QUESTIONS
11-1. What strategies and other approaches does IKEA follow that have allowed the firm
to become the world’s leading furniture retailer?
(LO 11.1; AACSB: Application of knowledge)
■ Strategy- Targeting a global customer segment allows IKEA to offer standardized products at
■ Philosophy– offer high-quality, well-designed furnishings at low prices. Its functional,
■ About 30% of the merchandise is made in Asia, and 2/3 in Europe. A few items are sourced in
■ Catalogue- Universally the most important marketing tool for this centralized advertising
Prepared in Sweden to ensure conformity with IKEA’s cosmopolitan style. Each product has a
■ Expertise- IKEA’s experience internationally is becoming more universal for other firms as
they recognize and struggle with the need to be efficient from a cost standpoint, and responsive
or differentiated to customers, who demand increased value. It is a difficult strategy to
implement.
11-2. Describe IKEA’s organizational culture. How does it contribute to the firm’s
success?
(LO 11.1; AACSB: Application of knowledge)
■ Corporate Culture- informal
■ Employees- Pivotal to success
◘ Centralized Management Style- Most initiatives are developed in Sweden and
◘ Consensus-based decision making- managers share their knowledge and skills with
◘ Communication- Management in each store is required to speak either English or
◘ “Anti-bureaucratic week” -each year- managers wear sales clerks’ uniforms and do
11-3. What challenges does IKEA face going forward?
(LO 11.1; AACSB: Application of knowledge)
IKEA CHALLENGES:
■ Manage operations across 51 countries, 315 stores, 20 franchises, 147,000 employees, 47
distribution centers, and 1,002 suppliers in 54 countries.
■ IKEA must figure out how to:
◘ Incorporate customer feedback and design preferences from diverse markets into
decision-making at headquarters
◘ Reward employees and motivate suppliers despite varying business customs and
V. END OF CHAPTER QUESTIONS
● TEST YOUR COMPREHENSION
11-8. Define visionary leadership. What are the traits of a manager who has visionary
leadership?
(LO 11.2; AACSB: Application of knowledge)
11-9. Describe the distinction between multidomestic and global industries.
Visit MyManagementLab for suggested answers.
(LO 11.3; LO 11.4; AACSB: Application of knowledge)
11-10. Describe the integration-responsiveness framework. What are the specific
pressures for local responsiveness and global integration?
(LO 11.3; AACSB: Application of knowledge)
■ Integration-Responsiveness Framework – summarizes two basic strategic needs
PRESSURES FOR GLOBAL INTEGRATION
■ Seek cost reduction through scale economies.
■ Capitalize on converging consumer trends and universal needs.
■ Provide uniform service to global customers.
■ Global sourcing- raw materials, components, energy, and labor
■ Monitor and respond to global competitors.
Benefits of global integration:
■ Global integration justification
Benefits of local responsiveness:
◘ Adjust the firm‘s practices to suit distinctive needs and conditions in each country
■ Local responsiveness justification
11-11. What is the difference between global strategy and multidomestic strategy? Visit
the web site of Dell Computer (www.dell.com). Does Dell generally apply a global strategy
or a multidomestic strategy? How can you tell?
(LO 11.4; AACSB: Analytical Thinking)
■ With a global strategy headquarters seeks high control over country operations to minimize
■ Dell applies mostly a global strategy in Japan, although it must incorporate some
11-12. Define transnational strategy. Give examples of firms that apply a transnational
strategy.
(LO 11.4; AACSB: Application of knowledge)
■ Transnational strategy is a coordinated approach in which the firm tries to be both more
11-13. What is the difference between a centralized and a decentralized organizational
structure? Why do firms often prefer to have a centralized structure?
(LO 11.5; AACSB: Application of knowledge)
■ A centralized approach means headquarters retains significant authority and control.
11-14. What are the different organizational structures for international operations?
Which structure(s) is most associated with global strategy?
(LO 11.5; AACSB: Application of knowledge)
■ There are four: (1) export and international division; (2) decentralized geographic; (3)
centralized product and functional; and (4) matrix.
11-15. What is the global matrix structure? What are the advantages and disadvantages
of this approach?
(LO 11.5; AACSB: Application of knowledge)
GLOBAL MATRIX STRUCTURE [Closely associated with Transnational]
■ This structure is a blend of the geographic area, product, and functional structures, leveraging
the global efficiencies of a global strategy and the local responsiveness of a multidomestic
strategy.
Advantages
Disadvantages
■ The chain of command from superiors to subordinates can become muddled.
