Introduction http://www.youtube.com/watch?v=6_ov2Vyt5dU&feature=channel_page

Guest Speaker: Dr. Thaddeus Fulford-Jones, CEO– Mobil Consumer Analytics (www.cadiomobile.com)

Midterm Exam Results Chapter 12: The Strategy of International Business Case Study: MTV Networks Case Study: Nestlé Chapter 13: The Organization of International Business Monday: The Great Globalization Debate!

Wendy Jeffus

Harvard Summer School

International Business

Highlights and Lowlights for “Ethical Business is GOOD business”

Highlight: “The companies can obtain higher visibility […] An example of that is the red AIDS label on some wine bottles. For every bottle, 1 euro goes to AIDS foundations. The price of the bottle is 25 to 150 euros so the economic cost of the donation is more than covered and increases the visibility of the company greatly”

Highlight: “If ABC is a competitor to Lego and ABC is using illegal paint, eventually ABC will face lawsuits and Lego will receive ABC’s clients automatically solely because they were ethical”

Lowlight: “The argument could be made that it is okay to engage in unethical behavior for non-U.S. businesses”

Lowlight: “Ethical business is good business because paying bribes may stimulate the economy”

Lowlight: “It will make you feel better”

Highlights and Lowlights for Ethical Dilemma

Highlight: “She can do this by perhaps organizing her own team to negotiate with the government agencies without having to use unethical tactics”

Highlight: “Suggest alternative methods of securing the government contracts such as providing donations to government electoral fund / public causes”

Lowlight: “I can not give a recommendation as the choice of action is a personal one”

Lowlight: “I would ask her to give up the position”

Wendy Jeffus

Harvard Summer School

Chapter 12: The Strategy of International Business

Group Projects: Section 1Green Car

(China)Wheel G

(Brazil)Spacebox

(China)AESNI

(U.S.)P-I-M

(Switzerland)

Group 1:Stuart Haigh (Australia)Alexandra Bustros (Lebanon)Jin Ji (China)Christian HeinGreen Car Corp, China

Group 2: Stefan Lorscheid (Germany)Juliana Nascimento (Brazil)Adomas Kraunevicius (Lithuania)Shariar Sean Monfared (US)WheelGuard, Brazil

Group 3: Andre Ribeiro Da Silva (Canada)Rodrigo Robles (Mexico)Katerina Barka (Greece)Spacebox, Japan

Group 4: Raya Awad (Lebanon)Benedikt Bingler (Germany)Concubhar O’Drisceoil (Ireland)Wajahat Laiq (US) AESNI-gadget in Cambridge, US

Group 5:Mariana Vega Silva (Mexico)Audun H. Hansen (Norway)Jan Icken (Germany)Kristian Andersen (Denmark)Soren Mogensen (Denmark)Professionals-in-Motion, Switzerland

Group 6:Rima Markarian (US)Jennifer Grygiel (US)Frank Dike (US)Petra Steger (Austria)TOMS shoes, Ethiopia

Group 7: Sarti Stefano (Italiy)Mads Krarup (Denmark)Hernik Gerstrom (Denmark) Original Food, Dubai

Group 8: Ayhan Sebin (Turkey)Monica Garcia de la Cadena Lozano (Mexico)Chamroeun Sieng (Cambodia)Marc Burde (Sweden)Muvbox, Spain

Group 9:Laurent Blumberg (Belgium)Mohit Gupta (India)Birgitte Egdal (Denmark)Healthy Foods, Netherlands

Group 10: Agnieska Sala (Poland)Min Shin Ang (Singapore)Georgi Petrov (Bulgaria)Smart Home International, Moscow

Shoes(Ethiopia)

Food(U.A.E.)

Muvbox(Spain)

Healthy F(Netherlands)

Smart H(Russia)

Group Projects: Session 1

Green Car(China)

Wheel G(Brazil)

Spacebox(China)

AESNI(U.S.)

P-I-M(Switzerland)

Shoes(Ethiopia)

Food(U.A.E.)

Muvbox(Spain)

Healthy F(Netherlands)

Smart H(Russia)

Group Projects: Section 2Natura

(Russia)Rollasole

(Singapore)Shortlister

(Singapore)Energy

(U.S.)Charge

(U.S.)

