International Business Strategy Quiz
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Questions and Answers

What are the three key strategic objectives for firms that aspire to become globally competitive?

  • Efficiency (correct)
  • Learning (correct)
  • Flexibility (correct)
  • Profit maximization

    • Visionary leadership is important for building a global firm.

    True

    What does the Integration-Responsiveness Framework describe?

    It describes how internationalizing firms simultaneously seek global integration and local responsiveness.

    Which of the following are types of organizational structures in international business? (Select all that apply)

    <p>Geographic area structure</p> Signup and view all the answers

    What is the role of global teams within an MNE?

    <p>Global teams are responsible for solving specific problems or sharing best practices across the organization.</p> Signup and view all the answers

    The firm's ability to learn from operating in international environments and exploit this learning is known as _____

    <p>Learning</p> Signup and view all the answers

    What are typical pressures for local responsiveness faced by firms? (Select all that apply)

    <p>Leverage natural endowments</p> Signup and view all the answers

    Multidomestic industries compete on a country-by-country basis.

    <p>True</p> Signup and view all the answers

    What distinguishes a home replication strategy?

    <p>It views international business as separate and secondary to domestic operations, with the focus on generating additional sales abroad.</p> Signup and view all the answers

    What is a disadvantage of the geographic product structure?

    <p>Lack of global orientation</p> Signup and view all the answers

    The product division structure results in economies of scale and knowledge sharing.

    <p>True</p> Signup and view all the answers

    What is one advantage of a functional structure?

    <p>Strong centralized control and coordination</p> Signup and view all the answers

    Which company is mentioned as an example of an organization with a global matrix structure?

    <p>Unilever</p> Signup and view all the answers

    What are the three basic categories of internationalization strategies?

    <p>Trade of products and services, equity-based international business activities, contractual relationships</p> Signup and view all the answers

    A wholly owned subsidiary represents maximum ___ in foreign ventures.

    <p>control</p> Signup and view all the answers

    What typical challenge arises with a global matrix structure?

    <p>Complex reporting relationships</p> Signup and view all the answers

    What are 'push' factors in the context of international expansion?

    <p>Unfavorable trends in the domestic market</p> Signup and view all the answers

    High-control strategies require minimal resource commitments by the focal firm.

    <p>False</p> Signup and view all the answers

    Exporting, countertrade, and global sourcing represent ___-control strategies.

    <p>low</p> Signup and view all the answers

    What is a common characteristic of firms with a decentralized structure?

    <p>Greater autonomy for subsidiaries</p> Signup and view all the answers

    What is the primary focus of a firm that follows a home replication strategy?

    <p>Replicating home-market success in foreign markets</p> Signup and view all the answers

    What best describes a multidomestic strategy?

    <p>Local responsiveness with autonomy for each market</p> Signup and view all the answers

    Which company is given as an example of a multidomestic strategy?

    <p>Nestlé</p> Signup and view all the answers

    A global strategy emphasizes significant autonomy for local subsidiaries.

    <p>False</p> Signup and view all the answers

    Which company is provided as an example of a global strategy?

    <p>Samsung Electronics</p> Signup and view all the answers

    What is a primary advantage of a global strategy?

    <p>Enhanced economies of scale</p> Signup and view all the answers

    What characterizes a transnational strategy?

    <p>Balancing global control with local responsiveness</p> Signup and view all the answers

    Which company is used as an example of a transnational strategy?

    <p>Lenovo</p> Signup and view all the answers

    Decentralization allows for substantial autonomy at foreign subsidiaries.

    <p>True</p> Signup and view all the answers

    Why might a firm create an export department?

    <p>To better manage international operations as export sales grow</p> Signup and view all the answers

    A firm using a __________ strategy focuses on achieving economies of scale by centralizing operations.

    <p>global</p> Signup and view all the answers

    What level of control does a wholly owned subsidiary provide for a firm in foreign ventures?

    <p>Maximum control</p> Signup and view all the answers

    Which of the following strategies are considered low-control strategies?

    <p>Exporting</p> Signup and view all the answers

    What is a significant trade-off associated with high-control strategies like FDI?

    <p>Higher risk</p> Signup and view all the answers

    When managers consider internationalization, which factors must they balance?

    <p>Risk and return</p> Signup and view all the answers

    Which scenario best describes a risk-averse manager's approach to international ventures?

    <p>Opting for conservative entry strategies in culturally similar markets</p> Signup and view all the answers

    What is a key aspect of highly committed firms in international market expansion?

    <p>They allocate necessary resources and empower processes.</p> Signup and view all the answers

    What does a strategic vision provide for a firm?

    <p>An ideal picture of the firm's future direction.</p> Signup and view all the answers

    What is one crucial aspect of investing in human assets for global firms?

    <p>Providing cross-cultural and language training.</p> Signup and view all the answers

    How can organizational culture impact employee behavior?

    <p>It shapes the way employees perceive and respond to situations.</p> Signup and view all the answers

    What aspect of organizational processes is essential for a firm to function effectively?

