11. Strategy and Organisation of International Firms

traditional motivations for internationalism

resource-seeking and market-seeking

emerging motivations for internationalism

more integration, growing and learning, competitive position

value creation

performing activities that increase the value of goods or services to consumers

strategy includes both…

deliberate and emergent actions of a firm to use its resources to achieve its goals

strategic positioning

selecting a competitive strategy with a value proposition and configuring internal operations to support that strategy

primary activities

R&D, production, marketing and sales, after-sales service and support

support activities

procurement/logistics, HR, IT, company infrastructure

organisational structure has 3 dimensions:

vertical differentiation, horizontal differentiation and the establishment of integrating mechanisms

vertical differentiation is…

the location of decision-making responsibilities within a structure

horizontal differentiation is…

the formal division of the organisation into sub-units

the establishment of integrating mechanisms is…

the mechanisms for coordinating sub-units

control systems

the metrics used to measure performance

personal controls

personal contact between subordinate staff

bureaucratic controls

rules and procedures, budgets, delegations

output controls

performance metrics such as sales and profit targets

cultural controls

norms and values that employees “buy into”

organisational culture

the values and norms that employees are encouraged to follow

location economies

cost advantages from performing value creation activities at the optimal location for that activity

experience curve

systematic production cost reductions that occur over the life of a product

international firms can increase profitability by…

expanding their market, realising locations economies, exploiting greater cost economies from experience effects and transferring valuable skills within the firm

business level strategies

cost leadership, differentiation, focus

2 conflicting types of competitive pressures in the global marketplace

pressures for cost reductions and to be locally responsive

when pressures for cost reductions are greatest

competitors are based in low-cost locations, excess capacity, consumers face low switching costs

when pressures for local responsiveness are greatest

differences in consumer tastes and preferences, traditional practices and infrastructure, distribution channels, host government demands, rise of regionalism

global standardisation strategy is when a firm…

focuses on profitability by reaping the cost reductions that come from economies of scale, learning effects, and location economies

localisation strategy is when a firm…

increases profitability by adjusting goods and services to match the tastes and preferences in different national markets