International

Business

Lecture
5
153
03/12/2024 1
 Homework questions

• In a developing country (like Vietnam) is the most valuable

thing knowledge? And gaining from acquired
knowledge/skills?

• If the definition of a knowledge based economy is ‘an

economy where production and services are based on
knowledge-intensive activities that contribute to an
accelerated pace of technical and scientific advance’ what part
does this play in the Vietnamese economy?

2
 11 Days – 11 Sessions
Session 1: Introduction to International Business--Globalization
Session 2: Communication, Culture, ethics, CSR and sustainability
Session 3: National Political, Economic and Legal Systems
Session 4: International trade and government Policies
Session 5: Industrial types, organizations, strategies in
international business, analysis and risk, control and planning
Session 6: Evaluation of countries and business
Session 7: Practical business planning, organization structure, strategies
and control
Session 8: Money, investment, finance & accounting
Session 9: Production and supply chains
Session 10: Global marketing
Session 11: Management, leadership, HRM and diversity

03/12/2024 3
 1. Industrial types & opportunities

2. Analysis of business

3. Risk

4a. Industrial clusters and

4b. Organizational structures (architecture)

5. Control systems

6. Business planning 4
03/12/2024
 1. Industrial types & opportunities

2. Analysis of business

3. Risk

4a. Industrial clusters and

4b. Organizational structures (architecture)

5. Control systems

6. Business planning 5
03/12/2024
 1 & 2. Industries &
opportunities

03/12/2024 6
 What are the traditional industry types?

What opportunities do they offer?

03/12/2024 7
 5 ‘traditional’ types
and Characteristics

Mature Slow increase in Process

industries demand, numerous and after-
repeat customers, sales
limited product service
innovation
innovation

Declining Consistent Leaders,

industries reduction in niche,
industry demand harvest and
divest
03/12/2024 8
 Characteristics

Global Significant Multinationa

industries international sales l and global

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 What industrial sector is best to enter?

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 So what is the potential in the industries that
are worth entering?

Need to analyse the different industries

03/12/2024 11
 Characteristics

Emerging Recent changes in demand or

technology, new industry Fast and
industries standards operating
furious
procedures developing

E-commerce/business:
B2C
B2B

Fragmented Large number of firms

of roughly equal size Consolidating
industries
(M&A)

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 Emerging
industries

Fast and
furious

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14
15
 Questions to consider

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 Questions one needs to consider:

Is a particular industry and market a realistic

place to start (a new venture)?

Does the industry contain markets ripe for

innovation or are underserved?

Are there positions in the industry that will

avoid some of the negative attributes of the
industry as a whole?

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What are the industry and business
opportunities in the near future?

What are the ideal situations

(contexts) and factors required to
produce those opportunities?

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 1. Industrial types, clusters & opportunities

2. Analysis of business

3. Risk

4a. Industrial clusters and

4b. Organizational structures (architecture)

5. Control systems

6. Business planning 19
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 What ‘tools’ can you use to
analyse business markets?

03/12/2024 20
 A standard tool used for
market analysis

PESTEL

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 PESTEL Analysis

Political

Economic (financial)

Social (cultural)

Technological

Environmental

Legal
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 ES S
U S I N
H E B
E T A Y &
T A R T OD
H A D S W ?
W RE N R RO
T M O
TO
03/12/2024 23
24
 Emerging, fragmented (but connected) and
global
Innovation:
Competitiveness lies in a company’s or firm’s-specific
advantage (FSAs), which need to be continuously
upgraded, and this requires firms to be innovative.

Innovation more broadly speaking can be thought of as

‘the successful exploitation or commercialisation of
new ideas’, which require specific resources and
capabilities.

25
Company specific resources and capabilities

26
27
 Porter’s forces

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 FIVE FORCES (Michael Porter) model helps you
analyse and understand an industry’s structure.

The forces are the forces that determine an industry’s

profitability. The challenge is to diminish these forces.

1. Threat of substitute

2. Threat of new entrants

3. Rivalry among existing firms

4. Bargaining power of suppliers

5. Bargaining power of buyers

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 1. Threat of substitute
Industry is more attractive when the threat of a
substitute is low.

2. Threat of new entrants

Industry is more attractive when the threat of
new entrants is low.