    <p>Collecting strategic information and ensuring quality control.</p> Signup and view all the answers

    Which of the following factors contributes to a firm gaining a competitive advantage?

    <p>Developing and improving managerial routines.</p> Signup and view all the answers

    What defines organizational culture within a firm?

    <p>The pattern of shared values and behaviors.</p> Signup and view all the answers

    What role does management have concerning organizational culture?

    <p>To cultivate a culture aligned with social responsibility.</p> Signup and view all the answers

    What is the primary function of strategic global teams within an MNE?

    <p>Identify or implement initiatives enhancing the firm's global positioning</p> Signup and view all the answers

    Which of the following best describes the role of culturally diverse teams?

    <p>To create creative ideas and make informed decisions about global operations</p> Signup and view all the answers

    What is a key benefit of global information systems for MNEs?

    <p>Ability to share knowledge despite geographic distances and cultures</p> Signup and view all the answers

    In the context of multidomestic industries, how is competition typically structured?

    <p>Competition on a country-by-country basis with tailored offerings</p> Signup and view all the answers

    What is one characteristic of successful global teams?

    <p>Flexibility and responsiveness to challenges</p> Signup and view all the answers

    What advantage does a firm gain by utilizing global teams?

    <p>Enhanced creative solutions through diverse perspectives</p> Signup and view all the answers

    Which factor is crucial for the success of global information systems?

    <p>Overcoming geographical and cultural limitations</p> Signup and view all the answers

    Which statement is most accurate concerning operational global teams?

    <p>They manage efficient business operations across the MNE network</p> Signup and view all the answers

    What challenge is often faced by MNEs due to cultural diversity in teams?

    <p>Potential miscommunication and conflicts in views</p> Signup and view all the answers

    Which is a reason why firms adopt global strategies?

    <p>To leverage efficiencies and reduce redundancy</p> Signup and view all the answers

    What is a primary advantage of high-quality products?

    <p>Increased brand recognition</p> Signup and view all the answers

    What is one challenge faced by management in a global strategy?

    <p>Maintaining ongoing communication across operations</p> Signup and view all the answers

    What is the focus of a transnational strategy?

    <p>Maximizing local responsiveness while ensuring efficiency</p> Signup and view all the answers

    Which of the following is NOT a characteristic of transnational firms?

    <p>Separation of global value chain activities</p> Signup and view all the answers

    What is encouraged by the integration of globalization and technology?

    <p>Diffusion of uniform technology</p> Signup and view all the answers

    Which statement about a firm's strategic implementation is true?

    <p>Global moves should be coordinated rather than country-specific.</p> Signup and view all the answers

    What describes a flexible approach in a transnational strategy?

    <p>Standardize where feasible; adapt where appropriate.</p> Signup and view all the answers

    What is one potential drawback of a transnational strategy?

    <p>Loss of coordination across global operations</p> Signup and view all the answers

    Which company is cited as an example of a transnational strategy?

    <p>Lenovo</p> Signup and view all the answers

    What is a strategy for optimizing local responsiveness in international operations?

    <p>Maximizing competitive advantages at local levels</p> Signup and view all the answers

    What is a primary characteristic of the multidomestic strategy employed by companies like Nestlé?

    <p>High autonomy for local managers to address specific market needs.</p> Signup and view all the answers

    What is one major disadvantage of the multidomestic strategy?

    <p>Development of varying organizational cultures in subsidiaries.</p> Signup and view all the answers

    How does Nestlé adapt its product distribution in China?

    <p>Through direct delivery by local vendors on bicycles.</p> Signup and view all the answers

    Which of the following best describes a challenge faced by firms employing a multidomestic strategy?

    <p>Reduced opportunity for knowledge sharing between subsidiaries.</p> Signup and view all the answers

    Why might companies view Nestlé as a local firm in different markets?

    <p>It varies its marketing and product offerings based on local preferences.</p> Signup and view all the answers

    What is an identified advantage of a multidomestic strategy?

    <p>Better alignment of products with local market needs.</p> Signup and view all the answers

    What term describes the inefficiencies that can arise from a company operating with a multidomestic strategy?

    <p>Diseconomies of scale.</p> Signup and view all the answers

    In which market did Nestlé adapt its Nescafé brand to have an intense, full-bodied flavor?

    <p>Spain</p> Signup and view all the answers

    Which of the following describes why a firm with limited international experience might choose a multidomestic strategy?

    <p>It simplifies operations by delegating tasks to local managers.</p> Signup and view all the answers

    What aspect of Nestlé's strategy makes it capable of adapting its marketing approaches, like advertising in Russia, to local contexts?

    <p>Autonomy of local managers to devise strategies.</p> Signup and view all the answers

    What is the primary goal of global integration in the context of international business?

    <p>To maximize worldwide value chain efficiencies</p> Signup and view all the answers

    Which justification for local responsiveness emphasizes the need for unique products?

    <p>Countries, cultures, and markets demand unique products/services</p> Signup and view all the answers

    Which industry is typically associated with high levels of global integration?

