MNEs confront two sets of pressures: cost reduction and local responsiveness influence global integration is the necessity to be responsive to different customer preferences around the world Four strategic choices for MNEs: - (1) home replication: international
or export Home replication (international or export) strategy: emphasizes the international replication of home country–based competencies such as production scales, distribution efficiencies, and brand power Localization (multidomestic) strategy: is an extension of the home replication strategy: Global standardization (global) strategy strategy is the development and distribution of standardized products worldwide in order
to reap the maximum benefits from low-cost advantages: MNEs subsidiaries explicitly recognized as a source of important capabilities, with the intention that these capabilities be leveraged by and/or disseminated to other subsidiaries
What does global standardization sacrifices? Sacrifices local responsiveness endeavors to be cost efficient, locally responsive, and learning driven simultaneously: Four organizational structures that are appropriate for the four strategic choices: -International division Typically set up when firms initially expand abroad, often when engaging in a home replication strategy Problems of international division: - Foreign subsidiary managers in the
international division are not given sufficient voice relative to the heads of domestic divisions Geographic Area Structure: - Organizes the MNE according to different geographic areas (countries and regions) Problems with geographic area structure: While being locally responsive can be a virtue, it may also encourage the fragmentation of the MNE into highly autonomous, hard-to-control “fiefdoms” Global Product Division Structure: - Supports a global strategy in
treating each product division as a stand-alone entity with full worldwide—as opposed to domestic—responsibilities for its activities Problems with global product division structure: It is the opposite of the geographic area structure: Little local responsiveness - Is often used to alleviate the disadvantages associated with both geographic area and global product division structures Problems with global matrix: - May add layers of management, slow down decision speed, and increase costs while not showing significant performance improvement: Three key ideas of The Reciprocal Relationship Between Multinational Strategies and Structures: - Strategy drives structure: a misfit, such as combining a global strategy with a geographic area structure, may have grave performance consequences Combining MNEs strategies and organizational structure: Based on two dimensions – cost reduction (high vs. low) and local responsiveness (high vs. low) The different nature of industries: - Industrial-products firms value technological knowledge that is not location-specific: Favor global product divisions - Interfirm rivalry: is the collective programming of the mind that distinguishes members of one organization from another Formal and informal internal institutions - Three choices of the head of a subsidiary: - a home-country national is the structures, processes, and systems that actively develop, leverage, and transfer knowledge. What does knowledge management depends on? Knowledge management not only depends on IT, but also on informal social relationships within the MNE (Captured by IT) Tacit knowledge is not codifiable, hard to be written down and transmitted without losing much of its richness (e.g., knowledge about how to drive) Globalizing Research and Development: R&D emerged as an important function to be internationalized and is often known as innovation-seeking investment: The problem of employee turnover which may lead to knowledge leakage Solutions inKnowledge Management - Manipulation of the formal rules of the game: the informal benefits individuals and organizations derive from their social structure and network Which structure allows for consolidation on a worldwide or regional basis and reduces inefficient duplication in multiple countries?Global product division is an organisational structure that treats each product division as a stand-alone entity with full global responsiveness. It allows for consolidation in a worldwide basis and reduces inefficient duplication in multiple countries.
When a firm expands abroad using a home replication strategy it typically uses a transnational strategy for its organization?When a firm expands abroad using a home replication strategy, it typically uses a transnational strategy for its organization. Global standardization is an excellent way to leverage low-cost advantages. Due to formal regulations in most countries, an MNE must usually choose a host country national to head a subsidiary.
Which of the following is a disadvantage of the home replication strategy quizlet?Which of the following is a disadvantage of the home replication strategy? It lacks local responsiveness. It is organizationally complex and difficult to implement.
Which of the following is a disadvantage of a Multidomestic strategy?This strategy allows firms to compete more effectively in the local market and increase their share in that market. The disadvantage of a multidomestic strategy, however, is that the firm faces more uncertainty because of the tailored strategies in different countries.
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Which strategy focuses on a number of foreign countries regions each of which is regarded as a standalone market worthy of significant attention and adaptation?
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