Chapter 10 - Strategizing, structuring and learning around the world

Question 1

MNEs confront two sets of pressures:

Answer 1

cost reduction and local responsiveness

Question 2

Cost pressures

Answer 2

influence global integration

Question 3

Local responsiveness

Answer 3

is the necessity to be responsive to different customer preferences around the world

Question 4

Four strategic choices for MNEs:

Answer 4

• (1) home replication: international or export
• (2) localization: multi-domestic
• (3) global standardization: global
• (4) transnational

Question 5

Home replication (international or export) strategy:

Answer 5

emphasizes the international replication of home country–based competencies such as production scales, distribution efficiencies, and brand power

Question 6

Localization (multidomestic) strategy:

Answer 6

is an extension of the home replication strategy:

• Focuses on a number of foreign countries/regions, each of which is regarded as a stand-alone “domestic” market worthy of significant attention and adaptation
• Effective when there are clear differences among national and regional markets and low pressures for cost reductions
• Has high costs due to duplication of efforts in multiple countries

Question 7

Global standardization (global) strategy

Answer 7

strategy is the development and distribution of standardized products worldwide in order to reap the maximum benefits from low-cost advantages:
-MNEs may designate centers of excellence or subsidiaries

Question 8

Centers of excellence:

Answer 8

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

Question 9

What does global standardization sacrifices?

Answer 9

Sacrifices local responsiveness

Question 10

Transnational strategy:

Answer 10

endeavors to be cost efficient, locally responsive, and learning driven simultaneously:

• Innovations flow from the home country to host countries and vice-versa and also flow among subsidiaries in multiple host countries
• It is organizationally complex and difficult to implement.

Question 11

Four organizational structures that are appropriate for the four strategic choices:

Answer 11

• International division
• Geographical area
• Global product division
• Global matrix

Question 12

International Division:

Answer 12

Typically set up when firms initially expand abroad, often when engaging in a home replication strategy

Question 13

Problems of international division:

Answer 13

• 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

Question 14

Geographic Area Structure:

Answer 14

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

Question 15

Problems with geographic area structure:

Answer 15

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

Question 16

Global Product Division Structure:

Answer 16

• 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
• 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

Question 17

Problems with global product division structure:

Answer 17

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

Question 18

Global Matrix:

Answer 18

• 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 strategy—in practice, it is often difficult to deliver

Question 19

Problems with global matrix:

Answer 19

• May add layers of management, slow down decision speed, and increase costs while not showing significant performance improvement:
• Front-line managers must report to two bosses: a country manager and a product division manager

Question 20

Three key ideas of The Reciprocal Relationship Between Multinational Strategies and Structures:

Answer 20

• Strategy drives structure: a misfit, such as combining a global strategy with a geographic area structure, may have grave performance consequences
• The relationship is two-way. To the extent that certain strategies facilitate certain structures, a given structure also supports a particular strategy
• Strategies and structures are not static. It is often necessary to change strategy, structure, or both

Question 21

Combining MNEs strategies and organizational structure:

Answer 21

Based on two dimensions – cost reduction (high vs. low) and local responsiveness (high vs. low)

Question 22

The different nature of industries:

Answer 22

• Industrial-products firms value technological knowledge that is not location-specific: Favor global product divisions
• Consumer-goods industries require deep knowledge about consumer tastes that is location-specific: Favor geographic areas

Question 23

Porter’s forces:

Answer 23

• Interfirm rivalry:
  Competitors focus on learning and innovation
• Need to increase entry barriers:
  Behind some recent moves to phase out multidomestic strategy and to erect world-scale facilities to deter entrants
• Bargaining power of suppliers and buyers:
  They also have to internationalize if the focal MNE goes overseas
• Threat of substitute products:
  MNE R&D often generates competing substitute products

Question 24

Organizational culture :

Answer 24

is the collective programming of the mind that distinguishes members of one organization from another

Question 25

Formal and informal internal institutions - Three choices of the head of a subsidiary:

Answer 25

- a home-country national - a host-country national - a third country national

Question 26

Knowledge management

Answer 26

is the structures, processes, and systems that actively develop, leverage, and transfer knowledge.

Question 27

What does knowledge management depends on?

Answer 27

Knowledge management not only depends on IT, but also on informal social relationships within the MNE

Question 28

Explicit knowledge

Answer 28

(Captured by IT) | is codifiable, it can be written down and transferred without losing much of its richness (e.g., a driving manual):

Question 29

Tacit knowledge:

Answer 29

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) - Its acquisition and transfer require hands-on experience

Question 30

Globalizing Research and Development:

Answer 30

R&D emerged as an important function to be internationalized and is often known as innovation-seeking investment: - The intensification of competition for innovation drives the globalization of R&D

Question 31

Knowledge retention:

Answer 31

The problem of employee turnover which may lead to knowledge leakage

Question 32

Solutions inKnowledge Management

Answer 32

- Manipulation of the formal rules of the game: * Individual and organizational incentives * Investing in tacit knowledge - Informal integrating mechanisms - Development of informal social capital

Question 33

Social capital:

Answer 33

the informal benefits individuals and organizations derive from their social structure and network