Group 1:Carolina Camargo (Brazil)Hitesh Uttamchandani (India)Natura, Russia (with Group 8)

Group 2: Nikhil Sharma (India)Nina Wagner (Canada)Nethra Murali (Singapore)Rollasole, Singapore

Group 3:Sweta Joshi (India)Andrew Buks (US)Andre Ukon (Brazil)Mar del Perez Alonso (Spain)Shortlister, Singapore

Group 4: Fernando Trinidad (Phillipines)Carol Reyes (Bolivia)Zhao Xuan (China)Natural Energy Drink in US

Group 5:Elena Ponomareva (Russia)James Freckleton (Australia)Sanjeev Masih (US)Ipek Hizlikan (Turkey)Electric Car Charging Station in California

Group 6: Deepika Choudhary (India)Samuel Turnwald (Germany)Judy Chua (Phillipines)Green Consultants in Japan

Group 7:Natalia Santo (Brazil)Angela Pernsteiner (Austria)Abhay Jain (India)Umbrella-o-mat in London

Group 8: Daniel Czajkowski (US)Umut Ozeren (Turkey)David Inbarajan (India)Akshay JainNatura, Russia (with Group 1)

Group 9:Daniel Tueni (Lebanon)Madhu Varshiti (India)Pablo Cienfuegos (Mexico)Sebastian Morad (Sweden) Custom Home Entertainment, France

Group 10: Ulrich Suter (Switzerland)Bernadette Almeda (US)Zilin Guan (China)Zhu Jin (China) Alternative Energy, China

Consult(Japan)

Umbrella(England)

Natura(Russia)

Home E(France)

Alt. E(China)

Group Projects: Session 2

Natura(Russia)

Rollasole(Singapore)

Shortlister(Singapore)

Energy(U.S.)

Charge(U.S.)

Consult(Japan)

Umbrella(England)

Natura(Russia)

Home E(France)

Alt. E(China)

Strategy Strategy – actions managers take to attain the goals of the firm.

– For most firms, the preeminent goal is to maximize the value of the firm for its owners

Value Creation Value Creation Activities – allow a company to

achieve superior efficiency, excellent quality, innovation, and customer responsiveness. – Product development, investments in human capital,

manufacturing, marketing, and/or R & D.

The way to increase the profitability of a firm is to create more value– The amount of value a firm creates is measured by

the difference between its costs of production and the value that consumers perceive in its products

Perceptions of Value… Which “red car with 2 doors” is worth more?

Which “brown bag” is worth more?

2008 Ferrari

http://allworldcars.com/wordpress/wp-content/uploads/2007/07/windowslivewriter2008ferrari430scuderia-1c202008-ferrari-430-scuderia-11.jpghttp://fotogrill.com/wp-content/uploads/2008/01/2008-mitsubishi-lancer-evolution-x-front-and-side-1600x1200.jpghttp://www.thebudgetfashionista.com/images/eluxurylv-thumb.jpg

2008 Mitsubishi

Value Creation Example: Cost per unit (C) = $15,000; Price per unit (P)

= $20,000*; Value to Customer (V) $22,000

Example: Cost per unit (C) = $1,500; Price per unit (P) = $2,000*; Value to Customer (V) $2,500

Note: (V) is the value to the average customer, customers have different perceptions of value. If you were a monopoly supplier, you could charge a price closer to this price.

Muvbox(Spain)

Umbrella(England)

Michael Porter states that there are two basic strategies for creating value and attaining a competitive advantage in an industry:– Low-Cost Strategy vs. Differentiation– Low Cost - value is created for the customer by

offering low priced products.– Differentiation – unique attributes that are valued by

customers and that customers perceive to be better than or different from the products of the competition

Strategic Positioning & Value Creation

Strategic Choice Pick a position that offers

enough demand to support your choice.

Configure internal operations, such as manufacturing, marketing, logistics, IT, and HR to support your position.

Connect this decision to your organizational structure.

Example: – Where should the

customizable smart home company position their services?

– Where should “Roll-a-sole” compete?

