Global Mgt & Strategy Chapter 9: Entry Strategies and Organizational Cultures

License

Lets another company use your brand, tech, or product design - in exchange for fees or royalties.

When Licensing Makes sense

- Use of patents, trademarks, or proprietary know-how

- Used when products are mature, competition is high, or profits are shrinking

- local laws require a domestic partner

- smaller firms want to monetize innovation without expanding abroad

Franchise

Lets someone runs a business using a company's brand, products, and systems - in exchange for fees and a cut of the revenue.

Why Franchising works globally

- Ideal for rapid expansion with lower risk and capital investment

- Franchisee pays upfront and shares revenue

- Franchisor provides training, support, and supply chain accessibility

- Works best with proven, standardized models - with local tweaks

Alliances

A cooperative relationship between firms. A joint venture (JV) is when they co-own or co-run the business.

Nonequity alliance

Involves collaboration without shared ownership (e.g. sharing tech, routes, or services)

Equity Joint Venture

Means both sides put in money- and share risk, control, and profits.

Challenges for Alliances & Joint Ventures

- MNCs often focus more on control than collaboration

- Local partners may also push for more say - leading to power struggles.

M&A

A fast track to global growth - but it comes to big challenges, especially across cultures and borders.

Key points:

- Purchasing a majority stake in a company is a quick way to expand internationally

- Nearly half of all global M&A deals today are cross-border

- Cultural clashes and integration timelines are major obstacles

- Transition costs - IT, HR, leadership - can derail post-merger sucess.

Wholly owned subsidiary

MNCs owns 100% of the foreign operations - full control but also full risk

Why do companies choose wholly owned subsidiary path?

Maximum control: No partners, no sharing - MNC calls all the shots.

Higher profit potential: Streamlined communication, aligned goals, no profit sharing.

Consistency across markets: easier to replicate HQ processes and culture abroad.

Key risks and challenges for wholly owned subsidiary

High costs & commitment: Requires big investment - harder to exit if things go wrong.

Not scalable for every market: Too much complexity to manage multiple subsidiaries at once.

Local resistance: Host countries may distrust foreign-owned firms with no local partnership.

Backlash at home: Labor unions public opnion may oppose moving jobs or operaitons abroad.

International Division Structure Advantages

International focus receives top management's attention.

Allows a unified approach to international operations.

The original organizational structure is left intact(a unit is simply added)

international division structure disadvantages

Separates the domestic and international managers.

As operations grow, resources may become scarce.

Ideas from the international market are given low priority.

Global Product Division

an organizational structure that assigns global responsibilities to each product division

Global Product Division Advantages

Preserves product emphasis and promotes product planning on global basis.

Provides a direct line of communication from the customer to those with product expertise.

Permits line/staff managers to gain expertise.

Managers have considerable autonomy.

Provides for the most benefits if there is a high need for product differentiation in different markets.

Global Product Division Disadvantages

Duplication of efforts

Division managers may neglect areas with better long-term potential

Division managers may spend too much time on the local, convenience and experience.

Global Area Division: Think Local, Operate Local

- MNCs structure geographic region to better respond to local market needs.

- Divisions are based on regions like North America, Europe, Asia-Pacific, etc.

- Each division runs all functions(marketing,sales,ops) for its regions.

-Emphasis is on local responsiveness - products and strategies are tailored by region.

Global Area Division Challenges

Hard to maintain a global product strategy

Can lead to a duplicate efforts and higher costs

Risk of ignoring global R&D or innovation if products feel "mature"

Global Function Division - Organizing by expertise

A company organizes international operations by business function - like production, R&D, marketing - not by product or region.

Advantages:

- Strong functional expertise

- Centralized control across all markets

- Lean management with fewer layers

Disadvantages:

- Hard to coordinate across functions

- Difficult to manage diverse product lines

- CEO carries most responsibility for performance

Mixed structure: one size Dosen't fit at all

Global firms mix and match structures - area, product, and function to handle complexity

Pros:

- flexible

- custom to fit business needs

Cons:

- can be confusing

- coordination and clarity become harder

Transnational Network Structure: Flexible + Connected

A structure connects specialized units across the globe, sharing knowledge and resources while staying locally responsive.

Key features:

- dispersed units: global offices and teams are spread across regions

- Specialized roles: each unit focuses on what it does best

- Shared learning: Units share data, tech, and expertise across the network

Why use JVs and Strategic alliances instead of full acquisitions?

- JVs allow partners to share risk and combine strengths

- alliances promote collaboration without full integration

- models are flexible, less expensive, and often easier to unwind than mergers.

Rise of digital, temporary teams

- MNCs are building around temporary, virutal teams using freelance talent from around the world

- In the U.S, about 1 in 3 workers is a freelancer

- These teams form for a specific project, work online, and disband afterward

- Known as e-lancers or electronic freelancers

Is there a "Global Way" to manage

- MNCs tend to export their home-country way of organizing across borders.

- If a firm is centralized and formal at home, it will likely be the same abroad

- There's less variation across global operations than many assume.

- Global managers must be aware of when to adapt and when to standarize.