Global Integration and Local Responsiveness

• local responsiveness: meeting specific needs of customers in individual markets
• when firms operate internationally, they try to strike the right balance of global integration and local responsiveness
• integration responsiveness framework describes how internationalizing firms simultaneously seek global integration and local responsiveness
• firms that emphasize global integration make and sell standardized products and services to capitalize on converging tastes and preferences
• firms that emphasize global integration compete on a regional or worldwide basis and seek to minimize operating costs by centralizing value chain activities and emphasizing scale economies
• firms that emphasize local responsiveness are meeting specific needs of buyers in individual countries
• firms that emphasize local responsiveness are allowed to adapt to customer needs locally due to the competitive environment
• firms that emphasize local responsiveness free local managers to adjust offerings, marketing, and practices to suit individual market conditions
• integration-responsiveness framework is associated with 4 strategies:

  1. home replication strategy (international business is separate from and secondary to its domestic business)
  2. multi domestic strategy (internationalizing firm develops in numerous foreign markets)
  3. global strategy (headquarters seeks substantial control over country operations to achieve maximum efficiency)
  4. transnational strategy (firm responsive to local needs while retaining central control of operations to ensure efficiency)
• home replication strategy view: expansion abroad is an opportunity to generate additional sales for domestic product lines
• home replication strategy view: firm pursues international business to extend product life cycles and replicate home market success
• home replication strategy view: expects little useful knowledge to flow from foreign operations
• home replication strategy view: firms that make and sell commodities such as raw materials and basic parts use this
• home replication strategy view: typically employed by the smaller firm with products it wants to sell abroad to generate additional sales
• home replication strategy view: contracts with an intermediary in several markets to import and distribute product, generally doesn't adapt it
• home replication strategy view: firm relies heavily on foreign intermediaries because management knows little about international business
• home replication strategy view: key consequence is that it maintains little control over how its products are marketed abroad
• home replication strategy view: replication provides few competitive advantages in foreign markets
• home replication strategy view: usually an initial, temporary approach rather than a long term strategy, often followed by inexperienced firms or those with limited international goals
• multi domestic strategy is also called multi local strategy
• multi domestic strategy view: firm delegates autonomy to managers to operate independently and pursue local responsiveness
• multi domestic strategy view: headquarters recognizes and emphasizes differences between national markets, allowing product and management practice variation by country
• multi domestic strategy view: country managers are often nationals of the host country and tend to function independently
• multi domestic strategy view: example is Nestle
• multi domestic strategy view: minimal pressure on headquarters staff
• multi domestic strategy view: firms with limited international experience find this easy because they can delegate many tasks to country managers
• multi domestic strategy view: organizational culture and businesses processes may differ substantially from those of headquarters
• multi domestic strategy view: limited info sharing leads to reduced economies of scale and developing knowledge based competitive advantage
• multi domestic strategy view: negatives could be inefficient manufacturing, redundant operations, proliferation of overadapted products, higher operating costs
• global strategy view: asks "Why not make the same thing, the same way, everywhere?"
• multi domestic strategy view: emphasizes central cordination and control of international operations
• multi domestic strategy view: headquarter managers are often largely responsible for firm's operations worldwide
• multi domestic strategy view: activities such as R&D and manufacturing are centralized at headquarters and management views world as one large marketplace
• multi domestic strategy view: example is Samsung Electronics
• global strategy view: provides substantial ability to respond to worldwide opportunities
• global strategy view: increases opportunities for cross national learning and cross fertilization of firm knowledge among all subsidiaries
• global strategy view: high quality products give rise to global brand recognition
• global strategy view: has many factors that make it easy to pursue
• global strategy view: challenging for management to coordinate the activities of widely dispersed international operations closely
• global strategy view: firm must maintain ongoing communications between headquarters and its subsidiaries as well as between the subsidiaries