    <p>Automobiles and aerospace</p> Signup and view all the answers

    What is a key characteristic of the Integration-Responsiveness Framework?

    <p>It balances global integration with local responsiveness</p> Signup and view all the answers

    What is one of the main goals of local responsiveness?

    <p>To adjust practices for distinctive needs in each country</p> Signup and view all the answers

    Which of the following is a result of maximizing global integration?

    <p>Minimized costly market tailoring</p> Signup and view all the answers

    What drives the justification for global integration?

    <p>Converging buyer demand and pan-regional media</p> Signup and view all the answers

    What challenge does a firm face when balancing integration and responsiveness?

    <p>Maintaining global brand identity while customizing products</p> Signup and view all the answers

    What is the primary focus of Samsung's global strategy?

    <p>Centralizing research and development at headquarters</p> Signup and view all the answers

    Which of the following advantages does Samsung experience from its global strategy?

    <p>Enhanced economies of scale</p> Signup and view all the answers

    How does Samsung approach product standardization in its smartphones?

    <p>By varying internal software but keeping hardware uniform</p> Signup and view all the answers

    What contributes to Samsung's ability to keep production costs low?

    <p>Conducting much of its manufacturing in emerging markets</p> Signup and view all the answers

    What is one way Samsung shares its expertise across its global operations?

    <p>Utilizing a company intranet for collaboration</p> Signup and view all the answers

    What role do Samsung's engineers play in the company's global strategy?

    <p>Seek cost-effective methods for leading-edge products</p> Signup and view all the answers

    Why is central coordination emphasized in Samsung's operations?

    <p>To achieve maximum learning and efficiency across the firm</p> Signup and view all the answers

    What type of market does Samsung view when developing its global strategy?

    <p>A single, large global marketplace</p> Signup and view all the answers

    How does decision making typically work for developing new products within global firms?

    <p>It tends to be centralized to headquarters.</p> Signup and view all the answers

    In which situation is decision making commonly left to local managers rather than being centralized?

    <p>Day-to-day human resource issues.</p> Signup and view all the answers

    What is a key consideration when balancing centralization and local autonomy in decision making?

    <p>Shared decision making depends on negotiations between headquarters and subsidiary managers.</p> Signup and view all the answers

    What phrase better describes the complexities of current multinational enterprise reality?

    <p>Think globally and locally and act appropriately.</p> Signup and view all the answers

    What is a consequence of highly centralized decision making in multinational enterprises?

    <p>Neglect of subsidiary managers' knowledge of local conditions.</p> Signup and view all the answers

    What dilemma does a highly decentralized, bottom-up decision making structure face?

    <p>Failure to integrate strategies across regions.</p> Signup and view all the answers

    What is often done about decisions that affect two or more countries in multinational enterprises?

    <p>They are typically centralized to headquarters managers.</p> Signup and view all the answers

    What must multinational enterprises balance in their structural strategies?

    <p>Global brand consistency against local preferences.</p> Signup and view all the answers

    What is the primary purpose of an export department in a manufacturing firm?

    <p>To facilitate an increase in export sales directly</p> Signup and view all the answers

    Which of the following describes the relationship between structure and strategy in international business?

    <p>Structure is designed to support the strategy being implemented</p> Signup and view all the answers

    What is a characteristic of a company with an international division structure?

    <p>Significant resource allocation towards international activities</p> Signup and view all the answers

    How does headquarters management promote corporate values within local subsidiaries?

    <p>By visiting subsidiaries for direct engagement</p> Signup and view all the answers

    What type of organizational strategy is closely related to home replication strategy?

    <p>Export department formation</p> Signup and view all the answers

    What advantage does centralization offer in managing international operations?

    <p>Streamlined management and coordination</p> Signup and view all the answers

    Which process is essential for fostering interaction between country managers?

    <p>Facilitating regional and global meetings</p> Signup and view all the answers

    What consequence might a firm face if it does not provide incentives/penalties for compliance?

    <p>Lack of adherence to headquarters' objectives</p> Signup and view all the answers

    What is a primary disadvantage of a geographic product structure in international operations?

    <p>It often lacks coordination with corporate headquarters.</p> Signup and view all the answers

    Which of the following best describes the global strategy of a firm?

    <p>Product divisions operate as independent profit centers with autonomy.</p> Signup and view all the answers

    What advantage does the functional structure provide for a firm's international operations?

    <p>Reduces coordination challenges through centralized control.</p> Signup and view all the answers

    Which of the following is NOT a characteristic of product divisions under a global strategy?

    <p>Focus on local market demands over product innovation.</p> Signup and view all the answers

    What is a major disadvantage of adopting a product division structure?

    <p>Potential duplication of corporate support functions.</p> Signup and view all the answers

    In which scenario would a functional structure be particularly beneficial?

    <p>When the firm needs to focus on specialized functions like production.</p> Signup and view all the answers

    What is a common issue faced by geographic area managers in a centralized structure?

    <p>Lack of orientation towards global product management.</p> Signup and view all the answers

    Which company is an example of using a global strategy?

