CH12

Strategy Organization in the

International Firm
 Strategy
Is a planned set of actions that managers
employ to make best use of the firms resources
and competencies to gain competitive
advantage.
 Strategy Development
1- Test strengths, weaknesses,
2- Analyze threats and opportunities
3- Decide targeted customers
4- decide products
5- how to compete
6- How to coordinate firms activities around the
world
 Global firms Strategic objectives
To become globally competitive firms must seek the
following objectives:
1. Efficiency: the firm must build efficient value
chains. Lowering the cost of operations and
activities on global scale.
Example: Toyota works with its suppliers to ensure
they provide low cost parts while maintaining
quality. Its logistical operations for shipping its cars
around the world are efficient and cost effective.
 Global firms Strategic objectives
2. Flexibility: accommodating risks and
opportunities through diversity
3.Learning: acquire new technologies and
managerial know- how, new products, improved
R&D, skills and survival capabilities.
 Building Global Firm
First: Visionary Leadership
Managers focus on directing day to day
operations

Leaders hold long term perspective challenges

and opportunities confronting the firm
 Building Global Firm
First: Visionary Leadership
Leader characteristics:
1. Has international mind set, an openness to
diversity across cultures
2. Willing to commit resources to achieve their
international goals
3. Strategic vision: what firm want to be in the
future and how to get their
4. Willing to invest in human assets
 Second: Organizational Culture
Pattern of shared values, systems, policies and
procedures that employees learn and adopt to
think and to behave to new problems and
opportunities.
 Second: Organizational Culture
1. Value and promote global perspective in all
major initiatives.
2. Value global competence and cross cultural
skills among their employees
3. Adopt a single corporate language
4. Promote interdependency between head
quarters and subsidiaries
5. Subscribe to globally accepted ethical
standards
 Third: Organizational Processes
Managerial routines, behaviors that allow the
firm to function as intended as:
• Mechanisms of collecting strategic
information,
• ensuring quality control,
• Maintaining efficient payment systems for int.
sales.
 Global Team
• Is an internationally distributed group of
employees charged with a specific problem
solving that affect company operations world
wide.
• Team members from different geographic units
within the MNE.
• Strategic Team tasks to identify or implement
initiatives that enhance long term directions of
the firm.
• Operational Team focus on the efficient and
effective operation of the business across the
network.
 Strategies based on Integration
1- Global Strategy
• HQ seek substantial control over its country operations
to minimize redundancy and achieve maximum
efficiency, learning and integration worldwide.
• R&D and manufacturing in HQ
• management see the world as one large market place
• An industry in which competition is on a regional or
worldwide scale.
• Industries as automobiles, metals, computers,
chemicals
• Industries catering to the needs and tastes of
consumers on regional or global scale
• Characterized by handful of major players
 Global Strategy

Offering the same

products using the same
marketing strategy in
all national markets

+ Cost savings from

standardization

– May overlook varying

buyer preferences
Chapter 12 & 13 - 13
 2- Home Replication strategy
• The firm views int. business as separate from
and secondary to its domestic business
• if they target markets similar to home market
• Used by small firm with products it wants to
sell abroad.
• It contracts with an intermediary in foreign
markets to import and distribute the product
and generally doesn’t adapt to foreign
customers.
 3- Multi domestic strategy
• An industry in which competition takes place on a
country basis.
• Industries as processes food, consumer products,
fashion.
• Products catering to specific needs and tastes of each
country products adapted to need of each country
• HQ delegates considerable authority to each country
manager allowing him to open independently
• Firm allow subsidiaries to vary product and
management practices by country
• Products and services adapted to country needs
 4- Transnational strategy
• coordinated approach to which firm strives to
be relatively responsive to local needs while
certain sufficient central control to ensure
efficiency and learning.
• Combines major advantages of mutli-domestic
and global strategies and minimize their
disadvantages
• Standardize where feasible and adapt where
appropriate
 Transnational 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
The Advantages and Disadvantages of the
Four Strategies
Strategy Advantages Disadvantages
Global Exploit experience curve effects Lack of local
responsiveness
Exploit location economies Lack of local
Home responsiveness
Replication Inability to realize
Transfer distinctive
competencies to location economies
Failure to exploit
Foreign Markets
experience curve
effects
Figure 12.6a
© McGraw Hill Companies, Inc., 2000 12-21
The Advantages and Disadvantages of the Four
Strategies
Strategy Advantages
Multi-domestic Customize product offerings
and marketing in accordance
with local responsiveness
Transnational Exploit experience curve
effects
Exploit location economies
Customize product offerings
and marketing in accordance
with local responsiveness
Reap benefits of global learning
© McGraw Hill Companies, Inc., 2000
Disadvantages
Inability to realize location
economies
Failure to exploit
experience curve effects
Failure to transfer
distinctive competencies
to foreign markets
Difficult to implement due
to organizational
problems
Figure 12.6b
12-22
 Fourth: Organizational Structure
• Centralized: give head quarter considerable
authority and control over the firm activities
(ignores subsidiaries managers , knowledge of
host countries).
• Decentralized: substantial authority and decision
making are delegated to firms subsidiaries
around the world. (ignores the big picture
knowledge of HD managers and fails to integrate
strategies across countries and regions).
 Organizational Structure

+ Coordination is paramount + Local responsiveness is key

+ Financial control and cost savings + Fast-changing environment
 Head Quarter duties
1. Promote positive open minded set
2. Promote collaborative relationships with
country managers
3. Encourage local managers to identify with broad
corp. objectives.
4. Rotate employees within corp. network.
5. Encourage country managers to interact and
share experiences.
6. Provide incentives and penalties to promote
compliance with HQ goals.
 Organizational Structure for Int.
Operations
1. Export Department: when manufacturing firm
start exporting
2. Int. Division structure: all int. activities
centralized in one division
3. Geographic area (Decentralized): local managers
responsible for operations within their region
4. Product structure (Centralized): each product
division responsible for producing and
marketing specific product world wide.
5. Functional structure (Centralized): arrange int.
operations by activity.
 Organizational Structure of Int.
Operations
6. Global Matrix structure: blends geographic area,
product and functional structures.
HQ should:
- Coordinate and control int. operations
- Respond to countries needs
- Maximize inter organizational learning and knowledge
sharing among firms units world wide close to
transnational strategy.
- Dual reporting system
Employees in foreign subsidiaries reports to two
managers: Local GM, Division manager
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