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11 International Strategy and Organization Copyright © 2014 Pearson Education, Inc.

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1 11 International Strategy and Organization Copyright © 2014 Pearson Education, Inc.

2 Copyright © 2014 Pearson Education, Inc. Chapter Objectives Explain the stages of identification and analysis that precede strategy selection Identify the two international strategies and the corporate-level strategies that companies use Identify the business-level strategies of companies and the role of department-level strategies Discuss the important issues that influence the choice of organizational structure Describe each type of international organizational structure, and explain the importance of work teams

3 Copyright © 2014 Pearson Education, Inc. Ryanair Employs a low-cost business strategy Charges far less than national airlines Uses low-cost airports near major cities

4 Copyright © 2014 Pearson Education, Inc. Planning and Strategy PlanningStrategy 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

5 Copyright © 2014 Pearson Education, Inc. Strategy-Formulation Process

6 Copyright © 2014 Pearson Education, Inc. Identify Mission and Goals Mission statements must consider: Company activities Business objectives Stakeholders Stockholders Customers Residents Environment and much more…

7 Copyright © 2014 Pearson Education, Inc. Identify Core Competency Special ability of a company that competitors find extremely difficult or impossible to equal Coordination of multiple skills Develop over lengthy period of time Difficult to teach

8 Copyright © 2014 Pearson Education, Inc. Value Chain Analysis

9 Copyright © 2014 Pearson Education, Inc. Business Environment National differences are inherent in analyzing a firm’s unique abilities  Cultural differences  Political processes  Legal matters  Economic systems  Labor issues  Consumer forces and much more…

10 Copyright © 2014 Pearson Education, Inc. Discussion Question What are the three stages of the strategy-formulation process, and what is involved at each stage?

11 Copyright © 2014 Pearson Education, Inc. Answer to Discussion Question Stage one is to identify company mission and goals. This means defining the business and its main objectives. Stage two is to identify company core competency and value-creating activities. This means analyzing a firm’s unique abilities, primary and support activities, and the business environment. Stage three is to formulate strategies. This means selecting a multinational or global strategy and then formulating corporate-, business-, and department- level strategies.

12 Copyright © 2014 Pearson Education, Inc. Multinational Strategy Adapting products and their marketing strategies to local preferences in each national market – Difficult to exploit economies of scale + Respond quickly to buyer preferences

13 Copyright © 2014 Pearson Education, Inc. Global Strategy Offering the same products using the same marketing strategy in all national markets – May overlook varying buyer preferences + Cost savings from standardization

14 Copyright © 2014 Pearson Education, Inc. Levels of Company Strategy

15 Copyright © 2014 Pearson Education, Inc. Growth Strategy Internally generated growth Mergers and acquisitions Joint ventures Strategic alliances Increase the scale (size of activities) or scope (kinds of activities) of operations

16 Copyright © 2014 Pearson Education, Inc. Retrenchment Strategy Reduce the scale or scope of a corporation’s businesses Reduce ScaleReduce Scope  Close factories  Lay off workers  Sell unprofitable businesses  Sell unrelated businesses

17 Copyright © 2014 Pearson Education, Inc. Stability Strategy Guard against change and avoid growth or retrenchment  No opportunities or threats  Strengths fully exploited  Weaknesses fully protected  Stated objectives are met

18 Copyright © 2014 Pearson Education, Inc. Combination Strategy Invest in promising units Retrench for less exposure Stabilize other units Mix of growth, retrenchment, and stability strategies across business units

19 Copyright © 2014 Pearson Education, Inc. Discussion Question A company that adapts its products and marketing to local preferences in each national market follows a __________ strategy. a. Global b. Multinational c. Preference

20 Copyright © 2014 Pearson Education, Inc. Answer to Discussion Question A company that adapts its products and marketing to local preferences in each national market follows a __________ strategy. a. Global b. Multinational c. Preference

21 Copyright © 2014 Pearson Education, Inc. Business-Level Strategies  Low-cost leadership  Differentiation  Focus

22 Copyright © 2014 Pearson Education, Inc. 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 to new entrants Perhaps low customer loyalty

23 Copyright © 2014 Pearson Education, Inc. Differentiation Strategy Effects  Price premium  Customer loyalty  Portion of market only  Higher production costs Design products that buyers perceive as unique throughout an industry Differentiators  Quality  Brand image  Product design

24 Copyright © 2014 Pearson Education, Inc. Focus Strategy Focus on narrow market segment by being the low-cost leader, differentiating, or both Many sub-segments today Need distinctive product Single geography, ethnicity, etc.

25 Copyright © 2014 Pearson Education, Inc. Department-Level Strategies Departmental strategies are key to a company achieving its objectives: Manufacturing Marketing Logistics Research & development and others… Source: Peng Neng/Newscom

26 Copyright © 2014 Pearson Education, Inc. Discussion Question What are the main differences between the three types of business- level strategy?

27 Copyright © 2014 Pearson Education, Inc. Answer to Discussion Question A low-cost leadership strategy exploits economies of scale to have the lowest cost structure of any competitor in an industry. A differentiation strategy designs products that buyers perceive as unique throughout an industry. A focus strategy focuses on the needs of a narrowly defined market segment by being the low-cost leader, by differentiating its product, or by doing both.

28 Copyright © 2014 Pearson Education, Inc. Organizational Structure Centralized decision making Decentralized decision making + Coordination is paramount + Financial control & cost savings + Improves local responsiveness + Increases accountability

29 Copyright © 2014 Pearson Education, Inc. International Division Structure

30 Copyright © 2014 Pearson Education, Inc. International Area Structure

31 Copyright © 2014 Pearson Education, Inc. Global Product Structure

32 Copyright © 2014 Pearson Education, Inc. Global Matrix Structure

33 Copyright © 2014 Pearson Education, Inc. Work Teams Cross-functional team Group of employees from similar levels but different functional departments Self-managed team Employees from one department take on responsibilities of former supervisors Global team Top managers from headquarters and subsidiaries solve company problems

34 Copyright © 2014 Pearson Education, Inc. Discussion Question The organizational structure that divides worldwide operations according to a company’s product areas is called a(n) __________ structure. a. Global matrix b. Global product c. International division

35 Copyright © 2014 Pearson Education, Inc. Answer to Discussion Question The organizational structure that divides worldwide operations according to a company’s product areas is called a(n) __________ structure. a. Global matrix b. Global product c. International division

36 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2014 Pearson Education, Inc


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