    <p>A technology firm organizing operations by major product lines.</p> Signup and view all the answers

    Study Notes

    International Business Strategy

    • Firms need to choose an international strategy that matches their goals, resources, and the competitive landscape.

    Multidomestic Strategy

    • Firms adapt products and marketing to local needs and preferences.
    • Example: Northern Europe (mild and aromatic products), Nigeria (local warehouses and shipping via pickup trucks), China (simple distribution links among villages), Russia (advertising emphasizing history and literature), Africa (local singers for entertainment and product demonstrations).
    • Advantages:
      • Products better adapted to local markets.
      • Minimal HQ staff pressure due to local management.
      • Easy option for firms with limited international experience.
    • Disadvantages:
      • Divergent subsidiary strategies and processes.
      • Limited knowledge sharing among subsidiaries, reducing economies of scale and potential for knowledge-based competitive advantage.
      • Inefficiencies, redundant operations, and higher operating costs.

    Global Strategy

    • Headquarters seeks substantial control over operations for maximum efficiency, learning, and worldwide integration.
    • Universal products and services, centralized coordination, and control of international operations are emphasized.
    • Example: Samsung Electronics
      • Leading manufacturer of consumer electronics.
      • Global activities managed from HQ.
      • Integrated value chains for sharing expertise in electronics, technology, production, and distribution.
      • Cost-effective production methods based on common parts and components.
      • Global R&D teams for semiconductor, flat-screen TV, smartphone development using standardized platforms.
      • Internal software varies to accommodate national preferences.
      • Parts and components sourced from a limited number of top global suppliers.
      • Manufacturing in China, Brazil, and other emerging markets.
      • Standardized marketing for global brand recognition.
    • Advantages:
      • Responsiveness to worldwide opportunities.
      • Economies of scale and lower operational costs.
      • Cross-national learning and knowledge sharing.
      • Improved product and process quality due to simplified manufacturing and processes.
      • Global brand recognition, consumer preference, and efficient international marketing.
    • Disadvantages:
      • Challenging to coordinate activities across dispersed operations.
      • Requires strong communication between HQ and subsidiaries.
      • Loss of responsiveness and flexibility in local markets.

    Transnational Strategy

    • A coordinated approach combining the responsiveness of multidomestic with the control and efficiency of global strategy.
    • Flexible approach: Standardize where feasible, adapt where necessary.
    • Key elements:
      • Exploit scale economies through global sourcing and manufacturing.
      • Organize production, marketing, and other value-chain activities globally.
      • Optimize local responsiveness and flexibility.
      • Facilitate global learning and knowledge transfer.
      • Coordinate global competitive moves.
    • Example: Lenovo
      • Chinese producer of PCs and laptops, acquired IBM's PC arm, gaining a global sales force and strong brands.
      • Headquarters rotate between China and USA.
      • Planning and design in USA, manufacturing in China (for Asia), Mexico (for Americas), and Poland (for Europe).
      • Basic computers are the same, but keyboards and internal software are adapted to each market.
      • Marketing operations are centralized in Bangalore, India, with global campaigns in over 60 countries.
    • Challenges:
      • Balancing central control and local responsiveness.
      • Most MNEs find implementation difficult.
      • Local decision-making is essential for adapting to unique country characteristics.

    Organizational Structure in International Business

    • Structure should follow strategy to enable its implementation.
    • Organizational structure defines reporting relationships, linking people, functions, and processes to enact the company's vision and strategies.
    • Centralization vs. Decentralization:
      • Centralized: More control and authority at headquarters, emphasizing global integration.
      • Decentralized: Greater autonomy and decision-making power for subsidiaries, prioritizing local responsiveness.
    • Example:
      • Centralized: Product development or factory construction overseas.
      • Centralized-Decentralized: Decisions affecting two or more countries.
      • Joint: Decisions on local products sold in one country.
      • Decentralized: Day-to-day HR issues in individual subsidiaries.

    Organizational Structures for International Operations

    • Firms evolve through various organizational structures as their international involvement grows.

    • Export Department:*

    • Initial foreign market entry strategy.

    • Products are usually channeled through intermediaries, such as foreign distributors.

    • A separate department is formed when export sales become significant.

    • Closely associated with home replication strategy.

    • International Division Structure:*

    • A separate unit dedicated to managing international operations.

    • Signals increased commitment to international business.

    • Manages relationships with foreign suppliers, distributors, and value chain partners.

    • Progresses to more advanced internationalization options like licensing and foreign direct investment.

    • Advantages: Centralizes management and coordination of international operations.

    • Disadvantages: Potential for domestic vs. international power struggles over resources. Limited knowledge sharing between domestic and international units.

    • More Advanced Organizational Structures:*

    • Geographic Area Structure: Decentralized, organized by geographic regions.

      • Each area has local managers responsible for operations.
      • Products are relatively standardized across regions.
      • Example: Nestlé with divisions for South America, North America, Asia, etc.
      • Advantages: Local responsiveness and regional balancing of global integration and adaptation.
      • Disadvantages: Lack of communication and coordination with other areas and HQ. Limited global orientation for product development.

