Lecture International business - Chapter 11: International strategy and organization

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

• 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

• Employs a low-cost business strategy

• Charges far less than national airlines

• Uses low-cost airports near major cities

Planning Strategy

Identifying and

selecting objectives

and deciding how to

Set of planned actions that managers take to help a company meet its

Strategy­Formulation Process

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

Coordination of multiple skills

Coordination of multiple skills

Develop over lengthy period of time

Develop over lengthy period of time

Difficult to teach

Value Chain Analysis

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.

Adapting products and

their marketing strategies

Offering the same

products using the same

marketing strategy in all

Levels of Company Strategy

Internally generated growth Mergers and acquisitions

Joint ventures Strategic alliances

Increase the scale (size of activities) or scope (kinds of activities) of operations

 Lay off workers

 Sell unprofitable businesses

 Sell unrelated businesses

Guard against change and avoid

growth or retrenchment

 No opportunities or threats

 Strengths fully exploited

 Weaknesses fully protected

 Stated objectives are met

Invest in

promising units

Retrench for less exposure

Stabilize other units

Mix of growth, retrenchment, and stability

strategies across business units

A company that adapts its

products and marketing to

local preferences in each

national market follows a

strategy.

a Global

b Multinational

c Preference

A company that adapts its

products and marketing to

local preferences in each

national market follows a

strategy.

a Global

b Multinational

c Preference

 Low-cost leadership

 Differentiation

 Focus

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

Effects

 Price premium

 Customer loyalty

 Portion of market only

 Higher production costs

Design products that buyers perceive

as unique throughout an industry

Differentiators

 Quality

 Brand image

 Product design

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.

Departmental strategies

are key to a company

achieving its objectives:

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.

Centralized decision making

Decentralized decision making

+ Coordination is

paramount

+ Improves local responsiveness

International Division Structure

International Area Structure

Global Product Structure

Global Matrix Structure

Cross-functional

team

Group of employees from similar levels but different functional

Top managers from headquarters and subsidiaries solve company problems

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