Strategizing, Structuring, & Learning Around the World 12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

LEARNING OUTCOMES 2 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1Describe the relationship between multinational strategy and structure 2Explain how institutions and resources affect multinational strategy, structure, and learning 3Outline the challenges associated with learning, innovation, and knowledge management 4List three things you can do to make a multinational firm successful

3 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Multinational Enterprises (MNEs) Face two sets of pressures Cost reduction and local responsiveness Integration-responsiveness framework MNE management framework for simultaneously dealing with the pressures for both global integration and local responsiveness

4 Exhibit GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Multinational Strategies and Structures: The Integration-Responsive Framework

5 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Strategic Choices Emphasizes on replicating home-country-based competencies in foreign countries Home-replication strategy Focuses on numerous potential foreign countries/regions, which stand alone in domestic markets Localization (multidomestic) strategy

6 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Strategic Choices (continued) Relies on the development and distribution of standardized products globally to reap the maximum benefits from low-cost advantages Global standardization strategy Endeavors to be cost efficient, locally responsive, and learning driven around the world Transnational strategy

7 Exhibit GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Four Strategic Choices for Multinational Enterprises

8 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizational Strategies Set up when a firm initially expands abroad, often engaging in home replication strategy Foreign subsidiary managers are not given sufficient voice Serves as silo whose activities are not coordinated with rest of the firm International division Organizes the MNE according to different countries and regions Regional managers carry a great deal of weight Strong local responsiveness, but that also leads to divisions of MNE Geographic area structure

9 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizational Strategies (continued) Assigns global responsibilities to each product division Responds to cost efficiency pressures Reduces inefficient duplication in multiple countries Lags in local responsiveness Global product division structure Reduces the disadvantages of geographic area and global product division structures, when using a transnational strategy Difficult to deliver in practice May add layers of management and slow down decision speed Global matrix

10 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Reciprocal Relationship Between Multinational Strategy and Structure Strategy drives structure Relationship is not one way Structure also drives strategy Neither strategy nor structure is static

11 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Institution-Based Considerations MNEs are subjected to government frameworks Informal institutions which deal with host and home countries External relationships Organizational structure specifies scope of various parties’ responsibilities Organizational norms, values, and networks Internal relationships

12 Exhibit GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part How Institutions and Resources Affect Multinational Strategy, Structure, and Learning

13 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Resources-Based Considerations Structural changes might add value Strategies must be rare Informal structures are preferred as they are difficult to imitate Formal and informal organization of MNEs worldwide Organizational culture: Collective programming of the mind distinguishing members of different organizations

14 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Knowledge Management Structures, processes, and systems that actively develop, leverage, and transfer knowledge Explicit knowledge: Codifiable and transferred with little loss of richness Tacit knowledge: Non-codifiable and transfer requires hands-on practice

15 Exhibit GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part Knowledge Management in Four Types of Multinational Enterprise

16 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Globalizing Research and Development Unique status a firm has because of its innovations gives it a competitive advantage R&D distributed in various locations guarantees consistent heterogeneity

17 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Major Perspectives Understanding and manipulating the rules in domestic and foreign markets offers a positive result Institution-based view Develop firm-specific advantages to increase chances for success Resources-based view

18 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Implications for Actions Understand and master the external rules governing MNEs and the domestic and host country environments Understand and prepare to change internal rules of the MNE management Develop learning and innovation capabilities to have a global presence

19 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Debate: Corporate Controls Versus Subsidiary Initiatives Subsidiary control Subsidiary initiatives inject entrepreneurship spirit in a larger corporation Corporate control Difficult to differentiate between good-faith subsidiary initiative and opportunistic empire building

KEY TERMS 20 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Center of excellence Worldwide (or global) mandate Transnational strategy International divisions Geographic area structure Country (or regional) manager Global product division structure Integration- responsive framework Local responsive Home replication strategy Localization (multidomestic) strategy Global standardization strategy

KEY TERMS 21 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Global matrix Organizational culture Subsidiary initiative Knowledge management Explicit knowledge Tacit knowledge

SUMMARY 22 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Strategic choices for multinational enterprises Home replication, localization, global standardization, and transnational Corresponding organizational structures -International division, geographic area, global product division, and global matrix

SUMMARY 23 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Institution-based considerations are based on external and internal relationships Resource-based considerations include the VRIO framework Differences in knowledge management among MNEs stem from interdependence: Between headquarters and subsidiaries Among subsidiaries

SUMMARY 24 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Managers should: Understand and master the external and internal rules of the MNE management Develop learning and innovation capabilities to have a global presence

25 GLOBAL 3 | CH12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.