11 International

Strategy and
Organization

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 Planning and Strategy

Planning Strategy

Identifying and selecting Set of planned actions that

objectives and deciding how to managers take to help a company
achieve those objectives meet its objectives
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 OBJECTIVES STRATEGY
* DELL * Strenghten
* http://i.dell.com/sites/docconte * https://toughnickel.com/indust
nt/corporate/corp-comm/en/D ries/Dell-Competitive-Advantag
ocuments/revised-goals.pdf e

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 Strategy-Formulation Process

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 * A mission statement * A vision statement
explains why a describes where the
company exists and company aspires to
what it plans to be upon achieving its
accomplish. It often mission,
describes how a * where the company
company’s wants a community,
operations are likely or the world, to be
to affect as a result of the
stakeholders in all company's services.
nations where the
firm is active.
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 Vision statements
* Alzheimer's Association: A world without Alzheimer's
disease.
* Creative Commons: Realizing the full potential of the
internet -- universal access to research and education,
full participation in culture -- to drive a new era of
development, growth, and productivity.
* Microsoft (at its founding): A computer on every desk
and in every home.
* Australia Department of Health: Better health and
wellbeing for all Australians, now and for future
generations.
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 Identify Mission and Goals
Mission statements
must consider:
✔ Company activities
✔ Business objectives
✔ Stakeholders
✔ Stockholders
✔ Customers
✔ Residents
✔ Environment
and much more…
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● High-level company objectives are stated in general
terms, as in “to be the largest global company in each
industry in which we compete.”
● Business-unit objectives tend to be more specific, as in
“to mass produce a zero-pollution emissions
automobile by 2015.”
● And department-level objectives often carry numerical
performance targets, as in “to increase global market
share by 5 percent in each of the next three years.”
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 MISSION STATEMENT

* https://blog.hubspot.com/marketing/inspiring-
company-mission-statements

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 Identify Core Competency
Special ability of a company that competitors
find extremely difficult or impossible to equal

Coordination of multiple skills

Develop over lengthy period of time

Difficult to teach

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 EXAMPLES

* NIKE: innovation and design

* APPLE: Design, Hardware/Software Integration and
Customer Service
* DELL: Customization, customer service and easy to fix
* COCA COLA: flavor, life style and massification
* STARBUCKS: ?
* EXITO: ?
* D1:?
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 Value Chain Analysis

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 Business Environment
National differences are
inherent in analyzing a
firm’s unique abilities
⮚ Cultural differences
⮚ Political processes
⮚ Legal matters
⮚ Economic systems
⮚ Labor issues
⮚ Consumer forces
and much more…

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 Discussion Question

What are the three

stages of the
strategy-formulation
process, and what is
involved at each
stage?

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 Answer to Discussion Question

The first stage is to identify the company’s

mission and goals, which involves defining
the business and its main objectives. The
second stage involves identifying a
company’s core competency and value-
creating activities, which requires
analyzing a firm’s unique abilities, primary
and support activities, and the national and
international business environments. The
third stage is to formulate strategies, which
means selecting a multinational or global
strategy and then formulating corporate- ,
business-, and department-level strategies.

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 Multinational Strategy
Adapting products and
their marketing strategies
to local preferences in
each national market

+ Respond quickly to
+buyer preferences

– Difficult to exploit
economies of scale
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 Global Strategy
Offering the same
products using the same
marketing strategy in all
national markets

+ Cost savings from

standardization

– May overlook varying

buyer preferences
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 Levels of Company Strategy

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 Growth Strategy
Increase the scale (size of activities) or
scope (kinds of activities) of operations
Internally generated growth
Mergers and acquisitions
Joint ventures
Strategic alliances

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 What are managers trying to
achieve with this strategy?

⮚ Reduce Competition

⮚ Expand Product Lines

⮚ Increase control over quality, cost, and timing of inputs

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 Retrenchment Strategy
Reduce the scale or scope
of a corporation’s businesses

Reduce Scale Reduce Scope

⮚ Close factories ⮚ Sell unprofitable businesses

⮚ Lay off workers ⮚ Sell unrelated businesses

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 Why this happens?

⮚ Economic conditions worsen

⮚ Competition increases

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 Stability Strategy
Guard against change and avoid
growth or retrenchment

� No opportunities or threats

� Strengths fully exploited

� Weaknesses fully protected

� Stated objectives are met

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 ⮚This strategy is seldom employed
because it assumes that a
corporation has met all objectives,
is satisfied with all its
accomplishments, and envisions no
new opportunities or threats.