Incr

ease

d D

iffer

entia

tion

(V)

Low Cost (C)

The Efficient Frontier shown below has a convex shape due to diminishing returns*

*Diminishing returns imply that when a firm has significant value built into its product offering, increasing value by a small amount requires significant additional costs. A firm with a low-cost structure, also may have to give up a lot of value to obtain further cost reductions.

Rollasole(Singapore)

Smart H(Russia)

The Firm as a Value Chain Any firm is composed of a series of distinct value creating activities

– Primary activities Research & development Production Marketing & Sales

– Activities associated with getting buyers to purchase the product, including channel selection, advertising, pricing, etc.

Customer Service– Customer support, repair services, etc.

– Support Activities Information systems

– Process automation, and other technology development Logistics

– Inbound logistics include the receiving, warehousing, and inventory control of input materials.

– Outbound logistics are the activities required to get the finished product to the customer, including warehousing, order fulfillment, etc.

Human resource– the activities associated with recruiting, development, and

compensation of employees.

The Value Chain

Green Car(China)

Natura(Russia)

Global Expansion, Profitability, & Growth Expanding globally allows firms to increase their

profitability and rate of profit growth in ways not available to purely domestic enterprises

Firms that operate internationally are able to– Expand the market for their domestic products– Realize location economies by dispersing individual value

creation activities– Realize greater cost economies – Earn a greater return by leveraging any valuable skills

developed in foreign operations

Energy(Japan)

Wheel G(Brazil)

Leveraging Products & Competencies A company can increase its growth rate by taking goods

or services developed at home and selling them internationally

– Returns from such a strategy are likely to be greater if indigenous competitors in the nations a company enters lack comparable products

Success of multinational companies also rest upon the core competencies that underlie the development, production, and marketing of goods or services

– Core competencies are skills within the firm that competitors cannot easily match or imitate

– Core competencies are the bedrock of a firm’s competitive advantage and enable them to reduce the costs of value creation

What are the Core Competencies? McDonalds

– fast food P & G

– brand marketing Wal-Mart

– logistics Starbucks

– Freshly brewed coffee

Toyota– Low cost, high quality

Boeing– Multisourcing

Dell – Inventory management

Apple– graphics

Location Economies Location economies are the economies that arise from

performing a value creation activity in the optimal location for that activity

Can have one of two effects:– It can lower the costs of value creation and help the firm to

achieve a low-cost position and/or– It can enable a firm to differentiate its product offering from those

of competitors One result of this kind of thinking is the creation of a

global web of value creation activities, with different stages of the value chain being dispersed to those locations around the globe where perceived value is maximized or where the costs of value creation are minimized

•Consider the following:•Where are the best designers?•Where is the low cost or skilled labor?•Who will develop the best marketing strategy?

Note: Transportation &trade complicate the picture.

Shortlister(Singapore)

AESNI(U.S.)

Experience Effects The experience curve refers to systematic reductions in

production costs that have been observed to occur over the life of a product

There are two explanations for the experience effect– Learning effects refer to cost savings that come from learning

by doing– Economies of scale refer to the reductions in unit cost achieved

by producing a large volume of a product The strategic significance of the experience curve is

clear; moving down the experience curve allows a firm to reduce its cost of creating value and increase its profitability

Making the first spacebox, is much more expensive than making the 1000th

Charge(U.S.)

Spacebox(China)

Leveraging Subsidiary Skills Leveraging the skills created within subsidiaries and

applying them to other operations within the firm’s global network may create value

Learning how to leverage the skills of subsidiaries presents a challenge for managers of multinational organizations

– They must have the humility to recognize that valuable skills leading to competencies can arise anywhere within the firm’s global network

– They must establish an incentive system that encourages local employees to acquire new skills

– They must have a process for identifying when valuable new skills have been created in a subsidiary

– They need to act as facilitators, helping to transfer valuable skills within the firm