    • Product Structure: Centralized, organized by product line.

      • Each product division manages worldwide operations for specific products.
      • Operates as a stand-alone profit center with autonomy.
      • Examples: Motorola (Mobile phones and Network solutions), Apple (iPad, iPod, iPhone, and PCs).
      • Advantages: Focus, global efficiencies, and sharing of technology and product knowledge.
      • Disadvantages: Duplication of support functions and potential for managers focusing on subsidiaries with quick returns.

    • Functional Structure: Centralized, organized by functional activities, such as production and marketing.

      • Examples: Oil companies (production and marketing of petroleum products), Cruise ship lines (shipbuilding and marketing).
      • Advantages: Strong centralized control, coordination, and focused global strategy.
      • Disadvantages: Lack of expertise in coordinating functions across diverse locations.
      • Unwieldy coordination with multiple product lines.

    • Global Matrix Structure: Combines geographic area, product, and functional structures.

      • Leverages global efficiencies and local responsiveness.
      • Example: Lenovo with a global sales force but manufacturing in different regions.
      • Advantages: Strong emphasis on coordination and control, response to country-specific needs, and inter-organizational learning.
      • Challenges: Balancing multiple dimensions and potential for conflict between managers with shared responsibility.

    Dual Reporting System

    • Employees report to two managers, one within the local subsidiary and one within the corporate product division.
    • This structure emphasizes flexibility and responsiveness in foreign operations.
    • Aims to optimize operational efficiency and competitive effectiveness by enabling knowledge and decision-making sharing across the organization.

    Unilever's Global Operations

    • A $55 billion European company producing food, beverages, household, and personal care products.
    • Owns global brands like Lipton Tea, Hellman's, Slimfast, and Dove.
    • Faced challenges balancing global integration with local adaptation, including differences in retail distribution strategies, labeling requirements, and consumer incentives.
    • Initially adopted a multidomestic structure but shifted towards a global matrix structure.
    • Faced issues with its decentralized structure, including duplication of efforts and inefficiencies.
    • Implemented a reorganization plan centralizing authority, reducing local subsidiary autonomy, and fostering a global employee culture.
    • Divested hundreds of businesses, cut jobs, closed factories, and discontinued brands.
    • Emphasis on developing new products using global teams focusing on commonalities across major markets.
    • Local managers are restricted from altering packaging, formulation, or advertising of global brands.
    • Transitioning towards a more balanced matrix approach for its global operations.

    Philips' Global Operations

    • A Dutch producer of electronics operating in over 100 countries worldwide.
    • Structured its operations with product groups integrated across major markets, and its organizational functions integrated across all areas and product groups.
    • Reorganized around three core units: consumer electronics, healthcare, and lighting products.
    • The matrix structure assigns various roles to executives, including overseeing regions, core product units, and the functions associated with the product units.

    Disadvantages of the Matrix Structure:

    • Complex chain of command, potentially leading to mixed signals and contradictory instructions from different managers.
    • Potential for managerial time waste and conflicts due to the intricate nature of the structure.
    • Limitations may arise as the international operations become more complex over time.
    • Many companies experimenting with the global matrix structure eventually revert to simpler organizational structures.

    Foreign Market Entry Strategies

    • A critical decision in international business, determining the way a firm enters a foreign market.
    • Entry strategy selection is influenced by the nature of the business and the firm itself.
    • Three main internationalization strategy categories:
      • Trade of products and services (importing, exporting, countertrade)
      • Equity or ownership-based international business activities
      • Contractual relationships
    • Each strategy has advantages and disadvantages, requiring specific managerial and financial resources.

    Variables Influencing Entry Strategy Selection

    • Goals and objectives (profitability, market share, competitive positioning)
    • Degree of control over decisions, operations, and assets involved in the venture.
    • Resource availability (financial, organizational, and technological)
    • Risk tolerance in relation to company goals.
    • Product/service characteristics.
    • Legal, cultural, and economic conditions (e.g., infrastructure).
    • Competition from existing and potential rivals.
    • Partner availability and capabilities.
    • Insourcing vs. outsourcing value-adding activities.
    • Market's long-term strategic importance.

    Control and Entry Strategies

    • Control refers to the ability to influence decisions, operations, and strategic resources in a foreign venture.
    • Low-control strategies (exporting, countertrade, global sourcing): Minimal control, delegating responsibility to foreign partners.
    • Moderate-control strategies (licensing, franchising, project-based ventures): Moderate control, involving contractual arrangements.
    • High-control strategies (equity joint ventures, FDI): Maximum control, establishing a physical presence and owning key assets.

    Trade-offs in Entry Strategy Selection

    • Costly: High-control strategies require substantial resource commitments, with FDI being particularly expensive.
    • Flexibility: Establishing a permanent base can limit operational reconfiguration based on changing market and company conditions.
    • Risk: Long-term involvement carries significant risk due to uncertainties in political and customer environments (political, cultural, currency risks).

