(Mt) – St Cloud State University Management Discussion

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Chapter 13. Strategizing, Structuring, and Learning around the World 1 Learning Objectives • Appreciate the complexities of the global-local dilemma • Understand the content of the multinational strategies • Describe the relationship between multinational strategy and structure. • Explain how institutions and resources affect strategy, structure, and learning. • Outline the challenges associated with learning, innovation, and knowledge management. © Cengage Learning Strategy Fundamentals • Strategy: the central, comprehensive, integrated, and externally oriented set of choices of how a company will achieve its objectives • Multinational companies use many of the same strategies as domestic companies © Cengage Learning Strategy Fundamentals • Strategy process – The three components of the strategy process include planning, implementation, and evaluation and control. – Planning is the systematic gathering of information from which the firm sets its mission, performance objectives, and its strategy. – This process is critical as it helps establish the foundation on which the firm bases its plans. © Cengage Learning A Strategic Framework Multinational Firm Performance Constraints Environment Opportunity • Economic • Socio-cultural • Political/Legal • Local competition Generic Competitive Strategies Constraints Organization Opportunity • Firm Resources • Firm Capability • Core competence • Strategic Disadvantages MULTINATIONAL STRATEGIES AND STRUCTURES Pressures for Cost Reductions and Local Responsiveness Integration-responsiveness framework • Allows managers to deal with the pressures for both global integration and local responsiveness Local responsiveness • Necessity to be responsive to different customer preferences around the world © Cengage Learning Local Responsiveness • • • • Different consumer tastes and preferences. Different infrastructure and practice. Differences in competitive situations. Government demands. © Cengage Learning Four Strategic Choices • Four broad multinational strategies – Home replication strategy – Localization (Multidomestic) strategy – Global standardization strategy – Transnational strategy © Cengage Learning Home replication strategy • Duplicates home country-based competencies in foreign countries • Selling global products and using similar marketing techniques worldwide – Limited adaptations in product offerings and marketing strategies – Upstream and support activities remain concentrated at home country, unlike transnational companies © Cengage Learning Multidomestic Strategy • The company attempts to offer products or services that attract customers by closely satisfying their cultural needs and expectations • Emphasizes local-responsiveness issues – Ex.: different packages, colors – Costs more to produce, need to charge higher prices to recoup – In many respects, a form of differentiation strategy – Not limited to large multinationals © Cengage Learning Global Standardization Strategy • Development and distribution of standardized products worldwide in order to reap the maximum benefits from low cost advantages • Desire to reduce costs by: – Mass production and Product standardization – Optimal location production • Hard to do with commodity-type products – products serving universal needs • Also hard where competition is in low cost producing location. © Cengage Learning Transnational Strategy • Two goals get top priority: – Seeking location advantages – Gaining economic efficiencies from operating worldwide • Aims to capture the best of both worlds by endeavoring to be both cost efficient and locally responsive © Cengage Learning Transnational Strategy (Network Structure) • Newest solution to the complex demand of being locally responsive and taking advantage of global economies of scale • Network of functional, product, and geographic subsidiaries dispersed worldwide. • Consists of three components – Dispersed subunits – Specialized operations – Interdependent relationships © Cengage Learning Transnational strategy (cont.) • With location advantages, the transnational can: – Set up global platforms to gain better quality and low costs – Locate subunits near cheap manufacturing – Be close to key and most demanding customers • Location advantages can exist for all activities of the value chain Center of excellence Subsidiary explicitly recognized as a source of important capabilities, with the intention that these capabilities be leveraged by and/or disseminated to other subsidiaries © Cengage Learning Transnational Strategy (Distributed but Networked Organization) Canada Korea Chile China Hilton, P&G, McDonald’s, etc. USA Japan India Mexico Resolving the Global-Local Dilemma © Cengage Learning Structural Designs • This should be thought of in terms of three dimensions – Vertical differentiation: the location of decision-making responsibilities within a structure – Horizontal differentiation: the formal division of the organization into sub-units – Establishment of integrating mechanisms: mechanisms for coordinating sub-units © Cengage Learning A Reciprocal Relationship • Strategy usually drives structure • As much as strategy drives structure, structure also drives strategy • Neither strategies nor structures are static • It is often necessary to change strategy, structure, or both © Cengage Learning The Basic Product and Geographic Structures • Product structure: departments or subunits based on different product groups • Geographic structure: departments or subunits based on geographic regions • Functional tasks are duplicated for each product/geographic area, leading to loss of economies of scale. © Cengage Learning Geographic Area Structure © Cengage Learning Global Product Division Structure © Cengage Learning Global Matrix Structure © Cengage Learning Matrix Structures • Problems emerging with worldwide matrix structures – Slow decision making process – Too bureaucratic – Too many meetings and too much conflict • Result – Some companies have abandoned their matrixes and returned to product structures – Others have redesigned their matrix structures to be more flexible with speedier decision making © Cengage Learning Control and Coordination Systems • Control system: helps link the organization vertically, up and down the organizational hierarchy • Basic functions of control system – Measure or monitor the performances of subunits – Provide feedback to subunit managers regarding the effectiveness of their units • Coordination system: horizontal organizational links – Provide information flows among subsidiaries to allow for coordination © Cengage Learning Design Options for Control Systems • Four types of control systems – Output control system – Bureaucratic control system – Decision-making control – Cultural control system © Cengage Learning Multinational Strategy and Structure: An Overview • Most companies support early internationalization efforts with export department • Depending on globalization strategy, they evolve into product or geographic structure • Pressure for local adaptation and global efficiencies result into matrix or transnational network structures • No company reaches any pure form—use hybrids © Cengage Learning Knowledge Management (KM) Knowledge management • Structures, processes, and systems that actively develop, leverage, and transfer knowledge. Explicit knowledge • Knowledge that is codifiable (that is, can be written down and transferred with little loss of richness). Tacit knowledge • Knowledge that is noncodifiable, and its acquisition and transfer require hands-on practice. © Cengage Learning Knowledge Management (KM) © Cengage Learning Conclusion • Multinational manager faces array of complex strategic issues • All companies must deal with global-local dilemma • Good strategies do not guarantee success – also need good implementation • Chapter also discusses knowledge management systems © Cengage Learning

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