BUS 304 Lecture : Ch.6 - Designing Organizations for the International Environment
Chapter 6: Designing Organizations for the International Environment
Entering the Global Arena
-Motivations for Global Expansion
oEconomic, technological and competitive forces push a domestic force to a global one
oEconomies of Scale
Global presence expands operations, so it can realize economics of scale
New technology and production methods increase large-volume production,
reducing cost per unit (large volume demand comes from beyond the domestic
borders as well as volume discounts from suppliers)
oEconomies of Scope
Score: number and variety of products and services a company offers, as well as
the variety of regions, countries, markets it serves
Having presence in multiple countries give marketing power synergy, be global
for your global customers
Market power; knowledge of cultural, social, economic of different customers
allowing more specialized products and services to meet those needs
oLow-cost Production
Opportunity to obtain raw materials and other resources for a low cost
Other countries offer cheaper land, electricity and water or be closer to major
customers and suppliers
-Stages of International Development
oDomestic
Domestically oriented but aware of global environment with initial foreign
involvement
Domestic structure (functional or divisional) with export department
Moderate market potential (mostly domestic)
oInternational
Export-oriented with multidomestic (company deals with each country
individually) attitude
Chapter 6: Designing Organizations for the International Environment
Concern with international competitive positioning, still a domestic structure but
international division replaces the export department (specialist deals with sales,
services, warehousing abroad)
Multiple countries are the potential market
oMultinational
Extensive experience in a few international markets with marketing and R&D
facilities in several foreign countries
Large % of revenues come from outside the country
Explosion (stage of development) occurs as international operations take off,
with multiple business units around the world with suppliers, manufacturers and
distributors
oGlobal (stateless corporation)
Transcends any single country, subsidiaries are interlinked to the point where
competitive position in one country significantly influences activities in other
countries
Entire world is the marketplace with complex structures (international matrix,
transnational model)
-Global Expansion through International Strategic Alliances (Chapter 4 for more insight)
oJoint venture: Shares development and production costs and penetrating new markets, can
be with customers or competitors. Advantage in knowledge of local markets.
oConsortia: groups of independent companies that joint together to share skills, resources,
costs and access to one another’s markets (suppliers, customers, competitors)
Virtual Organizations: type of consortia; continually evolving set of company
relationships that exist temporarily to exploit unique opportunities or strategic
advantages
Designing Structure to Fit Global Strategy
-Model of Global vs. Local Opportunities
oGlobal standardization vs. National responsiveness
Decide between global affiliate to act autonomously or standardize
Dilemma found between Globalization and Multidomestic strategies
Chapter 6: Designing Organizations for the International Environment
•Globalization strategy has product design, manufacturing and marketing
strategy standardized
oServices are usually not tailored for this due to different
customers and habits require different approaches
oCan help economies of scale, reduce lapping facilities
•Multidomestic strategy has competitor in each country handled
independently encouraging product design, assembly and marketing
tailored to the specific needs
oGlobal designs need to be suited to the need for either global standardization vs. national
responsiveness
High force for global integration, low force of national responsiveness = Global
product (globalization strategy)
High force for global integration, high force of national responsiveness = Global
matrix (globalization and multidomestic)
Low force for global integration, low force for national responsiveness =
International Division (export strategy)
Low force for global integration, high force for national responsiveness = Global
geographic (multidomestic strategy)
-International Division
oInternational division evolves from an export department (organized along functional or
product lines vs. organized with geographical interests)
oHas its own hierarchy to handle business in various countries
oFunctional structures are used domestically so geographic or product structures is used to
subdivide the organization into smaller units (can evolve into product/geographical
division structures)
-Global Product Divisional Structure
oProduct division takes responsibility for global operations in their product area
(straightforward way to manage variety of businesses and products around the world)
oManagers focus on organizing international operations as they see fit and around their
own division unique set of global problems
Document Summary
Motivations for global expansion: economic, technological and competitive forces push a domestic force to a global one, economies of scale. Global presence expands operations, so it can realize economics of scale. New technology and production methods increase large-volume production, reducing cost per unit (large volume demand comes from beyond the domestic borders as well as volume discounts from suppliers: economies of scope. Score: number and variety of products and services a company offers, as well as the variety of regions, countries, markets it serves. Having presence in multiple countries give marketing power synergy, be global for your global customers. Market power; knowledge of cultural, social, economic of different customers allowing more specialized products and services to meet those needs: low-cost production. Opportunity to obtain raw materials and other resources for a low cost. Other countries offer cheaper land, electricity and water or be closer to major customers and suppliers. Domestically oriented but aware of global environment with initial foreign involvement.
