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International Business : The Challenge of Global Competition, 8/e
Donald Ball
Wendell H. McCulloch, California State University Long Beach
Paul L. Frantz, California State University Long Beach
Michael Geringer, California Polytechnic State University
Michael S. Minor, University of Texas Pan American
Strategic Planning, Organization Design and Control of the Firm

E Learning Session

  1. The Competitive challenge facing managers of international business PowerPoint (34.0K)
    1. Success depends on quickly identifying and exploiting opportunities
    2. Managers must have clear understanding of organizational mission
    3. Assess strengths and weaknesses
  2. What is international strategy, and why is it important
    1. International strategy is concerned with the ways firms make fundamental choices about developing and deploying scarce resources internationally Concept Check
    2. To be effective, must be consistent
    3. Goal is to achieve a competitive advantage the ability to have higher rates of profits than its competitors
    4. Why plan globally?
      • To meet challenges of international markets, formal global strategic planning is necessary
      • Global strategic plans provide guides for constant actions everywhere in a firm's decision-making
    5. Standardization and planning
      • Research and development and manufacturing have been more easily standardized than has marketing
      • Many believe marketing strategies are best developed locally to account for cultural and other specifics of the market
      • However, standardizing marketing components is growing
    6. Global strategic planning process PowerPoint (35.0K)
      • This process involves Concept Check
        1. Analyzing the company's external environments
        2. Analyzing the company's internal environments
        3. Defining the company's business and mission
        4. Setting corporate goals
        5. Quantifying goals
        6. Formulating strategies
        7. Making tactical plans
      • Global and domestic planning processes similar
        1. Process parallel in steps described
        2. The variation of variables introduced by market arena is the difference
        3. Worldwide planning is, however, far more complex than domestic only planning
      • Analyze domestic, international and foreign environments
        1. Because the manager has little control over these forces, he or she must be aware of present conditions as well as predicted conditions
        2. Environment screening, as described in chapter 15, can be used to continuously gather and evaluate information
      • Analyze corporate controllable variables
        1. Analysis of force controlled by the firm can include both situational analysis and forecasts
        2. Analysis typically includes all production activities
        3. Although Porter is given credit for this analytical approach, the value chain concept has been around for a long time (note: "value" may be misspelled in the text book)
        4. Planning must answer questions such as
          1. What are our strengths and weaknesses?
          2. Have we uncovered any facts that require us to delete goals?
        5. Upon completion of the analysis the planning process can define the mission statement, a broad statement that defines the organization's scope
      • Define the corporate business, vision, and mission statements
        1. These broad statements communicate to all stakeholders what the company is and where it's going
        2. Mission statement must be evaluated in light of information assessed in external and internal analyses
      • Set corporate objectives
        1. Objectives direct the firm's courses of action, maintaining them within the boundaries of the mission
      • Quantify the objectives
        1. When objectives can be stated in quantifiable terms, they should be
        2. Seek objectives that are measurable
        3. But care should be exercised to ensure the quantified goals are appropriate
      • Formulate the corporate strategy
        1. Planners will create options for the corporate strategy, an action plan to enable organization to reach their objectives
        2. Selection of which option to implement is based, to some degree, on the corporate culture
        3. Strategies may also be general
          1. Strategies may be general rather than specific
          2. Quantification occurs when general strategy is implemented into action plans
        4. Scenarios
          1. Provide multiple, plausible stories for future outcomes
          2. Allows "what if" questions to be raised and anticipated for effect
          3. Scenarios could be based on sudden changes in amount of sales, sudden increases in production costs, changes in political power
        5. Contingency plans
          1. Many companies prepare contingency plans, worst- or best-case scenarios or critical events that could have a severe impact on the firm
          2. These provide optional guidance in response to major changes in the operational environment
      • Prepare tactical plans
        1. Tactical plans are also called operational plans
        2. Details of action to accomplish goals
    7. Management tools
      • Processes or artifacts used by management to implement strategic planning
      • Ninety percent of American company managers said they use mission statements as a management tool
      • Other widely tools include customer satisfaction surveys, and competitor profiling
      • Least used tools were value chain analysis, five forces analysis, mass customization, and dynamic simulations
    8. Strategic plan features and implementation facilitators
      • Sales forecasts and budgets
        1. Two prominent features of a strategic plan
        2. Sales forecasts provide estimates of revenue to be generated and number of units to be sold (produced)
        3. Budgets are both a planning and control technique
      • Plan implementation facilitators
        1. Policies
          1. Broad guidelines issued by upper management to assist others in the organization to make consistent decisions
          2. Because policies are broad, they allow some leeway in decision making
        2. Procedures
          1. Describe how certain activities should be performed
          2. Assures consistency in organizational activity
    9. Kinds of strategic plans PowerPoint (34.0K)
      • Time horizon
        1. Plans may be classified as short-, medium-, or long-term
        2. Absolute time increments are debatable
        3. Time horizon may vary based on age of the firm, stability of the market
      • Level of organization
        1. Each level of the organization will have its own level of plan
        2. As plans filter downward, they tend to be more specific in defining action
    10. Methods of planning
      • Top-down planning Concept Check
        1. Top-down planning is the process that begins at the highest level in the organization and extends to lower levels
        2. This method may restrict innovation at lower levels
        3. It may also ignore local conditions
        4. This method ensures that all global operations are consistent
      • Bottom-up planning
        1. Process of beginning planning at the lowest level and proceeding upward until top management melds all plans into a unified whole
