iml 8092(1)

INTERNATIONAL

MANAGEMENT AND LEADERSHIP

IML 8092

STUDENT ID: - A6940

SUBMITTED BY: -HIMANSHU SONI

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1. What are the biggest management challenges for international firms? What can firms do in response? What are some of the forms of political risks? What steps can firms take in order to deal with this risk?

Answer: BIGGEST MANAGEMENT CHALLENGES FOR INTERNATIONAL FIRMS

CULTURE Language BarriersThe biggest, most common managerial challenge when it comes to working internationally is a language barrier. While most executives are fluent in a number of languages, there is no guarantee an entire office will speak your language. Even if you have some foreign language skills, it is different to try to conduct business in a foreign language than to merely have casual conversation. Additionally, the nuances of other languages make it harder to understand and be understood.

Cultural DifferencesEvery culture across the globe has its own unique set of cultural norms. In the U.S., managers typically do much of their own administrative work, including answering phones, sending mail, etc., but in many other countries, specifically in Asia, managers have several administrative employees at their disposal to do everything from book travel to making a cup of tea. The best way to get used to the differences is to be gracious.

TECHNOLOGY

Technical DevelopmentDifferences among the technical development and facility of markets--internationally or within the United States--determine fundamentally the opportunities of production, sales and marketing of the operating businesses. For example, you cannot sell the latest 4G mobile phones in a market where there's no 4G network. You can build your advertising and promotion strategy exclusively on the Internet if the majority of the national population or local community uses the Web as its primary source of information.

BUSINESS ATTITUDE

Information and knowledge about the business etiquette, attitude and habits of a foreign country are essential to successfully compete or cooperate with businesses in a market. These attitudes also determine how businesses react to different situations in the market (whether they act offensively or defensively). Small businesses can use the information about these different international business attitudes while competing against foreign companies in their domestic market.

Work PracticesTo be successful as an international manager, ultimately it comes down to understanding the work practices of the culture you are in. In many countries, it's common for managers and employees to have lunch together at the same time. Also, some countries work half-days on Saturday, whereas in the U.S., businesses operate on a Monday through Friday schedule. By adopting the local work practices, you will continue to gain trust and overcome the challenges of working abroad.

Trust and UnderstandingThink about how you would feel if a manager from another country came in and started changing the way you had been doing things in your office for as long as you could remember. It might be hard to trust that person. Developing relationships with others is a

HIMANSHU SONI ID NO. A6940 2

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critical success factor for managers in international environments. If you can develop trust and show you understand your employees' value to the organization, you will have conquered a big hurdle.

Time Zone ChallengesA challenge to working with international employees is sometimes the time zone differences. If you are based in the U.S. and work with offices in Europe or Asia, get ready for some off-hour conference calls. Also, when emailing, remember you probably will not hear back from the person you sent your message to until the next day. This can sometimes pose a challenge when a decision needs to be made, but careful planning can help avoid any issues that arise.

WAYS TO OVERCOME MANAGEMENT CHALLENGES FOR INTERNATIONAL FIRMS

To take advantage of the opportunities that international business affords, businesses need to understand these complexities in order to maximize efficiency and maintain their competitive edge. Employers looking to improve global benefits management must establish a global strategy; gather local, competitive information; and look for opportunities to ease administration. Beyond the obvious job‐specific qualifications, an organization needs to consider the following qualities and circumstances when selecting expatriates for positions in foreign countries:

A willingness to communicate, form relationships with others, and try new things Good cross‐cultural communication and language skills Flexibility and open‐mindedness about other cultures The ability to cope with the stress of new situations The spouse's career situation and personal attributes The existence of quality educational facilities for the candidate's children Enthusiasm for the foreign assignment and a good track record in previous foreign

and domestic moves

Planning: The first stage of international planning is to decide how to do business globally: whether to export, to enter into licensing agreements or joint ventures, or to operate as a multinational corporation with facilities in a foreign country. To develop forecasts, goals, and plans for international activities, the manager must monitor environments very closely. Key factors include political instability, currency instability, and competition from governments, pressures from governments, patent and trademark protection, and intense competition.

