Stanford GSBSloan Program

Stramgt 258Strategic Management

14: Strategy, Organization and Globalization

Daimler Chrysler CVD

February 25, 2003 John Roberts 2

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.

February 25, 2003 John Roberts 3

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

February 25, 2003 John Roberts 4

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

February 25, 2003 John Roberts 5

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)

February 25, 2003 John Roberts 6

E

SO

Performance

In the environment, globalization can occur atthe level of: -- economy -- industry

-- market

CA based on -- home base -- global coordination -- local responsiveness -- combination of global coord, local resp., and learning

International vs. Global vs. Multi-Localmodels of organization

February 25, 2003 John Roberts 7

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)…..

February 25, 2003 John Roberts 8

LO MED HI

LO

HI

Tra

nspo

rt/C

omm

unic

atio

n C

osts

Acr

oss

Reg

ions

Preference Similarity Across Regions

Globalization of Economies

Globalization of Markets

Domestic(No Multi-Nationals)

Multi-Local

Multi-Local

? GlobalFirm

International(Not Tied toRegion)

February 25, 2003 John Roberts 9

Issues/Implications of Framework

(1) 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)