Topic 7 – International Strategies and Organization

These flashcards cover vocabulary related to international business strategy, including industry types, profit metrics, global expansion methods, and organizational structures.

Global Industry

An industry characterized by few big competitors worldwide, specialized product offerings, few barriers to international trade, and similar consumers globally, such as aviation or car manufacturing.

Multi-country Industry

An industry where competition is fragmented and multidomestic, featuring heterogeneous demand and significant entry barriers, such as the food industry or law firms.

Profitability

The rate of return the firm makes on its invested capital.

Profit Growth

The percentage increase in net profits over time.

Value Creation

The process where the price a firm can charge for a product is greater than the cost of producing that product.

Core Competencies

Skills within the firm that competitors cannot easily imitate, which help determine the success of global expansion.

Location Economies

Economies that arise from performing a value creation activity in the optimal location for that activity, anywhere in the world.

Global Web

A system where different stages of the value chain are dispersed to locations where perceived value is maximized or costs of value creation are minimized.

Experience Curve

Systematic reductions in production costs that occur over the life of a product.

Learning Effects

Cost savings that come from learning by doing, such as when labor productivity increases as individuals learn more efficient ways to perform tasks.

Economies of Scale

Reductions in unit costs achieved by producing a large volume of a product, often by spreading fixed costs or increasing bargaining power with suppliers.

Pressures for Cost Reductions

Competitive pressures that force firms to lower unit costs, common in industries with commodity-type products or powerful consumers with low switching costs.

Pressures for Local Responsiveness

Pressures requiring a firm to adapt its product to meet different local demands, arising from differences in consumer tastes, infrastructure, distribution channels, or host government demands.

Global Strategy

An internationalization strategy that views the world as a single market, utilizes homogeneous products, and centralizes operations and R&D to achieve cost advantages.

Localization Strategy

A strategy focused on local responsiveness through product adaptation, decentralized structures, and the duplication of activities in different countries.

Hybrid/International Strategy

A strategy where some activities are centralized while others are adapted to different markets, involving the transfer of core competencies from the home country to foreign subsidiaries.

Transnational Strategy

A strategy that simultaneously pursues global efficiency, local responsiveness, and global knowledge transfer through interdependent business units and intense communication.

Organizational Architecture

The totality of a firm’s organization, including structure, control systems, incentives, processes, organizational culture, and people.

Vertical Differentiation

The dimension of organizational structure that determines the location of decision-making responsibilities, specifically whether they are centralized or decentralized.

Horizontal Differentiation

The formal division of the organization into subunits, usually based on function, type of business, or geographical area.

Functional Structure

A growth-stage structure where a firm is split into units reflecting value creation activities, with coordination and centralized decision-making handled by top management.

Product Divisional Structure

A structure where each division is responsible for a distinct product line, while headquarters retains control for overall strategic direction and financial control.

International Division

A structure where all international activities are grouped into one division, often leading to potential conflict and coordination problems between domestic and foreign operations.

Worldwide Product Division Structure

A structure adopted by diversified firms that allows for worldwide coordination of value creation activities for each product division to facilitate the transfer of core competencies.

Worldwide Area Structure

A structure favored by firms with a low degree of diversification that divides the world into autonomous geographic areas to facilitate local responsiveness.

Global Matrix Structure

A structure that allows for differentiation along two dimensions—product division and geographic area—giving both equal responsibility for operating decisions.