session 11 © furrer 2002-20081 corporate strategy fall 2008 session 11 corporate strategy:...

Session 11 © Furrer 2002-2008 1

Corporate StrategyFall 2008

Session 11

Corporate Strategy:Organizational and International Dimensions

Dr. Olivier Furrer

Office: TvA 1-1-11, Phone: 361 30 79e-mail: [email protected]

Office Hours: only by appointment

Session 11 © Furrer 2002-2008 2Young

Strategy and Structure Growth Pattern

MaturityAge of Organization

Size

of

Org

aniz

atio

n

Small

Large

Coordination and Control Problems

Simple Structure

Functional Structure

Multi-divisional Structure

Matrix Structure

Network Structure

Ref

.: A

dapt

ed f

rom

Gre

iner

, 197

2; C

hurc

hill

and

Lew

is, 1

983


ProductionFinance R&D AccountingSales &

MarketingHuman

Resources

Chief Executive Officer



ProductionFinance Engineering AccountingSales &

MarketingHuman

Resources

Strategic Planning

Corporate Finance

Corporate R&D

Corporate Marketing

Corporate Human

Resources




Division Division Division Division

ProductionFinance Engineering AccountingSales &

MarketingHuman

Resources

Strategic Planning

Corporate Finance

Corporate R&D

Corporate Marketing

Corporate Human

Resources


Multi-Divisional Structure


Cooperative Form

Three variations of the Multi-Divisional Structure

Related-Constrained

Multi-Divisional Form Strategy Type

Strategic Business Unit (SBU) Structure

Related-Linked

Competitive FormUnrelated /Holding Company



Each division is operated as a separate business

Managers try to strike a balance between:

Competing among divisions for scarce capital resources

Creating opportunities for cooperation to develop synergies

The goal is to maximize overall firm performance

Key task of corporate managers is exploiting synergies among divisions

Appropriate for related-diversified businesses

Managers use a combination of strategic controls and financial controls

Cooperative Form Multi-Divisional Structure


The decision-making of managers in a Multi-Divisional structure may be:

Balance on these dimensions may change over time

* Centralized or Decentralized* Bureaucratic or Non-bureaucratic

* Changes in Strategy* Degree of Diversification* Geographic scope* Nature of competition

Structure will evolve over time with:



Finance

ProductionFinance Engineering Accounting Sales & Marketing

Human Resources

Production Engineering Accounting Sales & Marketing

Human Resources

Corporate Office (Staff)


Product A Product B

Evolution of Multi-Divisional Structure


Product A

North America Europe Asia


Product B Product C Product D

ProductionFinance Engineering Accounting Sales & Marketing

Human Resources




Type of Corporate Strategy selected will have an impact on the selection and implementation of the business-level strategies

Some Corporate strategies provide individual country units with flexibility to choose their own strategies

Others dictate business-level strategies from the home office and coordinate resource sharing across units

Global Strategy

Transnational Strategy

Multi-Domestic Strategy

Corporate-Level International Strategies

Three Corporate Strategies


Strategy and operating decisions are decentralized to strategic business units (SBU) in each country

Products and services are tailored to local markets

Business units in each country are independent of each other Assumes markets differ by country or regions

Focus on competition in each market

Prominent strategy among European firms due to broad variety of cultures and markets in Europe

Multi-Domestic Strategy


Products are standardized across national markets

Decisions regarding business-level strategies are centralized in the home office

Strategic business units (SBU) are assumed to be interdependentEmphasizes economies of scale

Often lacks responsiveness to local markets

Requires resource sharing and coordination across borders (which also makes it difficult to manage)

Global Strategy


Seeks to achieve both global efficiency and local responsiveness

Difficult to achieve because of simultaneous requirements for strong central control and coordination to achieve efficiency and local flexibility and decentralization to achieve local market responsiveness

Must pursue organizational learning to achieve competitive advantage

Transnational Strategy


High

Glo

bal C

o-or

dina

tion

In

tegr

atio

n

Low

Low HighNational differentiation, Responsiveness

Multi-National

Global Trans-National

International Corporate Strategy


Product A


Product B Product C Product D


A Structural evolution based on Product lines usually implies a Global International Strategy



A Structural evolution based on Geographic lines usually implies a Multi-Domestic International Strategy

North America AustraliaEurope Asia Latin

America Africa



Product A Product B Product C Product D



A Transnational International Strategy is likely to utilize a structure and that results in emphasis on both geographic and product structures



SBU’s Help to Solve Complexity Issues

Strategic Business Unit A

Division



Strategic Business Unit B

Strategic Business Unit C

Strategic Business Unit D

Division Division

Strategic Business Units (SBUs) are used to organize related businesses into groups for strategy development