Organizing: International firms should be sure that their plans fit the culture of the host country. Many countries must plan with the assistance of governmental agencies. International businesses must be organized so that they can adapt to cultural and environmental differences. An international firm must be organized so that it can be responsive to foreign customers, employees, and suppliers. The new organization must establish a very open communication system where problems, ideas, and grievances can quickly be heard and addressed at all levels of management. Without this, employees will not get involved, and their insights and ideas are crucial to the success of the business. As foreign operations become more important to the bottom line, decision-making becomes more centralized at corporate headquarters. A functional product group, geographic approach, or a combination of these approaches should be adopted. The firm unifies international activities with worldwide decisions at world headquarters.

Staffing: Because obtaining a good staff is so critical to the success of any business, the hiring and development of employees must be done very carefully. Management must be familiar with the country's national labor laws. Next, it must decide how many managers and personnel to hire from the local labor force and whether to transfer home‐based personnel.


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Directing: Cultural differences make the directing function more difficult for the international manager. Employee attitudes toward work and problem solving differ by country. Language barriers also create communication difficulties. To minimize problems arising from cultural differences, organizations are training managers in cross‐cultural management. Cross‐cultural management trains managers to interact with several cultures and to value diversity.

Controlling: Geographic dispersion and distance, language barriers, and legal restrictions complicate the controlling function. Meetings, reporting, and inspections are typically part of the international control system. Controlling poses special challenges if a company engages in multinational business because of the far‐flung scope of operations and the differing influences of diverse environments. In many countries, bonuses, pensions, holidays, and vacation days are legally mandated and considered by many employees as rights. Particularly powerful unions exist in many parts of the world, and their demands restrict managers' freedom to operate.

POLITICAL RISKS: MEANING AND FORMS

Political Risks refers to the risk that a host country will make political decisions that will prove to have adverse effects on the multinational's profits and/or goals. Adverse political actions can range from very detrimental, such as widespread destruction due to revolution, to those of a more financial nature, such as the creation of laws that prevent the movement of capital.

Macro Political Risk: A type of political risk in which political actions in a host country can adversely affect all foreign operations. Macro risk can come about from events that may or may not be in the reigning government's control.For example, any company that is engaging in foreign direct investment in a country that is on the verge of switching to an anti-foreigner slanted government would be facing tremendous macro risk, because the government is likely to expropriate any and all foreign operations, regardless of industry.

Micro Political Risk: A type of political risk that refers to political actions in a host country that can adversely affect selected foreign operations. Micro risk can come about from events that may or may not be in the reigning government's control.For example, diplomatic tension with Country A has caused the citizens of Country B to vandalize all Country A based companies situated in Country B. In this example, only operations from Country A were faced with adverse situations. Operations from other countries were not affected.

STRATEGIES TO MINIMIZE POLITICAL RISK Organizations make a serious mistake when they ignore or underestimate political risk. Political risk may have different characteristics than other types of risk, but it can – and should – be managed. Effective management of political risk can enable companies to enter and navigate new markets and business environments, providing a potential for competitive advantage.A three-step process can enable companies to identify key political risks, measure their potential impact on performance, and determine the best method to manage such risks:

Identify: In this first stage, risk managers identify the main political risks by geography. The key question at this stage is: “How can political actors or conditions directly affect our objectives?” Risk managers can develop an inventory of political risk types, ranging from capital controls to increased taxation to strikes and protests to wars and terrorism, to scan the horizon for potential risks. Some situations may create significant political or social instability but few real implications for the business; they may, in fact, present an opportunity


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to gain market share. The risk management team will then develop an evidence-based set of risk scenarios, based on both well-defined and highly specific data directly relevant to the company’s objectives. A scenario set gives risk and business managers a basis upon which to define their data requirements.

