Lecture 5 - International strategies and organisations

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  • Created by: Michhell
  • Created on: 19-03-20 10:32

Strategies and structures

Within a firm, formal reporting structures help control and facilitate a strategy. Hence there is a reciprocal relationship between the two. Strategy drives structure, structure constraints/facilitates strategy. This relationship can help craft competitive advantage.

The Integration Responsiveness framework - MNEs develop strategies with different (strategic) focuses, which relate to different approaches to worldwide activities depending on their perception of these forces.

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What drives these strategies Pt. 1

Global

Globalisation - trade liberalisation and culture similarities = managers can integrate cross-border interactions to reduce costs: favourable manufacturing locations, economies of scale (sheer volume of one good sold to a larger market), economies of scope (the production of one good, helps reduce the cost of another product a firm may make)

Flexibility - manage risks or capture opportunities in volatile markets = visualise the risk or the opportunity and respond.

National

Localisation forces  - spiky world, locational advantages. Understand the foreign consumer, the government, culture = leading to responsiveness through adaptation of your product.

Worldwide

Increased worldwide innovation - product life cycle shortened, R&D costs increasing, competitors entering the domestic market. Need for increased vigilance towards competitors and trends worldwide which fuel innovations

  • This can help knowledge be formulated and diffused within the company.

Extension - capturing external diversity = gain local expertise and knowledge

Leverage internal variety - staff from domestic, worldwide and nationals can all help create a competitive advantage

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What drives these strategies Pt. 2

Worldwide

Increased worldwide innovation - product life cycle shortened, R&D costs increasing, competitors entering the domestic market. Need for increased vigilance towards competitors and trends worldwide which fuel innovations

  • This can help knowledge be formulated and diffused within the company.

Extension - capturing external diversity = gain local expertise and knowledge

Leverage internal variety - staff from domestic, worldwide and nationals can all help create a competitive advantage

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What are the objectives of these strategies?

Three possible objectives MNE's can reach for:

  • Building global efficiency: by increasing the value of outputs or lowering cost of inputs:

Costs of inputs lowered through global integration

Value of outputs (or revenue) increased through local responsiveness

  • Building multinational flexibility: by managing the diversity and volatility of the global environment
  • Building worldwide learning: by capturing external diversity and leveraging an internal variety
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Balancing Integration or Responsiveness

The Integration - Responsiveness Framework by Bartlett and Ghoshal shows the tradeoffs between either integration or responsiveness affects certain kinds of products:

Different approaches at the industry and firm levels Consumer electronics Telecom equipme Automobiles Cement Packaged Foods Differentiation benefits from national responsiveness Toyota Ford Fiat Firms have different 'administrative heritages' or 'organisational history'

The strategic and organisational models MNE's can

There are four possible strategic choices for MNE's to take from the IR framework:

High Global integration Low Global Strategy International Strategy (Home replication) Low Local responsiveness Transnational Strategy Multinational Strategy (Multidomestic) High

The strategic choices cont.

International Strategy (Home Replication): Strategy emphasising international replication of parent home country based competencies in technology, marketing, and other skills. Treats overseas units as offshoots of domestic strategy. Sales subsidiaries. e.g.: Starbucks

Multi domestic Strategy: Strategy focusing on a number of foreign countries, each regarded as a stand alone local market worthy of significant attention and adaptation. Maximising localisation, decentralised and self-sufficient offshoots. e.g.: Nestle

Global Strategy: best use of economies of scale and location economies. Utilise product standardisation. Centralised strategy and control. e.g.: Panasonic

Transnational Strategy: Aims to capture ‘the best of both worlds’ by striving to be both cost-efficient and locally responsive; AND worldwide learning and innovation. e.g.: Nestle or P&G.

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Advantages and Disadvanatges of these strategies

See OneNote.

Companies are increasingly becoming Transnational, as companies have to consider and respond to a wide range of challenges. It is both a flexible, yet complex solution to problems.

MNES must consider complex interdependencies within and between multiple host locations, not considered in simplistic IR framework (Meyer et al.)

Not one strategy is appropriate, it may change over time.

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