    Additional Variables in Entry Strategy Selection

    • Fragility of the product or service.
    • Perishability of the product or service.
    • Ratio of product value to weight.

    Examples of Entry Strategies

    • Details about specific entry strategies are omitted from this summary.

    The Nature of Internationalization

    • Managers must consider balanced risk and return when internationalizing.
    • Initial international expansion may be gradual, incremental, or unplanned (emergent).
    • Push and pull factors can trigger internationalization:
      • Push factors: Unfavorable domestic conditions (e.g., declining demand, domestic competition, product maturity).
      • Pull factors: Favorable foreign conditions (e.g., growth potential, government incentives, competitive insights).
    • Internationalization is a continuous learning experience, offering opportunities for acquiring new knowledge and leverage for other markets.

    Committed firms

    • Committed firms develop the resources they need to achieve their international goals.
    • Committed firms engage in strategic international expansion.
    • Committed firms allocate necessary resources and empower processes to ensure success.

    Strategic vision

    • Articulating a strategic vision: what the firm wants to be and how it will get there
    • This vision drives plans, actions, and employees.

    Investing in human assets

    • Cultivating human capital is critical in global firms.
    • Senior leaders adopt practices like hiring foreign nationals, promoting multi-country careers, and providing cross-cultural training.

    Organizational culture

    • Shared values, behavioral norms, systems, policies, and procedures employees learn.
    • Cultures are often influenced by founders or unique history.
    • Management should promote a culture of social responsibility.

    Organizational processes

    • The routines, behaviors, and mechanisms that allow the firm to function as intended.
    • Processes include mechanisms for collecting strategic information, ensuring quality control, and maintaining efficient payment systems.
    • Example: General Electric's competitive advantage through developing and improving processes, such as digitalization, intranets, and the internet.

    Globalizing mechanisms

    • Interconnectedness within MNE networks.
    • Allow for knowledge sharing
    • Include global teams and global information systems.

    Global team

    • Internationally distributed group of employees with problem-solving or best practice mandates.
    • Drawn from geographically diverse units.
    • Interact via in-person meetings, intranets, and video conferencing.
    • Integrate employees with experience, knowledge, and skills to solve common challenges.

    Strategic Global Teams

    • Identify and implement initiatives that enhance the firm's position in its global industry.

    Operational Global Teams

    • Focus on efficient and effective operations across the whole network.

    Successful global teams

    • Are flexible, responsive, and innovative.

    Culturally diverse teams

    • Have three valuable roles:
      • Create a global view within the firm while staying connected to local realities.
      • Generate creative ideas and make informed decisions about global operations.
      • Ensure team decisions are implemented throughout the firm's global operations.

    Strategic Foundations

    • Emphasizes universality and global efficiencies.

    Global information systems

    • Intranets, the internet, and EDI overcome geographical distances and cultural differences to share knowledge.
    • Example: General Motors leveraged global information systems to develop the Equinox.

    Distinction between multidomestic and global industries

    • Two types of strategies:
      • Multidomestic Industries
      • Global Industries

    Multidomestic Industries

    • Competition is on a country-by-country basis.
    • Products tailored to local markets.
    • Example: Nestle
    • Highly autonomous nationals meet local needs and conditions.
    • Perceived as a local firm in each market.
    • Taste, distribution, marketing, and prices vary by country.

    Multidomestic Advantages

    • Locally produced products can be better adapted to the local market.
    • Minimal pressure on headquarters staff because local operations are managed individually.
    • Multidomestic strategy is easier for firms with limited international experience as tasks are delegated.

    Multidomestic Disadvantages

    • Each subsidiary tends to develop a local strategic plan, culture, and processes that may differ from headquarters.
    • Limited incentive to share knowledge - reduced economies of scale.
    • Limited information sharing reduces the possibility of developing a knowledge-based competitive advantage.
    • Inefficient manufacturing, redundant operations, proliferation of over-adapted products, and higher operating costs.

    Global Industries

    • Competition occurs on a global scale.
    • Products are standardized and sold globally.
    • Example: Toyota
    • The Toyota Corolla is produced in many locations globally; it is a standardized product.
    • Toyota creates global efficiencies by developing a standardized product with a consistent message.

    Global Advantages

    • Economies of scale through standardized products.
    • Global brand recognition.
    • Efficient international marketing programs.

    Global Advantages (cont.)

    • Global strategy is easier to implement due to:
      • Converging buyer characteristics worldwide.
      • Growing acceptance of global brands.
      • Uniform technology diffusion.
      • International collaborative ventures.
      • Integration effects of globalization and communication technologies.

    Global Disadvantages

    • Challenging to coordinate dispersed international operations.
    • Maintaining ongoing communications between headquarters and subsidiaries.
    • May result in a loss of responsiveness and flexibility in local markets.

    Transnational strategy

    • Combines the benefits of multidomestic and global strategies.
    • Responsive to local needs and retains centralized control for efficiency and learning.
    • Maximizes advantages, minimizes disadvantages.

