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Chapter 12: Strategizing, Structuring, and Learning Around the World
Chapter 12
Strategizing, Structuring, and Learning Around
the World
Learning Objectives
After studying this chapter, students will be able to accomplish the following objectives:
1. Describe the relationship between multinational strategy and structure.
2. Explain how institutions and resources affect multinational strategy, structure, and
learning.
3. Outline the challenges associated with learning, innovation, and knowledge management.
4. List three things you can do to make a multinational firm successful.
Chapter Overview
The chapter focuses on the issues of multinational strategy and structure as they pertain to
international business. The chapter begins by introducing the two key pressures on organizational
structure: cost reduction and local responsiveness. Then, it reviews four different strategies—
home replication, localization, global standardization, and transnational—and four different
organizational structures—international division, geographic area, global product division, and
global matrix—that a firm can use to respond to these pressures. Having outlined the basic
strategy/structure configurations, the chapter turns to discuss how the institution-based and
resource-based views shed light on these issues. Next, the chapter discusses how institutions and
resources affect multinational strategy and structure. The chapter concludes with a discussion of
knowledge management at a global level. This discussion covers both explicit knowledge, which
can be written down and transferred with little loss of richness, and tacit knowledge, which can
only be acquired through hands-on practice.
Opening Case Discussion Guide
Launching the McWrap
It is hard to believe, but McDonald’s is no longer the world’s largest fast food chain—at least
measured by the number of restaurants. While McDonald’s still sells more than Subway ($25
billion versus $18 billion in 2015), McDonald’s seems to have lost momentum, with US sales
slowing down noticeably. McDonald’s, of course, does not only compete with Subway, but also
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Chapter 12: Strategizing, Structuring, and Learning Around the World
with the likes of Five Guys and Chipotle. In all three competitors, customers can see their food
being prepared and feel that it is fresher and seemingly healthier. In the Fresh Wars, Subway has
elevated its food preparers to become “sandwich artists.” Chipotle has bragged about its “food
with integrity,” and released a short film critical of industrial farming.
In response, McDonald’s has unleashed the McWrap, a high-profile salvo in the Fresh Wars in an
effort to grab customer attention. The two-year, nine-ingredient, focus-grouped efforts to fix
McDonald’s freshness problem are an amazing case study of how a multinational changes its
strategy, taps into its global organization, and leverages its knowledge—all under the pressures
of cost reduction and local responsiveness. Dissecting what is behind the launch of McWrap, at
least three things can be observed.
First, the idea to launch McWrap did not come from the United States. It came from three
operations in Europe. Second, the attention that the McWrap idea attracted from the headquarters
was driven by a strategic interest in search of fresher and healthier items to outcompete rivals in
the Fresh Wars. Third, significant experimentation, learning, and innovation went into the
process. McDonald’s menu innovation team undertook intense research and numerous
experiments that ultimately took two years (2011–2013) to finish. The wrap’s name went through
intense testing. In the first trial in Chicago, it was called the Grande Wrap. But, customers could
not figure out what “grande” was. Then, the name Fresh Garden Wrap was tested in Orlando, and
it flopped too. Eventually, McWrap was chosen.
In a leaked, internal memo obtained by the media, McDonald’s admitted that it was not even in
the top ten of the Millennial Generation’s list of favorite restaurant chains. When asked to
elaborate, a McDonald’s spokesperson noted: “We don’t think we have a problem with
Millennials, but we want to remain relevant to all of our customers.” Whether McWrap will
prove to be relevant to customers remains to be seen—or tasted.
Lesson Plan for Lecture
Brief Outline and Suggested PowerPoint Slides
Learning Outcome PowerPoint Slides
Learning Objectives Overview 2: Learning Objectives
LO1
Describe the relationship between
multinational strategy and
structure.
3: Multinational Enterprises (MNEs)
4: Exhibit 12.1: Multinational Strategies
and Structures: The Integration-Responsive
Framework
5–6: Strategic Choices
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Chapter 12: Strategizing, Structuring, and Learning Around the World
7: Exhibit 12.2: Four Strategic Choices for
Multinational Enterprises
8–9: Organizational Structures That
Support Different Strategic Choices
10: Reciprocal Relationship between
Multinational Strategy and Structure
11: Institution-Based Considerations
LO2
Explain how institutions and resources
affect multinational strategy,
structure, and learning.
12: Exhibit 12.7: How Institutions and
Resources Affect Multinational Strategy,
Structure, and Learning
13: Resources-Based Considerations
LO3
Outline the challenges associated with
learning, innovation, and
knowledge management.
14–15: Knowledge Management
16: Exhibit 12.8: Knowledge Management
in Four Types of Multinational Enterprises
17: Globalizing Research and Development
18: Determining the Success of Failure of
Multinational Strategies, Structures, and
Learning
LO4
List three things you can do to make a
multinational firm successful.
19: Implications for Action
Debate 20: Corporate Controls versus Subsidiary
Initiatives
Key Terms 21–22: Key Terms
Summary 23–24: Summary