11 InternationalStrategy andOrganization

Copyright © 2014 Pearson Education, Inc.

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Chapter ObjectivesChapter 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

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RyanairRyanair

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

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

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Planning and StrategyPlanning 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

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Strategy-Formulation ProcessStrategy-Formulation Process

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Identify Mission and GoalsIdentify Mission and Goals

Mission statementsmust consider: Company activities Business objectives Stakeholders Stockholders Customers Residents Environment

and much more…

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Identify Core CompetencyIdentify Core CompetencyIdentify Core CompetencyIdentify Core Competency

Special ability of a company that competitors find extremely difficult or impossible to equalSpecial ability of a company that competitors find extremely difficult or impossible to equal

Coordination of multiple skillsCoordination of multiple skills

Develop over lengthy period of timeDevelop over lengthy period of time

Difficult to teachDifficult to teach

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Value Chain AnalysisValue Chain Analysis

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Business EnvironmentBusiness 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…

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Discussion QuestionDiscussion Question

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

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Answer to Discussion Answer to Discussion QuestionQuestion

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.

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Multinational StrategyMultinational Strategy

Adapting products and their marketing strategies

to local preferences in each national market

– Difficult to exploit economies of scale

+ Respond quickly to buyer preferences

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Global StrategyGlobal Strategy

Offering the same products using the same marketing strategy in all

national markets

– May overlook varying buyer preferences

+ Cost savings from standardization

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Levels of Company StrategyLevels of Company Strategy

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Growth StrategyGrowth Strategy

Internally generated growth

Mergers and acquisitions

Joint ventures

Strategic alliances

Increase the scale (size of activities) orscope (kinds of activities) of operations

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Retrenchment StrategyRetrenchment Strategy

Reduce the scale or scopeof a corporation’s businesses

Reduce Scale Reduce Scope

Close factories

Lay off workers

Sell unprofitable businesses

Sell unrelated businesses

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Stability StrategyStability Strategy

Guard against change and avoidgrowth or retrenchment

No opportunities or threats

Strengths fully exploited

Weaknesses fully protected

Stated objectives are met

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Combination StrategyCombination Strategy

Invest inpromising units

Retrench forless exposure

Stabilizeother units

Mix of growth, retrenchment, and stability strategies across business units

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Discussion QuestionDiscussion 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

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Answer to Discussion Answer to Discussion QuestionQuestion

A company that adapts its products and marketing to local preferences in each national market follows a __________ strategy.

a. Global

b. Multinational

c. Preference

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Business-Level StrategiesBusiness-Level Strategies

Low-cost leadership

Differentiation

Focus

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

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

• Mantra is cutting costs

• Quality remains important

• Scale is barrier to new entrants

• Perhaps low customer loyalty

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Differentiation StrategyDifferentiation Strategy

Effects

Price premium

Customer loyalty

Portion of market only

Higher production costs

Design products that buyers perceiveas unique throughout an industry

Differentiators

Quality

Brand image

Product design

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Focus StrategyFocus StrategyFocus StrategyFocus Strategy

Focus on narrow market segment by being the low-cost leader, differentiating, or both

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.

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Department-Level StrategiesDepartment-Level Strategies

Departmental strategies

are key to a company

achieving its objectives:

Manufacturing Marketing Logistics Research & development

and others…Source: Peng Neng/NewscomSource: Peng Neng/Newscom

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Discussion QuestionDiscussion Question

What are the main differences between the three types of business-level strategy?

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Answer to Discussion Answer to Discussion QuestionQuestion

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.

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Organizational StructureOrganizational Structure

Centralizeddecision making

Decentralizeddecision making

+ Coordination is paramount+ Financial control & cost savings

+ Improves local responsiveness+ Increases accountability

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International Division International Division StructureStructure

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International Area StructureInternational Area Structure

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Global Product StructureGlobal Product Structure

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Global Matrix StructureGlobal Matrix Structure

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Work TeamsWork Teams

Cross-functionalteam

Group of employeesfrom similar levels but

different functionaldepartments

Self-managedteam

Employees from onedepartment take onresponsibilities offormer supervisors

Globalteam

Top managers fromheadquarters andsubsidiaries solvecompany problems

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Discussion QuestionDiscussion 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

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Answer to Discussion Answer to Discussion QuestionQuestion

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

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