International Business take-home exam

MNE Organization

BUAD 841 Fall 2017

Kurt Norder, Ph.D.

Organization and Philips vs. Matsushita

Agenda

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� Today we will… � Brief recap of Maynooth � Brief recap of some concepts � Team exercise to present connections between the readings � Apply the concepts to Philips vs. Matsushita case

Organization and Philips vs. Matsushita

Building competitive advantage

3

Organization and Philips vs. Matsushita

Industry Globalization Potential Market Factors

Competitive Factors

Governmental Factors

Cost Factors IGP

• Homogenous needs • Global customers • Global channels • Transferrable marketing

• Interdependence of countries

• Competitors globalize or might globalize

• Favorable trade policies • Compatible technical

standards • Common marketing

regulations

• Economies of scale and scope • Learning and experiences • Sourcing efficiencies • Favorable logistics Differences in

country costs & skills • Product development costs

Organization and Philips vs. Matsushita

Yip’s Model for “Total Global Strategy”

Organization and Philips vs. Matsushita

Porter’s Diamond of National Advantage Demand Conditions

Firm Strategy, Structure, Rivalry

Factor Conditions

Related & Supporting Industries

Change is Good

• Picky customers and difficult environments make you innovate to become better (price- quality relationship)

• Competition driving evolution through innovation

• Stocks of needed resources (land, labor, capital, raw materials) at reasonable prices

• Do we have sufficient support that enables us to specialize (can outsource for good quality)

• Global suppliers to help share knowledge and team up

• Even potential to integrate forward increases pressure to stay ahead

Organization and Philips vs. Matsushita

Varieties of Capitalism … interactive institutions

� Liberal Market Economies (LMEs) � Short term � More equity financing � TMT makes decisions � Labor is fluid: weak unions,

labor protection � Layoffs enable more risk � Build general skills � Radical or tech changing

innovations

� Coordinated Market Economies (CMEs) � Long term � More debt financing � Cross-own; Insider info � Labor integrated in

decisions, strong unions, councils

� Resist layoffs mean less risk

� Build industry- or firm- specific skills

� Incremental innovations

Organization and Philips vs. Matsushita

Factors in entry mode decision

Look Familiar?

Target Country Enviro- mental factors

Foreign Market Entry Mode

Decision

Target Country Market Factors

Home Country Factors

Target Country Produc-

tion factors

Company Resource/

Commitment Factors

Company Product Factors

Internal Factors

External Factors

Organization and Philips vs. Matsushita

Strategy Making Process External Analysis • Political, Social, Regulatory • Competitive conditions

Internal Analysis • Resources and capabilities • Sources of competitive adv.

Company’s Strategic Situation Strategic

Alternatives • TOWS

Strategy

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Opportunities and Threats

Key Success Factors

Strengths and Weaknesses

MODES ARE PART OF THE ALTERNATIVE

ACTIONS

Organization and Philips vs. Matsushita

Alternative operating modes

Organization and Philips vs. Matsushita

How do entry modes relate to organization?

� Equity � Sets the boundaries of the firm and influences control (+risk) � Enables more trust for easier knowledge transfer within

� Control vs. Coordination � different modes offer different levels of these

Organization and Philips vs. Matsushita

Mode dynamics (Root)

Dynamic changes in

mode = dynamic

organization

Organization and Philips vs. Matsushita

Compare classical and neo-classical structure

� Classical (Vertical and Horizontal): � Vertical centralization � Functional � Divisional (International, product, area) � Matrix

� Neo-classical � Network (kieretsu, chaebol, etc.) � Virtual organization

Organization and Philips vs. Matsushita

How structure, coordination, and control relate?

� Coordination � Standardization � Plan � Mutual adjustment

� Control � Bureaucratic � Market � Clan

Organization and Philips vs. Matsushita

Connections?

� How does organization relate to the Strategy Process? � Connect to the Strategy Process

� How does strategy relate to structure? � Guillen Dispersion-Coordination

� How does environment relate to organization? � Ghoshal and Nohria

� How does complexity and frequency relate to authority? � Doz Bartlett Prahalad

Organization and Philips vs. Matsushita

How org relates to strategy? External Analysis • Political, Social, Regulatory • Competitive conditions

Internal Analysis • Resources and capabilities • Sources of competitive adv.