How to keep new entries low is by having

disincentives; 6 examples -

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a. economies of scale (new entrants have to
accept cost disadvantages).

b. product/service differentiation – e.g.

drinks market have strong brands.

Advertising costs are high if you want to
compete. One way to enter is have a
product/service so different! (USP)

c. Capital requirements – a disincentive is

when its costs a lot to gain access to an
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 d. Government and legal barriers– do you
need a licence/certificate?

e. Cost advantage– an existing company may

have cost advantages not related to their size
that are not available to new entrants. E.g.
they have historically been operating a long
time, so they have land, property etc. No
start-up costs.

f. Access to distribution channels. Having

good distribution channels is hard in crowded
markets. E.g. shelf space in the greeting cards
market. (Cakes, car repair)
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 3. Rivalry among existing firms
How many competitors are there?
What is the difference in their products / services?
What is the growth rate in the industry like?
What is the level of fixed costs? (with higher fixed
costs you must sell higher volumes to reach break-
even)

4. Bargaining power of suppliers

5. Bargaining power of buyers

S ?
ES
S IN
-B U
03/12/2024
E 33
 Analysis and evaluation is crucial for success

• Most new businesses fail - folklore says 90% but it is

difficult to measure

• Most fail because of poor opportunity evaluation

65% of all failures are avoidable

• Due to a weak business proposition and poor

management

• Knowing when to walk away is a key strength

Avoiding non-opportunities is a core competence for

entrepreneurs
• Need to consider the motives, values and commitment
of your team, the actual value of social capital, how
long it will take to raise the financial capital, etc. !
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 TRADITIONAL VS. ENTREPRENEURIAL
MANAGEMENT

Traditional Entrepreneurial

Slow Quick
Heavy Light
Unguided (dumb) Guided (smart)
Static targets Moving targets
Inflexible Flexible
High fixed costs Low fixed costs

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03/12/2024 ©Provox Training and Consulting for NEU - EBBA
 1. Industrial types, clusters & opportunities

2. Analysis of business

3. Risk

4a. Industrial clusters and

4b. Organizational structures (architecture)

5. Control systems

6. Business planning 36
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 3. Risk

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If risk is about balancing + and – what factors are going
to help you decide to enter a market or start a
business?

Design a template to be able to analyse

data/information and to help you make a decision?

38
03/12/2024 ©Provox Training and
Consulting for GUST 39
 Threat to success of a business or
industry (i.e. profitability)

LOW MEDIUM HIGH

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 RISK – Traffic lights and alarms The greater the need
for success, the easier
it is to ignore the
downside.

Necessity for upside?

Probable
Definition of success?
+ Upside Upside
Degrees of success?
Control – degree of
control (how much
RISK control have you got
over the risk?)

Probable IMPACT:
- Downside Downside
Can the risk be absorbed?

Can you recover from the impact?

Is the downside irreversible?

Is there a mitigation
strategy/policy?

M E A S U R A B L E : predictability, forecasting, direction, alerts, etc.

 SMART Analysis

Specific

Measurable

Achievable

Relevant

Timely (time-bound)

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 Business Risks (1/2)
Risk name TVaR in MSEK Explanations

1. Redundancy of 45
employees due to
lost orders (+/-0)

Description: Price reduction can occur due to new competitors (cross segment merchandising),
lower demand for maintenance, economic down-turn
2. Price reduction 16 Risk Response:
(market
conditions) (+/-0) *Instead of hiring new employees, increase the use of subcontractors.
*Reduce overhead costs: Thorough follow-up on overheads to make sure that they don't increase
* Alternative ways of purchasing. Explore alternative suppliers.

3. Damage in 11
customer
facilities (+/-0)

Confidentiality - High (C3) 43 | BP Presentation | BU ERS Nordic | 2011.10.19

 Business Risks (1/2)
TVaR in
Risk name Explanations
MSEK

Description: Price reduction can occur

2.Price due to new competitors (cross segment
reduction merchandising), lower demand for
16
(market maintenance, economic down-turn
conditions)
Risk Response:

Confidentiality - High (C3) 44 | BP Presentation | BU ERS Nordic | 2011.10.19

 Business Risks (1/2)
TVaR in
Risk name Explanations
MSEK

Description: Price reduction can occur

due to new competitors (cross segment
merchandising), lower demand for
maintenance, economic down-turn
2.Price Risk Response:
reduction *Instead of hiring new employees,
16
(market increase the use of subcontractors.
conditions) *Reduce overhead costs: Thorough
follow-up of overheads to make sure that
they don't increase * Alternative ways of
purchasing. Explore alternative
suppliers.