        2. This method allows those responsible for achieving goals to define what they are
        3. A disadvantage may be the variation in goals among units.
        4. Time to complete plan is also a disadvantage
      • Iterative planning
        1. Becoming more popular as a planning technique
        2. Combines aspects of top-down and bottom-up planning
        3. Example is 3-M's Strategy Planning Cycle
    11. New directions in planning
      • Who does it
        1. Specialized planners developed in the 1970s
        2. In 1980s. uncertainty in world markets made long-range planning ineffective
        3. Senior operating managers were brought back into the planning process because they were closer to local markets and conditions
        4. Recent developments are creation of teams to conduct planning
        5. Teams comprised of a variety of stakeholders
      • How it is done
        1. By 1980s, computer models and sophisticated forecasting methods were used
        2. Emphasis on these methods tended to concentrate on factors that could be quantified
        3. In the 1990s, managers realized that strategy plans were short and concise
      • Contents of the plan
        1. Content of strategic plans varies widely
    12. Summary of the planning process
      • Paraphrasing Frederick W. Gluck
        1. Top management must assume more explicit decision-making role
        2. Planning should change from forecasting process to a creative process
        3. Processes based on the future being like the past must be discarded
        4. The planner's role should change from a purveyor of incrementalism to a crusader for action
        5. Strategic planning must be restored to the core of the management responsibilities
  3. Organizational design
    1. Organizational design concerns PowerPoint (34.0K)
      • Finding the most effective way to departmentalize to take advantage of efficiencies of specialization
      • Coordination of activities to enable the firm to meet its overall objectives
      • The management challenge is to optimize these two conflicting needs
    2. Evolution of the global company
      • As international activities increase, an international division might be formed
        1. Division of the organization at the same level as the domestic division and is responsible for all non-home country activities
        2. Larger firms may be organized on a regional or geographic basis
        3. Goals for organization include
          1. Being more capable for developing competitive strategies to confront new global competitors
          2. Obtain lower production costs by promoting worldwide product standardization and manufacturing rationalization
          3. Enhance technology transfer and the allocation of company resources
        4. Global corporate form-product
          1. A domestic product division is given responsibility for global distribution of product
          2. Each product division is responsible for all aspects of production and distribution which sometime results in duplication of capabilities in larger organizations
        5. Global corporate form-geographic regions Concept Check
          1. All responsibility is assigned to an area manager
          2. Direction of worldwide activity is simplified
          3. Regionalized form is popular among companies producing low, or at least stable, technology content
          4. Coordination across regions present problems under this organization
        6. Global corporate form-function
          1. Few firms use a functional approach
          2. Those that do believe the functional specialization is appropriate anywhere the company operates
        7. Hybrid forms
          1. A hybrid organization is structured using more than one organizational type
          2. These may result from acquisitions and mergers
          3. They may develop in response to specialized situations
        8. Matrix organizations
          1. The matrix organization developed as management sought to mesh product, regional, functional or other expertise into an easily coordinated use of resources
          2. Problems with the matrix
            • Seemed to be a way to optimize resources by creating teams to achieve objectives
            • The created need for multiple managers in decision structure created difficulties
            • Matrix overlay attempts to overcome these difficulties
              1. Matrix overlay requires top management to heed the input from experts of other organizational dimension but do not have the double report requirement of a true matrix structure
        9. Strategic business units
          1. Product units are defined as if they were separate businesses
          2. If a product must be modified to meet local conditions, an SBU may be subdivided for the new products
    3. Changes in organizational form
      • Rapid change forces firms to seek organizational structures with flexibility
      • Reengineering involves restructuring of work and work flows for maximum effectiveness and efficiency
    4. Current organizational trends
      • Virtual corporation Concept Check
        1. Also called a network corporation
        2. An organization that coordinates economic activity to deliver value to its customers using resource outside the traditional boundaries of the organization
        3. It relies to a great extent on third parties to carry on business
        4. Although the name is new, the concept is old
        5. Provides greater flexibility than a traditional structure
        6. It has a disadvantage of the possible reduction of control by management over processes
      • Horizontal corporation
        1. A form of organization characterized by lateral decision processes, horizontal networks, and a strong corporate wide business philosophy
        2. Provides structure to respond quickly to market changes
        3. In many companies, teams are drawn from functional areas to attack problems or to exploit opportunities
        4. Described as "antiorganization because it seeks to overcome constraints of traditional organizations
    5. Corporate survival into the 21st century
      • Greater use of the dynamic network structure
      • Divides functions of a firm into small companies coordinated by small-sized headquarters
      • The firm focuses on core business with anything not essential to the business done more cheaply and faster by outside suppliers
  4. Control
    1. Subsidiaries,100 percent owned
      • Words "subsidiaries" and "affiliates" are used interchangeably
      • Parent has 100 percent control over organizational activity
    2. Where are decisions made? PowerPoint (32.0K)
      • Decisions made either in international headquarters or in the subsidiary, relating to five decision variables:
