1. LEARNING OBJECTIVES After studying this chapter, you should be
able to 1. Explain the stages of identification and analysis that precede
strategy selection. 2. Identify the two international strategies and the
corporate-level strategies that companies use. 3. Identify the business-
level strategies of companies and the role of department-level
strategies. 4. Discuss the important issues that influence the choice of
organizational structure. 5. Describe each type of international
organizational structure, and explain the importance of work teams. A
Look Back Chapter 10 explored the international monetary system. We
examined the factors that affect the determination of exchange rates
and discussed international attempts to create a system of stable and
predictable exchange rates. A Look at This Chapter This chapter
introduces us to the strategies used by international companies. We
explore the different types of strategies available to international
companies and important factors in their selection. We also examine
the organizational structures that companies devise to suit their
international operations. A Look Ahead Chapter 12 explains how
managers screen and research potential markets and sites for
operations. We identify the information required in the screening
process and explain where managers can go to obtain such
information.
FLYING HIGH WITH LOW FARES DUBLIN, Ireland—No one is as
successful as Ryanair (www.ryanair. com) at offering no-frills flying,
shuttling nearly 80 million passengers a year across Europe. Ryanair’s
fares are around 50 percent lower than Europe’s big national carriers,
and sometimes even one-tenth as much. In 25 years, Ryanair has
grown from offering one flight a day between Ire- land and England to
more than 1,100 routes between 28 nations that connect 168
destinations. Ryanair has successfully carved out a niche among the
flying public. Describ- ing his company’s approach, CEO Michael
O’Leary (pictured here) said, “It’s very simple. We’re like Walmart in
the United States—we pile it high and sell it cheap.” Ryanair’s strategy

2. is to use less-congested, secondary airports just outside Europe’s
biggest cities. Instead of serving London’s Heathrow or Gatwick
airport, Ryanair flies into Stansted. And rather than fly to Ger- many’s
Frankfurt Main airport, Ryanair services Hahn, a former U.S. fighter
base 60 miles west of Frankfurt. With the fly- ing public trying to save
money during the recent global recession, Ryanair’s low-cost strategy
helped it take even more market share away from the national
carriers. Ryanair’s strategy lets it negotiate airport fees as low as
$1.50 per passenger as opposed to the $15 to $22 per passenger
charged by Europe’s major airports. Rya- nair also slashes other
expenses to achieve its mission: For example, not serving ice with
drinks saves Ryanair $50,000 a year. Charging passengers for
checked baggage means fewer bags, which saves fuel and cuts the
cost of ground services. And rather than serve free water on flights,
Ryanair charges several dollars a bottle. Ryanair is hot on the heels of
big national carriers, such as British Airways, Lufthansa in Germany,
and Alitalia in Italy. Ryanair once painted “Arrivederci Alitalia” on one
of its planes to anger its Italian competitor. O’Leary is confident his
strategy will succeed. “Ryanair is going to be a monster in Europe
within the next 10 to 12 years,” he says. As you read this chapter,
consider the creative strategies companies use to out-compete rivals
and serve their customers. 1
Planning is the process of identifying and selecting an organization’s
objectives and de- ciding how the organization will achieve those
objectives. In turn, strategy is the set of planned actions taken by
managers to help a company meet its objectives. The key to de-
veloping an effective strategy, then, is to define a company’s
objectives (or goals) clearly and to plan carefully how it will achieve
those goals. This requires a company to undertake an analysis of its
own capabilities and strengths in order to identify what it can do better
than the competi- tion. It also means that a company must carefully
assess the competitive environment and the national and international

3. business environments in which it operates. A well-defined strategy
helps a company compete effectively in increasingly competitive
international markets. It serves to coordinate a company’s various
divisions and departments so that the company reaches its overall
goals in the most effective and efficient manner possible. A clear,
appropriate strategy focuses a company on the activities that it
performs best and on the industries for which it is best suited. It keeps
an organization away from a future of mediocre performance or total
failure. An inappropriate strategy can lead a manager to take actions
that pull a company in opposite directions or take it into industries it
knows little about. We begin this chapter by exploring important factors
that managers consider when analyzing their companies’ strengths
and weaknesses. We examine the different international strategies and
the corporate-, business-, and department-level strategies that
companies implement. Finally, we explore the different types of
organizational structures that companies use to coordinate their
international activities. International Strategy Managers confront
similar concerns whether formulating a strategy for a domestic or an
international company. Both types of firms must determine what
products to produce, where to produce them, and where and how to
market them. The biggest difference lies in complexity. Companies
considering international production need to select from many
potential countries, each likely having more than one possible location.
Depending on its product line, a com- pany that wants to market
internationally might have an equally large number of markets to
consider. Whether it is being considered as a site for operations or as
a potential market, each international location has a rich mixture of
cultural, political, legal, and economic traditions and processes. All
these factors add to the complexity of planning and formulating
strategy for international managers. Strategy Formulation The strategy-
formulation process involves both planning and strategy. Strategy
formulation per- mits managers to step back from day-to-day activities