Measure: In the second stage, armed with a very specific set of political risk scenarios, risk managers assess and quantify the potential impact of each scenario on the business. Discounted cash flow (DCF) analysis can be used, for example, to estimate the financial impact of specific events as an input to help organizations understand their tolerance levels. Other tools, such as an organizational network analysis, can help determine the estimated operational impact of specific risks. Here, risk managers create a model of the company as a network of various inter-dependent business units; for example, a consumer goods company might have manufacturing, packaging and distribution across countries. One of the most important aspects of measurement is the translation of projected events into readily identifiable and comprehensible metrics, such as dollar figures, an impact index, or an ability-to-influence index. Using these metrics, risk managers can assess whether the risk level surpasses the organization’s risk appetite or tolerance.

Manage: Once risks have been identified and measured, an effective system for active political risk management can be put in place. The first element in managing political risks is to map potential risk management methods against the priority risks. Once the organization establishes a course of action, the risk management team can assign responsibilities and establish a schedule for consultation, reporting and review, as with other risk controls. Companies actually have multiple options for addressing identified risks. A company operating in a country where there are signs of corruption in trade practices, for example, may seek to review its overall code of conduct and step up local training activities to ensure that all rules are thoroughly understood. As noted, organizations can gain significant benefits from managing political risk and ignore this risk at their peril. Effective management of political risk can enable companies to tap new revenue streams through access to markets and joint ventures that, without careful management, might seem too risky. Clear identification, measurement and management of risk can facilitate organizational buy-in for growth strategies that target emerging markets and “frontier” markets, while improving the performance of existing businesses.

2.What are the steps in making international negotiations successful?

Answer: Meaning of International Business Negotiation: The business negotiation that takes place between the interest groups from different countries or regions.

STEPS IN MAKING INTERNATIONAL NEGOTIATIONS SUCCESSFUL International business deals not only cross borders, they also cross cultures. Culture profoundly influences how people think, communicate, and behave. It also affects the kinds of transactions they make and the way they negotiate them. Differences in culture between business executives—for example, between a Chinese public sector plant manager in Shanghai and a Canadian division head of a family company in Toronto– can create barriers that impede or completely stymie the negotiating process.Negotiating abroad requires the ability to meet special challenges and deal with the unknown. Even those experienced in cross-cultural communication can sometimes work against their own best interests during international business negotiations. Skilled negotiators know how to analyze each situation, set up negotiations in ways that are advantageous for their side, cope with cultural differences, deal with foreign bureaucracies, and manage the negotiation process to reach a deal.The great diversity of the world’s cultures makes it impossible for any negotiator, no matter how skilled and experienced, to understand fully all the cultures that may be encountered. The “top ten” elements of negotiating behavior constitute a basic framework for identifying cultural differences that may arise during the negotiation process. Applying this framework in


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the international business negotiations may enable one to understand your counterpart better and to anticipate possible misunderstandings.

The negotiation process

1.Preparation: negotiator must familiarize themselves with the entire context and background of their counterparts.

There should be the specific subjects to be negotiated. They must be aware of the differences in culture, language, and environment. Managers must have an understanding of there on negotiating style.

Managers should find out as much as possible about: The kinds of demands that might be made The composition of the opposing team The relative authority that the members possess Develop a profile of their counterparts. They consider different variables during this process as well.

2. Relationship building: taking time to build mutual trust before starting business discussions

May require go-betweens Be prepared to wait for the other party to start business negotiations

3.Exchanging task related information – during this stage each side makes a presentation and states its position, normally followed by a question – and – answer session.

Role reversal: showing an understanding of the other party’s vie points and needs

4. Persuasion – during this stage both parties try to persuade the other to accept more of their position while giving up some of their own; there are recognizable tactics for this stage

Stressful tactics

5. Concessions and agreements – at this point each side will make various concessions so that an agreement can be reach and signed.

