MNGT4800 Ch 10, 11, &12 Notes
MNGT4800 Ch 10, 11, &12 Notes MNGT 4800
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This 12 page Class Notes was uploaded by Peyton Oglesby on Sunday March 6, 2016. The Class Notes belongs to MNGT 4800 at Auburn University taught by Dr. Peter Stanwick in Spring 2016. Since its upload, it has received 17 views. For similar materials see Strategic Management (Section 009) in Business, management at Auburn University.
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Chapter 10 Globalization- “a process of closer integration and exchange between different countries and peoples worldwide” Globalization is made possible by: Investment barriers and falling trade Superior telecommunications Lower transportation costs Importance of MNEs and FDIs o Multinational Enterprise (MNE)- deploys resources and capabilities in the procurement, production, and distribution in at least two countries o Foreign Direct Investment (FDI)- investments in value chain activities abroad o International Strategy-leveraging home-based core competencies by selling the same products or services in both domestic and foreign markets o Global Strategy- to sustain a competitive advantage, competing against foreign and domestic companies around the world Why Global? o Gain access to larger markets-capitalize on market potential-- like: China, India, and emerging economies o Gain access to low-cost input factors-labor, natural resources, technology, logistic o Develop new competencies-location economies, unique locational advantages Expanding Internationally: Disadvantages Foreignness liabilities o Added cost of doing business in an unfamiliar environment, both cultural and environmental. o Business costs increasing due to economic development Rising wages Protecting intellectual property Where How does an MNE decide where it should go? o National institutions-well-established legal and ethical pillars as well as well-functioning economic institutions such as banks, infrastructures, and capital markets o National culture- “Programming of the mind” Geert Hofstede’s Cultural Dimensions Power distance- how a society handles inequality among people in terms of physical and intellectual capabilities Individualism- relationship between individuals in a society, particularly to the relationship between individuals and their collective pursuits Masculinity/femininity- relationship among genders and their relations to an individuals role at work and in society Uncertainty-avoidance- societal variances in tolerance towards ambiguity and uncertainty Long-term orientation How Exporting-making goods in one country and selling in another Acquisition, strategic alliance -also popular vehicles for entrance into foreign markets MNEs sometime prefers greenfield operations or wholly owned subsidiaries Strategy around the World-Cost Reduction v. Local Responsiveness Local responsiveness- modify products and services to fit local consumer preferences and host-country requirements. The 4 Global Strategies International- leveraging home-based skills/competencies. Selling products/services in the homeland and foreign markets o Benefits Leveraging core competence Economies of scale Low-cost implementation via: Exporting or licensing Franchising Licensing o Risk No/or limited local responsiveness Greatly affected by exchange rate fluctuations IP embedded in product/service could be expropriated Localization- maximize local responsiveness, consumers will believe that the products are from domestic companies. o Benefits Highest possible local responsiveness Reduced exchange rate exposure o Risks Duplication of main business functions in multiple countries, this could lead to a high costs in implementation Little, or no, economies of scale Little, or no, learning across different regions Higher risk of intellectual property expropriation Global standardization- location economies and economies of scale; pursuing a global division of labor based on best-of-class capabilities reside at the lowest cost o Benefits Location economies Economies of scale o Risks No local responsiveness Little/no product differentiation Some exchange-rate exposure As wages increase there is a “race to the bottom” Some risk of intellectual property expropriation Transnational- combo of localization and global standardization, “glocalization” o Benefits Attempts to combine benefits of standardization and localization strategies Economies of location, scale, and learning o Risks Some exchange-rate exposure HIGH risk of intellectual property expropriation Global matrix structure is costly and hard to implement See slide 16 for “Walmart Retreats from Germany” National Competitive Advantage Death-of-distance hypothesis- geographic location alone shouldn’t lead to firm-level competitive advantage, because firms now have the ability to source inputs globally. o “So why are certain industries in some countries more competitive than in others?” National Competitive Advantage see slide 18 for Porters diamond of national competitive advantage The National Competitive Advantage Framework Factor conditions- a nation’s endowments- in terms of human, national, and other resources Demand conditions- specific characteristics of demand in a firm’s domestic market Competitive intensity- competitive environments have a