Strategy and Organization in International Firms
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Strategy is:

  • The procurement of selected value-chain activities, including production of intermediate goods or finished products, from independent suppliers
  • The pattern of shared values, behavioral norms, systems, policies, and procedures that employees learn and adopt
  • A quality of executive management that provides inspirational guidance and motivation to personnel, leading the firm to a better future
  • A planned set of actions that managers employ to make the best use of the firm's resources and core competencies to gain competitive advantage (correct)

    • When developing strategies, managers start by:

  • Analyzing the particular opportunities and challenges that confront the firm
  • Examining the firm's specific strengths and weaknesses (correct)
  • Configuring and coordinating the firm's activities around the world
  • Deciding which customers to target

    • Which of the following activities would be considered last by a manager while developing strategies?

  • Analyzing the particular challenges that confront the firm
  • Deciding how best to contend with competitors (correct)
  • Analyzing the particular opportunities for the firm
  • Examining the firm's specific strengths and weaknesses

    • ________ refers to lowering the cost of the firm's operations and activities on a global scale.

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

    Firms that want to become globally competitive must seek simultaneously three strategic objectives-efficiency, flexibility, and learning.

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

    Efficiency refers to emphasizing consensus-based decision making and problem solving, in which managers readily share their knowledge.

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

    During the recent global recession, efficiency and flexibility became particularly important to the success of multinational firms.

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

    Describe the three strategic objectives for creating a competitive advantage in international business as proposed by Bartlett and Ghoshal. Provide an example to illustrate each objective.

    <p>The three strategic objectives are efficiency, flexibility, and learning.</p> <ul> <li> <strong>Efficiency:</strong> This involves streamlining operations to lower costs. For example, automotive companies like Toyota concentrate manufacturing and sourcing activities in a limited number of locations to achieve economies of scale.</li> <li> <strong>Flexibility:</strong> The firm must be able to adapt to different local market conditions, such as regulations, customer preferences, and cultural differences. For example, managers might choose to form contractual relationships with local suppliers and distributors in some countries while engaging in direct investment in others.</li> <li> <strong>Learning:</strong> This objective focuses on gaining new knowledge and capabilities by operating in different international markets. For example, Procter &amp; Gamble established a research center in Belgium to develop water-softening technology, which was necessary due to the higher mineral content of European water.</li> </ul> Signup and view all the answers

    How can a firm's strategy make the best use of the firm's resources? How does a firm's decision to have a centralized versus a decentralized organizational structure affect its strategy?

    <p>A well-defined strategy helps a firm optimize its resource allocation. This involves analyzing the firm's strengths, weaknesses, opportunities, and challenges to identify the most appropriate strategies. For example, the firm can decide which customers to target and how to best compete with rivals.</p> <p>Centralization gives headquarters control over the firm's operations worldwide. Decentralization grants subsidiaries a significant autonomy and allows for more local flexibility, which can be beneficial for adapting to local needs. Ultimately, the chosen organizational structure should align with the firm's strategic vision.</p> Signup and view all the answers

    Managers who exemplify an open-minded attitude and who appreciate cultural diversity are described as applying a global ________.

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

    GramTech Solutions is a software development firm based in the United States. The firm's CEO, David Ghaster, wants to open an outlet in India. Being a visionary leader, he would ________

    <p>Require managers to acquire an openness to, and awareness of, culture in India</p> Signup and view all the answers

    Which of the following is the most critical asset of any organization?

    <p>Human capital</p> Signup and view all the answers

    Organizational culture is:

    <p>The pattern of shared values, behavioral norms, systems, policies, and procedures that employees learn and adopt</p> Signup and view all the answers

    Companies that proactively build a global organizational culture will ________.

    <p>Maintain a global perspective in all major initiatives</p> Signup and view all the answers

    The managerial routines, behaviors, and mechanisms that allow a firm to function as intended are known as ________.

    <p>Organizational processes</p> Signup and view all the answers

    Which of the following is a characteristic of a global team?

    <p>Culturally diverse</p> Signup and view all the answers

    Which of the following is true about global teams?

    <p>To develop global strategies, the team should include culturally diverse managers whose business activities span the globe.</p> Signup and view all the answers

    A culturally diverse team would ________.

    <p>Create a global view inside the firm while remaining in touch with local realities</p> Signup and view all the answers

    Which of the following is characteristic of a global industry?

    <p>A small number of major players compete head-on in multiple markets.</p> Signup and view all the answers

    Strategic global teams identify or implement initiatives that enhance the long-term direction of the firm in its global industry.

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

    Global IT infrastructure and tools such as intranets, the Internet, and electronic data interchange ensure that distant parts of the global network share knowledge and learn from each other.

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

    A multidomestic industry is one in which competition takes place on a regional or worldwide basis.

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

    Contrast the strategies of multidomestic industries and global industries. Why is there a difference in strategies between the two industries? Provide an example for illustration.