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 Combination Strategy
Mix of growth, retrenchment, and stability
strategies across business units

Retrench
Invest in for
promising less
units Stabilize exposure
other
units

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 Discussion Question

A company that adapts its

products and marketing to
local preferences in each
national market follows a
__________ strategy.
a. Global
b. Multinational
c. Preference

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 Answer to Discussion Question

A company that adapts its

products and marketing to
local preferences in each
national market follows a
__________ strategy.
a. Global
b. Multinational
c. Preference

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 Business-Level Strategies

❖ Low-cost leadership

❖ Differentiation

❖ Focus

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 Low-Cost Strategy
Exploit economies of scale to have the lowest
cost structure of any competitor in an industry

• Mantra is cutting costs

• Quality remains important

• Scale is barrier to new entrants

•CON: Perhaps low customer

loyalty
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 Differentiation Strategy
Designs products that buyers perceive as
unique throughout an industry
Differentiators Effects

▪ Quality ▪ Price premium

▪ Customer loyalty
▪ Brand image
▪ Portion of market only
▪ Product design ▪ Higher production costs
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 Focus Strategy
Focus on narrow market segment by being the
low-cost leader, differentiating, or both

• Many sub-segments today

• Need distinctive product

• Single geography, ethnicity, etc.

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 Department-Level Strategies
Departmental strategies
are key to a company
achieving its objectives:
✔ Manufacturing
✔ Marketing
✔ Logistics
✔ Research & development
and others…
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 Discussion Question

What are the main

differences
between the three
types of business-
level strategy?

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 Answer to Discussion Question

A low-cost leadership strategy

exploits economies of scale to have
the lowest cost structure of any
competitor in an industry. A
differentiation strategy designs
products that buyers perceive as
unique throughout an industry. A
focus strategy focuses on the needs
of a narrowly defined market
segment by being the low-cost
leader, by differentiating its
product, or by doing both.

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 Organizational Structure
Centralized Decentralized
decision making decision making

+ Coordination is paramount + Improves local responsiveness

+ Financial control & cost savings + Increases accountability
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 International Division Structure
…separates domestic and
international activities by
creating a separate
international division with
its own manager.

A general manager for

each nation in which a
company operates then
controls product
manufacturing and
marketing within that
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 ⮚ This structure concentrates international expertise in one
division where the manager becomes a specialist in activities
such as foreign exchange, exporting, and so forth.

⮚ Reduce costs and increase efficiency

⮚ Potential problems include poor coordination between the

international division and the rest of the company, and
destructive rivalries between country managers within the
international division.

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 International Area Structure
…organizes a
company’s global
operations into
countries or regions.
Each geographic
division operates as a
self-contained unit,
with decision making
decentralized to
country or regional
managers
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 ⮚ This structure works well when a business operates in
countries with vastly different cultural, political, and
economic characteristics. General managers, then,
become experts on the unique needs of local
customers.

⮚ A drawback is that units acting independently may

cause resources to overlap and impair cross-
fertilization of knowledge across units

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 Global Product Structure

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 ⮚ worldwide operations according to a company’s
product areas.

⮚ It is well-suited to a company that sells a diverse set

of products. But with the primary focus on the
product, domestic and international managers.

⮚ in each product division must coordinate their

activities so they do not conflict.

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 Global Matrix Structure
…splits the chain of
command between
product and area
divisions.

Each manager has two

bosses who share
decision making—the
president of the
product division and
the president of the
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 ⮚ Bringing specialists together can create….
✔ A team-type organization
✔ Increase local responsiveness
✔ Reduce costs
✔ Coordinate worldwide operations
✔ Increase coordination

⮚ Drawbacks can include slow decision making and

reaction time due to the need for coordination, and
fuzzy accountability due to shared responsibility

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 Work Teams

Self-managed Cross-functional Global

team team team

Employees from one Group of employees Top managers from

department take on from similar levels but headquarters and
responsibilities of different functional subsidiaries solve
former supervisors departments company problems

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 Discussion Question

The organizational
structure that divides
worldwide operations
according to a company’s
product areas is called a
__________ structure.
a. Global matrix
b. Global product
c. International division
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 Answer to Discussion Question

The organizational
structure that divides
worldwide operations
according to a company’s
product areas is called a
__________ structure.
a. Global matrix
b. Global product
c. International division
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