tendency to stimulate firms to outperform others Related and supporting industry- leadership in associated and supporting businesses can also foster world-class competitors in downstream industry Regional clusters Regional cluster- is a group of interrelated companies and institutions in a specific industry, geographically located near each other and linked by mutual features Chapter 11 Implementation: AFI Framework Strategy implementation: o Must close the “knowing-doing” gap o Get things done o Key to gaining and sustaining competitive advantage o Only way to realize the values of competitive strategies Organizational design- the objective is to interpret strategies into realized ones Organizational structure- specifies the firm’s formal reporting relationships, procedures, controls, and authority and decision-making processes. Structure must be flexible Structure follows strategies Organizational inertia Resistance to change- often leads to failure due to the environmental dynamics (competition, strategy, competition, etc.) Organizational strategy and structure are dynamic see slide 5 for Organizational Inertia image Key Elements of Organizational Structure Organizational structure determines: work efforts of individuals and teams, and resource distribution Key building blocks: o Specialization- the degree to which a task is divided Division of labor o Formalization- codified rules and formal procedures Detailed written policies and rules o Centralization-where the decision is made Centralized decision making o Hierarchy- formal, position-based reporting lines see slide 9 for Strategy Highlight Assembling the Pieces Organic organizations: o Flat structure o Uses virtual team due to information technology o Decentralized decision making o Low degree of specialization & formalization Mechanistic organizations o Tall hierarchy o Centralized decision making o High degree of specialization and formalization Matching Strategy and Structure Simple structure o A basic organizational structure o Low degree of formalization and specialization o Small firms with low complexity o Top management makes all important strategic decisions Functional structure o Groups of personnel with distinct functional areas o The areas of expertise correspond to specific stages in the company value chain activities o Drawbacks: Lacks effective communication channels across departments It can’t effectively address a high level of diversification Multidivisional structure o Contains multiple distinct SBUs o Each SBU is independent and ran by a separate CEO; each CEO reports to the corporate office o Use with several corporate strategies o Related diversification Co-opetition amongst SBUs Centralized decision making Transfer core competences across SBUs o Unrelated diversification Decentralized decision making and competing for resources Matrix structure o Matrix structure- is a combo of function and multidivisional Very versatile Creation of dual line of authority Enhanced learning from different SBUs Each SBU receives support both vertically and horizontally o Shortcomings of this structure: Unclear reporting structure causes misunderstanding and delays Difficult to implement Complexity rises when expandingespecially globally The Values, Norms, and Artifacts of Organizational Culture Organizational culture o Collectively shared norms and values o Value-what’s thought to be important o Norms- proper employee behaviors and attitudes o Artifacts- illustration of culture in items like physical design, stories, and celebrations Socialization- internalize org’s norms and values through exchanges Where do Org. Cultures come from? o Founder imprinting Founders defined and shaped the culture Disney-Walt Disney Apple-Steve Jobs Microsoft-Bill Gates Sam Walton-Walmart’s low cost culture Recruit people who fit in the culture How Does Org Culture Change? o Core competencycore rigidity When the culture no longer fits with the environment there is change needed o Cultural change can bring new leadership via mergers and acquisitions Culture must be VALUABLE, RARE, INIMITABLE, and NON- SUBSTITUTABLE (RBV) Cultural impact on employee behavior: o Strengthens commitments, engagement, and effort of employees o By appealing to employees behavior it motivates them Culture is Vital to an Org: o It leads to higher performance o Alignment allows development and refines organizational core competency Strategic Control and Reward Systems Internal governance mechanisms- culture and sanctions Input controls are rules and standard operating procedures like behavior guidelines and budgets Out-put controls are result-oriented Chapter 12 Strategic MNGT & the Role of Business in Society • It is said that public stock company is the backbone of our economy • The four characteristics of public firms: o Limited liability for investors-the investors aren’t legally liable for the company, they just suffer an indirect impact of law suits o Transferability of investor interest-availability to buy and sell stock o Legal personality-a corporation is a legal entity so they can be sued, they have to follow the legal regulations of the given country o Separation of ownership and control- shareholders own st stock but they don’t own the company • 21 century: already two financial crises o Accounting scandals: Enron WorldCom