Example: McDonalds Old McDonalds New McDonalds

http://images.businessweek.com/ss/06/05/mcdonalds/image/spring-road-interior-3.jpghttp://www.danlockton.co.uk/research/images/mcdonaldsseating.jpg

http://www.youtube.com/watch?v=Cg87E1tjTOE

Coffee Wars HOWARD SCHULTZ once said that he finds it painful

when people compare his firm, Starbucks, to McDonald's. The founder of the world's biggest chain of coffee shops thinks a visit to Starbucks should involve “romance and theatre”, a far cry from the pit-stop-like experience of eating a meal at the world's biggest fast-food chain. Yet in its efforts to expand and attract less affluent customers over the past couple of years, Starbucks has started to become more like McDonald's—even as McDonald's, for its part, has been moving upmarket to become more like Starbucks.

http://www.economist.com/business/displaystory.cfm?story_id=E1_TDQJRSQS

Cost Pressure vs. Local Responsiveness Firms that compete in the global marketplace typically

face two types of competitive pressure– Pressures for cost reductions– Pressures to be locally responsive

Pressure for Cost Reductions International businesses often face pressures for cost

reductions because of the competitive global market Pressures for cost reduction can be particularly intense

in industries producing commodity-type products– Universal needs exist when the tastes and preferences of

consumers in different nations are similar if not identical Pressures for cost reductions are also intense

– In industries where major competitors are based in low-cost locations

– Where there is persistent excess capacity– Where consumers are powerful and face low switching costs

Pressure for Local Responsiveness Differences in consumer tastes & preferences

– North American families like pickup trucks while in Europe they are viewed as a utility vehicle for firms

Differences in infrastructure & traditional practices– Consumer electrical system in North America is based on 110 volts; in

Europe on 240 volts Differences in distribution channels

– Germany has few retailers dominating the food market, while in Italy it is fragmented

Host-Government demands– Health care system differences between countries require

pharmaceutical firms to change operating procedures

Where Does Your Company Fit?

Natura(Russia)

Rollasole(Singapore)

Shortlister(Singapore)

Energy(U.S.)

Charge(U.S.)

Consult(Japan)

Umbrella(England)

Home E(France)

Alt. E(China)

Where Does Your Company Fit?

Green Car(China)

Wheel G(Brazil)

Spacebox(China)AESNI

(U.S.)

P-I-M(Switzerland)

Shoes(Ethiopia)

Food(U.A.E.) Muvbox

(Spain)

Healthy F(Netherlands)

Smart H(Russia)

Choosing a Strategy

International Strategy International Strategy – transfer the skills and products

derived from distinctive competencies to foreign markets, while undertaking some limited local customization.

Create value by transferring valuable core competencies to foreign markets that indigenous competitors lack

Centralize product development functions at home Establish manufacturing and marketing functions in local

country but head office exercises tight control over it Limit customization of product offering and market

strategy– Strategy effective if firm faces weak pressures for local

responsive and cost reductions

Localization Strategy Localization Strategy – customize product offering,

marketing strategy, and business strategy to national conditions

– Local responsiveness

Main aim is maximum local responsiveness Customize product offering, market strategy including

production and R&D according to national conditions Generally unable to realize value from experience curve

effects and location economies Possess high cost structure

Global Strategy Global Strategy – focus on cost reductions

– Experience curve effects – systematic reduction in production costs that occur over the life of a product

Learning effects Economies of scale

– Location economies – arise from performing a value creation activity in the optimal location

Focus is on achieving a low cost strategy by reaping cost reductions that come from experience curve effects and location economies

Production, marketing, and R&D concentrated in few favorable functions

Market standardized product to keep costs low Effective where strong pressures for cost reductions and low

demand for local responsiveness exist– Semiconductor industry

Transnational Strategy Transnational Strategy – simultaneous focus on

reducing costs, transferring skills and products, and being locally responsive.

To meet competition, firms aim to reduce costs, transfer core competencies while paying attention to pressures for local responsiveness

Global learning– Valuable skills can develop in any of the firm’s world wide

operations– Transfer of knowledge from foreign subsidiary to home country,

to other foreign subsidiaries Transnational strategy difficult task due to contradictory

demands placed on the organization– Caterpillar

The Evolution of Strategy Over time competitors inevitably emerge

– An international strategy may not be viable in the long-term so firms need to shift toward a global standardization strategy or a transnational strategy in advance of competitors

As competition intensifies– International and localization strategies tend to become less

viable– Managers need to orient their companies toward either a global

standardization strategy or a transnational strategy

The Evolution of Strategy

Managerial Implications: Global Activities Benefits

– Greater return on core competencies– Location economies

Challenges– Consumer tastes and preferences– Infrastructure and traditional practices– Distribution channels– Host government demands

BCG Matrix (Chapter 12) The BCG Matrix is based

on the product life cycle theory and it became on of the most well-known portfolio management decision making tools in the early 1970's.