    Transnational approach

    • Standardize where feasible; Adapt where appropriate.

    Transnational implementation

    • Exploit scale economies by sourcing globally and concentrating manufacturing in strategic locations.
    • Organize production, marketing, and other value-chain activities globally.
    • Optimize local responsiveness and flexibility.
    • Facilitate knowledge transfer.
    • Coordinate global competitive tactics.
    • Example: Lenovo

    Control

    • The ability to influence decisions, operations, and strategic resources in a foreign venture.
    • Essential to implement strategies, coordinate actions, and resolve disputes.

    Low-control strategies

    • Exporting, countertrade, and global sourcing.
    • Least control over foreign operations.
    • Delegates responsibility to foreign partners, such as distributors or suppliers.

    Moderate-control strategies

    • Contractual relationships like licensing, franchising, and project-based ventures.

    High-control strategies

    • Equity joint ventures and FDI.
    • Focal firm attains maximum control through a physical presence and ownership of assets.

    Trade-offs: cost, flexibility, and risk

    • High-control strategies require substantial resource commitments; FDI is especially costly.
    • Permanent bases limit flexibility in reconfiguring operations.
    • Longer-term involvement leads to greater risk due to political and customer uncertainties.

    Additional variables

    • Fragility
    • Perishability.
    • Ratio of value to weight.

    The nature of internationalization

    • Managers must:
      • Balance risk and return.
      • Carefully select their international expansion strategy.
      • Understand the implications of internationalization for the organization.

    Internationalization patterns and characteristics

    • Risk and return must be balanced.
      • Risk-takers prefer challenging markets and non-traditional strategies.
      • Risk-averse managers prefer safe markets with similar cultures.

    Internationalization Patterns and characteristics (cont.)

      1. Gradual expansion: the process of gradually expanding into new markets, starting with relatively low-risk strategies and moving to higher-risk strategies over time.
      1. Incremental commitment: investing in small, manageable steps to gain experience and reduce risk while minimizing exposure to losses.
      1. Managing the psychological distance: the perceived differences in language, culture, and business practices between countries.
      1. Leveraging location advantages: the competitive advantages that result from being in a particular location, such as access to raw materials, skilled labour, and transportation infrastructure.
      1. Utilizing different entry modes: choosing the entry mode that best suits the company's strategy and resources.

    Global Industries

    • In global industries, competition occurs on a regional or worldwide scale.
    • Examples include aerospace, automobiles, metals, computers, chemicals, industrial equipment, earth-moving machinery, and photography.

    Integration-Responsiveness Framework

    • Balances global integration and local responsiveness.
    • Two basic strategic needs companies have:
      • Integrate value chain activities globally, capitalizing upon economies of scale.
      • Create products and processes responsive to local market needs.

    Global Integration

    • Coordinated value chain activities across multiple countries to achieve worldwide efficiency, synergy, and cross-fertilization.
    • Seeks to capitalize on similarities between countries.
    • Goals:
      • Maximize worldwide value chain efficiencies
      • Reduce operational redundancies
      • Minimize costly market tailoring of products and services
    • Typically found in global industries.
    • Examples:
      • DuPont sells essentially the same chemicals worldwide.
      • Subaru markets very similar cars in most countries.
      • Caterpillar and Komatsu compete head-on in major world markets.
    • Justifications:
      • Converging buyer demand
      • Spread of global brands
      • Diffusion of uniform technology
      • Availability of pan-regional media
      • Need to monitor competitors globally.

    Local Responsiveness

    • Meeting specific buyer needs in individual countries, responding to specific conditions in local markets, managing diverse opportunities and risks on a country-by-country basis.
    • Goals:
      • Adjust firm's practices to suit distinctive needs and conditions in each country
      • Adapt to local customer requirements, language, culture, regulation, competitive landscape, and distribution.
    • Justification:
      • Countries, cultures, and markets demand unique products and services.
      • Demand differences require customized products and services.

    Global Strategy

    • Headquarters maintains substantial control over country operations to minimize redundancy and achieve maximum efficiency, learning, and integration.
    • Emphasizes universal products and services, centralized coordination, and control of international operations.
    • R&D and manufacturing are centralized at headquarters.
    • The world is viewed as one large marketplace.
    • Example: Samsung Electronics
      • Leading manufacturer of consumer electronics.
      • Manages a wide collection of global activities from company headquarters.
      • Integrated value chains continuously share advanced expertise in consumer electronics, technology, production, and distribution among business units worldwide.
      • Engineers seek cost-effective ways to produce leading-edge products based on common parts and components.
      • R&D personnel from Asia, Europe, and the Americas work in global teams for standardized platforms with little cross-national variation.
      • Internal electronics in smartphones are identical globally, but internal software varies for national preferences.
      • Intranet allows access to ideas and specifications for integrating inputs into Samsung products.
      • Parts and components are sourced from top worldwide suppliers.
      • Manufacturing occurs in China, Brazil, and other emerging markets for low cost.
      • Sells smartphones in over 120 countries.
      • Standardized marketing activities focus on making Samsung a global brand.
      • Optimizes value chains for superior performance worldwide.
    • Advantages:
      • Ability to respond to worldwide opportunities.
      • Economies of scale, reducing operational costs.
      • Cross-national learning and knowledge sharing among subsidiaries.
    • Centralization:
      • Headquarters takes primary responsibility for decisions regarding high financial outlay or high-risk ventures.
      • Example: decisions about developing new products or building factories abroad.
    • Centralized-Decentralized:
      • Decisions affecting two or more countries are best left to headquarters managers with regional or global perspective.
    • Joint:
      • Decisions about local products for only one country are a joint responsibility of corporate and country-level managers, with country-level managers taking the lead.
    • Decentralized:
      • Decisions on day-to-day human resource issues in individual subsidiaries are generally left to local managers.

