MBA 718: GLOBAL BUSINESS IN

PRACTICE
strategizing AND structuring around the world

Multinational Strategies
Pressures for cost reductions and local responsiveness
Integration-responsiveness framework: Four strategic
choices for MNEs
Home replication strategy emphasizes the international
replication of home country-based competencies
Localization (multidomestic) strategy is an extension of the
home replication strategy, focusing on a number of foreign
countries/regions, each regarded as a stand-alone local market
worthy of significant attention and adaptation
Global standardization strategy is the opposite of the
localization strategy
Transnational strategy aims to capture the best of both worlds
by endeavoring to be both cost efficient and locally responsive

MULTINATIONAL STRATEGIES AND STRUCTURES:

THE INTEGRATIONRESPONSIVENESS FRAMEWORK

Figure 10.1

Four Strategic Choices for Multinational

Enterprises
Home replication

Multidomestic

ADVANTAGES

DISADVANTAGES

Leverages home country-based advantages

Lack of local responsiveness

Relatively easy to implement

May result in foreign customer alienation

Maximizes local responsiveness

High costs due to duplication of efforts in

multiple countries
Too much local autonomy

Global

Leverages low-cost advantages

Lack of local responsiveness

Too much centralized control

Transnational

Cost-efficient while being locally responsive

Organizationally complex

Engages in global learning and diffusion

of innovations

Difficult to implement

Table 10.1

Multinational Strategies and

Structures
Four organizational structures that are
appropriate for the four strategic choices:
International division
Geographical area
Global product division
Global matrix

Multinational Strategies and

Structures
International Division
The firm has separate domestic and international
divisions
Typically set up when firms initially expand abroad, often
when engaging in a home replication strategy

Problems:
Foreign subsidiary managers in the international division
are not given sufficient voice relative to the heads of
domestic divisions
The silo effect: International division activities are not
coordinated with the rest of the firm, which focuses on
domestic activities
Firms often phase out this structure after their initial
overseas expansion

International Division Structure at Starbucks

Figure 10.2

Multinational Strategies and

Structures
Geographic Area Structure
Organizes the MNE according to different geographic
areas (countries and regions)
Its ability to facilitate local responsiveness is both a
strength and a weakness
Is the most appropriate for a localization strategy

Problems:
While being locally responsive can be a virtue, it may
also encourage the fragmentation of the MNE into
highly autonomous, hard-to-control fiefdoms

Geographic Area Structure at Avon Products

Avon
North America

Avon
Latin America

Avon
Asia Pacific

Avon
Western Europe
Middle East
Africa

Source: Adapted from avoncompany.com. Headquartered in New York, Avon Products, Inc. is the
company behind numerous Avon ladies around the world.

Avon
Central & Eastern
Europe

Figure 10.3

Multinational Strategies and

Structures
Global Product Division Structure
Supports a global strategy in treating each product
division as a stand-alone entity with full worldwide
as opposed to domesticresponsibilities for its activities
Facilitates attention to pressures for cost efficiencies
in allowing for consolidation on a worldwide (or regional)
basis and reduction of inefficient duplication in multiple
countries

Problems:
It is the opposite of the geographic area structure: Little
local responsiveness

Global Product Division Structure at

European Aeronautic Defense and Space Company
(EADS)

Source: Adapted from www.eads.com. Headquartered in Munich, Germany, and Paris, France,
EADS is the largest commercial aircraft maker and the largest defense contractor in Europe.

Figure 10.4

Example: Nokia

Example: Procter & Gamble

Multinational Strategies and

Structures
Global Matrix
Is often used to alleviate the disadvantages associated
with both geographic area and global product division
structures
Is intended to support the goals of the transnational
strategyin practice, it is often difficult to deliver

Problems
May add layers of management, slow down decision
speed, and increase costs while not showing significant
performance improvement

A Hypothetical Global Matrix Structure

Figure 10.5