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13Implementing
Strategy in Companies That Compete Across Industries and
Countries
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 2
Managing Corporate Strategy Through the Multidivisional Structure
• Functional or product structures are not sufficient when a company enters new industries
• Multidivisional structure innovations– Divisions (operating responsibility)– Corporate headquarters staff to monitor divisions
(strategic responsibility)– Each division may be organized differently
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 3
Multidivisional Structure
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Advantages of a Multidivisional Structure
• Enhanced corporate financial control
• Enhanced strategic control
• Growth
• Stronger pursuit of internal efficiency
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 5
Problems in Implementing a Multidivisional Structure
• Establishing the divisional-corporate authority relationship
• Distortion of information
• Competition for resources
• Transfer pricing
• Short-term R&D focus
• Duplication of functional resources
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 6
Structure, Control, Culture, and Corporate-Level Strategy
• Unrelated diversification– Easiest and cheapest strategy to manage– Allows corporate managers to evaluate divisional
performance easily and accurately– Divisions have considerable autonomy– No integration among divisions is necessary
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 7
Structure, Control, Culture, and Corporate-Level Strategy (cont’d)
• Vertical integration– More expensive than unrelated diversification
– Multidivisional structure provides necessary controls to achieve benefits from the control of resource transfers
– Must strike balance between centralized and decentralized control
– Divisions must have input regarding resource transfer
– Managed through a combination of corporate and divisional controls
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 8
Structure, Control, Culture, and Corporate-Level Strategy (cont’d)
• Related diversification– Multidivisional structure allows gains from the transfer,
sharing, or leveraging of R&D knowledge, industry information, and customer bases across divisions
– Difficult to measure performance of individual divisions
– High bureaucratic costs
– Integration and control at divisional level is required
– Incentives and rewards for cooperation are necessary
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 9
Corporate Strategy and Structure and Control
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The Role of Information Technology
• IT provides a common software platform that can make it less problematic for divisions to share information
• IT facilitates output and financial control
• IT helps corporate managers react more quickly because of higher-quality, more timely information
• IT makes it easier to decentralize control to divisional managers, but react quickly if necessary
• IT makes it difficult to distort information because of standardized information
• IT eases the transfer pricing problem
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 11
Implementing Strategy Across Countries
• Multidomestic strategy– Local responsiveness; decentralized control
• International strategy– Centralized R&D and marketing; other functions
are decentralized
• Global strategy– Cost reductions; centralized functions
• Transnational strategy– Local responsiveness and cost reduction
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 12
Global Strategy/Structure Relationships
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Implementing a Multidomestic Strategy
• Global-area structure– All value creation activities duplicated and
overseas division established in every country of operation
– Decentralized authority– Managers at global headquarters evaluate
performance of overseas divisions– No integrating mechanisms needed– No global organizational culture– Duplication of specialist activities raises costs
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 14
Global-Area Structure
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Implementing International Strategy
• International division structure– Used when a company sells domestically made products in
markets abroad– Foreign sales organization added to existing structure;
same control system– Customization is minimal– Subsidiary handles local sales and distribution– Behavior controls keep the home office informed– International division coordinates flow of different
products across different countries– Domestic and overseas managers may compete for control
of strategy making
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International Division Structure
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Implementing Global Strategy
• Global product-division structure– All value chain activities located to allow
efficiency, quality, and innovation– Problems of coordinating and integrating global
activities– Structure must lower bureaucratic costs and
provide central control– Product division headquarters coordinates
activities
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 18
Global Product-Division Structure
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 19
Implementing Transnational Strategy
• Global Matrix Structure– Lower cost structures and differentiate activities– Decentralized control provides flexibility for local
issues, but product and corporate managers at headquarters have centralized control to coordinate company activities on global level
– Knowledge and experience can be transferred– Global corporate culture– IT integration mechanisms provide coordination– Bureaucratic costs are high
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 20
Global Matrix Structure
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Entry Mode and Implementation
• Internal new venturing– Structure, control, and culture must encourage
creativity and give intrapreneurs autonomy and freedom to develop and champion new products and allow corporate managers to monitor profitability and fit
– Organization-wide new venturing vs. separate new-venture division
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 22
Entry Mode and Implementation (cont’d)
• Joint venturing– Managing culture differences
– Allocating authority and responsibility
• Mergers and acquisitions– Must establish new lines of authority
– Must streamline operations
– In unrelated acquisitions, managers must understand the new industry
– Must standardize control systems
– Must recognize culture differences
Copyright © Houghton Mifflin Company. All rights reserved. 13 - 23
IT, the Internet, and Outsourcing
• IT and strategy implementation– Knowledge leveraging through IT to achieve low
costs and differentiation– Flattening the organization, moving toward
decentralization and increased integration through IT
– Virtual organization– Knowledge management system
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IT, the Internet, and Outsourcing
• Strategic outsourcing and network structure– IT increases the efficiency of inter-organizational
relationships– Business-to-business (B2B) networks– Network structure