Lecture 6.1: International Organization Design

Question 1

Primary motivators for expanding internationally

Answer 1

1. Economies of scale
   = large-volume production
   = enables low cost per unit
   = industrial giants are forced to become international in order to have the lowest possible cost per unit of production
2. Economies of scope
   = Increase number of variety of products and services
   = build synergies with suppliers
   = market power through country-specific knowledge
3. Low-cost production factors
   = Lower cost labor and capital
   = sources of cheap energy
   = reduced government regulations

Question 2

Primary enablers for expanding internationally

Answer 2

1. Technology
   = Better process management coordinates global processes
   = Example: cloud-based data exchange
2. Regulatory framework
   = Lowering of trade barriers
   = Example: international trade agreements

Question 3

Emerging economies?

Answer 3

= China, Brazil, Russia, India
= are growing rapidly as
- Providers for both products and services to foreign countries
- Major markets for products and services of foreign companies

=> China: 2008 - 29; 2023 - 142 companies in Fortune Global 500

Question 4

Why are there changes in the competitive landscape?

Answer 4

= Through advancements in technology

• Workflow software: better process management to coordinate global processes
• Supply chaining: better horizontal coordination across the supply chain
• Wireless revolution: information exchange possible interdependent if the location

Question 5

Global expansion through international strategic alliances
- What are the alliances?

Answer 5

1. Licensing
   = Allowing another firm to market your brands
   = Limitation of risk
2. Joint Ventures
   = separate entity of two or more active firms as sponsors
   = Sharing development and production costs in penetrating markets
   = Share complementary technological strengths or knowledge of local markets
   = Example: Tata and Starbucks - Starbucks: A Tata Alliance
3. Consortia
   = Group of independent companies; E.g.: suppliers, customers
   = Sharing skills, resources, costs, and access to another’s market
   = Example: Star Alliance (Lufthansa, United, …)