Confidentiality - High (C3) 45 | BP Presentation | BU ERS Nordic | 2011.10.19

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 Feasibility Study (analysis)

Is what you are proposing in business /

industry possible?

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 Product/service feasibility

Industry/target market feasibility

Organisational feasibility

Financial feasibility

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 Product/service feasibility

Product/service desirability

Product/service demand

Industry/target market feasibility

Industry attractiveness

Target market attractiveness

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 Organisational feasibility
Management skills and
competence/expertise/experience

Resources availability/sufficiency

Financial feasibility

Total start-up cash needed

Continuation of financial resources

Financial performance of a similar business

Overall financial attractiveness

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 This all depends on the ‘gap’ in
the market.

Which also depends on your

analysis of the industry and the
feasibility of entering the market.

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 Customer
Internal or external?

52
 What are you doing
for your customer?’

‘Understanding your
market – creating
value’.
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 What value to you bring to your customer?

Why will they pay for your product/service?

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 A. Helping them get a job done

B. Removing pain points

C. Creating gains.

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 HELP THEM TO ‘GET A JOB DONE’ (2
factors)

Describe what a specific customer segment is

trying to get done. It could be the tasks they are trying to
perform and complete, the problems they are trying to solve or the needs
they are trying to satisfy:

•Functional jobs (e.g. perform or complete a specific task, solve a

specific problem)

•Social jobs (e.g. trying to look good, gain power or status)

•Emotional jobs (e.g. aesthetics, feel good, security)
What basic needs are you helping your customer satisfy? (e.g.
communication, finding a partner)
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Factor 1: REMOVE ‘PAIN POINTS’
Negative emotions, undesired costs, situations and risks that the customer experiences

1. What do customers find too costly? (e.g. time, money, substantial effort ..)
2. What frustrates customers?
3. How are current solutions underperforming for customers? (e.g. lack
of features, performance, faults, etc.)
4. What are the main difficulties and challenges encountered by
customers?
5. What negative social consequences does the customer encounter
or fear? (e.g. loss of face, power, trust, or status)
6. What risks does the customer fear? (e.g. financial, social, technical risks)
7. What common mistakes does your customer make? (e.g. usage
mistakes)
8. What barriers are keeping your customer from adopting
solutions? (e.g. upfront investment costs, learning curve, resistance to change, etc.)

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 Factor 2: CREATE ‘CUSTOMER GAINS’
The benefits customers expect, desire or would be surprised by. This includes functional
utility, social gains, positive emotions and cost savings.

1. Which savings would make your customer happy? (e.g. Time,

money and effort)
2. What outcomes does your customer expect? (e.g. quality level, more
of something, less of something)
3. What would make your customer’s job or life easier? (e.g. flatter
learning curve, more services, lower cost of ownership)
4. What positive social consequences does your customer desire?
(e.g. makes them look good, increase in power, status, …)
5. What are customers looking for? (e.g. good design, guarantees, specific or
more features, …)
6. What do customers dream about? (e.g. big achievements, big reliefs, …)
7. How does your customer measure success and failure? (e.g.
performance, cost, etc.)

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 What value do you bring to your
customer?

Why will they pay for your

product/service?

03/12/2024 59
 10 tests for a business opportunity

1. Market conditions?
2. Industry conditions?
3. Access to required resources?
4. Technology –proof, prototype, patent,
platform
5. Timing –Market, funding?
6. Is it scalable?
7. Is there an exit route?
8. Personal fit –skills, experience, interest
9. Team –fit and function
10. Revenue model

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 So … in conclusion … What is the (your)
dream ticket?

