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Strategizing and Structuring Internationally
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strategizing AND structuring around the world
MBA 718: GLOBAL BUSINESS IN PRACTICE
Multinational Strategies
• Pressures for cost reductions and local responsiveness
• Integration-responsiveness framework: Four strategic choices for MNEs
• Home replication strategy emphasizes the international replication of home country-based competencies
• Localization (multidomestic) strategy is an extension of the home replication strategy, focusing on a number of foreign countries/regions, each regarded as a stand-alone local market worthy of significant attention and adaptation
• Global standardization strategy is the opposite of the localization strategy
• Transnational strategy aims to capture “the best of both worlds” by endeavoring to be both cost efficient and locally responsive
MULTINATIONAL STRATEGIES AND STRUCTURES:THE INTEGRATION–RESPONSIVENESS FRAMEWORK
Figure 10.1
Four Strategic Choices for Multinational Enterprises
ADVANTAGES DISADVANTAGES
Home replication Leverages home country-based advantages Lack of local responsiveness
Relatively easy to implement May result in foreign customer alienation
Multidomestic Maximizes local responsiveness High costs due to duplication of efforts in multiple countries
Too much local autonomy
Lack of local responsiveness Leverages low-cost advantagesGlobal
Too much centralized control
Transnational Cost-efficient while being locally responsive Organizationally complex
Engages in global learning and diffusion of innovations
Difficult to implement
Table 10.1
Multinational Strategies and Structures
• Four organizational structures that are appropriate for the four strategic choices:
• International division
• Geographical area
• Global product division
• Global matrix
Multinational Strategies and Structures
• International Division• The firm has separate domestic and international
divisions• Typically set up when firms initially expand abroad,
often when engaging in a home replication strategy
• Problems:• Foreign subsidiary managers in the international division
are not given sufficient voice relative to the heads of domestic divisions
• The “silo” effect: International division activities are not coordinated with the rest of the firm, which focuses on domestic activities
• Firms often phase out this structure after their initial overseas expansion
International Division Structure at Starbucks
Figure 10.2
Multinational Strategies and Structures
• Geographic Area Structure• Organizes the MNE according to different geographic
areas (countries and regions)• Its ability to facilitate local responsiveness is both a
strength and a weakness• Is the most appropriate for a localization strategy
• Problems:• While being locally responsive can be a virtue, it may
also encourage the fragmentation of the MNE into highly autonomous, hard-to-control “fiefdoms”
Geographic Area Structure at Avon Products
AvonCentral & Eastern
Europe
AvonWestern Europe
Middle EastAfrica
AvonAsia Pacific
AvonLatin America
AvonNorth America
Source: Adapted from avoncompany.com. Headquartered in New York, Avon Products, Inc. is thecompany behind numerous “Avon ladies” around the world. Figure 10.3
Multinational Strategies and Structures
• Global Product Division Structure
• Supports a global strategy in treating each product division as a stand-alone entity with full worldwide—as opposed to domestic—responsibilities for its activities
• Facilitates attention to pressures for cost efficiencies in allowing for consolidation on a worldwide (or regional) basis and reduction of inefficient duplication in multiple countries
• Problems:
• It is the opposite of the geographic area structure: Little local responsiveness
Global Product Division Structure at European Aeronautic Defense and Space Company
(EADS)
Source: Adapted from www.eads.com. Headquartered in Munich, Germany, and Paris, France,EADS is the largest commercial aircraft maker and the largest defense contractor in Europe. Figure 10.4
Example: Nokia
Example: Procter & Gamble
Multinational Strategies and Structures
• Global Matrix• Is often used to alleviate the disadvantages associated
with both geographic area and global product division structures
• Is intended to support the goals of the transnational strategy—in practice, it is often difficult to deliver
• Problems• May add layers of management, slow down decision
speed, and increase costs while not showing significant performance improvement
A Hypothetical Global Matrix Structure
Figure 10.5