    Balancing Centralization and Local Autonomy

    • Effective balancing of benefits of centralization and local autonomy is crucial for success.
    • "Think globally, act locally" oversimplifies global competition complexities.
    • "Think globally and locally and act appropriately" more accurately reflects current MNE reality.
    • Coca-Cola Example:
      • HQ provides global brand support and marketing guidance to bottlers in individual countries.
      • Local bottlers are responsible for customer research, sales promotion, retailer support, and local government compliance.

    Myopia

    • Highly centralized, top-down decision making ignores subsidiaries' knowledge of host countries.
    • Highly decentralized, bottom-up decision making ignores headquarters' big-picture knowledge and fails to integrate strategies across countries and regions.
    • Shared decision making necessitates negotiations between headquarters and subsidiary managers with reciprocal give-and-take.
    • All decisions are subject to headquarters approval.

    Headquarters Management Responsibility:

    • Encourage local managers to align with corporate objectives.
    • Visit subsidiaries periodically to instil corporate values and priorities.
    • Rotate employees within the corporate network for global perspective development.
    • Foster interaction and experience sharing among country managers through regional and global meetings.
    • Provide incentives and penalties for adherence to headquarters' goals.

    Organizational Structures for International Operations

    • "Structure follows strategy".
    • Structure is a tool for facilitating strategy implementation.
    • Structures evolve as international business involvement increases.
    • Organizational structure is a function of the centralization/decentralization decision.

    Export Department

    • For manufacturing firms, exporting is typically the first foreign market entry strategy.
    • Initially, exports are channeled through an external intermediary, such as a foreign distributor.
    • When export sales become significant, a separate Export Department is established.
    • Most closely associated with home replication strategy.

    International Division Structure

    • Increased international activities lead to a separate unit, dedicated to managing international operations.
    • A significant shift in resource allocation and focus on international business accompanies the division creation.
    • Division managers oversee relationships with foreign suppliers, distributors, and other value chain partners.
    • Over time, the division undertakes more advanced internationalization options, such as licensing and small-scale foreign direct investment.
    • Firms evolve from this strategy/structure to multidomestic or global strategies with corresponding structures.
    • Advantages:
      • Centralized management and coordination of international operations.
      • Staffed with international experts who focus on developing new business opportunities abroad and providing assistance and training for foreign operations.
      • Improved communication and coordination between subsidiaries within each region.
    • Disadvantages:
      • Communications and coordination can be lacking with other area units and corporate headquarters.
      • Geographic area managers may lack a global orientation in developing and managing products.

    (Geographic) Product Structure - Centralized Structure - Global Strategy

    • Firm organizes its international operations by major product line.
    • Each product division is responsible for producing and marketing a specific group of products worldwide.
    • Each international product division operates as a stand-alone profit center with substantial autonomy.
    • The goal is a high degree of worldwide coordination within each product category.
    • Centralized structure - increased coordination facilitates economies of scale and technology and knowledge sharing across firm operations worldwide.
    • Examples:
      • Motorola: mobile phones and network solutions.
      • Apple: iPad, iPod, iPhone, and personal computers.
    • Advantages:
      • All support functions, such as R&D, marketing, and manufacturing, are focused on the product.
      • Global efficiencies.
    • Disadvantages:
      • Duplication of corporate support functions.
      • Managers tend to focus on subsidiaries with the greatest potential for quick returns.

    Functional Structure - Centralized Structure

    • Firm's international operations are organized by functional activities, such as production and marketing.
    • Examples:
      • Oil companies: organize worldwide operations along production and marketing of petroleum products.
      • Cruise ship lines: engage in shipbuilding and cruise marketing – requiring separate departments.
    • Advantages:
      • Small central staff, providing strong centralized control and coordination, and a united, focused global strategy with high functional expertise.
    • Disadvantages:
      • Headquarters may lack expertise in coordinating manufacturing, marketing, and other functions in diverse geographic locations.
      • Coordination may become unwieldy with numerous product lines.

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    Description

    Test your knowledge on international business strategies, focusing on multidomestic approaches. This quiz covers how firms adapt to local markets and the advantages and disadvantages of this strategy. Assess your understanding of real-world examples and implications for resource allocation.

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