Chapter 8 - International Strategy

Takeaways

- Describe the key benefits that firms pursue international strategy - Define the three international corporate-level strategies: global, multi-domestic and transnational. - Describe match between international corporate-level strategies and organizational structure - Understand strategic competiveness outcomes to a firm pursuing international diversification

2. Multidomestic Strategy

- Products and services are tailored to local markets - Emphasizes localization - Strategy and operating decisions are decentralized to country offices in each country - Less knowledge sharing for the corporation as a whole - Do not allow the development of economies of scale and thus can be costly Products and services are tailored to local markets Strategy and operating decisions are decentralized Focus on competition in each market

1. Global Strategy

- Products are standardized across national markets - Emphasizes economies of scale - Often lacks responsiveness to local markets - Business-level strategic decisions are centralized in home office - Requires resource sharing and coordination across borders Standardized product across national markets Strategic decisions are centralized in the home office Emphasizes economies of scale Often lacks responsiveness to local markets

3. Transnational Strategy

- Seeks to achieve both global efficiency and local responsiveness - Difficult to achieve because of simultaneous requirements: 1. strong central control and coordination to achieve efficiency 2. decentralization to achieve local market responsiveness - Firms must pursue organizational learning to achieve competitive advantage Seeks to achieve both global efficiency and local responsiveness Difficult to achieve because of simultaneous requirements Firm must pursue organizational learning

Organizational structure for implementation of transnational strategy

- each product division is charges with driving down costs through economies of scale and other efficiencies (product divisional structure) - the geographic divisions are charged with local responsiveness and learning (geographic are structure) - it is appropriate structure to diffuse organizational learning to achieve competitive advantage

Key international strategy benefits:

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International Corporate Strategies:

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Selecting an International Corporate-level strategy

1. To what extent does the multinational corporation require global integration? - Economies of scale - Effective coordination of activities 2. To what extent does the multinational corporation need local responsiveness? - Local consumer tastes and customs - Local regulations - Local opportunities

3. Location Advantages

Aid in developing competitive advantage by providing access to: - Lower costs for labor - Raw materials - Key customers

Geographic Area Structure (a multi-domestic strategy)

Each country office operates as if it is a company itself. Each country office has business functions Country offices customize products and adjust manufacturing and marketing process

2. Economies of scale

Expanding size or scope of markets helps firms achieve economies of scale in manufacturing as well as marketing, R&D or distribution - can spread costs over a larger sales base

Comparison of Diversification Strategy

Geographic diversification: - Increases market size - Economies of scale - Location advantages - Learning Product diversification: - Economies of scope - market power (vertical integration)

International strategies and organizational structures

International strategies - organizational structures Multidomestic strategy - geographic structure Global strategy - product divisional structure Transnational strategy - matrix structure

Matrix structure

a transnational strategy

4. Learning

expanding foreign operations can accelerate learning-by-doing

1. Increased market size

firms can expand the size of their potential markets. International markets yield potential new opportunities

Product Divisional Structure (a global structure)

key business functions are located in its home office home office focuses on coordination and facilitates global economies of scale