03/12/2024 61
 THE DREAM TICKET..!
• The idea creates or adds significant value
to
a customer or consumer
• It solves a major problem for which
customers will pay a premium (they just have to have it)
• The idea is protectable (patent)
• Large (VD xx m -trillion) market
• Strong market growth (20% pa)
• High gross margin (40% plus)
• High potential for net profit (10 to 15%)
• Realistic break-even point
• Strong cash flow
• Clear exit evident from the start
• Attractive returns for investors (>40% IRR)
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 1. Industrial types, clusters & opportunities

2. Analysis of business

3. Risk

4a. Industrial clusters and

4b. Organizational structures (architecture)

5. Control systems

6. Business planning 63
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 4a. Industrial clusters

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 Industrial clusters (organisations)

Innovation clusters

Supported by modern entrepreneurs/innovators

03/12/2024 65
03/12/2024 ©Provox Training and
Consulting for NEU - EBBA 66
• SILICON VALLEY SUCCESS STORIES.
• •AirBnB–started 2007 – worth $25 bn.
• •Instagram –launched 2010 – worth $35 bn.
• •Fitbit –Founded 2007 – worth > $4 bn.
• •Whatsapp–Founded 2009 –Sold to Facebook in 2014 for $19.3 bn.
• •Tinder –released 2012 – worth $5 billion
• •Uber –launched 2009 – worth $62.5 billion
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70
https://www.vietnam-briefing.com/
doing-business-guide/vietnam/sector-
insights/how-to-source-industrial-
suppliers-in-vietnam

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 These successes are not just in the tech
industries, but also:

Retail
Food
Health Care
Creative Industries
Tourism

So, what makes a good cluster?

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 So, what makes a good cluster?

• Critical mass
• Money / investment
• Talent
• Recycling ideas
• But also “teaching” and mentorship
• Spill-overs and knock-ons
• Co-creation of novelty / uniqueness
• Networking and transivity (a:b, b:c, So c:a)

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 Transivity – logic and mathematics

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 76
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 1. Industrial types, clusters & opportunities

2. Analysis of business

3. Risk

4a. Industrial clusters and

4b. Organizational structures (architecture)

5. Control systems

6. Business planning 78
03/12/2024
 4b. Organisational
structures

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 What do organisational
structures look like?

Why do organisations evolve?

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 What do organisational structures look
like?

Why?

How and why do they change

Understand operations & processes

Responsibilities & roles
…………..
03/12/2024 81
 Why do organisations
evolve?

03/12/2024 82
84
 e.g.
Development of a company

Local Regional

Multinational
National
Global
Proctor and Gamble
Localisation – based on International
Market Development
Organisation

85
Proctor and Gamble in the mid-2000s
organisation structure was not working, so
P&G changed it. Dropped 100 brands and
focused on 80 core brands (rep 95%
co.profits)

From, Market development Organisation

to Selling and Market Operations (SMO)

(organisation) with a wider focus on the
global market concentrating on superior,
effective and efficient selling, distribution,
shelving, price execution and
merchandising.
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Structured into 4 industry based sectors and 5 SMOs

N. America Europe Asia

Baby, feminine
and family care

Beauty, hair &

personal care Latin
America
Fabric & home
care
Africa, Middle
Health and East & India
grooming

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Consulting for NEU - EBBA 87
88
SMOs (selling and market operations) got:
More power
More responsibility
More accountability to total global business

But
Local companies cooperated fully with local
customers, cooperation with local projects and
had local responsiveness

From local to transnational

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Consulting for NEU - EBBA 89
 Organisation and Organisational
architecture (totality of a
companies organisation)

03/12/2024 90
What does it depend on?

People – employees, skills they have and strategies for

recruiting, keeping them, compensating them, etc.

Incentives (performance metrics) e.g. bonuses to

reward performance (e.g reaching a specified target)

Culture – norms and value systems shared among

employees.

Control systems for measuring (e.g. profitability) and

making judgements about performance.

Processes & procedures – operation of the company,

how decisions are made and work performed, etc.

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91
What does an organisational structure / culture
include?

1.Subunits – product divisions, national operations &

functions

2.Location of decision-making responsibilities

(centralised or decentralised)

3.Integrating and coordinating mechanisms

across subunits (e.g. cross-functional teams,
shared service centres, etc.)

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03/12/2024 ©Provox Training and Consulting for NEU - EBBA
 Structure

Processes Incentives
and
controls

Culture

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Questions that need to be addressed about the
structure:

What is the hierarchical structure?

Where is decision making power?

Who is responsible for what?

Are decisions (power) centralised or decentralised?

What structure is needed to make big changes?

‘knock-on’ Question:
If power is decentralized is there bigger chances of
conflict between lower and senior managers?