Managing negotiation Successful management of intercultural negotiations requires the manager- To gain specific knowledge of the parties in the upcoming meeting- To prepare accordingly to adjust to and control the situation- To be innovative A problem solving approach is essential to successful cross- cultural negotiations- Treat everyone with respect, avoid making anyone feel uncomfortable, don’t criticize

or blame others in a personal way such that they lose face

Using the Web to support Negotiation Negotiation support systems (NSS) can provide support for the negotiation process

by: Increasing the likelihood that an agreement is reached when a zone of agreement

exists (solutions that both parties would accept) Decreasing the direct and indirect costs of negotiations such as costs caused by

time delays (strikes, violence), and attorneys’ fees among others


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Maximizing the chances for optimal outcomes

3. Identify and explain the cultural causes of conflict in international management.

ANSWER: CULTURAL CAUSES OF CONFLICT IN INTERNATIONAL BUSINESS

Meaning: When business people from different cultures interact, they sometimes come into conflict because of different worldviews, manners, taboos and social mores. In an increasingly global market place, business people can avoid conflict through awareness of these differences.

Function: Culture can include race, ethnicity, nationality and language. It can also include economic class, religion, gender and sexual orientation. Culture shapes many aspects of life such as worldview, relationships and self-identity.

Type: Business-related cultural conflict can arise from difference in time orientation, nonverbal communication, spatial orientation, gender roles and similar factors. These factors affect areas of business such as negotiation, marketing and management.

A key to being successful in business internationally is to understand the role of culture in international business. However, on the one hand where it is important to be aware of cultural differences of different countries, on the other, it is also hard to be aware of every single aspect of each country’s organizational culture. Therefore, you should be aware of the key factors that have a direct impact on business. These are:

Communication is the key to success for any business, whether you are operating nationally or internationally, but when operating internationally it becomes even more important due to language barriers. Passport to Trade 2.0 project aims to remove this barrier by providing training materials in the languages of the country you are operating.

Being aware of basic customer needs is an important aspect, as this will give the advantage of conveying your message. In simple terms, if you are aware of the customer’s cultural background, then you will be able to adopt better and more suitable advertising methods.

Body language is another key factor in cultural difference. As different countries have different ways to convey or share their message, for instance in Germany people tend to speak loudly when sharing ideas, whereas in Japan people speak softly, it very important to know what your body language should be doing when interacting with people whether it’s your business partner or an interviewer.

Before launching a marketing campaign, always conduct research to become aware of your target audience since customer demand, decision-making, gender views and ideologies greatly vary in cultures.

In the business world, communication is imperative for the successful execution of daily operations. Understanding cultural differences and overcoming language barriers are some of the considerations people should have when dealing with business with people of various cultures. Often business deals are lost because the parties involved did not take the time to learn about their each other’s cultures prior to interacting.

Advertising Conflicts


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Businesses that either market to, or negotiate with, foreign cultures should research cultural differences in order to avoid situations that could create conflict. Advertising to foreign culture should be carefully reviewed, especially if it is translated into another language.

Negotiating ConflictsConflict in international negotiations can result from differences in language as well, but often, foreign cultures also have different attitudes about negotiating. For example, the intellectual property website FPO says some European countries don't have a culture of negotiation. In these cases, buyers or sellers who propose prices far off from what they are willing to accept in order to build room for negotiation are seen as untrustworthy.

Workplace ConflictsEven small businesses that don't trade overseas can be faced with cultural conflict issues. In some cases, cultural and ethnic diversity in the workplace can create conflict and affect employee moral if not managed properly. But through communication and leadership, small businesses can avoid these conflicts and reap the benefits that a workforce of diverse views and talents offers.

CustomsWhen doing business with an affiliate from another country, consider the cultural differences that may be presented. This includes basic customs, mannerisms and gestures. For example, If a salesperson approaches a meeting with knowledge of a customer’s cultural background, then his words, body language and actions can all be adapted to better suit those of the customers. This in turn may lead to being better liked by the customer, ultimately increasing the salesperson's opportunity to close the deal.

