Chapter 9 MGMT460
Terms in this set (43)
Entry Strategies and Ownership Structures
-Wholly Owned Subsidiary
-Alliances and Joint Ventures
-Exporting and importing often are the only available choices for small and new firms wanting to go international
-Also permits larger firms to begin international expansion with minimum investment and minimum risk
Wholly Owned Subsidiary
-An overseas operation is totally owned and controlled by an
MNCs using a wholly owned subsidiary want total control and believe that managerial efficiency is better without outside partners
-Some host countries worry that the MNC could drive out local enterprises
-Home country unions sometimes view foreign subsidiaries as an attempt to "export jobs"
-Today many MNCs opt for a merger, alliance, or joint venture rather than a wholly owned subsidiary
Mergers and Acquisitions
-Are the cross-border purchase or exchange of equity involving two or more companies.
-Cultural differences and time constrains are barriers.
-Difficult to communicate new goals to subsidiary.
-Any type of cooperative relationship among different firms.
-Some are temporary, some more permanent.
International joint venture (IJV)
-Agreement under which two or more partners from different countries own or control a business.
-There are two types of alliances and joint ventures:
--Equity joint ventures
Advantages of alliances and joint ventures include
-Improvement of efficiency
-Access to knowledge
-Mitigating political factors
-Overcoming collusion or restriction in competition
Suggestions regarding participation in alliances
-Know their partner well before alliance is formed.
-Expect differences in alliance objectives among potential partners in different countries.
-Realize that having desired resource profiles does not guarantee that they are complementary to the firm's resources.
-Be sensitive to alliance partner needs.
-After identifying the best partner, work on developing a relationship of trust.
-An agreement that allows one party to use an industrial property right in exchange for payment to the other party.
-Licensor less expensively enters foreign market; licensee adds a product to its line.
-Licensee may avoid entry costs by licensing to a firm already there.
-Licensor usually is a small firm lacking financial and managerial resources.
-An arrangement in which one party (the franchisor) permits another (the franchisee) to operate an enterprise using its trademark, logo, product line, and method of operation in return for a fee
-Widely used in fast-food and hotel/motel industries
-With minor adjustments for the local market, this can result in highly profitable international business.
Initial Division Structure
Common among manufacturing firms, especially those with technologically advanced products
On-site manufacturing operations
In response to local governments when sales increase
Helps to reduce transportation costs
Common for finance-related businesses or other operations that require onsite presence from the start
International division structure
Structural arrangement that handles all international operations out of a division created for this purpose.
International division structure Advantages
-Assures international focus receives top management attention
-Unified approach to international operations
-Often adopted by firms still in developmental states of international business operations
International division structure Disadvantages
-Separates domestic from international managers
-May find it difficult to think and act strategically, or to allocate resources on a global basis
There are three types of global structures
Global Product Division
Global Area Division
Global Functional Division
Global Product Division
Structural arrangement in which domestic divisions are given worldwide responsibility for product groups.
Global Product Division
-Global product divisions operate as profit centers
-Provides a direct line of communication from customer
-Helps R&D to work on development of products that serve the world customer
-Permits managers to gain expertise in technical and marketing aspects of products
Global Product Division Disadvantages
-Duplication of facilities and staff personnel within divisions
-Division manager may pursue currently attractive geographic prospects and neglect others with long-term potential
-Division managers may spend too much time tapping local rather than international markets
Global area division
Structure under which global operations organized on geographic basis rather than a product basis.
Global area division Advantages
-International operations put on same level as domestic operations
-Global division mangers are responsible for all business operations in designated geographic area
-Often used by firms in mature businesses with narrow product lines
-Firm is able to reduce cost per unit and price competitively by manufacturing in a region
Global area division Disadvantages
-Difficult to reconcile a product emphasis with geographic orientation
-New R&D efforts often ignored because divisions are selling in mature market
Global functional division
-Structure that organizes worldwide operations primarily based on function and secondarily on product.
-Approach used mainly by extractive companies such as oil and mining
Global functional division Advantages
-Emphasizes functional expertise
-Relatively lean managerial staff
Global functional division disadvantages
-Coordination of manufacturing and marketing often difficult
-Managing multiple product lines can be very challenging because of separation of production and marketing into different departments.
-Only the CEO can be held accountable for the profits.
Mixed organization structure
-Structure is a combination of global product, area, or functional arrangements.
Mixed organization structure Advantages
-Allows the organization to create the specific type of design that best meets its needs
Mixed organization structure disadvantages
-As matrix design's complexity increases, coordinating personnel and getting everyone to work toward common goals often become difficult.
-Too many groups go their own way.
Transnational network structure
-A multinational structural arrangement combining elements of function, product, geographic design, while relying on network arrangement to link worldwide subsidiaries.
-At center of the transnational network structures are nodes, which are units charged with coordinating product, functional, and geographic information.
-Different product line units and geographic area units have different structures.
Nontraditional Organizational Arrangements
-Electronic network (matrix design)
-Individuals who work on a project for a company, usually via the Internet, and move on to other employment when the assignment is done
-Serve a particular, short-term purpose and then go on to other assignments
-Many of the people in the structure are temporary contingent employees, never see each other and communicate exclusively in an electronic environment
-Resulted in people spending less time within their functions and thus becoming less knowledgeable.
-Often leads to product teams becoming autonomous and thus failing to integrate their overall efforts.
Organizational Characteristics of MNCs
-Use of defined structures and systems in decision making, communicating, and controlling.
-Assigning individuals to specific, well-defined tasks.
-Important decisions are made at the top.
-Decision making is pushed down the line and lower-level personnel are involved.
-A management style in which one manager has authority over another. one manager may be assigned to human resources, a second to operations, and a third to accounting, but all three must answer to the company president.
-A management style in which several persons with equal authority are given oversight over specific departments or tasks.
-No manager has authority over another
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