The Strategy of International Business & The Organization of International Business

1. The Strategy of International Business & The Organization of International Business

2. 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 Preview

3. 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

4. Strategy-Formulation Process

5. Identify Mission and Goals • Mission statements must consider: • Company activities • Business objectives • Stakeholders • Stockholders • Customers • Residents • Environment • and much more…

6. 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

7. Divide company activities into primary and support activities and identify those that create value for customers Value-Chain Analysis Each activity is a source of either strength or weakness • Insights gained are • fed into the strategy • formulation process

8. Value Chain Components

9. Business Environment National differences are inherent in analyzing a company’s unique abilities • Cultural differences • Political processes • Legal matters • Economic systems • Labor issues • Consumer forces and much more…

10. Be sure company is ready to go international Thoroughly understand your product Examine your company’s internal activities Ask important questions of strategy Finally, create the strategic plan Small Firm Strategy

11. 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

12. Global Strategy Offering the same products using the same marketing strategy in all national markets • Cost savings from standardization • May overlook varying • buyer preferences

13. Levels of Company Strategy

14. 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

15. Poor economic conditions • Increased competition • Lay off workers • Close inefficient factories • Sell unprofitable businesses Retrenchment Strategy Reduce the scale or scope of a corporation’s businesses Conditions Actions

16. Guard against change and avoid growth or retrenchment Stability Strategy • No opportunities or threats • Strengths fully exploited • Weaknesses fully protected • Stated objectives are met

17. 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

18. Business-Level Strategies

19. 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

20. Differentiators Quality Brand image Product design Differentiation Strategy Design products to be perceived as unique by buyers throughout an industry Effects Price premium Customer loyalty Portion of market only Higher production costs

21. 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.

22. Organizational Structure Centralized decision making Decentralized decision making • Coordination is paramount • Financial control and cost savings • Local responsiveness is key • Fast-changing environment

23. International Division Structure

24. International Area Structure

25. Global Product Structure

26. Global Matrix Structure

27. Work Teams Self-managed team Employees from one department take on responsibilities of former supervisors Cross-functional team Group of employees from similar levels but different functional departments Global team Top managers from headquarters and subsidiaries solve company problems

28. 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 Summary

29. International Strategy and Organization