Strategies and Organization

of International Business
Elvry Hartono – 016191700
Felice Giovanni – 016191700
Hendi Kurniawan – 01619170102
Meda Listiana - 01619170087
Stanley - 016191700
 What is STRATEGY?
 The actions taken to attain the goals of the firm
 Contains the determinates of creating value for a firm
Different Types of Strategies
Global Standardization Strategy
 Focus on increasing profitability and profit
growth by reaping costs reduced from
economies of scale, learning effects and
location economies
 Pressures for lowering costs are high
 Pressures for local responsiveness is low
International Strategy
 Take products first produced for the domestic
market and sell them internationally with
only minimal local customization
 Pressure for lowering costs is low
 Pressure for local responsiveness is also low
Transnational Strategy
 Firm seeks to achieve both global efficiency
and local responsiveness
 Hardest strategy to achieve
 Pressure for lowering costs are high
 The need for local responsiveness is high
Localization Strategy
 Increasing profitability by customizing the
firm’s goods or services so that they provide
a good match to taste and preferences in
different national market
 Pressure to lower costs are low
 Consumer tastes and preferences are
extremely different between nations
How Do Strategies Evolve
 When changes in pressures for cost
reductions and local responsiveness occur,
changing strategies may be necessary for
survival
 Example: localization may separate a firm’s
products from others in the market, but
competitors may create pressure for a firm to
reduce the price. Firm would ideally shift
toward transnational strategy.
 Example
 McDonalds uses
localization strategy
 They customize their
menu based on local
consumer’s tastes,
culture, and
preferences.
Organizational Architecture
Dimensions of Organizational
Structure
 Vertical differentiation: the centralization and
decentralization of decision making
responsibilities
 Horizontal differentiation: the division of the
firm into subunits
 Integrating mechanisms: mechanisms for
achieving coordination between subunits
within an organization
 Importance of Vertical
Differentiation
 Centralized decision  Decentralized decision
making:
 Facilitates coordination
 Allows managers to
bring about
organizational change
 Ensures decisions
correlate with the
organization’s goals
 Avoids duplication of
activities
making:
 Increases control
 Relieves the burden of
centralized decision
making
 Allows for greater
flexibility
 Motivates individuals
 Result in better decisions
Importance of Horizontal
Differentiation
 Functional structure: organization is split into
functions reflecting the firm’s value creation
activities
Importance of Horizontal
Differentiation
 Product divisional structure: each division is
responsible for a distinct product line
Global Expansion
 International division: division responsible
for a firm’s international activities
 Manufacturing may be shifted to foreign
markets over time
 Potential for managing and coordination
issues between domestic and foreign
operations
One company’s international division structure
 Worldwide product division structure tends to be
adopted by firms that are reasonably diversified
and, accordingly, originally had domestic
structures based on product divisions.
 Allows for global coordination of value creation
activities of each product division
 Does not allow for local responsiveness
 Facilitates the transfer of core competencies
 Helps with visibility of location and experience curve
economics
A worldwide product divisional structure
 Worldwide area structure tends to be favored
by firms with a low degree of diversification
and a domestic structure based on functions
 Facilitate local responsiveness
 Consistent with localization strategy
 Divides the world into autonomous geographic
areas
 Decentralizes operational authority
 Possibly result in fragmentation of organization
A worldwide area structure
 Relationship Between Strategy
& Organizational Architecture

 Localization strategy: focus on local  International strategy: create value

responsiveness by transferring core competencies
 Low performance ambiguity and from domestic to foreign
control costs subsidiaries
 No high need for mechanism  Moderate control
integration  Moderate need for mechanism
 Worldwide area structure is often integration
used  Low performance ambiguity
and control costs
 Worldwide product division
structure is often used
 Relationship Between Strategy &
Organizational Architecture
 Global standardization strategy: focus
on realization of location and
experience curve economies
 HQ has control over most
decisions
 High need for mechanism
integration
 Strong organizational culture is
encouraged
 Worldwide product division
structure is often used
 Transnational strategy: focus on attaining
location and experience curve economies,
local responsiveness, and global learnin
 Some decisions are centralized and
others are decentralized
 Formal and informal mechanism
integration
 Strong organizational culture
encouraged
 Matrix structures are often used
Thank You