    <p>Multidomestic industries focus on adapting to local needs and preferences, while global industries aim to achieve economies of scale and standardize products for global markets. This difference arises from the different competitive environments and market conditions. For example, in the beverage industry, Coca-Cola adapts its formula for specific local markets, reflecting a multidomestic strategy. On the other hand, industries like aerospace are more global due to the need for efficiency and standardization across production processes.</p> Signup and view all the answers

    Firms that emphasize global integration make and sell ________.

    <p>Products that require minimal adaptation</p> Signup and view all the answers

    Managing a firm's value-chain activities on a country-by-country basis to address diverse opportunities and risks is known as ________.

    <p>Local responsiveness</p> Signup and view all the answers

    Coordinating the international value-chain activities of a firm across multiple countries to achieve maximum efficiency is known as ________.

    <p>Global integration</p> Signup and view all the answers

    Which of the following would exert pressure on a firm to become locally responsive?

    <p>The need to cater to local customer needs</p> Signup and view all the answers

    Marketing the same product worldwide is most appropriate for the ________ industry.

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

    Global integration is a plan of action that accounts for competition on a country-by-country basis.

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

    Due to the competition involved in global industries, marketing strategies are determined by the unique needs and regulations of each nation.

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

    Sourcing inputs from large-scale, centralized suppliers allows firms to obtain economies of scale, more consistent quality, lower costs, and generally more efficient operations.

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

    Firms undertake global integration to seek cost reduction through scale economies.

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

    A company can be compelled to be locally responsive in individual countries to provide uniform services to global customers.

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

    What is the integration-responsiveness framework? Describe the two main components of the framework.

    <p>The integration-responsiveness (IR) framework analyzes the pressures on firms to achieve both global integration and local responsiveness. Global integration refers to coordinating the firm's value chain activities across countries to achieve worldwide efficiency, synergy, and cross-fertilization. Local responsiveness focuses on meeting the specific needs of buyers in individual countries.</p> Signup and view all the answers

    Describe four factors that might persuade a firm to become locally responsive in a nation where it conducts business.

    <ol> <li> <strong>Cater to local customer needs:</strong> In industries with diverse customer needs, like food and beverage, adapting products and services to local preferences becomes crucial for success.</li> <li> <strong>Accommodate differences in distribution channels:</strong> Different countries have different distribution channels, requiring firms to adapt their strategies. For instance, in Latin America, small stores are more common than large retailers, necessitating adjustments in distribution networks.</li> <li> <strong>Respond to local competition:</strong> Firms must address competition from local rivals, particularly when operating in markets with numerous local competitors, by offering competitive pricing, product features, and services.</li> <li> <strong>Adjust to cultural differences:</strong> Cultural differences can significantly impact business decisions. Firms selling products like food and clothing may need to tailor their offerings to specific cultural norms and values.</li> </ol> Signup and view all the answers

    In the ________ strategy, a firm views international business as separate from, and secondary to, its domestic business.

    <p>Home replication</p> Signup and view all the answers

    Which of the following is true about foreign units of a company using a multidomestic strategy?

    <p>They are autonomous and operate independently.</p> Signup and view all the answers

    Which of the following characterizes a multidomestic strategy?

    <p>Subsidiary managers adapt products and services to meet local needs.</p> Signup and view all the answers

    Which of the following is a disadvantage of a multidomestic strategy?

    <p>Inefficient manufacturing</p> Signup and view all the answers

    A ________ strategy is characterized by substantial control over country operations by headquarters in order to increase efficiency and integration.

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

    Which of the following is a characteristic of a transnational strategy to internationalization?

    <p>Local responsiveness with central control</p> Signup and view all the answers

    The home replication strategy is often employed as a means of extending a product's life cycle in a foreign market and to replicate home-market success.

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

    When using a multidomestic strategy, products and services are carefully adapted to suit the unique needs of each country.

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

    Global strategy is an approach to internationalization in which headquarters delegates considerable autonomy to each country manager, allowing him or her to operate independently and pursue local responsiveness.

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

    In a multidomestic strategy, there is maximum pressure on headquarters staff because there is little incentive for decision making by individual managers.

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

    With a global strategy, headquarters seeks substantial control over its country operations in order to minimize redundancy and achieve maximum efficiency, learning, and integration worldwide.

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

    By standardizing international operations as much as possible, yet being adaptable to the needs of local markets, a firm is utilizing a transnational strategy of globalization.

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

    Explain the benefits of a multidomestic strategy to firm internationalization. What are some of the disadvantages to this approach?

    <p>Advantages:</p> <ol> <li> <strong>Adaptation to local markets:</strong> Locally produced goods and services better cater to specific customer preferences and can be more competitive.</li> <li> <strong>Reduced pressure on headquarters:</strong> Local managers are responsible for key decisions, minimizing headquarters involvement in country-specific operations, especially for firms with limited international experience.</li> <li> <strong>Flexibility:</strong> Companies with less centralized control can quickly adapt to changes in local markets.</li> </ol> <p>Disadvantages:</p> <ol> <li> <strong>Duplication of effort:</strong> Each subsidiary may develop its own processes, potentially leading to inefficiencies and reducing the sharing of knowledge and resources across the firm.</li> <li> <strong>Limited economies of scale:</strong> Difficulty in leveraging economies of scale by standardizing across subsidiaries.</li> <li> <strong>Potential for conflict between subsidiaries:</strong> Subsidiaries might compete for resources, leading to friction and hindering the firm's long-term goals.</li> </ol> Signup and view all the answers

    Discuss the advantages and implementation of a transnational strategy, and explain why this strategy is closely associated with a global matrix structure.