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Factors influencing organisation of
operations
Need to:
Formulate a strategy
Physical and
Social Factors Organize Operations

Specify the Structure of Roles,

Competitive Responsibilities, and
environment Relationships

Operating Develop Coordination and

Environment Control Systems

Promote Shared Understanding

of the Company's Culture
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95
 Write down as many company jobs
(positions / roles / responsibilities)
you can think of.

03/12/2024 96
 Ceo

Support
services

Purchasing Manufacturing Finance Marketing

97
Questions that need to be addressed about the
structures:

1. How do you make the ‘boxes’ (divisions)?

• Functional differences
• Product
• Geographic

2. What happens when things change?

Strategy – structure

3. How do you coordinate everything?

Standardized plan – mutual adjustment

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There are basically 2 types of traditional
structures (each with their own advantages and
disadvantages)

Structures need to indicate who has authority (chain

of command) and responsibility in the decision
making process.

1. Vertical
(chain of command)
Centralised – top down decisions (autocratic)

Decentralised – bottom up decisions (consensual)

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 This is what I talked about in
lecture 2

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 3 Manager/Leader styles
Autocratic Consultative Consensual

w n
d o
pManagers
To degree of
involvement

Subordinates
degree of
Bo
involvement
tto
m
Leadership regularly conforms to national stereotypes and

up
therefore, when transferring from culture to culture, careful
thought is required.
03/12/2024 101
2. Horizontal structures
(how to divide the firm into discrete functional groups)

a) specify the set of tasks that must be done

b) divide those tasks among business units (BUs), divisions,
subsidiaries, departments, teams, jobs, and individuals, etc.
c) stipulates superior and subordinate relationships.

There is often 3 criteria for formatting the structure:

• Business function (to maximise efficiency; e.g. coal, gas, Hydro,

etc.).
• Type of business (according to product; soap, toothpaste
cosmetics, etc.)
• Geographic location
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The structure provides the framework within
which the personnel operate. It answers:

What is to be done?

Who should do what?

How will they do it?

It is basically about coordination and decision making

….

103
Factors that encourage decentralisation and centralisation of
decision making in MNE operations

104
105
 Board

Ceo

Communication

Legal HRM

And
Purchasing Manufacturing A Finance Marketing
Sales
Employees Employees Employees Employees

Manufacturing B

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 Power Company

Sales, District heat by Country

maket country Z
ing,
Production Distribution
Country X Country X
etc .

Z Y Country
X X
Y

Shared Service Centre

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Service organisation in a 75 000 employee company
Head of Vattenfall
Services
Jan Bardell

Human Resources
Finance

Magnus Hasselgren Ingrid Ruppert

Market &
Support Systems
Communication
Magnus Hasselgren Berndt Larsson

Generation Distribution Heat & Industry

Services Services Services
Ulrika Wiberg Fredrik Holmgren Per Thorin

Employees 374 1176 357

Turnover (MSEK 518 2000 793
External business: 10 % 25 % 45%

108 | Vattenfall Services Nordic | Jan Bardell | 03/12/2024

 Or

Other ways of structuring

companies and organisations
Line division
International divisions
Functional structure
Product division structure
International division structure
Geographic division structure
Matrix division structure

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 Typical line divisions

Headquaters
Manufacturing
Division

Product Product Product

line 1 line 2 line 3
Shared services:Purchasing
Marketing & Sales (branch sales)
Finance & accounting
Maintenance & Service

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 Typical International divisions

Headquarters

International Division Gen

Man (region)

Domestic Domestic Domestic

line A GM line B GM line C GM

Country A, B, C
GM
(products A, B and/or C)

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 Functional structure

Extract from International Business – Environment and Operation by Daniels,

Radebaugh & Sullivan (Pearson 2015)

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 Product Division Structure

Extract from International Business – Environment and Operation by Daniels,

Radebaugh & Sullivan (Pearson 2015)

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 International Division Structure

Extract from International Business – Environment and Operation by Daniels,

Radebaugh & Sullivan (Pearson 2015)

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 Geographic Division Structure

Extract from International Business – Environment and Operation by Daniels,

Radebaugh & Sullivan (Pearson 2015)

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 Matrix Division Structure Superimposing
geographical
divisions across
traditional business units
combines these units that
are sensitive to competing
pressures and supposedly
Improving the chances
that decision-making
can simultaneously
resolve both.