Global Matrix Structure

Europe AsiaNorth

AmericaAfrica



Product A

Product B

Product C

Unit 1 Unit 4Unit 3Unit 2




Traditional International Structures

International Division

Area Division

WorldwideProduct Division

FOREIGN PRODUCT DIVERSITY

FOREIGN SALES AS PERCENTAGE OF TOTAL SALES

Global Matrix


The choice between centralization and decentralization is frequently based on the business-level strategy implemented in each division

Multi-Divisional structure firms use a combination of:

Cost LeadershipDecentralizationDifferentiation

Centralization

Complex Multi-Divisional structure firms may be simultaneously centralized and decentralized , depending upon the various business-level strategies employed throughout the firm’s individual businesses

Financial ControlsStrategic Controls



Cooperative M-Form

SBU M-Form

Competitive M-Form

Structural Characteristics

Degree ofCentralization

Use ofIntegratingMechanisms

DivisionalPerformance

Appraisal

DivisionalIncentive

Compensation

Type of Strategy

Related-Constrained

Mixed Relatedor Unrelated

Centralized atCorporate Office

Centralizedin SBUs

Decentralizedto Division

ExtensiveSynergies

ModerateSynergies

FinancialCriteria

Strategic &FinancialCriteria

Linked to Corporate

Performance

Linked toCorporation,

Division & SBU

Linked toDivisional

Performance

NonexistentSynergies

Subjective/StrategicCriteria

Attributes of Various Structural Forms

Unrelated


Administrative Heritage

• “Where to” is influenced by “where from.”

• Competitive advantage shaped by country of origin, time of expansion, and nature of leadership.

• The challenge is to built new capabilities while protecting existing strengths.

Strategic Asset and Organisational Anchor


Pre-war European Empires

• Expended abroad in a period of high international barriers.– Preferential access to foreign empire markets

• Organisation developed as a portfolio of national companies.– Heritage of family management, personal control

• Strategy based on understanding and responding to national markets.

Nationally Responsive Strategies


Pre-War European Empires:Decentralised Federations

• MULTINATIONAL STRATEGY MODEL

- COMPETE BY BEING NATIONALLY RESPONSIVE


Post-war American Hegemony

• Expended abroad in a time of economic reconstruction.– Large, advanced home market as knowledge source

• Organisation built on strong links to the parent company based on transfer of expertise.– Heritage of professional management, systems control

• Strategy based on transferring parent company’s leadership in technology, marketing, and another skills.

Strategy of Knowledge Transfer


Post-war American Hegemony:Co-ordinated Federations

• INTERNATIONAL STRATEGY MODEL

- COMPETE THROUGH KNOWLEDGE TRANSFER


Modern Day Japanese Challenge

• Expanded abroad in a period of falling trade barriers.– Newly added capacity and government industrial policy as

assets

• Organisation grew as dependent foreign units tightly controlled from the centre.– Heritage of culturally dependent management practices

dominated by group processes

• Strategy based on capturing global scale economies.

Competing Through Global Efficiency


Modern Day Japanese Challenge:Centralised Hubs

• GLOBAL STRATEGY MODEL

- COMPETE THROUGH GLOBAL EFFICIENCY


Strategic Capabilities of the Transnational

• Sensitivity, flexibility, and responsiveness to local needs.

• Global scale efficiency and competitive response capability.

• World-wide innovation skills and learning capabilities.

The New Game for the 21th Century


The Transnational Organization Model:The Integrated Network

Centralized Hub Decentralized Federation

The Integrated Network

Coordinated Federation


Organisational Characteristicsof the Transnational

• Multi-dimensional Perspective– Large flows of components, products, resources,

people, and information among interdependent units.

• Distributed, Interdependent Capabilities

• Flexible Integrative Process– Complex process of co-ordination and co-

operation in an environment of shared decision making


Organizational Characteristics of the Transnational

Characteristics

Configuration ofassets andcapabilities

Multinational

Decentralizedand nationallyself-sufficient

Global

Centralized andglobally scaled

International

Corecompetenciescentralized,othersdecentralized

Transnational

Dispersed,interdependentand specialized

Role of overseasoperation

Sensing andexploiting localopportunities

Implementingparentcompanystrategy

Adapting andleveragingparentcompanycompetencies

Differentiatedcontributions bynational units tointegratedworldwideoperations

Developmentand diffusion ofknowledge

Knowledgedeveloped andretained withineach unit

Knowledgedeveloped andretained at thecenter

Knowledgedeveloped atthe center andtransferred tooverseas units

Knowledgedevelopedjointly andsharedworldwide


Next Session: Case Study 3

The Globalization of CEMEX

session 11 © furrer 2002-20081 corporate strategy fall 2008 session 11 corporate strategy:...

Documents

type of corporate strategy

corporate strategyfall

individual country units

marketprominent strategy

local marketsbusiness

international dimensionsdr

operating decisions

synergiesthe goal