BU398 Chapter Notes -Gender Role, Market Power, Organizational Culture
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Designing Organizations for the International Environment
Entering the Global Arena
Motivations for Global Expansion: economic, technological and competitive forces have combined to push many
companies from a domestic to a global focus.
Economies of Scale – building a global presence expands an organization’s scale of operations, enabling it to
realize economies of scale. Economies of scale also enable companies to obtain volume discounts from
suppliers, lowering the organization’s cost of production.
Economies of Scope – scope refers to/ the number and variety of products and services a company offers, as
well as the number and variety of regions, countries, and markets it services.
o Economies of scope can also increase a company’s market power as compared to competitors, because
the company develops broad knowledge of cultural, social, economic factors that affect its consumers
and can provide specialized products and services to meet those needs.
Low-Cost Production Factors – the opportunity to obtain raw materials and other resources (cheap labour) at
the lowest possible cost. Companies have gone international in search of lower costs of capital, sources of cheap
energy, reduced government restrictions, or other factors that lower the company’s total production costs.
Stages of International Development
Global Companies are considered as stateless corporations whose businesses transcend any single country.
o Domestic Stage
o International Stage
o Multinational Stage
o Global Stage
4 Stages of International Evolution
Export oriented, multi-domestic
Initial foreign involvement
Domestic structure, plus
Domestic structure, plus
Moderate, mostly domestic
Very large, multinational
Global Expansion through International Strategic Alliances
Joint Venture is a separate entity created with two or more active firms as sponsors; strategy is used to lower
costs, share strengths and risks, take advantage of partner’s knowledge
Consortia – becoming involved in groups of independent companies – including suppliers, customers, or even
competitors – that join together to share skills, resources, costs, and access to one another’s markets
Designing Structure to Fit Global Strategy
Model for Global vs. Local Opportunities
Managers must decide whether they want each global affiliate to act autonomously (national responsiveness) or whether
activities should be standardized across countries.
Globalization Strategy – product and design, manufacturing, and marketing strategy are standardized
throughout the world; cannot use this strategy for services due to cultural differences
Multidomestic Strategy – competition in each country is handled independently of competition in other
countries. This strategy encourages tailoring of product design, assembly, and marketing to the specific needs to
Forces for Global Integration
Global Product Structure
Both Globalization and Multidomestic Strategy:
Global Matrix Structure
Global Geographic Structure
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