International Strategy and Organization

International Business 3e Chapter © Prentice Hall, 2006 Chapter Preview 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

International Business 3e Chapter © Prentice Hall, 2006 Planning and Strategy Planning - Identifying and selecting objectives and deciding how to achieve those objectives Strategy - Set of planned actions that managers take to help a company meet its objectives

International Business 3e Chapter © Prentice Hall, 2006 Identify Mission and Goals Mission statements must consider: - Company activities - Business objectives - Stakeholders - Stockholders - Customers - Residents - Environment and much more…

International Business 3e Chapter © Prentice Hall, 2006 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

International Business 3e Chapter © Prentice Hall, 2006 Value-Chain Analysis Divide company activities into primary and support activities and identify those that create value for customers - Each activity is a source of either strength or weakness - Insights gained are fed into the strategy formulation process

International Business 3e Chapter © Prentice Hall, 2006 Value Chain Components Primary activities - Inbound logistics - Operations - Outbound logistics - Marketing and sales - Service Support activities - Firm infrastructure - Human resource management - Technology development - Procurement

International Business 3e Chapter © Prentice Hall, 2006 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

International Business 3e Chapter © Prentice Hall, 2006 Small Firm Strategy 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

International Business 3e Chapter © Prentice Hall, 2006 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

International Business 3e Chapter © Prentice Hall, 2006 Global Strategy Offering the same products using the same marketing strategy in all national markets - Cost savings from standardization - May overlook varying buyer preferences

International Business 3e Chapter © Prentice Hall, 2006 Levels of Company Strategy Corporate-level strategies Business-level strategies Department-level strategies

International Business 3e Chapter © Prentice Hall, 2006 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

International Business 3e Chapter © Prentice Hall, 2006 Retrenchment Strategy Reduce the scale or scope of a corporation’s businesses - Conditions Poor economic conditions Increased competition - Actions Lay off workers Close inefficient factories Sell unprofitable businesses

International Business 3e Chapter © Prentice Hall, 2006 Stability Strategy Guard against change and avoid growth or retrenchment - No opportunities or threats - Strengths fully exploited - Weaknesses fully protected - Stated objectives are met

International Business 3e Chapter © Prentice Hall, 2006 Combination Strategy Mix of growth, retrenchment, and stability strategies across a corporation’s business units - Invest in promising units - Stabilize other units - Retrench for less exposure

International Business 3e Chapter © Prentice Hall, 2006 Business-Level Strategies Low-cost leadership - Industry-wide & lowest cost Differentiation - Industry-wide & unique Focus - Segment & lowest cost - Segment & unique

International Business 3e Chapter © Prentice Hall, 2006 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

International Business 3e Chapter © Prentice Hall, 2006 Differentiation Strategy Design products to be perceived as unique by buyers throughout an industry - Differentiators Quality Brand image Product design - Effects Price premium Customer loyalty Portion of market only Higher production costs

International Business 3e Chapter © Prentice Hall, 2006 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.

International Business 3e Chapter © Prentice Hall, 2006 Organizational Structure Centralized decision making - Coordination is paramount - Financial control and cost savings Decentralized decision making - Local responsiveness is key - Fast-changing environment

International Business 3e Chapter © Prentice Hall, 2006 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