– There are two dimensions - market share and market growth.

http://www.decide-guide.com/BCG-matrix.htmlhttp://www.decide-guide.com/porters-five-forces-model.html

5 Forces Analysis (Chapter 12)1. Entry of competitors

– How easy or difficult is it for new entrants to start competing?

– What economies of scale does a competitor need?

– Is there a learning curve? 2. Threat of substitutes

– How easy can a product or service be substituted?

– Can products be made cheaper ? – What are the switching costs?

3. Bargaining power of buyers – What buyer information is available? – What price sensitivity exists in the

market? 4. Bargaining power of suppliers

– Is there a monopoly of suppliers? – Is there presence of substitute

inputs? 5. Rivalry among the existing players

– Does strong competition between the existing players exist?

– What barriers to exit exists? – What kind of industry growth exists?

http://www.decide-guide.com/porters-five-forces-model.html

Wendy Jeffus

Harvard Summer School

Chapter 13: The Organization of International Business

Strategic Choice Global strategy

– Centralized due to operational issues

Localization strategy– Decentralized due to

emphasis on local responsiveness

International strategy– Centralize core

competencies and decentralize foreign subsidiaries

Transnational strategy– Mixed Centralized for

location and experience curve economies

– And decentralized for local responsiveness

http://www.intel.com, http://www.ti.com, http://www.motorola.com/us, http://www.zara.com/, http://www.cat.com/cda/layout?m=8703&x=7,http://www.nestle.com, http://www.pg.com/en_US/index.jhtml, http://www.xerox.com/, http://www.microsoft.com/en/us/default.aspx, http://www.mtv.com/

Organizational Architecture Organizational architecture includes the totality of a

firm’s organization, including formal organization structure, control systems and incentives, processes, organizational culture, and people

Superior enterprise profitability requires three conditions

1. The different elements of a firm’s organizational architecture must be internally consistent

2. The organizational architecture must match or fit the strategy of the firm

3. The strategy and architecture of the firm must not only be consistent with each other but they also must be consistent with competitive conditions

Organizational ArchitectureStructure – Formal division of the firminto subunits (product divisions, nationaloperations, and functions); location ofdecision-making responsibilities; &integrating mechanisms.

Incentives - The devices used to reward appropriate managerial behaviorControl systems - The metrics used to measure the performance of sub-units

Processes - The manner in which decisions are made and work is performed within the organization

Culture - The norms and value systems that are shared among the employees of an organization

People - The strategy used to recruit, compensate, and retain employees and the type of people hired(i.e. their skills, values, and orientation.)

Structure Organizational structure can be thought of in

terms of three dimensions:1. Vertical differentiation: the location of decision-

making responsibilities within a structure. Where decision-making power is concentrated.– Centralized or Decentralized decision making

2. Horizontal differentiation: the formal division of the organization into sub-units Examples: by function, product, geography, or type of

business.

3. Establishment of integrating mechanisms: mechanisms for coordinating sub-units

Shoes(Ethiopia)

Consult(Japan)

Vertical Differentiation Centralization:

– Facilitates coordination– Ensure decisions

consistent with organization’s objectives

– Top-level managers have means to bring about organizational change

– Avoids duplication of activities

Decentralization:– Reduces the burden on top

management– Motivational research

favors decentralization– Permits greater flexibility– Can result in better

decisions– Can increase control

Consult(Japan)

Shoes(Ethiopia)

Horizontal Differentiation Horizontal differentiation – how a firm divides

itself into subunits– Based on function

(i.e. finance, marketing, etc.)

– Type of business– Geographical area

Local responsiveness

– By product Location economies Experience curve economies

Shoes(Ethiopia)

Consult(Japan)

Typical Functional Structure Most small firms develop along these lines as they grow

– the entrepreneur typically maintains tight control.

