Introduction to IBS Concepts

1
Introduction to IBS Concepts

• Timothy M. Devinney

2
The Context of International Strategy

• Growing importance of international networks
• Growing importance of local responsiveness
• Growing importance of cost flexibility/global
  economies of scale
• Growing importance of importance of the
  management of intangible assets (e.g. brands,
  training, technology)
• Internationalisation of financial intermediation
• Internationalisation of knowledge/information

3
Conflicting Pressures in International Strategy

• Low cost (labour) versus high skill (capital)
• Availability of capital alternatives to low
  labour cost
• Horizon of the low labour cost window
• Importance of labour to production
• Absenteeism, turnover, training and other
  ancillary issues
• Centralisation versus Decentralisation
• Local Responsiveness
• Speed of Response
• Economies of Scale
• Protection of Assets
• Consistency of Management

4
Specific Factors That Appear to Affect
International Success (In order of importance)

• Human Resources
• Suitability of Products
• Strategic Vision
• Product Quality
• Cost Control
• Suitability of the Foreign Partner
• Pricing in the Local Market
• Brand Awareness
• Distribution and Logistics

• Economic Factors
• Market Information
• Feedback from the Market
• Timeliness of the Entry
• Infrastructure
• Intellectual Property Protection
• Expatriate Costs
• Speed of Localisation
• Technical Resources
• Financing
• Foreign Exchange Repatriation
• Government Interference
• Political Links

Source EIU
5
Important Considerations in Developing an
International Strategy

• Having an Appropriate Product/Service
• Working Within the Capabilities of the Company
• Using International Operations to Develop
  Corporate Capabilities
• Determining the Correct Form of Expansion
• Determining the Correct Organisation Form
• Over-Rating or Under-Rating the Importance of
  Hard Factors (Economics)
• Over-Rating or Under-Rating the Importance of
  Soft Factors (Culture, Corporate Disposition)

6
The ImperativesA General IBS Framework
Orgn Cultural Orgn History Technology Orgn
Structure Distn of Business Product Structr
Local Economic Conditions
Local Cultural / Sociodemographic Conditions
Local Political Environment
Firm Strategic Disposition
Orgn Cultural Orgn History Technology Orgn
Structure Distn of Business Product Structr
Firm Strategic Disposition
Local Economic Conditions
Local Cultural / Sociodemographic Conditions
Local Political Environment
Intl Economic Conditions
7
Dimensions of International Organisation
Structure Porter Takeuchi
8
The Two Extremes of International Strategy
9
Multinational Integration versus National
Responsiveness
National Responsiveness

• Subsidiaries behave, to a great degree, like
  national companies
• Product line is produced within the country
• Local optimisation
• Management is decentralised
• BUT, there are some gains from being part of a
  MNE
• Risk sharing
• Technology sharing
• Export opportunities
• Information sharing
• Financing

10
Multinational Integration versus National
Responsiveness
Multinational Integration

• Specialisation of production across national
  borders
• Process and product integration
• National subsidiaries distribute full product
  range
• Management is centralised
• Decisions aim for system-wide optimisation

11
Dimensions of International Organisation
Structure Bartlett Ghoshal
12
Some International Structure Examples What does
it mean?
13
Pick an IndustryApply the Bartlett Ghoshal
Framework
14
Organisational Drivers of Strategy
15
Is There a Dominant IB Structure?
16
Dimensions of International Organisation
Structure Devinney et al
Global
Integration
Economies of
High
scale and scope
increase the sources
and applications and
efficiency in use
Low
Local
Responsiveness
High
Becomes more
proprietary and
High
protectible
Transactional
Completeness
17
Organisation Structure Implications