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International Strategy and Organization ( Part I ). Josef Windsperger Professor of Organization and Management Center of Business Studies. Lecturer: Josef Windsperger E-mail: josef.windsperger@univie.ac.at Homepage:www.univie.ac.at/IM Phone: 00431-4277-38180. Content. Part I - PowerPoint PPT Presentation
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International Strategy and Organization
(Part I)
Josef WindspergerProfessor of Organization and Management
Center of Business Studies
Lecturer: Josef WindspergerE-mail:
josef.windsperger@univie.ac.atHomepage: www.univie.ac.at/IMPhone: 00431-4277-38180
Content
Part I1 MNC as Global Network: Existence and Evolution
1.1 Product Life Cycle Theory1.2 Transaction Cost Theory1.3 Eclectic Theory1.4 Network Approach
2 Culture, Strategy and Organization of the MNC2.1 Country and Organization Culture of the MNC2.2 Strategy and Organization Design of the MNC
Content
Part II
3 Management of Networks of the MNC
3.1 International Licensing
3.2 International Strategic Alliances, Joint Ventures and Consortia
3.3 International Franchising-Networks
3.4 Networks and M&As
3.5 Internationalization through Countertrade
3.6 International Clusters
3.7 Networks versus Hierarchies of the MNC of the Future
4 Market Entry Decision of the MNC
1 MNC als Global Network 1.1 Product Life Cycle Theory
Vernon (1966):Extension of the product life cycle view to explain the internationalization of the firm.
Product Life Cycle
1.2 Transaction Cost Theory
Transaction costs =» costs of using the price mechanism (Coase 1937)
Search costs
Information costs
Costs of decision making
Negotiation costs
Planning period:Ex ante costs
Transaction Costs
Monitoring or control costs Contract execution costsAdjustement costs
Contract execution period: Ex post costs
Transaction Cost Theory O. E. Williamson (1975)
Atmosphere
Bounded Rationality Uncertainty/Complexity
‚Information Impactedness‘
Opportunism Transaction Specifity
Market and Hierarchy
CCTransaction costs Organizational costs
(Setup-costs)
Degree of organization
Quasi-Rents, Specific Investments and Hold-up
g AB
A‘s quasi-rent: QRAB = (gAB – gAC)
A Bg BA
CD g ACg BD
A‘s profit with B: gAB B‘s profit with A: gBA
B‘s quasi-rent: QRBA = (gBA – gBD)
HOLD-UP Potential of B (HB)Quasi-rent of A (QRBA) =
Transaction Cost Theory of the MNC - David Teece
Definition:– Eclectic Theory offers a framework to identify
firm specific and industry specific characteristics, referring to
ownership, location and internalization advantages(OLI).
1.3 Dunning‘s Eclectic Theory
Ownership Advantages
Internalization Advantages
Local Advantages
Export YES NO YES
Direct Investment YES YES YES
Eclectic Theory
1.4 Network Approach
Internationalization Process– current position in the international market– level of internationalization of the other firms
– Four internationalization situations:» The early starter» The late starter» The lonely international» The international among others
LOW HIGH
LOWThe Early Starter The Late
Starter
HIGHThe Lonely International
The International
Among Others
Degree of internationalization of the market
Degreeof the
Internation-alization of the firm
2 Culture, Strategy and Organization of MNC2.1 Country and Organization Culture
•“Culture is the collective programming of the mind.”Geert Hofstede
Hofstede
Individualism/collectivism Masculinity/femininity Uncertainty avoidance
Power distance
Power Distancebeschreibt
The extent to which people tollerate unequal distribution of power in economy and society.
Individualismbeschreibt
The degree of integration of individuals in groups
Individualism:Individual values, individual responsibility, goal orientationCollectivism:Group values, loyal behaviour, common responsibility
Percentage opting for Individual Freedom
89%71%
69%67%
65%64%
61%60%
53%52%
44%41%41%
39%37%
32%30%
0% 20% 40% 60% 80% 100% 120%
IsraelCanada
USADenmark
NetherlandsFinland
UKRussia
GermanyItaly
IndonesiaChina
FranceJ apanIndia
MexicoEgypt
Masculinitybeschreibt
How strong are masculin values (for instance achievement, success, money) compared to feminin values (security, life quality, social contact)?
