The Strategy of International Business The Organization of
The Strategy of International Business & The Organization of International Business
Chapter 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 - 2
Planning and Strategy Planning Identifying and selecting objectives and deciding how to achieve those objectives Strategy Set of planned actions that managers take to help a company meet Chapterits 12 & 13 - 3
Strategy-Formulation Process Chapter 12 & 13 - 4
Identify Mission and Goals Mission statements must consider: Company activities ü Business objectives ü Stakeholders ü Stockholders ü Customers ü Residents ü Environment ü and much more… Chapter 12 & 13 - 5
Identify Core Competency Special ability of a company that competitors find extremely difficult or impossible to equal Coordination of multiple skills Lengthy period to develop Difficult to teach Chapter 12 & 13 - 6
Value-Chain Analysis Divide company activities into primary and support activities and identify those that create value for customers Each activity is a source of either strength or weakness Insights gained are fed into the strategy formulation process Chapter 12 & 13 - 7
Value Chain Components Chapter 12 & 13 - 8
Business Environment National differences are inherent in analyzing a company’s unique abilities Ø Cultural differences Ø Political processes Ø Legal matters Ø Economic systems Ø Labor issues Ø Consumer forces and much more… Chapter 12 & 13 - 9
Small Firm Strategy ü Be sure company is ready to go international ü Thoroughly understand your product ü Examine your company’s internal activities ü Ask important questions of strategy ü Finally, create the strategic plan Chapter 12 & 13 - 10
Multinational Strategy Adapting products and their marketing strategies in each national market to suit local preferences + Respond quickly to buyer preferences – Difficult to exploit economies of scale Chapter 12 & 13 - 11
Global Strategy Offering the same products using the same marketing strategy in all national markets + Cost savings from standardization – May overlook varying buyer preferences Chapter 12 & 13 - 12
Levels of Company Strategy Chapter 12 & 13 - 13
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 Chapter 12 & 13 - 14
Retrenchment Strategy Reduce the scale or scope of a corporation’s businesses Conditions Actions Ø Lay off workers Ø Poor economic conditions Ø Close inefficient factories Ø Increased competition Ø Sell unprofitable businesses Chapter 12 & 13 - 15
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 Chapter 12 & 13 - 16
Combination Strategy Mix of growth, retrenchment, and stability strategies across a corporation’s business units Invest in promising units Retrench for less exposure Stabilize other units Chapter 12 & 13 - 17
Business-Level Strategies Chapter 12 & 13 - 18
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 for new entrants Perhaps low customer loyalty Chapter 12 & 13 - 19
Differentiation Strategy Design products to be perceived as unique by buyers throughout an industry Differentiators Effects Quality Price premium Customer loyalty Brand image Product design Portion of market only Higher production costs Chapter 12 & 13 - 20
Focus Strategy Focus on narrowly defined market segment by being the low-cost leader, differentiating, or both Many sub-segments today Need distinctive product Specific geography, ethnicity, etc. Chapter 12 & 13 - 21
Organizational Structure Centralized decision making Decentralized decision making + Coordination is paramount + Financial control and cost + Local responsiveness savings is key + Fast-changing environment Chapter 12 & 13 - 22
International Division Structure Chapter 12 & 13 - 23
International Area Structure Chapter 12 & 13 - 24
Global Product Structure Chapter 12 & 13 - 25
Global Matrix Structure Chapter 12 & 13 - 26
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 Chapter 12 & 13 - 27
Chapter 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 - 28
International Strategy and Organization Chapter 12 & 13 - 29
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