      • Product and equipment
        1. Decision location determination depends on degree of standardization of equipment or second markets
        2. Standardize?
          1. Standardized products reduce costs
          2. Good idea to have local management participate in product design
          3. Without global policy, headquarters is likely to seek standardization
          4. Foreign operations must convince central staff that alteration will produce greater profit
      • Competence of subsidiary management and the reliance on that management by headquarters
        1. Depends on how well executives know one another
        2. Moving executives around
          1. Many ICs have policy to transfer young executives around
          2. They receive exposure to both headquarters and subsidiary views
          3. Creates a network of managers who know each other and potentially work better together
        3. Understanding host country conditions
          1. The more the headquarters is familiar with the local situation, the more likely that decisions will be vested in headquarters
        4. How far away is the host country?
          1. The greater the distance or communication ease, the more likely the decision responsibility will be vested in the subsidiary
      • Size of the international company and how long it has been one
        1. As a rule, a large company can hire more people with specialized skill than small companies
        2. The longer a company has been an IC, the more likely they will have a significant presence of experts
        3. In larger organizations, with more headquarters resources, decisions are more likely vested in headquarters
      • The detriment of the subsidiary for the benefit of the enterprise
        1. Resource allocation can create a situation where a small loss for a subsidiary results in a major gain for the overall organization
        2. In these circumstances, decision are more likely at the headquarters level
        3. Moving production factors
          1. For any number of reason the IC may decide to move production factors from one country to another
          2. The subsidiary from which factors are taken would likely be reluctant
        4. Which subsidiary gets the order?
          1. When a large order is received the decision about which subsidiary fills the order might depend of production factors.
          2. When transportation costs, production capacity, labor cost and the like are calculated in, the firm may find advantages in assigning an order to one subsidiary or another
        5. Multicountry production
          1. When coordinating production of a single product in several countries at different subsidiaries, then IC decisions can help improve efficiency
        6. Which subsidiary books the profit
          1. When a company has option of where to book profit, decisions can be affected by tax regulations, exchange rates, or expatriation of profit
      • Subsidiary frustration
        1. Managers of subsidiaries must be motivated and loyal
        2. Taking decision authority from subsidiary erodes the important characteristics
    3. Joint venture and subsidiaries less than 100 percent owned
      • IC will never have the same level of control over a joint venture as a subsidiary
      • Loss of freedom and flexibility
        1. Shareholders outside the IC have input to management decisions
        2. Even minority shareholders can exert influence on management decisions
      • Control can be had
        1. IC can achieve control
          1. Through a management contract
          2. Maintain control of the finances
          3. Maintain control over technology
          4. Placing people from the IC into important positions in the JV
    4. Reporting
      • Financial
        1. A surplus could be held in a subsidiary for investment
        2. But funds might be useful to support other subsidiary activities
        3. IC wants an accounting of financial picture to make such decisions
      • Technological
        1. New technology is constantly being developed in many different countries
        2. Technology developed in one subsidiary could make a marked improvement to operations in other subsidiaries
      • Market opportunity
        1. Various subsidiaries might spot new or emerging markets for products or services produced by sister subsidiaries
        2. Other market related information should be transmitted to the IC on a regular basis
      • Political and economic
        1. This category has increased in importance as a report topic during the past few years
        2. Governments change as do their policies toward business
    5. "De-Jobbing"
      • Types of work performed in organizations is changing
      • Technology has led to "de-jobbing" or the trend from fixed-jobs tp a team approach
      • Teams are constituted to respond to situations
      • Hierarchy implodes
        1. Under these conditions, hierarchy cannot be maintained
        2. Direction comes from changing characteristics of the task rather than from job descriptions or supervision
      • Traits of companies with de-jobbed workers
        1. They encourage employees to make decisions
        2. They give employee information they need to effectively function
        3. The give employees lots of training in the broad business issues
        4. They give employees a stake in the organization-profit sharing
    6. Managers in a world out of control
      • The Internet represents a world out of control for managers
      • Kevin Kelly suggests that to cope
        1. Do simple things first
        2. Learn to do them flawlessly
        3. Add new layers of activity over the results of the simple task
        4. Don't change the simple things
        5. Make the new layer work as flawlessly as the simple one
        6. Repeat ad infinitum




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