1. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. CHAPTER 13 IMPLEMENTING STRATEGY IN COMPANIES THAT COMPETE ACROSS INDUSTRIES AND COUNTRIES

2. ©2015 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 OBJECTIVES  Discuss the reasons why companies pursuing different corporate strategies need to implement these strategies using different combinations of organizational structure, control, and culture  Describe the advantages and disadvantages of a multidivisional structure 2

3. ©2015 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 OBJECTIVES  Explain why companies that pursue different kinds of global expansion strategies choose different kinds of global structures and control systems to implement these strategies  Discuss the strategy-implementation problems associated with the three primary methods used to enter new industries: internal new venturing, joint ventures, and mergers 3

4. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MULTIDIVISIONAL STRUCTURE  Allows a company to grow and diversify while reducing coordination and control problems  Uses self-contained divisions and has a separate corporate headquarters staff  Self-contained division: Independent business unit or division that contains all the value-chain functions it needs to pursue its business model successfully 4

5. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MULTIDIVISIONAL STRUCTURE  Corporate headquarters staff: Team of top executives and their support staff who are responsible for:  Overseeing a company’s long-term multibusiness model  Providing guidance to increase the value created by the company’s self-contained divisions 5

6. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. FIGURE 13.1 - MULTIDIVISIONAL STRUCTURE 6

7. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. ADVANTAGES OF A MULTIDIVISIONAL STRUCTURE Profit center: Each self-contained division is treated as a separate financial unit and financial controls are used to establish its performance goals and measure profitability Enhanced corporate financial control By allowing corporate managers to focus on developing corporate strategy Enhanced strategic control By minimizing communication problems and information overload Profitable long-term growth Organizational slack: Unproductive use of functional resources by divisional managers that go undetected unless corporate managers monitor their activities Stronger pursuit of internal efficiency 7

8. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PROBLEMS IN IMPLEMENTING A MULTIDIVISIONAL STRUCTURE  Establishing the divisional–corporate authority relationship  Restrictive financial controls lead to short-run focus  Competition for resources  Transfer pricing: Problem of establishing the fair price of a resource or skill developed in one division that is to be sold to another division  Duplication of functional resources 8

9. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. TABLE 13.1 - CORPORATE STRATEGY, STRUCTURE, AND CONTROL 9

10. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. TYPES OF GLOBAL EXPANSION STRATEGIES Localization strategy International strategy Global standardization strategy Transnational strategy 10

11. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. FIGURE 13.2 - AN INTERNATIONAL DIVISION STRUCTURE 11

12. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. INTERNATIONAL DIVISION  Company groups all of its international activities into one division  Limitations  Heads of foreign subsidiaries do not have as much control in the organization as the heads of domestic functions or divisions  Implied lack of coordination between domestic operations and foreign operations 12

13. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. FIGURE 13.3 - A WORLDWIDE AREA STRUCTURE 13

14. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. WORLDWIDE AREA STRUCTURE  World is divided into geographic areas with each area being a self-contained autonomous entity  With its own set of value creation activities  Facilitates local responsiveness  Limitation - Transferring distinctive competencies and skills between areas and realizing operating efficiencies become difficult 14

15. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. FIGURE 13.4 - A WORLDWIDE PRODUCT DIVISION STRUCTURE 15

16. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. WORLDWIDE PRODUCT DIVISIONAL STRUCTURE  Each division is a self-contained autonomous entity with its own value creation activities  Headquarters retain responsibility for the firm’s:  Overall strategic development  Financial control  Advantages  Helps overcome coordination problems that arise with international division and worldwide area structures 16

17. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. WORLDWIDE PRODUCT DIVISIONAL STRUCTURE  Helps realize location economies and attain scale economies at the global level  Facilitates transfer of competencies within a division’s worldwide operations  Facilitates simultaneous worldwide introduction of new products  Limitation  Considers country managers subservient to product- division managers 17

18. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. FIGURE 13.5 - A GLOBAL-MATRIX STRUCTURE 18

19. ©2015 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 STRUCTURE  Horizontal differentiation proceeds along the product division and geographic area dimensions  Limitations  Slows decision making, producing an inflexible organization unable to respond quickly  Dual-hierarchy structure can lead to power struggles  Ascertaining accountability becomes difficult 19

20. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. INTERNAL NEW VENTURING  Transferring and leveraging existing competencies to create value-chain activities necessary to compete effectively in a new industry  Intrapreneurs: Managers who pioneer and lead new-venture projects or divisions  Act as inside or internal entrepreneurs  New-venture division: Separate and independent division established to give its managers the autonomy to develop a new product 20

21. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. JOINT VENTURE  Two companies pool resources and capabilities and establish a new business unit to develop a:  New product  Business model to bring the new product to market successfully  Implementation issues  Allocating authority and responsibility  Loss of new technology to the company’s partner or to a competitor who acquires the partner  Building a new culture to unite managers used to working in different cultures 21

22. ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MERGERS AND ACQUISITIONS  Managers of the acquiring and acquired companies must:  Establish new lines of authority and responsibility aimed to make the best use of their joint competencies  Decide how to coordinate and streamline operations to reduce costs and leverage and share competencies  Realize that each company has its own unique norms, values, and culture 22