Uncertainty Avoidancebeschreibt
How tolerant are the people concerning new and unstructured situations?
high UA: Many Rules, regulations and legal norms to minimize risk
Model of Hofstede
Country Comparison
Village market (nordic)-Decentralized, flexible-Coordination through personal and informal communication
Family or tribe (Asiatic)-Centralized decision making-Loyal, personal relationships-Social control (clan control)
Well-oiled machine(Germanic)-Decentralized decision making-Strong role of experts-Coordination through rules and routines
Traditional bureaucracy„Pyramid of people“ (Latin)-Centralized decision making-Central personal coordination-Informal relationships
highlowhigh
low
Powerdistance
Uncertainty Avoidance
Hierarchy
Form
aliza
tion
EIFFEL TOWERRule-oriented
culture
Fulfillment-orientedculture
INCUBATOR
FAMILYPower-oriented
culture
Project-orientedculture
GUIDED MISSILE
Decentralization
Centralization
TaskPerson
Trompenaars‘ Cultural Model
Family Culture
Power-oriented culture Diffuse relationships Status is ascribed (parent figures) People are seen like family members Father makes the changes Management by subjectives
Eiffel Tower Culture Role-oriented culture Specific relationships Status is ascribed to superior roles Rationally thinking People are seen like human ressources Change through rules and procedures Management by job description Everything is planned, structured
Guided Missile Culture
Project-oriented culture Egalitarian and task-oriented Specific relationships Problem centered way of thinking People are seen as experts Management by objectives
Incubator Culture
Self-fulfilment oriented culture Diffuse relationships Thinking is process-oriented and creative People are seen as co-creators Management by enthusiasm
2.2 Strategy und Organization design of the MNC2.2.1 Strategies of the MNC
What is a competitive advantage?Sustainable cost and/or revenue advantages compared to the best competitor
StrategyRessources Capabilities Industry structure
I. Strategic ApproachesPorter‘s Model
Competitive advantage through low costs and differentiation
Low-cost, differentiation and focus strategy
monopolistic Rents
Resource-Based Theory (Barney, Grant)
1. Identify and classify the firm‘s resources
2. Identify the firm‘s capabilities
3. Appraise the rent-generating potential of resources and capabilities
4. Select a strategy which best exploits the firm‘s resources and capabilities relative to external opportunities.
Resources
CompetitiveAdvantage
Capabilities
Strategy
5. Identify resource gaps which need to be filled Invest in replenishing, augmenting and upgrading the firm‘s resource base
Strategic Rents
II. International Strategies: Perlmutter
Ethnocentric StrategyPolycentric StrategyGeocentric StrategyRegiocentric Strategy
Perlmutter‘s Model
Bartlett/Ghoshal-Model
high
highlow
low
Cost pressures
Pressure for local responsiveness
Global Strategy
International
Strategy
Multi-national Strategy
Trans-national Strategy
International strategy– create value by transferring valuable skills and
products to foreign markets – differentiated products developed at home and
transferred to other markets– sources of core competencies (e.g. R&D) centralized,
others decentralized
UK Chile
IndiaJapan
USA
HK
Mexico
Multidomestic/multinational strategy– decentralized and nationally self-sufficient– exploiting local opportunities– value creation activities (production, marketing and
R&D) in each major national market
UK Chile
IndiaJapan
USA
HK
Mexico
Global strategy– focus on profitability – prefer a low-cost-strategy– standardized products, aggressive pricing – do not customize their products– implementing parent company strategy
UK Chile
IndiaJapan
USA
HK
Mexico
Transnational strategy– transfer of skills from the home company to the
foreign subsidiaries and vice versa– knowledge developed jointly and shared worldwide,
“global learning”– interdependent and specialized
UK Chile
IndiaJapan
USA
HK
Mexico
Yip‘s Model: A Framework for Analyzing ‚Globalization‘
Locus of decision making power on corporate, business, functional strategy issues
Corporate headquarters Regional centers National units
World product 1
Global strategy4 7
Region-based or adapted product
2 5Regional strategy
8
Nation-based or adapted product
3 6 9National strategy
Actual product Characteristics
2.2.2 Strategy and Organisation DesignChandler (1962): „Structure follows Strategy“
Matrix structure Product-/geographic Structure Functional Structur
Differentiation strategy Low-cost strategy
Bartlett/Ghoshal-Model
‚Structure follows Strategy‘
Global Strategy
International
Strategy
Multi-national Strategy
Trans-national Strategy
Global Product Structure
Matrix Structure
Multidivi-sional Structure
Transna-tional Structure
Interna-tional Division
International Division
CEO
HR Finance R & D Int. Division
Europe
Middle East
Brazil
Staff
Global Geographic Structure
CEO
Pacific Division
European Division
Latin American Division
Corporate Staff
Long Term Planning
ProductCoordination
ABB
Comparison
Global Heterarchy (Hedlund)Transnational Organization (Bartlett/Ghoshal)
Country competence centersCountry competence centers
Local and global advantagesLocal and global advantages
Decentralisation of decision makingDecentralisation of decision making
Centralization of controlCentralization of control
IT-enabled strategyIT-enabled strategy
Organization culture as clan controlOrganization culture as clan control
Transnational Form
Objective: Globally integrated and locally responsive
Global Product
Form Transnational Form
Multidomestic Form
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