In this chapter, you will explore how companies select their international strategies and structures. You will also: Learn about the variety of strategies that companies use in international business, examine the organizational structures used in international operations, and understand factors relevant to selecting these strategies and structures.
11 International Strategy and Organization Copyright © 2014 Pearson Education, Inc 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 Copyright © 2014 Pearson Education, Inc 11 - Ryanair • Employs a low-cost business strategy • Charges far less than national airlines • Uses low-cost airports near major cities Copyright © 2014 Pearson Education, Inc 11 - 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 - Copyright © 2014 Pearson Education, Inc StrategyFormulation Process Copyright © 2014 Pearson Education, Inc 11 - Identify Mission and Goals Mission statements must consider: Copyright © 2014 Pearson Education, Inc Company activities Business objectives Stakeholders Stockholders Customers Residents Environment and much more… 11 - Identify Core Competency 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 Copyright © 2014 Pearson Education, Inc 11 - Value Chain Analysis Copyright © 2014 Pearson Education, Inc 11 - Business Environment National differences are inherent in analyzing a firm’s unique abilities Cultural differences Political processes Legal matters Economic systems Labor issues Consumer forces and much more… Copyright © 2014 Pearson Education, Inc 11 - Discussion Question What are the three stages of the strategy-formulation process, and what is involved at each stage? Copyright © 2014 Pearson Education, Inc 11 - 10 LowCost Strategy LowCost 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 Copyright © 2014 Pearson Education, Inc 11 - 22 Differentiation Strategy Design products that buyers perceive as unique throughout an industry Differentiators Quality Brand image Effects Price premium Customer loyalty Portion of market only Product design Higher production costs Copyright © 2014 Pearson Education, Inc 11 - 23 Focus Strategy 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 Copyright © 2014 Pearson Education, Inc 11 - 24 DepartmentLevel Strategies Departmental strategies are key to a company achieving its objectives: Manufacturing Marketing Logistics Research & development and others… Copyright © 2014 Pearson Education, Inc Source: Peng Neng/Newscom 11 - 25 Discussion Question What are the main differences between the three types of businesslevel strategy? Copyright © 2014 Pearson Education, Inc 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 Copyright © 2014 Pearson Education, Inc 11 - 27 Organizational Structure Centralized decision making Decentralized decision making + Coordination is + Improves local paramount + Financial control & cost Copyright © 2014 Pearson Education, Inc savings responsiveness + Increases accountability 11 - 28 International Division Structure Copyright © 2014 Pearson Education, Inc 11 - 29 International Area Structure Copyright © 2014 Pearson Education, Inc 11 - 30 Global Product Structure Copyright © 2014 Pearson Education, Inc 11 - 31 Global Matrix Structure Copyright © 2014 Pearson Education, Inc 11 - 32 Work Teams Self-managed Cross-functional team team Global team Employees from one Group of employees Top managers from department takefrom on similar levels but headquarters and responsibilities ofdifferent functionalsubsidiaries solve former supervisors departments company problems Copyright © 2014 Pearson Education, Inc 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 Copyright © 2014 Pearson Education, Inc 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 Copyright © 2014 Pearson Education, Inc 11 - 35 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher Printed in the United States of America Copyright © 2014 Pearson Education, Inc 11 - 36 ... or global strategy and then formulating corporate-, business- , and departmentlevel strategies Copyright © 2014 Pearson Education, Inc 11 - 11 Multinational Strategy Adapting products and their... airlines • Uses low-cost airports near major cities Copyright © 2014 Pearson Education, Inc 11 - Planning and Strategy Planning Strategy Identifying and selecting objectives and deciding how to... each type of international organizational structure, and explain the importance of work teams Copyright © 2014 Pearson Education, Inc 11 - Ryanair • Employs a low-cost business strategy • Charges