1. © 2013 Cengage Learning. All rights reserved. CHAPTER 12 GLOBAL2  PENG © DJ Dates/Alamy

2. © 2013 Cengage Learning. All rights reserved. CHAPTER 12 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1.Describe the relationship between multinational strategy and structure. 2.Explain how institutions and resources affect multinational strategy, structure, and learning. 3.Outline the challenges associated with learning, innovation, and knowledge management. 4.List three things you can do to make a multinational firm successful.

3. © 2013 Cengage Learning. All rights reserved. LO1: TWO PRESSURES FOR MNE  MNEs confront two sets of pressures:  Cost reduction – calls for global integration.  Local responsiveness – calls for local adaptation. These two sets of pressures are dealt with in the integration- responsiveness framework.

4. © 2013 Cengage Learning. All rights reserved. LO1: MULTINATIONAL STRATEGIES AND STRUCTURES

5. © 2013 Cengage Learning. All rights reserved. LO1: MULTINATIONAL STRATEGIES © iStockphoto.com/blackred

6. © 2013 Cengage Learning. All rights reserved. LO1: MULTINATIONAL STRATEGIES Home replication strategy – duplicates home-based competencies in foreign countries.  Makes sense when most customers are domestic.  Lacks local responsiveness.

7. © 2013 Cengage Learning. All rights reserved. LO1: MULTINATIONAL STRATEGIES Localization strategy – focuses on a number of countries/regions, each one regarded as a stand-alone market.  Effective when differences among markets are clear and pressures for cost reduction are low.  High costs due to duplication of efforts in multiple countries.

8. © 2013 Cengage Learning. All rights reserved. LO1: MULTINATIONAL STRATEGIES Global standardization strategy– development and distribution of standardized products worldwide.  Not limited to major operations at home— may designate centers of excellence.  Best when pressure for cost reduction is high and local responsiveness is low.

9. © 2013 Cengage Learning. All rights reserved. LO1: MULTINATIONAL STRATEGIES Transnational strategy – endeavors to be both cost effective and locally responsive.  Global learning and diffusion of innovations.  Organizationally complex, difficult to implement.

10. © 2013 Cengage Learning. All rights reserved. LO1: FOUR ORGANIZATIONAL STRATEGIES International division – typically used when firms expand abroad, often engaging in home replication strategy.  Foreign subsidiary managers often not given sufficient voice.  International division serves as silo whose activities are not coordinated with rest of the firm.

11. © 2013 Cengage Learning. All rights reserved. LO1: FOUR ORGANIZATIONAL STRATEGIES International division: Typically used when firms engage in home replication strategy

12. © 2013 Cengage Learning. All rights reserved. LO1: FOUR ORGANIZATIONAL STRATEGIES Geographic area structure – organizes MNE according to geographic areas.  Most appropriate for localization strategy.  Regional mangers carry a great deal of weight.  Strong local responsiveness, but that also encourages fragmentation of MNE.

13. © 2013 Cengage Learning. All rights reserved. LO1: FOUR ORGANIZATIONAL STRATEGIES Geographic area structure: appropriate for localization strategy

14. © 2013 Cengage Learning. All rights reserved. LO1: FOUR ORGANIZATIONAL STRATEGIES Global product division structure – supports global standardization strategy by assigning global responsibilities to each product division.  Highly responsive to pressure for cost efficiency.  Reduces inefficient duplication in multiple countries.  Lags in local responsiveness.

15. © 2013 Cengage Learning. All rights reserved. LO1: FOUR ORGANIZATIONAL STRATEGIES Global product division structure: Highly responsive to pressure for cost efficiency; Reduces inefficient duplication in multiple countries

16. © 2013 Cengage Learning. All rights reserved. LO1: FOUR ORGANIZATIONAL STRATEGIES Global matrix – sharing and coordination of responsibilities between product divisions and geographic areas in order to be both cost efficient and locally responsive.  Difficult to deliver in practice.  May add layers of management, slow down decision speed.

17. © 2013 Cengage Learning. All rights reserved. LO1: FOUR ORGANIZATIONAL STRATEGIES Global matrix: Designed to be both cost efficient and locally responsive; Difficult to deliver in practice

18. © 2013 Cengage Learning. All rights reserved. LO1: MULTINATIONAL STRATEGIES AND STRUCTURES The relationship between strategy and structure is reciprocal. Neither strategy nor structure is static. It is often necessary to change one, the other, or both.

19. © 2013 Cengage Learning. All rights reserved. LO2: EFFECT OF INSTITUTIONS AND RESOURCES

20. © 2013 Cengage Learning. All rights reserved. LO2: INSTITUTION-BASED CONSIDERATIONS External relationships Internal relationships

21. © 2013 Cengage Learning. All rights reserved. LO2: RESOURCE-BASED CONSIDERATIONS  Does a structural change add value?  Strategy must be rare.  Inimitability – formal structures are easier to observe, making informal structures more popular.  Organization of MNEs, formal and informal.

22. © 2013 Cengage Learning. All rights reserved. LO3: KNOWLEDGE MANAGEMENT Knowledge management: the structures, processes, and systems that actively develop, leverage, and transfer knowledge.

23. © 2013 Cengage Learning. All rights reserved. LO3: CATEGORIES OF KNOWLEDGE  Explicit knowledge – codifiable. Transferred with little loss of richness.  Tacit knowledge – non-codifiable. Transfer requires hands-on practice.

24. © 2013 Cengage Learning. All rights reserved. LO3: KNOWLEDGE MANAGEMENT IN FOUR TYPES OF MNEs

25. © 2013 Cengage Learning. All rights reserved. LO3: KNOWLEDGE MANAGEMENT IN FOUR TYPES OF MNEs Globalizing R&D A fundamental basis for competitive advantage is innovation-based firm heterogeneity. Decentralized R&D in different locations virtually guarantees persistent heterogeneity.

26. © 2013 Cengage Learning. All rights reserved. LO4: THREE THINGS TO DO

27. © 2013 Cengage Learning. All rights reserved. DEBATE: CORPORATE CONTROL vs. SUBSIDIARY INITIATIVES Subsidiary control: Subsidiary initiatives may inject a spirit of entrepreneurship throughout the larger corporation. Corporate control: Hard to distinguish between good-faith subsidiary initiative and opportunistic empire building. Subsidiary initiatives are not necessarily compatible with corporate-wide goals.