Making It Work: Effective International Operations Chapter 10 Making It Work: Effective International Operations

Overview Managing strategic alliances Factors affecting entry choice Structuring operations Approaches to coordination Managing technology Copyright © Houghton Mifflin Company. All rights reserved.

Key Issues in Managing Strategic Alliances

Getting Out if Necessary Alliance Agreements Should Include: Conditions to dissolve alliance How assets will be liquidated Handling of liabilities after termination Mechanism for resolution of disputes Copyright © Houghton Mifflin Company. All rights reserved.

Factors Affecting Entry Choice Degree of control Amount of “say” Resource commitment Capital and human assets required Dissemination risk Risk of proprietary knowledge getting out Systemic risk Economic and political risk Copyright © Houghton Mifflin Company. All rights reserved.

Factors Affecting Choice of International Entry Mode Copyright © Houghton Mifflin Company. All rights reserved.

Culture & Entry Choice Culture and national origin Perception of cultural distance Double-layered acculturation Success less likely when dealing with different national and corporate cultures Can interact with other variables to affect choice Copyright © Houghton Mifflin Company. All rights reserved.

Establishing an International Structure No one best way Changes with expansion or entry method Should match competitive environment Matching structure & process can be challenging Combination structures are sometimes necessary Copyright © Houghton Mifflin Company. All rights reserved.

International Structures Export International Division By area or product Global Product Area Matrix Copyright © Houghton Mifflin Company. All rights reserved.

Export Structure Often first step toward accommodating international business in the structure Export Department Narrow vs. broad product line Can be more complex than it appears Copyright © Houghton Mifflin Company. All rights reserved.

Typical Structures for Firms With a Primary Focus on International Exports Copyright © Houghton Mifflin Company. All rights reserved.

International Division Structure Splitting domestic and international operations Concentrates managerial expertise and know-how Umbrella for all international activities By product or region Challenge of coordinating both domestic and international Copyright © Houghton Mifflin Company. All rights reserved.

Examples of an International Division Structure Copyright © Houghton Mifflin Company. All rights reserved.

Global Structures International operations critical part of overall operation Area structure-Few products, high degree of local responsiveness, functional autonomy within each area Product structure-Diversified products, separate divisions for each line, minimal local responsiveness, some duplication Matrix structure-Global integration and local responsiveness needed, overlapping geographic and product divisions, confusion and ambiguity Copyright © Houghton Mifflin Company. All rights reserved.

The Global Area Structure

The Global Product Structure Copyright © Houghton Mifflin Company. All rights reserved.

The Global Matrix Structure Copyright © Houghton Mifflin Company. All rights reserved.

Structure and Strategy Locus of decision making Centralized, decentralized Structure matches desired control over decisions Culture and perception of control often linked to structure Copyright © Houghton Mifflin Company. All rights reserved.

The Relationship between Structural Components & Strategy

Formal vs. Informal Coordination mechanisms Lateral communication network Formal coordination mechanisms Established team Copyright © Houghton Mifflin Company. All rights reserved.

Lateral Communication Networks Facilitate information flow needed to spread expertise throughout organization Large global structure can impede information flow Difficult to organize Patchwork of relationships doesn’t always cover each area Copyright © Houghton Mifflin Company. All rights reserved.

Managing Technology Facilitate coordination, both formal and informal Better decision making Keeping up essential to maintain firm’s competitive advantage Integrate into strategic initiatives Copyright © Houghton Mifflin Company. All rights reserved.

Getting and Keeping a Technological Edge Develop In-house Depends on technology intensity of industry Expensive Ability to guard within Shared development Cost savings Through acquisition Rapid Expensive but cheaper than in-house development Copyright © Houghton Mifflin Company. All rights reserved.

Transferring Technology Intercompany transfer Sales Source of revenue Risk of competition Methods Franchising Licensing Joint ventures Copyright © Houghton Mifflin Company. All rights reserved.

Maintaining Technological Edge Intellectual Property Protection--Reward for investment in R & D Patents—monopoly rights for a period of time Trademark—protection from use of distinctive designs, features, or logos Variations across countries Copyright © Houghton Mifflin Company. All rights reserved.