International Business Strategies: Expanding into Global Markets
Chapter 7: International Strategy: Creating Value in Global Markets
Motivations for International Expansion
- Increase market size
- Achieve economies of scale
- Reduce R&D and operating costs
- Extend product life cycle
- Optimize value chain location
Potential Risks of International Expansion
- Political and economic instability
- Currency fluctuations
- Management challenges (language, income levels, customer preferences)
Outsourcing vs. Offshoring
Outsourcing: Utilizing external entities for value-creating activities.
Offshoring: Shifting an activity to a foreign location while maintaining ownership.
Balancing Cost Reduction and Local Adaptation
Strategies Favoring Global Products
Organizations may standardize products for all markets to reduce costs, assuming:
- Homogeneous global needs/interests
- Preference for lower prices with high quality
- Achievable economies of scale
Alternative Strategies
Transnational Strategy: Adapting products and prices to regional preferences (e.g., McDonald’s).
Multidomestic Strategy: Prioritizing local adaptation over cost efficiency (e.g., Procter & Gamble).
International Strategy: Balancing global standardization with local responsiveness (e.g., Nike).
Entry Modes of International Expansion
Chapter 9: Strategic Control
Traditional vs. Contemporary Approaches
Traditional Approach: Sequential process of goal setting, implementation, and feedback-based control.
Contemporary Approach:
- Informational Control: Ensuring the organization is “doing the right things” by focusing on the end result.
- Behavioral Control: Ensuring the organization is “doing things right” in strategy implementation.
Informational Control
Focuses on the internal and external environment to assess the fit between goals, strategies, and the current strategic context.
Behavioral Control
Focuses on implementation through:
- Culture: Shared values and beliefs shaping behavior.
- Rules/Boundaries: Guidelines for employee actions.
- Rewards: Motivating desired behaviors.
Building a Strong & Effective Culture
Organizational culture influences people, structures, and control systems, leading to behavioral norms.
Role of Corporate Governance
Corporate governance aligns managerial motives with shareholder interests and board intentions.
Key Players
- Shareholders: Invest capital, share profits, and have limited involvement.
- Management: Runs the company without personally providing funds.
- Board of Directors: Elected by shareholders to protect their interests.
Chapter 10: Creating Effective Organizational Designs
Traditional Forms of Organizational Structure
Structure refers to formalized patterns of interaction within a firm.
Types of Traditional Structures
- Functional Structure: Grouping departments by specialization (e.g., Marketing, R&D).
- Divisional Structure: Grouping functions by product or market.
- Matrix Structure: Dual authority with two bosses.
International Operations and Organizational Structure
Structures for International Operations
- International Division
- Geographic-area Division
- Worldwide Functional
- Worldwide Product Division
- Worldwide Matrix
Boundaryless Organizations
Making boundaries more permeable through:
- Barrier-Free: Cross-functional teams and collaboration.
- Modular: Outsourcing non-vital functions.
- Virtual: Network of independent companies collaborating on projects.