Tyco… o Global financial crisis real estate bubble burst Lessons o Managerial actions disturb the economy Ethical business produces wealth but unethical practices destroy it o Stakeholder mngt is needed Stakeholder Strategy • Stakeholder theory o How an assortment of stakeholders interact to jointly craft and exchange value Effective mngt of these relationships creates a competitive advantage Why have stakeholder management? o More cooperative and better info o Added trust & lowers costs o Greater flexibility & adaptability o Lower risk o Stronger reputation • Professor statements: o Stakeholder is anyone who has a vested interest in the company (employees, customers, etc) o Stakeholder theory connects three things: corporate governance, business ethics, and strategic leadership Stakeholder Impact Analysis • Tool for considering power, legitimacy, and urgency o Five-step process Step 1: Who are the stakeholders? Internal and external stakeholders Identify the most powerful stakeholders and their needs Step 2: What are our stakeholders’ interests and claims?-what are their needs? What do they want from us? Claims on a company's profits Employee stock -- ESOPs Bigger institutional investors Step 3: What opportunities and threats do our stakeholders present? Step 4: What economic, legal, ethical, and philanthropic responsibility do we have to our stakeholders? Corporate social responsibility (CSR) framework Step 5: What should we do to effectively address the stakeholder concerns? How do we communicate with our stakeholders? You have to know what their needs are, ask. Create a course of action Take into account all earlier factors Reconsideration power, legitimacy, and urgency Corporate Social Responsibility • Milton Friedman circa 1962: o “The only social responsibility of business is … to increase profits so long as it stays within the rules of the game” • Today’s businesses tend to do more than just concentrate on their stockholders o Corporate Social Responsibility helps build competitive advantage • Shared value-creation framework through stakeholder focus o Consider the interests of the stakeholders in the decision making process o It can help grow customer base o Stronger relationships with stakeholders can boost the firm’s competitive advantage o Focus on the convergence between shareholders and stakeholders Corporate Governance • Corporate governancethe board of directors, their legal responsibility is to monitor the executive behavior and performance o Means to direct and control a firm o Ensure the activity of strategic goal o Address: principal–agent problem • When corporate governance failed o Accounting scandal o Global financial crisis o Bernard Madoff à Ponzi scheme • Information asymmetry o Insider info à Martha Stewart and ImClone • Professor statements: o CEO is also the chairperson of the board à this weakens the power of the board because it creates an inconsistency because the board is supposed to manage the board • Agency theory- sees a firm as a nexus of legal contracts o Relationships among shareholders, managers, and hierarchies o Firms need to design work tasks Adverse selection- misrepresentation of a job o Beyond your ability to do things Moral hazard- difficulty to determine whether an agent gives their best Board of Directors • Centerpiece of corporate governance o Inside (also works for the company) and outside directors o General strategic oversight and guidance Choosing, evaluating, and rewarding the CEO Supervision of the CEO succession plan – Recently an issue for both HP and Apple Delivering guidance to executives and their compensation Reviewing, watching, and approving strategic initiatives Directing a risk assessment and mitigation Guaranteeing a firm’s audited financial statements Guaranteeing a firm’s fulfillment with laws and regulations Other Governance Mechanisms • Executive compensation o Stock options- aligns incentives with the managers and shareholders o Performance-oriented compensation in recent years • The market for corporate control o External governance mechanism o Hostile takeover o Corporate raiders and hedge funds • Auditors, government regulators, and industry analysts Strategy and Business Ethics • Business ethics o Agreed-upon code of conduct and behavior in business • Legal conduct vs. Ethical conduct • When confronting an ethical dilemma o Do the activities fall in acceptable norms of professional behavior? o Do you feel content explaining and supporting the decision in public? Strategic Leadership • Strategic leadership o Conducts and styles of executives that influence others Managerial discretion/caution o Steve Jobs --- Apple o Michael Dell --- Dell o Mark Zuckerberg--- Facebook o Bill Gates --- Microsoft What do Strategic leaders do? • Interpersonal Role: o Figurehead o Liaison o Leader • Informational: o Monitor o Disseminator o Spokesperson • Decisional: o Entrepreneur o Disturbance handler o Resource allocator o Negotiator see slide 21 for roles that strategic leaders play exhibit How do you become effective and ethical leader • Upper-echelons theory-drawing on skills as a manager to help make decisions o Top mngt team determines the success or failure of an organization through the strategy they pursue Strong leadership through innate capabilities and learning Level-5 leadership pyramid