBrand imageBrand image

Product designProduct designProduct designProduct design

QualityQualityQualityQuality

EffectsEffectsEffectsEffects

Customer loyaltyCustomer loyaltyCustomer loyaltyCustomer loyalty

Portion of market onlyPortion of market onlyPortion of market onlyPortion of market only

Price premiumPrice premiumPrice premiumPrice premium

Design products to be perceived as unique

by buyers throughout an industry

Higher production costs Higher production costs Higher production costs Higher production costs

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Focus StrategyFocus StrategyFocus StrategyFocus Strategy

Focus on narrowly defined market segment bybeing the low-cost leader, differentiating, or bothFocus on narrowly defined market segment by

being the low-cost leader, differentiating, or both

Many sub-segments todayMany sub-segments todayMany sub-segments todayMany sub-segments today

Need distinctive productNeed distinctive productNeed distinctive productNeed distinctive product

Specific geography, ethnicity, etc.Specific geography, ethnicity, etc.Specific geography, ethnicity, etc.Specific geography, ethnicity, etc.

Chapter 12 & 13 - 22

Organizational StructureOrganizational Structure

Centralizeddecision making

Decentralizeddecision making

+ Coordination is paramount+ Financial control and cost savings

+ Local responsiveness is key+ Fast-changing environment

Chapter 12 & 13 - 23

International Division International Division StructureStructure

Chapter 12 & 13 - 24

International Area StructureInternational Area Structure

Chapter 12 & 13 - 25

Global Product StructureGlobal Product Structure

Chapter 12 & 13 - 26

Global Matrix StructureGlobal Matrix Structure

Chapter 12 & 13 - 27

Self-managedSelf-managedteamteam

Employees from onedepartment take onresponsibilities offormer supervisors

Self-managedSelf-managedteamteam

Employees from onedepartment take onresponsibilities offormer supervisors

Cross-functionalCross-functionalteamteam

Group of employeesfrom similar levels but

different functionaldepartments

Cross-functionalCross-functionalteamteam

Group of employeesfrom similar levels but

different functionaldepartments

GlobalGlobalteamteam

Top managers fromheadquarters andsubsidiaries solvecompany problems

GlobalGlobalteamteam

Top managers fromheadquarters andsubsidiaries solvecompany problems

Work TeamsWork Teams

Chapter 12 & 13 - 28

Chapter SummaryChapter Summary

• This chapter presents the strategies companies use to achieve their

international business objectives. National and international business

environments complicate strategy formulation. To overcome obstacles, firms

formulate multinational or global strategies. They support these general

approaches with appropriate corporate, business, and department-level

strategies. For strategies to be implemented successfully, a company must

select an appropriate organizational structure. Issues that affect

organizational structure include centralized vs. decentralized decision making

and the need for coordination and flexibility. Companies choose from four

types of organizational structure: the international division structure, area

structure, product structure, and matrix structure. Work teams are assigned

the tasks of coordinating their efforts to arrive at solutions and implement

corrective action. The three main types of work teams are: self-managed

teams, cross-functional teams, and global teams.

Chapter 12 & 13 - 29

International International Strategy and Strategy and OrganizationOrganization