Stanford GSB Sloan Program Stramgt 258 Strategic Management

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Stanford GSBSloan ProgramStramgt 258Strategic
Management

• 14 Strategy, Organization and Globalization
• Daimler Chrysler CVD

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Alignment

• A central premise of the O-E-S triangle is that
  performance derives from aligning the
  organization, environment, and strategy
• But, especially in a global context where
  organization is trying to reconcile demands of
  localization and global coordination certain
  elements of the O/E/S triangle just cannot be
  brought into alignment.

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3 Models

• International tightly coupled, emphasize global
  coordination, often export based, C.A. often from
  home base characteristics
• Multidomestic decoupled, emphasize local
  responsiveness, confederation of national
  companies, little coordination
• Global variegated coupling, try for both, but
  costly to manage

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Alignment

• International Model
• easier to achieve internal alignment of
  organization and strategy (i.e., internal
  consistency)
• generally harder to achieve external alignment of
  organization/strategy with environment (i.e.,
  harder to achieve external consistency)
• Multidomestic Model
• easier to achieve external alignment
• harder to achieve internal alignment
• Global Model is intermediate

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Management Attention and Alignment

• Considerable fraction of time and effort of
  management will necessarily be devoted to
  managing facets of O-E-S that are out of
  alignment
• For international firm, most of attention will be
  directed to managing firm-environment interface
  (e.g., inconsistencies between centrally
  determined marketing campaign and local
  differences in taste)
• For global firm, most of attention will be
  directed to managing internal inconsistencies
  (e.g., conflicts between local units)

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E
In the environment, globalization can occur
at the level of -- economy --
industry -- market
Performance
S
O
CA based on -- home base -- global
coordination -- local responsiveness --
combination of global coord, local
resp., and learning
International vs. Global vs. Multi-Local models
of organization
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Deciding on a Model

• If firm has competitive advantage from home base
  that is leverageable across regions, then follow
  international design that extends that advantage
  geographically
• If there is no competitive advantage from the
  home base,then consider the design implications
  of transportation/communication costs and
  preference similarity across regions (as in
  following diagram)..

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Globalization of Economies
Domestic (No Multi- Nationals)
Multi- Local
Multi- Local
HI
Transport/Communication Costs Across Regions
International (Not Tied to Region)
Global Firm
?
LO
LO
MED
HI
Preference Similarity Across Regions
Globalization of Markets
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• Issues/Implications of Framework
• Offers a contingent framework for integrating
  views of Porter, Ohmae, and Bartlett/Ghoshal
• (2) Framework does not provide exhaustive
  consideration of relevant factors. Specifically,
  framework does not consider
• (a) how tacit collusion might affect design
  choice
• (i.e., Cemex shows tacit collusion is
  facilitated by international design)
• (b) the role of path dependence in
  organization design choice (change is hard and
  costly)
• (c) how choices of competitors may constrain
  or influence choice of focal firm
• (e.g., a global choice by others may
  make an international choice more attractive in
  so far as it gives rise to a distinct advantage)