But as firms grow and develop new product lines, it can become a clumsy structure that is difficult to supervise and it can be difficult to identify the profit/loss of each business area.

The International Division

Many manufacturing firms expanded internationally by exporting the product manufactured at home to foreign subsidiaries to sell

In time it might prove viable to manufacture the product in each country

The result could be that– Firms with a functional structure at home would

replicate the functional structure in every country in which they do business

– Firms with a divisional structure would replicate the divisional structure in every country in which they do business

http://www.walmart.com/

Problems with the International Structure Potential for conflict and coordination problems between

domestic and foreign operations Heads of foreign subsidiaries are not given as much

voice in the organization as the heads of domestic functions

– The international division is presumed to be able to represent the interests of all countries to headquarters

Lack of coordination between domestic operations and foreign operations

To combat these problems firms choose one of the following structures

– Worldwide product divisional structure which tends to be adopted by diversified firms that have domestic product division

– Worldwide area structure which tends to be adopted by undiversified firms whose domestic structures are based on functions

Worldwide Area Structure Worldwide area structure

– Favored by firms with low degree of diversification and domestic structure based on function

– World is divided into autonomous geographic areas– Operational authority decentralized– Facilitates local responsiveness – Fragmentation of organization can occur– Consistent with multi-domestic strategy

Worldwide Product Divisional Structure Adopted by firms that are reasonably diversified Original domestic firm structure based on product division Value creation activities of each product division coordinated by

that division worldwide– Help realize location and experience curve economies– Facilitate transfer of core competencies

Problem: area managers have limited control, subservient to product division managers, leading to lack of local responsiveness

http://www.motorola.com/us

Global Matrix Structure Helps to cope with conflicting demands of earlier

strategies Two dimensions: product division and

geographic area Product division and geographic areas given

equal responsibility for operating decisions Problems

– Bureaucratic structure slows decision making– Conflict between areas and product divisions– Difficult to make one party accountable due to dual

responsibility

Global Matrix Structure

http://www.unilever.com/default.asp

Organizational Structure This should be thought of in terms of three dimensions

Vertical differentiation: the location of decision-making responsibilities within a structure. Where decision-making power is concentrated

Horizontal differentiation: the formal division of the organization into sub-units

– Establishment of integrating mechanisms: mechanisms for coordinating sub-units

Need for coordination follows the following order:

Impediments to Coordination– Differing goals and lack of respect– Different orientations due to different tasks– Differences in nationality, time zone, and distance– Particularly problematic in multinational enterprises with their

many sub-units both home and abroad

Integrating Mechanisms

Highest

Lowest

Transnational Strategy

Global Strategy

Localization Strategy

International Strategy

The Telephone GAME

Formal Integrating Systems Direct contact between

sub-unit managers Liaison roles: an individual

assigned responsibility to coordinate with another sub-unit on a regular basis

Temporary or permanent teams from sub-units to achieve coordination

Matrix structure: all roles viewed as integrating roles

– Often based on geographical areas and worldwide product divisions

Food(U.A.E.)

Healthy F(Netherlands)

Alt. E(China)

Home E(France)

Informal Integrating Mechanisms Informal management networks supported by an

organization culture that values teamwork and a common culture

Non-bureaucratic flow of information It must embrace as many managers as possible Two techniques used to establish networks

– Information systems– Management development policies

Rotating managers through various sub-units on a regular basis

Food(U.A.E.)

Healthy F(Netherlands)

Alt. E(China)

Home E(France)

Informal Integrating Mechanisms

Control Systems Types of control systems

– Personal controls – personal contact with subordinates.

More common in small firms, but GE’s Jack Welch also used this control system.

– Bureaucratic controls – high need for approval & emphasis on rules and guidelines.

