Lecture 6 - Strategy and Structure Flashcards
What are the two pressures MNEs encounter?
cost reduction: calls for global integration
local responsiveness: calls for local adaptation
- these two sets of pressures are dealt with in the integration-responsiveness framework
What are the two basic strategic needs for firms? as illustrated in the integration-responsiveness framework
- to integrate value chain activities globally
2. to create products and processes that are responsive to local market needs
What are the pressures for local responsiveness?
- unique resources and capabilities available to the firm
- diversity of local customer needs (different in different countries)
- differences in distribution channels
- local competition (could drive firms to change)
- cultural differences
- host government requirements and regulations
What are the pressures for global integration?
- economies of scale (reducing costs)
- capitalise on converging consumer trends and universal needs
- uniform service to global customers
- global sourcing of raw materials, components, energy, and labour
- availability of media that reaches customers in multiple markets
- global competitors
What are the four multinational strategies that a firm can use?
- home-replication strategy
- multi-domestic/localization strategy
- global standardization strategy
- transnational strategy
Draw the global integration vs local responsiveness graph
Look at notes
Define the home replication strategy and its main features
Duplicates home-based competencies in foreign countries
- makes sense when most customers are domestic
- lacks local responsiveness
- maintains central control
- IKEA failed in Japan in the 1970s (Japanese not ready for do-it-yourself)
- Walmart replicated itself in Brazil in 1995 (selling American footballs)
Define the multi-domestic/localization strategy and its main features
Focuses on a number of countries/regions, each one regarded as a stand-alone market
- effective when difference among markets are clear
- high costs due to duplication of efforts in multiple countries
- firms that specialize in such industries as processed foods, consumer products, fashion, retailing, and publishing usually cater to specific conditions in each country where they do business
- in such industries, the firm must adapt its offerings to suit the language, culture, laws, income level, and other specific characteristics of each country
- example MTV since 1995
Define the global standardization strategy and its main features
Development and distribution of standardized products worldwide
- not limited to major operations at home - may designate centres of excellence
- best when pressure for cost reduction is high and local responsiveness is low
- firms that specialize in such industries as aerospace, cars, computers, chemicals, and industrial equipment, typically cater to customers on a global scale
- example: Toyota markets similar cars worldwide
Define the transnational strategy and its main features
Endeavours to be both cost effective and locally responsive
- think global and act local
- a flexible approach: standardize where feasible and adapt to local demands where appropriate
- global learning and diffusion of innovations
- organisationally complex, difficult to implement
How does IKEA strive for a transnational strategy?
- some 90% of the product line is identical across more than to dozen countries. IKEA modifies some furniture offerings to suit tastes in individual countries
- an overall, standardized marketing plan is centrally developed at the firm’s headquarters in Sweden, but is implemented with local adjustments
- management decentralizes some decision-making to local stores, such as product displays and language to use in advertising
What is organisational structure?
The reporting relationships inside the firm - ‘the boxes and lines’ - that specify the linkages among people, functions, and processes that allow the firm to carry out its operations
- STRUCTURE SHOULD SUPPORT STRATEGY
- choice between centralisation and decentralisation
Define what international division structure is and its main features
Typically used when firms expand abroad, often engaging in home replication strategy (e.g. Starbucks)
- foreign subsidiary managers often given sufficient voice
- international division serves as silo whose activities are not coordinated with rest of the firm
Define what geographic area structure is and its main features
Organizes MNE according to geographic areas (e.g. Avon)
- most appropriate for localization strategy
- regional managers carry a great deal of weight
- strong local responsiveness but that also encourages fragmentation (less integration) of MNE
Define what global product division structure is and its main features
Supports global standardization strategy by assigning global responsibilities to each product division (e.g. EADS/Airbus)
- highly responsive to pressure for cost and efficiency
- reduces inefficient duplication in multiple countries
- lags in local responsiveness