Language BarriersIn some countries, like the United States and Germany, it is common for people to speak loudly and be more assertive or aggressive when sharing ideas or giving direction. In countries like Japan, people typically speak softly and are more passive about sharing ideas or making suggestions. When interacting with people from different cultures, speaking in a neutral tone and making a conscious effort to be considerate of others' input, even if it is given in a manner to which you are not accustomed, can help foster effective business communication.

Target AudienceWhen launching a marketing campaign or advertising to members of a different culture, always research the target market prior to beginning the campaign. Levels of conservatism, gender views and ideologies can vary greatly between cultures. Presenting a campaign that is not in line with specific cultural norms can insult the target audience and greatly hinder the campaign. Being aware of cultural norms can also help your company narrow down the target audience. For instance, in Japan and Austria, men usually are in control of decision-making, but women make the majority of purchasing decisions in Sweden.

TechnologyDue to globalization, people from various cultures and countries increasing conduct business with each other. Technology enables people to easily connect with people around the world in a moment's notice, but there are a few rules to remember before doing so. If making an international phone or video conferencing call, be conscious of the time zone differences and make sure to set a reasonable time for all involved parties to interact. It is important to remember that cultural differences can also affect availability. For instance, just because you schedule a conference call for the middle of the business day does not mean that the time will be favorable for the people you are conducting business with. Many Spanish cultures have longer lunch breaks than Americans are accustomed to, which means there may be a two- to three-hour time period during the day in which the person you would like to meet with is


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unavailable. Asking for availability prior to making the call is the best way to avoid any confusion. Once you are able to connect, speak clearly and slowly.

PoliticsPolitical influences, both past and present, can potentially affect the way a person or company does business. Some cultures have a very strong sense of nationalism and government pride, and therefore, are more comfortable and willing to purchase from companies with some sort of government backing. Conducting business with those of differing cultures can also impact negotiations if there are on-going political disputes between the involved parties' countries of origin. To avoid conflict, it is best to avoid discussing any political matter that does not directly pertain to the business at hand. This is also true for inter-office interactions.

4.Explain the five steps in the process of developing international strategy. Outline the advantages and disadvantages of various foreign market entry options.

Answer: The strategic management process is more than just a set of rules to follow. It is a philosophical approach to business. Upper management must think strategically first, then apply that thought to a process. The strategic management process is best implemented when everyone within the business understands the strategy. The five stages of the process are goal setting, analysis, strategy formation, strategy implementation and strategy monitoring.

Goal-SettingThe purpose of goal-setting is to clarify the vision for your business. This stage consists of identifying three key facets: First, define both short- and long-term objectives. Second, identify the process of how to accomplish your objective. Finally, customize the process for your staff; give each person a task with which he can succeed. Keep in mind during this process your goals to be detailed, realistic and match the values of your vision. Typically, the final step in this stage is to write a mission statement that succinctly communicates your goals to both your shareholders and your staff.

AnalysisAnalysis is a key stage because the information gained in this stage will shape the next two stages. In this stage, gather as much information and data relevant to accomplishing your vision. The focus of the analysis should be on understanding the needs of the business as a sustainable entity, its strategic direction and identifying initiatives that will help your business grow. Examine any external or internal issues that can affect your goals and objectives. Make sure to identify both the strengths and weaknesses of your organization as well as any threats and opportunities that may arise along the path.

Strategy Formulation:

The first step in forming a strategy is to review the information gleaned from completing the analysis. Determine what resources the business currently has that can help reach the defined goals and objectives. Identify any areas of which the business must seek external resources. The issues facing the company should be prioritized by their importance to your success. Once prioritized, begin formulating the strategy. Because business and economic situations are fluid, it is critical in this stage to develop alternative approaches that target each step of the plan.

Strategy ImplementationSuccessful strategy implementation is critical to the success of the business venture. This is the action stage of the strategic management process. If the overall strategy does not work


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with the business' current structure, a new structure should be installed at the beginning of this stage. Everyone within the organization must be made clear of their responsibilities and duties, and how that fits in with the overall goal. Additionally, any resources or funding for the venture must be secured at this point. Once the funding is in place and the employees are ready, execute the plan.

