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Designing Organizations for the International Environment
This chapter talks about the organization for international environment; the chapter examines global strategic approaches and the application of various structural designs for global advantage.
Today the world is becoming a unified global field, extraordinaryadvancements in communications, technology, and transportation have created a new, highly competitive landscape. Products can be made and sold anywhere in the world, communications are instant, and product-development and life cycles are growing shorter. No company is isolated from global influence.
MOTIVATIONS FOR GLOBAL EXPANSION
Today being successful means succeeding on a global scale, theimportance of the global environment is reflected in the shifting global economy.
There are three primary motivations for global expansions:
* Economies of scales: being able to achieve the lowest possible cost per unit of production, and to obtain volume discounts from suppliers.
* Economies of scope: by increasing a company’s market power as compared to competitors, because the companydevelops broad knowledge of the cultural, social, economic, and other factors that affect its customers in varied locations and can provide specialized products and services to meet those needs.
* Low-cost factors of production such as labor, raw materials, or land: many companies look for centers in other countries to take advantage of tax breaks, find skilled workers, and be closer to majorcustomers and suppliers.
STAGES OF INTERNATIONAL DEVELOPMENT
Each managers should consciously adopt a strategy for global development in order to become a global giant overnight, So the shift from domestic to global occurs through stages of development.
There are four stages
1. Domestic Stage: the company is domestically oriented; market potential is limited and is primarily in the homecountry. The structure of the company is typically functional or divisional, and initial foreign sales are handled through an export department.
2. International Stage: company takes exports seriously and become multidomestically oriented, it deals with each country individually, and the market is large and multidomestic.
3. Multinational Stage: having many experiences in a number ofinternational markets. The company obtains a large percentage of revenues from sales outside the home country, and it has business units scattered around the world along with suppliers, manufacturers, and distributors.
4. Global Stage: Organization structure can be extremely complex and often evolved into and international matrix or transnational model. The company, then, transcends any singlecountry.
Global expansion through international strategic alliances
Joint venture: is a separate entity created with two or more active firms as sponsors. This is a popular approach to sharing development and production costs and penetrating new markets. Joint venture may be with either customers or competitors. Companies often seek joint venture to take advantage of a partner’s knowledge of localmarkets, to achieve production cost savings through economies of scale, to share complementary technological strengths, or to distribute new products and services through another country’s distribution channels.
Consortia: mean groups of independent companies that join together to share skills, resources, costs, and access to one another’s markets. Consortia are often used in others parts of theworld.
DESIGNING STRUCTURES TO FIT GLOBAL STRATEGY
* Model for global versus local opportunities:
The globalization strategy refers to the product design manufacturing, and marketing strategy are standardized throughout the world.
* International Division:
has a status equal to the other major departments or divisions within the company. It’s organized according to geographical...