■ Employees may receive contradictory instructions from multiple managers, who may be
11-16. What are the major foreign market entry strategies? What are the
characteristics of each?
Visit MyManagementLab for suggested answers.
(LO 11.6; AACSB: Application of knowledge)
● APPLY YOUR UNDERSTANDING
11-17. AlumCo is a large producer of aluminum products and now handles international
operations through its export department. However, management believes this
arrangement is no longer suited to the firm’s growing international activities and wants
to adopt a more sophisticated approach. What alternative organizational structures
(international division, geographic area structure, etc.) should the firm consider? Make a
recommendation to management regarding the most appropriate international structure
that AlumCo should employ. For reference, check out the website of Alcan, the
well-known Canadian aluminum firm, at www.riotintoalcan.com.
(LO 11.5; AACSB: Analytical Thinking)
Students may draft a memo acknowledging current exporting history and appropriateness of the
export department as the structure of choice for the early stages of internationalization. Then,
students might discuss briefly the other three types (international division, geographic, product,
and matrix structures) and when they are appropriate. The student may give the example of
11-18. Barbie is the best-selling doll, produced by Mattel, a U.S. company. Mattel is
targeting Barbie to foreign markets but struggles to find the right strategy because of
cultural differences. In Muslim countries, Barbie faces competition from doll producers
that offer Islamic alternatives that feature conservative styling. In Latin America,
competitors offer dolls with tanned skin and dark hair. In Asia, many girls prefer dolls
with Asian features. The fun-loving image that Barbie projects in the U.S. market is often
inappropriate abroad. In marketing Barbie abroad, should Mattel management apply a
strategy that is global or multidomestic? What are the advantages and disadvantages of
each approach? Is it possible to reach a compromise? Elaborate and justify your answer.
(LO 11.4; AACSB: Analytical Thinking)
The global strategy assumes universal demand, while the multidomestic strategy assumes that
cultural differences demand market adaptability. The transnational strategy is the hybrid,
leveraging the best of both worlds to yield global efficiencies with local responsiveness.
PRESSURES FOR GLOBAL INTEGRATION
■ Seek cost reduction through scale economies.
PRESSURES FOR LOCAL RESPONSIVENESS
■ Leverage natural endowments available to the firm.
MULTIDOMESTIC STRATEGY (also called multilocal strategy)
■ Headquarters delegates considerable autonomy to each country manager, allowing him or her
to operate independently and pursue local responsiveness
Benefits of local responsiveness:
◘ Adjust the firm‘s practices to suit distinctive needs and conditions in each country
◘ Adapt to local customer requirements, language, culture, regulation, the competitive
Advantages
■ Locally produced products can be better adapted to the local market.
■ There is minimal pressure on headquarters staff because local operations are managed by
individual managers in each country.
The MULTIDOMESTIC STRATEGY would address:
●In Muslim countries, Barbie faces competition from doll producers that offer Islamic
alternatives that feature conservative styling.
Disadvantages
■ Country managers are often nationals of the host country and tend to function independently,
with little incentive to share knowledge and experience with managers in other countries
■ Limited information sharing also reduces the possibility of developing a knowledge-based
competitive advantage
GLOBAL STRATEGY
■ Headquarters seeks substantial control over its country operations in order to minimize
redundancy and achieve maximum efficiency, learning, and integration worldwide.
Benefits of global integration:
◘ Maximize worldwide value chain efficiencies
■ Global integration justification
◘ Converging buyer demand
Advantages
■ Provides substantial ability to respond to worldwide opportunities. It creates economies of
scale, which results in lower operational costs.
■ High-quality products give rise to global brand recognition, increased consumer preference,
Global strategy is easier due to:
■ Converging buyer characteristics worldwide
Disadvantages
■ Challenging for management to closely coordinate the activities of widely dispersed
international operations.
TRANSNATIONAL STRATEGY (MULTIDOMESTIC + GLOBAL)
■ A coordinated approach to internationalization in which the firm strives to be both- more
responsive to local needs while retaining sufficient central control of operations to ensure
efficiency and learning.
In the event that licensing strategies are employed, beware of past Mattel issues:
◘ The U.S. toymaker Mattel licensed rights to distribute the Barbie doll to the Brazilian toymaker
Estrela (www.estrela.com.br). Once the agreement expired, Estrela developed its own Barbie
look-alike –”Susi”—which eclipsed Brazilian sales of Barbie dolls. Estrela then launched the