    <p>A transnational strategy balances the need for both global integration and local responsiveness. It aims to achieve efficiency and standardization while adapting to specific local market requirements. To implement a transnational strategy, firms should strive for the following:</p> <ol> <li> <strong>Global Sourcing and Production:</strong> Consolidating production in key locations to leverage economies of scale.</li> <li> <strong>Optimize Global Activities:</strong> Organizing marketing, production, and other value chain activities on a global scale.</li> <li> <strong>Promote Local Responsiveness:</strong> Adapt to the unique needs and preferences of specific regions.</li> <li> <strong>Facilitate Learning and Knowledge Transfer:</strong> Encourage knowledge sharing and collaboration across international subsidiaries.</li> <li> <strong>Coordinate Competitive Moves:</strong> Focus on global competitors instead of reacting on a country-by-country basis.</li> </ol> <p>The global matrix structure is well-suited for transnational strategies. It combines geographic area structures (local responsiveness) and product structures (global integration), allowing employees to report to both country managers and product managers. This allows for a balance between global integration and local responsiveness and helps companies better adapt to the complexities of the global business environment.</p> Signup and view all the answers

    In establishing a firm's organizational structure, a fundamental issue is ________.

    <p>How much decision-making responsibility the firm should retain at headquarters</p> Signup and view all the answers

    Which of the following gives headquarters considerable authority and control over the firm's activities worldwide?

    <p>Centralized approach</p> Signup and view all the answers

    In which of the following are substantial autonomy and decision making authority delegated to a firm's subsidiaries around the world?

    <p>Decentralized approach</p> Signup and view all the answers

    A firm's headquarters is the primary contributor to ________.

    <p>Capital planning</p> Signup and view all the answers

    A firm's subsidiary is the primary contributor to ________.

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

    Discuss the factors relevant to a firm's decision to centralize or decentralize foreign operations.

    <p>The decision to centralize or decentralize foreign operations depends on several factors, including:</p> <ol> <li> <strong>Nature of the product:</strong> Products requiring significant standardization or complex technology often necessitate centralized decision-making. Conversely, products with high local customization needs may benefit from decentralized control.</li> <li> <strong>Nature of competition:</strong> In highly competitive or volatile markets, firms may choose centralization to ensure consistency and efficiency. However, in markets with less intense competition, local subsidiaries may have more autonomy.</li> <li> <strong>Size and strategic importance of foreign operations:</strong> Larger and strategically crucial operations often involve more significant headquarters participation to ensure alignment with overall firm strategy. Conversely, smaller and more specialized operations may benefit from decentralization.</li> <li> <strong>Risk involved:</strong> High-risk operations, like entering new markets or developing new products, may require more centralized control to mitigate potential losses.</li> </ol> Signup and view all the answers

    Which of the following organizational arrangements for foreign operations is most closely associated with home replication strategy?

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

    International division managers usually oversee ________.

    <p>Distributor relationships</p> Signup and view all the answers

    Which of the following is an advantage of an international division structure?

    <p>It allows concentration and development of international expertise.</p> Signup and view all the answers

    Which of the following is a disadvantage of a geographic area structure?

    <p>Geographic area managers' lack of global orientation for developing and managing products</p> Signup and view all the answers

    An advantage to firms that use a product structure arrangement is that ________.

    <p>Individual product lines are coordinated and managed globally</p> Signup and view all the answers

    An export department rarely requires much organizational structure until export sales reach a critical point.

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

    Geographic area structure is an organizational design in which management and control are decentralized to the level of individual geographic regions.

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

    Study Notes

    Strategy and Organization in the International Firm

    • Strategy is a planned set of actions to best utilize firm resources and core competencies to gain competitive advantage.

    • When developing strategies, managers first analyze firm strengths and weaknesses, then the opportunities and challenges.

    • Deciding how best to counteract competitors is the final step in strategy development.

    Efficiency, Flexibility, and Learning

    • Efficiency is lowering operational costs globally.
    • Flexibility means responding to diverse international opportunities and risks.
    • Learning is gaining new knowledge from international experiences to improve firm capabilities.

    Organizational Structure

    • Centralized structures give headquarters more control.

    • Decentralized structures give greater autonomy to foreign subsidiaries.

    • Strategy choices influence organizational structure decisions.

    • Firms that emphasize global integration often have centralized structures.

    • Firms emphasizing local responsiveness tend towards decentralized structures.

    • Effective strategic planning requires managers to make appropriate decisions on resource allocation ensuring a balance between local responsiveness and global integration.

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    Description

    Explore key concepts in developing strategies and organizational structures for international firms. This quiz covers efficiency, flexibility, and the importance of learning in a global context. Test your knowledge on how strategies influence organizational decisions in a competitive international landscape.

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