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OVERVIEW
1.
Patterns of Internationalization
2.
3.
Entry Strategies
Organizational Structures
Patterns of Internationalization
Why go international?
Expand markets (exporting) Acquire resources (labor, materials, capital) Diversification/minimize competitive risk
Entry Strategies
Exporting and Importing
Advantages
Only available choices for small and new firms wanting to go international Exporting and importing can provide easy access to overseas markets
Constraints
Reliance on foreign distributors and suppliers Competitive risk
Entry Strategies
Exporting and Importing
Wholly Owned Subsidiary
Advantages
Desire for total control Belief that managerial efficiency is better without outside partners Host countries concerns may limit or prohibit fully owned subsidiaries Home-country unions may view foreign subsidiaries as exporting jobs
Constraints
Entry Strategies
Exporting and Importing
Wholly Owned Subsidiary Mergers and Acquisitions
Advantages
Each company contributes its strategic strengths to increase the global competitiveness of the firm Each firm has relevant local knowledge for its domestic market
Constraints
Challenges of post-merger integration Commitment of capital limits flexibility and adaptability
Entry Strategies
Exporting and Importing
Wholly Owned Subsidiary Mergers and Acquisitions Alliances and Joint Ventures
Advantages
Improved efficiency Increased access to knowledge Reduced political risk Gain insider advantages Lack of knowledge about local partners Time required to develop relationships Concerns to protect IP rights Dependence on partner skills High switching costs
Constraints
Entry Strategies
Exporting and Importing
Wholly Owned Subsidiary Mergers and Acquisitions Alliances and Joint Ventures
Advantages
Improved efficiency Increased access to knowledge Reduced political risk Gain insider advantages Lack of knowledge about local partners Time required to develop relationships Concerns to protect IP rights Dependence on partner skills High switching costs
Constraints
Entry Strategies
Exporting and Importing
Wholly Owned Subsidiary Mergers and Acquisitions Alliances and Joint Ventures Licensing and Franchising
Advantages
Allows small firms that lack financial and managerial resources to avoid entry costs Allows firms to enter markets without making a direct investment (WOS, merger or acquisition)
Constraints
New competitors created Dependence on licensee Concerns about trademark protection Difficulty in maintaining quality control
ORGANIZATIONAL STRUCTURES
1.
2.
3.
Marketing
Finance
Human Resources
France
Japan
Egypt
Australia
Argentina
Adapted from Figure 93: Use of Subsidiaries during the Early Stage of Internationalization
Subsidiary
Common for financial and other service firms where main export is expertise
Export Arrangements
Common among manufacturing firms, especially those with technologically advanced products
Operating divisions
Domestic Division: Plant Domestic Division: Tools Domestic Division: Hardware Domestic Division: Furniture Australia Office Operations
Adapted from Figure 94: An International Division Structure
International Division:
Japan
Italy
Marketing
Government Relations
Description
Handles all international operations out of a division created for this purpose Assures that international focus receives top management attention Unified approach to international operations Often adopted by firms still in the developmental states of international business operations
Advantages
Disadvantages
Separates domestic from international managers May find it difficult to think and act strategically, or to allocate resources on a global basis
Human Resources
Production
Marketing
Finance
Human Resources
Description
Domestic divisions given worldwide responsibility for product groups Global product divisions operate as profit centers
Advantages
Helps manage product, technology, customer diversity Ability to cater to local needs Marketing, production and finance can be coordinated on a product-by-product global basis
Disadvantages
Duplication of facilities and staff personnel within divisions Division manager may pursue currently attractive geographic prospects and neglect others with long-term potential Division managers my spend too much time tapping local rather than international markets
Marketing
Finance
Africa
Description
Advantages
Disadvantages
Production
Marketing
Finance
Description
Advantages
Disadvantages
Approach not used except by extractive companies such as oil and mining firms Coordination of manufacturing and marketing often is difficult Managing multiple product lines can be very challenging because of the separation of production and marketing into different departments
Marketing
Finance
Industrial Goods
Europe
Description
Advantages
Structure can be designed to best meet needs Promotes an integrated strategic approach tailored to local needs and priorities As the matrix designs complexity increases, coordinating the personnel and getting everyone to work toward common goals often become difficult Too many groups go their own way
Disadvantages
Description
Nodes linking a worldwide network of subsidiaries, alliances and joint ventures Networks consist of dispersed units, specialized operations, and interdependent relationships
Advantages
Allows firms to take advantage of economies of scale while being responsive to local customer needs Flexible and adaptable, since different product line units and geographical area units can have different structures depending on what is best for their particular operations
Disadvantages
Highly decentralized, control depends on a shared organizational culture Complex to develop, manage and sustain
Keiretsu-like Arrangements
Description
Vertically and/or horizontally integrated groups of companies Linked through cross-ownership, interlocking directorates, long-term business dealings, and social ties
Advantages
More reliable access to materials, capital, and markets Ensure access to high quality inputs and just-in-time delivery Sharing of R&D costs and information Cross-marketing of products and services
Disadvantages
May limit shareholder rights and promote management complacency Interdependence and inward focus can over-insulate the firm and limit innovation
Global integration
High
Global strategy
Transnational strategy
Low
International strategy
Multi-domestic strategy
Organizational Structures
Pressure for globalization High
Aircraft Cameras Consumer electronics Computers
Telecommunications
Aerospace
Low
Clothing
Cement
Forms
Electronic freelancers: Individuals who work on a project, usually via the Internet, and move when assignment done Temporary companies: Individuals assigned for a particular, short-term purpose and then go on to other assignments
Characteristics
Services outsourcing function (delivered online) People in structure are temporary, contingent employees, and never see each other