11
International
Strategy and
Organization
Chapter Objectives
• Explain the stages of identification and analysis that
precede strategy selection
• Identify the two international strategies and the
corporate-level strategies that companies use
• Identify the business-level strategies of companies and
the role of department-level strategies
• Discuss the important issues that influence the choice
of organizational structure
• Describe each type of international organizational
structure, and explain the importance of work teams
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Ryanair
• Employs a low-cost business strategy
• Charges far less than national airlines
• Uses low-cost airports near major cities
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Planning and Strategy
Planning
Strategy
Identifying and selecting
objectives and deciding how
to achieve those objectives
Set of planned actions that
managers take to help a
company meet its objectives
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Strategy-Formulation Process
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Identify Mission and Goals
Mission statements
must consider:
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Company activities
Business objectives
Stakeholders
Stockholders
Customers
Residents
Environment
and much more…
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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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Value Chain Analysis
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Business Environment
National differences are
inherent in analyzing a
firm’s unique abilities
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Cultural differences
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Political processes
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Legal matters
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Economic systems
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Labor issues
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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
Stage one is to identify company mission
and goals. This means defining the
business and its main objectives.
Stage two is to identify company core
competency and value-creating activities.
This means analyzing a firm’s unique
abilities, primary and support activities,
and the business environment.
Stage three is to formulate strategies.
This means selecting a multinational or
global strategy and then formulating
corporate-, business-, and departmentlevel 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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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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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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Combination Strategy
Mix of growth, retrenchment, and stability
strategies across business units
Invest in
promising units
Retrench for
less exposure
Stabilize
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
• Perhaps low customer loyalty
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Differentiation Strategy
Design products that buyers perceive
as unique throughout an industry
Differentiators
 Quality
 Brand image
 Product design
Effects
 Price premium
 Customer loyalty
 Portion of market only
 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:
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Manufacturing
Marketing
Logistics
Research & development
and others…
Source: Peng Neng/Newscom
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Discussion Question
What are the main
differences
between the three
types of businesslevel 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
decision making
Decentralized
decision making
+ Coordination is paramount
+ Financial control & cost savings
+ Improves local responsiveness
+ Increases accountability
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International Division Structure
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International Area Structure
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Global Product Structure
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Global Matrix Structure
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Work Teams
Self-managed
team
Cross-functional
team
Global
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(n) __________ 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(n) __________ structure.
a. Global matrix
b. Global product
c. International division
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