Evaluation and Control:Strategy evaluation and control actions include performance measurements, consistent review of internal and external issues and making corrective actions when necessary. Any successful evaluation of the strategy begins with defining the parameters to be measured. These parameters should mirror the goals set in Stage 1. Determine your progress by measuring the actual results versus the plan. Monitoring internal and external issues will also enable you to react to any substantial change in your business environment. If you determine that the strategy is not moving the company toward its goal, take corrective actions. If those actions are not successful, then repeat the strategic management process. Because internal and external issues are constantly evolving, any data gained in this stage should be retained to help with any future strategies.

FOREIGN MARKET ENTRY OPTIONS: TYPES, ADVANTAGES AND DISADVANTAGES Foreign market entry modes differ in degree of risk they present, the control and commitment of resources they require and the return on investment they promise.

1. Exporting2. Licensing3. Franchising4. Turnkey Projects5. Wholly owned subsidiaries6. Joint venture

Exporting: It is the process of selling of goods and services produced in one country to other countries.

Advantages of Direct Exporting Control over selection of foreign markets and choice of foreign representative

companies Good information feedback from target market, developing better relationships with

the buyers Better protection of trademarks, patents, goodwill, and other intangible property Potentially greater sales, and therefore greater profit, than with indirect exporting

Disadvantages of Direct Exporting Higher start-up costs and higher risks as opposed to indirect exporting Requires higher investments of time, resources and personnel and also organizational

changes Greater information requirements Longer time-to-market as opposed to indirect exporting

Licensing: An international licensing agreement allows foreign firms, either exclusively or non-exclusively to manufacture a proprietor’s product for a fixed term in a specific market.

Advantages of Licensing Obtain extra income for technical know-how and services


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Reach new markets not accessible by export from existing facilities Quickly expand without much risk and large capital investment Pave the way for future investments in the market Retain established markets closed by trade restrictions Political risk is minimized as the licensee is usually 100% locally owned Is highly attractive for companies that are new in international business.

Disadvantages of Licensing Lower income than in other entry modes Loss of control of the licensee manufacture and marketing operations and practices

leading to loss of quality Risk of having the trademark and reputation ruined by an incompetent partner The foreign partner can also become a competitor by selling its production in places

where the parental company is already in.

Franchising: A system in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system.

Advantages of Franchising Low political risk Low cost Allows simultaneous expansion into different regions of the world Well-selected partners bring financial investment as well as managerial capabilities to

the operation.

Disadvantages of Franchising Franchisees may turn into future competitors Demand of franchisees may be scarce when starting to franchise a company, which

can lead to making agreements with the wrong candidates A wrong franchisee may ruin the company’s name and reputation in the market Comparing to other modes such as exporting and even licensing, international

franchising requires a greater financial investment to attract prospects and support and manage franchisees.

Turnkey Projects: A project when clients pay contractors to design and construct new facilities and train personnel. A turnkey project is way for a foreign company to export its process and technology to other countries by building a plant in that country. Industrial companies that specialize in complex production technologies normally use turnkey projects as an entry strategy.

Advantages of Turnkey Projects Possibility for a company to establish a plant and earn profits in a foreign country

especially in which foreign direct investment opportunities are limited and lack of expertise in a specific area exists.

Disadvantages of Turnkey Projects Risk of revealing companies secrets to rivals, and takeover of their plant by the host

country. Entering a market with a turnkey project CAN prove that a company has no long-term interest in the country which can become a disadvantage if the country proves to be the main market for the output of the exported process


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Wholly owned subsidiaries (WOS)

Advantages of Wholly owned subsidiaries (WOS) The monetary influence of a parent company cannot be overemphasized. The parent has the means of providing buying power, research and development

funds, marketing money and know-how, employees, technical expertise and other features the smaller company could not afford or accomplish alone.