Typical for R&D and other budgets

– Output controls (i.e. profitability, growth, productivity, market share)

– Cultural controls – norms and values of the system guide behavior (i.e. Starbuck’s employees and Disney employees)

Incentive systems– Refer to devices used to reward appropriate behavior– Closely tied to performance metrics used for output controls– Differs across cultures (i.e. Lincoln Electric pays for “piecework”

in the U.S. – but this is illegal in Germany). Factors that influence incentive systems

– Seniority and nature of work Reward linked to output target that the employee can influence

– Cooperation between managers in sub-units Link incentives to profit of the entire firm

– National differences in institutions and culture – Consequences of an incentive system should be understood

Incentive Systems

Performance Ambiguity Key to understanding the relationship between

international strategy, control systems and incentive systems is performance ambiguity

– Caused due to high degree of interdependence between sub-units within the organization

Level of performance ambiguity depends on number of sub-units, level of integration, and joint decision making

Descending order of ambiguity in firms

Organizational Culture Values and norms shared among people Sources

– Founders and important leaders– National social culture– History of the enterprise– Decisions that result in high performance

Cultural maintenance– Hiring and promotional practices– Reward strategies– Socialization processes– Communication strategy

P-I-M(Switzerland)

Natura(Russia)

Organizational Culture: SWA vs. AA 1992 - Herb Kelleher and Stevens Aviation

Chairman Kurt Herwald square off in the Malice in Dallas arm wrestling event for the rights to use the slogan, “Just Plane Smart.” Although Herb loses, Kurt allows Southwest to use the slogan, and local charities are the real winners.

http://www.cbsnews.com/video/watch/?id=3228291n&tag=related;photovideo

http://www.southwest.com/about_swa/airborne.html

Malice In Dallas Part 1

– http://www.youtube.com/watch?v=51a5xuxxxZQ Part 2

– http://www.youtube.com/watch?v=iCQINlYBXOs Part 3

– http://www.youtube.com/watch?v=46osNRJxBks Part 4

– http://www.youtube.com/watch?v=EwU9m4oCtRE Part 5

– http://www.youtube.com/watch?v=H_sXAdUNFnc Part 6

– http://www.youtube.com/watch?v=onze5yCRiOI

More “LUV” Culture

Rapping Flight Attendant– http://www.youtube.com/watch?v=ivjybzdXVmI

GAAP Explained by the “Rapping Flight Attendant”– http://www.youtube.com/watch?v=7P2-vEtXSug

Culture and Performance A “Strong” Culture

– Not always good– Sometimes beneficial, sometimes not– Context is important

Adaptive cultures– Culture must match an organization’s architecture– Culture does not necessarily translate across borders

Strategic Fit

Structure & Controls

Localization International Global Transnational

Vertical differentiation

Decentralized Core competency centralized; other decentralized

Some centralized

Mixed (Centralized and Decentralized)

Horizontal differentiation

Area structure Product division Product division Informal matrix

Need for coordination

Low Moderate High Very high

Integrating mechanisms

None Few Many Very many

Performance ambiguity

Low Moderate High Very high

Need for controls

Low Moderate High Very high

Organizational Change Firms need to periodically alter their architecture to conform to

changes in environment and strategy Hard to achieve due to organizational inertia Sources of inertia

– Possible redistribution of power and influence among managers– Strong existing culture– Senior manager’s preconceptions about the appropriate business model– Institutional constraints such as national regulations including local

content rules regarding layoffs

Organizational Change Change to match competitive and strategy environment

– Hard to change Existing distribution of power and influence Current culture Manager’s preconceptions about the appropriate business model or

paradigm Institutional constraints

Principles for change– Unfreeze the organization– Moving to the new state– Refreezing the organization

http://www83.homepage.villanova.edu/richard.jacobs/MPA%208002/Project/reorganizatoin.jpg

Case Assignments JCB in India

1. JCB's initial strategy was to export it's products, discuss the pros and cons of this strategy.

2. Why did JCB pursue a JV entry strategy in India? What were the risks of this strategy?

3. More recently JCB has invested in wholly owned factories. Discuss.

Tesco Goes Global Present a 5-10min (timed) assessment of the case

(answer case questions) All group members must participate.

http://www.jcb.co.uk/

http://www.youtube.com/watch?v=k3WhQB7Hq0Q

Monday The Great Globalization Debate

– www.courses.fas.harvard.edu/sum/32268

There will be prizes for the best team!

Bring Your Cameras!