4. and get a fresh perspective on the current and future direction of the
company and its industry. As shown in Figure 11.1, the strategy-
formulation procedure can be regarded as a three-stage process.
Let’s examine several important factors that should be considered in
each stage of this process. Identify Company Mission and Goals Most
companies have a general purpose for why they exist, which they
express in a mission statement—a written statement of why a
company exists and what it plans to accomplish. For example, one
company might set out to supply the highest level of service in a
market segment— a clearly identifiable group of potential buyers.
Another might strive to be the lowest-cost sup- plier in its segment
worldwide. The mission statement often guides decisions such as
which industries to enter or exit and how to compete in chosen
segments. TYPES OF MISSION STATEMENTS Mission statements
often spell out how a company’s operations affect its stakeholders—all
parties, ranging from suppliers and employees to stockholders and
consumers, who are affected by a company’s activities. Some
companies place corporate brands center stage and place the mission
of creating well-liked brands above all else. The mission statements of
other businesses focus on other issues, including superior shareholder
returns, profitability, market share, and corporate social responsibility.
Still other companies make their mission to be the interests of
consumers. For example, the mission
Planning is the process of identifying and selecting an organization’s
objectives and de- ciding how the organization will achieve those
objectives. In turn, strategy is the set of planned actions taken by
managers to help a company meet its objectives. The key to de-
veloping an effective strategy, then, is to define a company’s
objectives (or goals) clearly and to plan carefully how it will achieve
those goals. This requires a company to undertake an analysis of its
own capabilities and strengths in order to identify what it can do better
than the competi- tion. It also means that a company must carefully

5. assess the competitive environment and the national and international
business environments in which it operates. A well-defined strategy
helps a company compete effectively in increasingly competitive
international markets. It serves to coordinate a company’s various
divisions and departments so that the company reaches its overall
goals in the most effective and efficient manner possible. A clear,
appropriate strategy focuses a company on the activities that it
performs best and on the industries for which it is best suited. It keeps
an organization away from a future of mediocre performance or total
failure. An inappropriate strategy can lead a manager to take actions
that pull a company in opposite directions or take it into industries it
knows little about. We begin this chapter by exploring important factors
that managers consider when analyzing their companies’ strengths
and weaknesses. We examine the different international strategies and
the corporate-, business-, and department-level strategies that
companies implement. Finally, we explore the different types of
organizational structures that companies use to coordinate their
international activities. International Strategy Managers confront
similar concerns whether formulating a strategy for a domestic or an
international company. Both types of firms must determine what
products to produce, where to produce them, and where and how to
market them. The biggest difference lies in complexity. Companies
considering international production need to select from many
potential countries, each likely having more than one possible location.
Depending on its product line, a com- pany that wants to market
internationally might have an equally large number of markets to
consider. Whether it is being considered as a site for operations or as
a potential market, each international location has a rich mixture of
cultural, political, legal, and economic traditions and processes. All
these factors add to the complexity of planning and formulating
strategy for international managers. Strategy Formulation The strategy-
formulation process involves both planning and strategy. Strategy

6. formulation per- mits managers to step back from day-to-day activities
and get a fresh perspective on the current and future direction of the
company and its industry. As shown in Figure 11.1, the strategy-
formulation procedure can be regarded as a three-stage process.
Let’s examine several important factors that should be considered in
each stage of this process. Identify Company Mission and Goals Most
companies have a general purpose for why they exist, which they
express in a mission statement—a written statement of why a
company exists and what it plans to accomplish. For example, one
company might set out to supply the highest level of service in a
market segment— a clearly identifiable group of potential buyers.
Another might strive to be the lowest-cost sup- plier in its segment
worldwide. The mission statement often guides decisions such as
which industries to enter or exit and how to compete in chosen
segments. TYPES OF MISSION STATEMENTS Mission statements
often spell out how a company’s operations affect its stakeholders—all
parties, ranging from suppliers and employees to stockholders and
consumers, who are affected by a company’s activities. Some
companies place corporate brands center stage and place the mission
of creating well-liked brands above all else. The mission statements of
other businesses focus on other issues, including superior shareholder
returns, profitability, market share, and corporate social responsibility.
Still other companies make their mission to be the interests of
consumers. For example, the mission