International Business Structures and Market Entry Strategies

Organizational structure

How a company arranges its domestic and international units and relationships.

Organizational design

Process of structuring a company so global activities are integrated efficiently and can adapt to change.

Two main design issues

Balance specialization benefits with coordination costs.

International division

Separate division that manages all foreign operations.

Main issue with international division

Creates conflict and power struggles with domestic divisions.

Worldwide structure bases

Product; Region; Function; Customer class.

International product structure

Each product division oversees global operations.

Advantage of product structure

Avoids duplication of product specialists.

Disadvantage of product structure

Duplicates regional expertise and limits regional authority.

Geographic region structure

Regional heads manage all functions in their area and report to HQ.

Who uses region structure

Low-tech and diverse firms needing strong local marketing (e.g., pharma).

Advantage of region structure

Strong local responsiveness and eliminates duplication of regional specialists.

Disadvantage of region structure

Duplicates product/functional staff and weak central coordination.

Global functional structure

Firm organized by functions at the top level.

Who uses functional structure

Narrow, highly integrated industries (oil, aircraft).

Hybrid structure

Mix of product, region, and function structures.

Matrix organization

Dual reporting lines across dimensions (e.g., product × region).

Main issue with matrix

Slow decisions and internal conflict due to dual authority.

Matrix overlay

Single reporting line but must consider input from another dimension.

Strategic business unit (SBU)

Self-contained business with its own mission, market, and competitors.

Reengineering

Redesign structure/processes to increase efficiency and flatten hierarchy.

Virtual corporation

Company relying on networks and external resources for flexibility.

Advantages of virtual corporation

High flexibility and access to expertise.

Disadvantages of virtual corporation

Less control and partner risk.

Horizontal corporation

Emphasizes lateral communication and cross-unit teamwork for speed and innovation.

Subsidiaries vs affiliates

Subsidiary = majority control; Affiliate = control without majority ownership.

HQ vs subsidiary decision factors

Standardization, local competence, experience, HQ priorities, local frustration.

Transfer pricing

Internal pricing to allocate profit strategically while complying with regulations.

Control with <50% ownership

Use contracts, tech control, financial control, and key managers to influence firm.

HQ reporting requirements

Financial, surplus funds, technology, and innovation updates.

Market screening

Systematic elimination of unattractive markets.

Two screening levels

Country screening and segment screening.

Initial screening

Basic needs potential.

Easy to assess needs

Industrial equipment with clear demand.

Hard to assess needs

Lifestyle/luxury goods.

Second screening

Economic and financial forces (inflation, FX, credit).

Market indicator

Macro data measuring market strength (GDP, population).

Market factor

Variable correlated with demand.

Trend analysis

Forecast based on past data.

Cluster analysis

Group markets or consumers by similarity.

Third screening

Political/legal environment and stability.

Fourth screening

Culture; hard to quantify and interpret.

Fifth screening

Competitive conditions (competitors, market share, quality).

Final screening

Personal visits to verify findings.

Segment screening traits

Definable, Large, Accessible, Actionable, Capturable.

Trade mission

Official visit to explore business opportunities abroad.

Trade fair

Exhibition where companies show products and meet buyers.

Social desirability bias

Respondents give socially acceptable answers instead of truthful ones.

Non-equity entry modes

Exporting, licensing, franchising, turnkey, management contracts, contract manufacturing.

Equity entry modes

Greenfield investment, acquisition, joint venture, strategic alliance.

Exporting first reason

Lowest risk and cost to enter foreign markets.

Turnkey project

Company builds and hands over ready-to-operate facility.

Licensing vs franchising

Licensing = IP rights; Franchising = business model + support.

Management contract

Company operates facilities for another owner (e.g., hotel chains).

Contract manufacturing

Outsource production abroad.

Greenfield vs acquisition

Build new vs buy existing operations.

Joint venture vs alliance

Shared equity vs partnership without equity.

Marketing mix (4Ps)

Product, Price, Place, Promotion.

Why standardize mix

Economies of scale, consistent image, lower cost.

Corporate visual identity

Logos, colors, fonts, slogans, packaging cues.

Total product

Physical product + brand + service + warranty + packaging.

Products needing adaptation

Consumer products > services > industrial products.

Economic strata effect

Lower incomes require more product/service modifications.

Services vs industrial vs consumer

Services need least modification; industrial less than consumer.

Cultural/legal/economic forces

Culture, regulations, income, climate drive product changes.

Brand rights differences

Many countries grant trademark to first registrant.

Income disparity strategy

Use simpler or repackaged formats for affordability.

Physical forces example

Climate/terrain affect design (e.g., insulation, altitude cooking).

Promotion

Any communication with customers/public.

Promotional mix

Advertising, sales promotion, PR, personal selling, social media.

Cultural ad differences

Differences in directness, humor, gender roles, message style.

Advantages of Internet ads

Low cost, broad reach, interactivity, youth reach.

Glocal advertising

Think global, act local — global theme, local adaptation.

Programmed-management

Standardize where possible, allow local flexibility.

Personal selling

Face-to-face sales interactions; common in industrial markets.

Sales promotion

Coupons, contests, trade shows, premiums.

Public relations

Goodwill activities (donations, sponsorships).

Foreign national pricing

Set local prices based on local market forces.

International pricing

Prices between countries, often affected by transfer pricing.

Price-skimming

High initial price to recover R&D costs.

Penetration pricing

Low initial price to gain market share.

Disintermediation

Cutting out intermediaries using direct online distribution.