Company’s Strategic Situation Strategic

Alternatives • TOWS

Strategy

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Opportunities and Threats

Key Success Factors

Strengths and Weaknesses

Org facilitates capabilities and

enables implementation

Organization and Philips vs. Matsushita

Resource-based (RBV) Model

Resources Physical, human, and organizational capital (tangible and intangible)

Capability An integrated set of resources

Core competence A source of competitive advantage

Organization and Philips vs. Matsushita

Value Chain Analysis Support Activities

Primary Activities

Firm Infrastructure Human Resource Management

Systems & Solutions Materials & Equipment

Product Design

Operations Distrib. (Outbound Logistics)

Marketing

& Sales Service

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Organization and Philips vs. Matsushita

How does D-C relate to I-R? Geographic Dispersion

Organizational Coordination

Low

HighLow

High Transnational Strategy [Matrix Organization]

Global Exporter Strategy [Global function or product divisions]

Multidomestic Strategy [Country-based Organization]

Exporter Strategy with Decentralized Marketing

[Global function or product divisions]

Organization and Philips vs. Matsushita

How does the environment influence the org?

Organization and Philips vs. Matsushita

How does the environment influence the org?

Organization and Philips vs. Matsushita

How does the environment influence the org?

Organization and Philips vs. Matsushita

How does the environment influence the org?

Low

Low High

High

Co m

pl ex

ity o

f t he

B us

in es

s

Frequency of decisions requiring balancing of national demands and competitive pressures

Organization and Philips vs. Matsushita

Country attractiveness by Company strength matrix

Organization and Philips vs. Matsushita

Integration vs. Responsiveness • Scale Economies • similar demand/

standard product • Centralize at HQ • Typical cost leader

• Adapt for local demands to increase value

• Local autonomy • Focused on single

country as the market

• Local differentiator

• Combined, similar to integrated/hybrid

• “Flexible coordination”

• Integrated network

• Little adaptation but still benefit from core competences in foreign locations

Organization and Philips vs. Matsushita

Business Model - interactive

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From Demil & Lecocq, LRP, 2010

Organization and Philips vs. Matsushita

Parting thoughts for the day

� For next class… � Midterm Exam (mainly short answer) � Particularly understand the frameworks = tool kit

� When to use each? Why? What it answers? How to use? � Interconnections and process

� The following week you will have the class period to work on your team projects

� Class resumes Oct 26 � Quiz 6 should be open after the midterm… until start of class

on Oct 26 � I’m available by email or in Lerner 209

Organization and Philips vs. Matsushita

Parting thoughts for the day … midterm

� Be able to draw up the frameworks (tools & high level components)

� Be able to choose when a framework/tool is appropriate � Know the types of strategies, types of organizational

approaches, types of modes … the value and challenges of each and when you would use them

� Be able to compare and contrast the theoretical reasoning underlying the frameworks

� Types of integration and their benefits � Understand the global trends and the related opportunities

and threats

Organization and Philips vs. Matsushita

Team application exercise… � Philips vs Matsushita:

� Organization? � Strategy? � Capabilities (strengths and weaknesses)? � Strategic actions?

Organization and Philips vs. Matsushita

Appendix

Organization and Philips vs. Matsushita

Vertical Integration

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Country 1 (Product Design)

Country 2 (Ops)

Country 3 (Distribution)

Country 4 (Mktg & Sales)

Country 5 (Service)

Tap into location advantages needed for each activity

Organization and Philips vs. Matsushita

Horizontal Integration

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Country 1 (Product Design)

Country 1 (Ops)

Country 3 (Distribution)

Country 3 (Mktg & Sales)

Country 5 (Service)

Multiple locations for the same activity

Country 2 (Distribution)

Country 4 (Distribution)

Country 2 (Mktg & Sales)

Country 4 (Mktg & Sales)

Organization and Philips vs. Matsushita Copyright © 2015 Pearson Education, Inc. 16-33

Functional Structure The Functional Structure

Organization and Philips vs. Matsushita Copyright © 2015 Pearson Education, Inc. 16-34

Divisional Structure The International Division Structure

Organization and Philips vs. Matsushita Copyright © 2015 Pearson Education, Inc. 16-35

Divisional Structure Product Division Structure

Organization and Philips vs. Matsushita Copyright © 2015 Pearson Education, Inc. 16-36

Divisional Structure

Geographic (area) Division Structure

Organization and Philips vs. Matsushita Copyright © 2015 Pearson Education, Inc. 16-37

Matrix Structure Matrix Division Structure

Organization and Philips vs. Matsushita Copyright © 2015 Pearson Education, Inc. 16-38

Neoclassical Structures �Neoclassical structures

� emphasize coordination and cultivation not command and control � Network structure

� arranges differentiated elements in patterned flows of activity that allocate people and resources to problems and projects in a decentralized manner � keiretsu, sogo shosha, chaebol

� Virtual organization � dynamic arrangement among partners that efficiently adapts to market

change

Organization and Philips vs. Matsushita Copyright © 2015 Pearson Education, Inc. 16-39

Neoclassical Structures A Simplified Network Structure