Global Business 2e C ha p t e

Global Business 2e C ha p t e

Global Business 2e C ha p t e r 13 Strategizing, Structuring, and Learning around the World 2011 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 After studying this chapter, you should be able to: 1. Describe the relationship between multinational strategy and

structure. 2. Explain how institutions and resources affect strategy, structure, and learning. 3. Outline the challenges associated with learning, innovation, and knowledge management. 4. Participate in two leading debates on multinational strategy, structure, and learning. 5. Draw implications for action. 2011 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 Pressures for Cost Reductions and Local Responsiveness Integration-responsiveness framework Allows managers to deal with the pressures for both global integration and local responsiveness Local responsiveness

Necessity to be responsive to different customer preferences around the world 2011 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 Home replication strategy Duplicates home country-based competencies in foreign countries Localization (multidomestic) strategy

Focuses on a number of foreign countries/regions, each of which is regarded as a stand-alone local (domestic) market worthy of significant attention and adaptation 2011 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 Global standardization strategy

Development and distribution of standardized products worldwide in order to reap the maximum benefits from low cost advantages Center of excellence Subsidiary explicitly recognized as a source of important capabilities, with the intention that these capabilities be leveraged by and/or disseminated to other subsidiaries Worldwide (global) mandate

Responsible for one MNE function throughout the world 2011 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 Transnational strategy Aims to capture the best of both worlds by endeavoring to be both cost efficient and locally responsive

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. A RECIPROCAL

RELATIONSHIP Strategy usually drives structure As much as strategy drives structure, structure also drives strategy Neither strategies nor structures are static It is often necessary to change strategy, structure, or both 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2011 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 Externally, MNEs are subject to the formal institutional frameworks erected by various home-country and host-country governments Host-country governments often attract, encourage, or coerce MNEs into

undertaking activities that they otherwise would not 2011 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 Dealing with host countries also involves numerous informal institutions Airbus devotes 40% of its procurement budget to US suppliers in more than 40 states but there is

no formal requirement to farm out supply contracts Its sourcing decisions are guided an informal norm of reciprocity: If one countrys suppliers are involved with Airbus, airlines based in that country are more likely to buy Airbus aircraft 2011 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

Formal organizational charts do not reveal are the informal rules of the game, such as organizational norms, values, and networks The nationality of the head of foreign subsidiaries is such an example: a home country national as the head of a subsidiary (such as an American for a subsidiary of a US-headquartered MNE in India) a host country national (such as an Indian for the same subsidiary)

a third-country national (such as an Australian for the same subsidiary above) The nationality of top executives at the highest level (such as chairman, CEO, and board members) seems to follow another informal rule: they are almost always home-country nationals. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. RESOURCE-BASED

CONSIDERATIONS When looking at structural changes, it is critical to consider whether a new structure (such as a matrix) adds concrete value. The value of innovation must also be considered as a vast majority of innovations simply fail to reach market, and most new products that do reach market end up being financial failures 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

RESOURCE-BASED CONSIDERATIONS A second question is rarity Certain strategies or structures may be in vogue at a given point in time but they are designed to be implemented widely and appeal to a broad range of firms, thus providing no firm-specific advantage for the adopting firm

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. RESOURCE-BASED CONSIDERATIONS Even when capabilities are valuable and rare, they have to pass a third hurdle, namely, imitability Formal structures are easier to observe and imitate than informal structures The informal, flexible matrix is less a structural classification than a broad organizational concept or

philosophy, manifested in organizational capability and management mentality 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. RESOURCE-BASED CONSIDERATIONS Organizational culture Collective programming of the mind that distinguishes the members of one

organization from another ? Can you think of an example of organizational culture in your personal life? 2011 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 Knowledge management Structures, processes, and systems that actively develop, leverage, and transfer knowledge.

Explicit knowledge Knowledge that is codifiable (that is, can be written down and transferred with little loss of richness). Tacit knowledge Knowledge that is noncodifiable, and its acquisition and transfer require hands-on practice. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2011 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 AND SOLUTIONS IN KNOWLEDGE MANAGEMENT Global virtual team Teams that do not meet face to face Absorptive capacity The ability to recognize the value of new information, assimilate it, and apply it Social capital

The informal benefits individuals and organizations derive from their social structures and networks Micro-macro link The micro, informal interpersonal relationships among managers of various units may greatly facilitate macro, inter-subsidiary cooperation 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

CORPORATE CONTROLS VS SUBSIDIARY INITIATIVES Subsidiary initiative When subsidiaries actively pursue their own, subsidiary level strategies and agendas 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. CUSTOMER-FOCUSED DIMENSIONS

VS INTEGRATION, RESPONSIVENESS AND LEARNING Global account structure Customer-focused dimension in which companies strive to supply customers (often other MNEs) in a coordinated and consistent way across various countries Solutions-based structure Customer-focused dimension in which companies strive to supply customers with what

fits their needs, regardless of what that involves 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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