11 International Strategy and Organization Chapter Objectives Explain

11 International Strategy and Organization

Chapter Objectives Explain the stages of identification and analysis that precede strategy selection Identify the two international strategies and the corporate-level strategies that companies use Identify the business-level strategies of companies and the role of department-level strategies Discuss the important issues that influence the choice of organizational structure Describe each type of international organizational structure, and explain the importance of work teams 11 - 2

Ryanair • Employs a low-cost business strategy • Charges far less than national airlines • Uses low-cost airports near major cities 11 - 3

Planning and Strategy Planning Strategy Identifying and selecting objectives and deciding how to achieve those objectives Set of planned actions that managers take to help a company meet its objectives 11 - 4

Strategy-Formulation Process 11 - 5

Identify Mission and Goals Mission statements must consider: ü ü ü ü Company activities Business objectives Stakeholders Stockholders Customers Residents Environment and much more… 11 - 6

Identify Core Competency Special ability of a company that competitors find extremely difficult or impossible to equal Coordination of multiple skills Develop over lengthy period of time Difficult to teach 11 - 7

Value Chain Analysis 11 - 8

Business Environment National differences are inherent in analyzing a firm’s unique abilities Ø Cultural differences Ø Political processes Ø Legal matters Ø Economic systems Ø Labor issues Ø Consumer forces and much more… 11 - 9

Discussion Question What are three stages of the strategy-formulation process, and what is involved at each stage? 11 - 10

Answer to Discussion Question Stage one is to identify company mission and goals. This means defining the business and its main objectives. Stage two is to identify company core competency and value-creating activities. This means analyzing a firm’s unique abilities, primary and support activities, and the business environment. Stage three is to formulate strategies. This means selecting a multinational or global strategy and then formulating corporate-, business-, and department-level strategies. 11 - 11

Multinational Strategy Adapting products and their marketing strategies to local preferences in each national market + Respond quickly to buyer preferences – Difficult to exploit economies of scale 11 - 12

Global Strategy Offering the same products using the same marketing strategy in all national markets + Cost savings from standardization – May overlook varying buyer preferences 11 - 13

Levels of Company Strategy 11 - 14

Growth Strategy Increase the scale (size of activities) or scope (kinds of activities) of operations Internally generated growth Mergers and acquisitions Joint ventures Strategic alliances 11 - 15

Retrenchment Strategy Reduce the scale or scope of a corporation’s businesses Reduce Scale Reduce Scope Ø Close factories Ø Sell unprofitable businesses Ø Lay off workers Ø Sell unrelated businesses 11 - 16

Stability Strategy Guard against change and avoid growth or retrenchment è No opportunities or threats è Strengths fully exploited è Weaknesses fully protected è Stated objectives are met 11 - 17

Combination Strategy Mix of growth, retrenchment, and stability strategies across business units Invest in promising units Retrench for less exposure Stabilize other units 11 - 18

Discussion Question A company that adapts its products and marketing to local preferences in each national market follows a _____ strategy. a. Global b. Multinational c. Preference 11 - 19

Answer to Discussion Question A company that adapts its products and marketing to local preferences in each national market follows a _____ strategy. a. Global b. Multinational c. Preference 11 - 20

Business-Level Strategies v Low-cost leadership v Differentiation v Focus 11 - 21

Low-Cost Strategy Exploit economies of scale to have the lowest cost structure of any competitor in an industry • Mantra is cutting costs • Quality remains important • Scale is barrier to new entrants • Perhaps low customer loyalty 11 - 22

Differentiation Strategy Design products that buyers perceive as unique throughout an industry Differentiators § Quality § Brand image § Product design Effects § Price premium § Customer loyalty § Portion of market only § Higher production costs 11 - 23

Focus Strategy Focus on narrow market segment by being the low-cost leader, differentiating, or both • Many sub-segments today • Need distinctive product • Single geography, ethnicity, etc. 11 - 24

Department-Level Strategies Departmental strategies are key to a company achieving its objectives: ü Manufacturing ü Marketing ü Logistics ü Research & development and others… Source: Peng Neng/Newscom 11 - 25

Discussion Question What are the main differences between the three types of businesslevel strategy? 11 - 26

Answer to Discussion Question A low-cost leadership strategy exploits economies of scale to have the lowest cost structure of any competitor in an industry. A differentiation strategy designs products that buyers perceive as unique throughout an industry. A focus strategy focuses on the needs of a narrowly defined market segment by being the low-cost leader, by differentiating its product, or by doing both. 11 - 27

Organizational Structure Centralized decision making + Coordination is paramount + Financial control & cost savings Decentralized decision making + Improves local responsiveness + Increases accountability 11 - 28

International Division Structure 11 - 29

International Area Structure 11 - 30

Global Product Structure 11 - 31

Global Matrix Structure 11 - 32

Work Teams Self-managed Cross-functional team Global team Employees from one Group of employees. Top managers from department take on from similar levels butheadquarters and responsibilities of different functional subsidiaries solve former supervisors departments company problems 11 - 33

Discussion Question The organizational structure that divides worldwide operations according to a company’s product areas is called a(n) _____ structure. a. Global matrix b. Global product c. International division 11 - 34

Answer to Discussion Question The organizational structure that divides worldwide operations according to a company’s product areas is called a(n) _____ structure. a. Global matrix b. Global product c. International division 11 - 35