The parent can provide the monetary means and capability to jump start new companies and products. The marketing power of the parent, such as the ability to place products in stores, can be a boon to a smaller company seeking to expand.

It is easier for a smaller subsidiary to form joint ventures and partnerships with other companies if a larger corporate bureaucracy does not hinder it.

Subsidiaries can borrow money and issue their own debt.

Disadvantages of Wholly owned subsidiaries (WOS) Integrating two organizations can be quite difficult due to different organization

cultures, control system, and relationships. Integration is a complex issue, but it is one of the most important things for organizations.

By applying acquisitions, some companies significantly increased their levels of debt, which can have negative effects on the firms because high debt may cause bankruptcy.

Too much diversification may cause problems. Even when a firm is not too over diversified, a high level of diversification can have a negative effect on the firm in the long term performance due to a lack of management of diversification

5.What are the pros and cons associated with various organizational structures used by international firms?

Answer: PROS AND CONS ASSOCIATED WITH VARIOUS ORGANIZATIONAL STRUCTURES USED BY INTERNATIONAL FIRMS

Organizational structure is the formal arrangement of roles, responsibilities, and relationships within an organization and is a powerful tool with which to implement strategy. A company’s choice of structure depends on many factors, including the configuration of a company’s value chain in terms of the location and type of foreign facilities, as well as the impact of international operations on total corporate performance. Global Functional Model

The simplest model for multinational firms. Works especially well for companies where there are few customer differences in

taste but there are highly specialized skills used in creating the product.

Advantages Efficiencies- because each functional set is coordinated globally, each functional

group is efficient Costs are kept low because there is little need to duplicate skill sets Economies of scale- developed in one place and quickly spread to all the other

subsidiaries Rapid transfer of skills- easier to see what others are doing and learn from it


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Disadvantages Inflexibility: Some people resist helping each other Local dysfunctions: Each function becomes frustrated with the others Market rejection- Local market preferences tend to get ignored and if those market

preferences are important, the product ends up being rejected in the local market Bureaucracy-Discourage initiative- decide their ideas are not really wanted

Geographic model Used in companies with one operating division and in companies that would prefer

fairly simple organizational structure Highest levels of managers are regional specialist's not functional specialists Works well for companies in which customers have substantial demands for

customization to their region.

Advantages Flexibility- each country manager can adapt the company's products to make it

successful. Local needs- can target local needs. Products are a much better match to local consumers desires

Quickly adapts to markets- the country manager has all the internal expertise needed to make changes. That means adaptations occur quickly.

Disadvantages Diseconomies of scale- Very expensive. It also lacks coordination between functional

skill sets. Duplication- Information is often not shared between countries which means every

invention made or process must be remade or rediscovered in every country Poor at serving global customers- It can't easily deliver one consistent product at a

consistent price to a consumer all around the world.

Single Matrix Model Strong regional customer preferences and highly technical skills needed within the

company. Have one functional manager and one geographic manager.

Advantages Global efficiencies- all the local marketing or operations managers are connected to

each other through their functional managers so decisions occur globally Local responsiveness- Managers pay more attention to local needs which allows

grater customization and adaptiveness on the local level

Disadvantages Power struggles- Constantly faced with opposing goals. Role Ambiguity- due to constant power struggles, people are left not knowing what to

do. Dilutions of responsibility- Managers point the finger at each other. Cost Inefficiencies- a lot of time spent politicking, often little else accomplished. Cost of compromise- the solution in between solves neither problem and produces a

market failure.

Multi-business global product division


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The multi division makes a company more profitable and more powerful in the industry.

Technology oriented companies with highly specialized skills require but fewer customer requirements for localization are likely to use this model.

Advantages Flexibility- by selling several related products, a company can learn more about

customer needs Local needs- Various product divisions can combine their offerings in different ways

to meet local standards Global Coordination- Have better resources for global coordination

Disadvantages Duplication of effort- Each functional group is repeated in each division Lack of local responsiveness- when integrated well, multiple product divisions make

bureaucracy much worse and the company can become blinded by local needs.

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