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Chapter 12: Strategizing, Structuring, and Learning Around the World
Chapter Outline
LO1: Describe the relationship between multinational strategy and structure.
1. Key Concepts
2. Key Terms
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Chapter 12: Strategizing, Structuring, and Learning Around the World
3. Discussion Exercise
The first Starbucks opened in Seattle in 1971 as a purveyor of coffee beans and brewing
equipment. It was only in 1987, after the company was sold to Howard Schultz, that it began
selling espresso drinks. The firm’s global reach is impressive. It operates over 16,000 stores
in 49 countries and works with raw bean suppliers all over the world. Recently, though,
Starbucks’s rapid expansion has come to a screeching halt, with the company closing nearly
1,000 stores and eliminating nearly 8,000 jobs. As part of its recovery strategy, Starbucks is
experimenting with coffee shops that cater to local interests and needs. In a bold move, it
opened an outlet in Seattle, the Fifteenth Avenue Coffee and Tea, that had no trace of the
corporate logo. Two more similar outlets are planned for Tokyo and Paris.
Using the integration-responsiveness framework detailed in the chapter, how could students
describe this strategy? How effective will the strategy be? Do students think the general
public will have negative reactions toward this “local” branding of a global product? What
changes would students suggest Starbucks to make to their strategy?
LO2: Explain how institutions and resources affect multinational strategy, structure, and
learning.
1. Key Concepts
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Chapter 12: Strategizing, Structuring, and Learning Around the World
2. Key Terms
Organizational culture: The collective programming of the mind that distinguishes
members of one organization from another
3. Discussion Exercise
How can a firm respond to the institutional challenges presented by Iraq’s political situation?
What is the most effective strategy for entering this unstable, unpredictable market? How
would a particular strategy allay or compound Iraq’s fears of being dominated by foreign
companies? How would one (legally) encourage institutional changes that would facilitate
foreign investment?
LO3: Outline the challenges associated with learning, innovation, and knowledge
management.
1. Key Concepts
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Chapter 12: Strategizing, Structuring, and Learning Around the World
2. Key Terms
3. Discussion Exercise
The strategies that an MNE can adopt to establish its foreign presence determine how it will
share knowledge with its subsidiaries. For example, a home replication strategy features a
moderate level of interdependence between the headquarters and its subsidiaries, in which
the latter adapt and leverage competencies developed by the former.
For managers of MNEs, which strategy, in students’ opinion, offers the optimal mode of
knowledge management? Why is this mode better than others? Do students think it is more
important for knowledge to flow from local subsidiaries to headquarters or vice versa? Or,
would they prefer a flow of knowledge in multiple directions? If they prefer the last option,
what kind of resources would make such communication both effective and efficient?
LO4: List three things you can do to make a multinational firm successful.
1. Key Concepts
Debate: Ethical Dilemma
Corporate Control versus Subsidiary Initiatives
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Chapter 12: Strategizing, Structuring, and Learning Around the World
1. Key Concepts
2. Key Terms
Closing Case Discussion Guide
Moving Headquarters Overseas
A number of MNEs have moved headquarters (HQ) overseas. In general, there are two levels of
HQ: business unit HQ and corporate HQ. The question is: Why? One simple answer is that the
benefits must significantly outweigh the drawbacks. At the business unit level, the answer is
straightforward: the “center of gravity” of the activities of a business unit may pull its HQ toward
a host country.
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Chapter 12: Strategizing, Structuring, and Learning Around the World
Video Case
Watch “Freedom to Plan” by Phillip Kotler of Kellogg School of Management,
Northwestern University.
1. Kotler discussed a plea by a district manager for IBM who was concerned about his
Chicago market. On a global basis, which strategic response would best relate to his plea?
Why might the ability to apply the strategic response differ when applied internationally
and domestically?
2. Do you agree with Kotler’s assertion that “all markets are local?” Why?
3. The district manager wanted to be able to run his part of the company as a business.
Obviously he was already running part of a business, so what did he mean by that?
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Chapter 12: Strategizing, Structuring, and Learning Around the World
4. Do you agree with the assertion that corporate headquarters cannot have the same feel for
opportunity as those at the local level? Given a firm’s limited resources and the possibility
that all local managers may see an opportunity for the company (or an opportunity to build
their own empires), how should headquarters determine which local manager has the best
feel for opportunity?
5. Accountability was stressed as key in granting greater autonomy to the local managers who
are willing to go out on a limb. However, remember that such managers are not only going
out on a limb with their careers but also with the firm’s resources. How would you
implement such autonomy in a way that would limit the risks to the firm?
Additional Discussion Material
(From Prep Cards)
Critical Discussion Questions
1. In this age of globalization, some gurus argue that all industries are becoming global and
that all firms need to adopt a global standardization strategy. Do you agree? Why, or why
not?
2. On Ethics: You are the manager of the best-performing subsidiary in an MNE. Because
bonuses are tied to subsidiary performance, your bonus is the highest of all subsidiary
managers. Now, headquarters is organizing managers from other subsidiaries to visit and
learn from your subsidiary. You worry that if performance at other subsidiaries catches up,
your subsidiary will no longer be the star unit, and your bonus will go down. What are you
going to do?
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Chapter 12: Strategizing, Structuring, and Learning Around the World
3. On Ethics: Find a high-profile case of an MNE moving its headquarters out of its home
country to a new country. Discuss the media and political outcry surrounding this move. If
you were CEO, how would you defend the move at a press conference?
Review Questions
1. What are the four strategic choices in the integration-responsiveness framework?
2. What are the four corresponding organizational structures?
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Chapter 12: Strategizing, Structuring, and Learning Around the World
3. Why is the relationship between strategy and structure reciprocal?
4. What are some of the informal rules of the game governing the selection of subsidiary
managers in MNEs headquartered in different countries?
5. Summarize how knowledge is developed and disseminated in each of the four types of
MNEs.
6. The pressure to reduce costs is common to both domestic and international competition,
but what additional kind of pressure is unique to international competition?
What is unique in international competition is the pressures for local responsiveness, which
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Chapter 12: Strategizing, Structuring, and Learning Around the World
7. List three examples of how formal and informal external institutions affect MNEs.
8. Summarize the insights revealed by using a VRIO framework to analyze a potential
structural change.
9. How would you characterize the two types of knowledge found in an MNE?
10. Which do you think would be more integral to a multinational’s success: corporate controls
or subsidiary-level strategies and agendas?
11. From time to time, a manager may be faced with the need to change the internal rules of
the game within his or her MNE. What skills and capabilities might be useful in achieving
this?
12. What is your interpretation of the phrase “act local, think global”?
The extent to which the student demonstrates thought in providing the answer is more
important than the answer.