However, when
subsidiaries report to two
different bosses this
requires excellent
communication and may
mean that subsidiaries
Extract from International Business – Environment and Operation by Daniels,
compete for company
Radebaugh & Sullivan (Pearson 2015)
resources.
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Structures change depending on markets,
people, technology, etc.

1. Many different growth rates and market conditions prevent

applying a single organisational structure across globally
operating organisations.

2. Industrial conditions vary and so too do strategic capabilities and

company legacy, time and place make. Conditions determine
formats.

3. 20 years ago technology, costs and skills meant people in a

particular place could economically serve customers— companies
relied on multi-domestic strategies and geographic structures.

As markets and technologies changed MNEs were pushed to

reboot their organization.
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What changes have affected operations and processes
in the last 10-3 years?

What changes have affected operations and processes

in the last 24 months?

118
What happens when through highly developed ICT,
employees can report at any time from any place on
the planet?
Distance management! (managers who are responsible
for leading employees from a remote location)

Some companies have developed an elaborate system of

cross-functional, cross-market, and cross-business
committees, some of which do without a formal leader
and behave more like a sports team, building a culture of
collaboration.

Others are ‘boundary-less’ and do not have even an

office, but the office is wherever they are, employees are
self-employed, who operate by themselves and organise
their own schedule.

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 Network structure, matrix, team-based,
virtual & modular structure

Network
structure

Extract from International Business – Environment and Operation by Daniels,

Radebaugh & Sullivan (Pearson 2015)

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 Extract from International Business – Environment and Operation by Daniels,
Radebaugh & Sullivan (Pearson 2015)
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Team-based
structure

The team should be a group of workers, with complementary

skills and synergistic efforts, all working toward a common
goal. Teams can include members from different functions and are known as cross-
functional teams, where there is less hierarchy less structure, and are more fluid than
traditional structures (such as functional or divisional)
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Virtual Organization
Non-permanent arrangement between
independent companies, sole-traders,
suppliers, customers, that “work across
space, time and organizational
boundaries” with links strengthened by
webs via ICT.”

Formal rules, responsibilities, procedures,

and relationships within a group create
informal communication.

Improved technologies support

coordination among people working from
different locations, making it easier to
develop relationships, get resources and
develop strategic capabilities.
123
03/12/2024 ©Provox Training and Consulting for NEU - EBBA
Further examples:
a- film industry
b- hospital modular structure

124
e.g. The film industry
People (“employees”) move freely
from project to project and
applying their skills (i.e., directing,
talent search, animation,
costuming, set design, etc.) as
needed.

Market mechanisms, typically in the

form of contracts, formalize
relationships, while strong and
successful performers (actors) replace
poor performers.

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Modular structure

A modular organization involves

several largely independent bodies
that can rearrange and work with
different other departments as
needed.

The modular structure divides the

business into small, tightly knit strategic
business units ( SBUs ) operating
independently, with focus on specific
elements of the organizational process.
This image shows the GNU health module
An advantage of the modular structure interacting with many different departments,
is that loosely coupled structures enable such as oncology, radiology, surgery and
pediatrics, across many contexts, such as
organizations to be more flexible and location and socioeconomic status
restructure more easily
126
03/12/2024 ©Provox Training and Consulting for NEU - EBBA
Further questions that need to be addressed
about the structures:

• What is the company doing (product or service)?

• What divisions and units do they have (function)?

• Should the structure in each place be the same?

NB
As the company develops the structure will
change; e.g. domestic/national, cross-border, international, etc.

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Problems that occur !!

• Poor communication
• Focused on different goals - ‘Turf war’ – ‘I am
boss and I have power’
• Poor coordination
• Too much standardisation and not ‘local focus’
(local responsiveness)
• Difficult to share competencies and ‘know-how’

128
So, need to have integrating networks and
mechanisms:

Formal - official (direct contact (training), liaison,

teams …)

Informal (personal, e-mail, notice boards …)

129
Control mechanisms

1. Personal control of subordinates

2. Bureaucratic (rules and procedures, e.g. capital

and budget rules … e.g. > 1000$)

3. Output control – performance metrics (quality,

productivity, profitability, market hare, growth …)

4. Cultural – norms and values of the organisation

130
 1. Industrial types, clusters & opportunities

2. Analysis of business

3. Risk

4a. Industrial clusters and

4b. Organizational structures (architecture)

5. Control (monitor) systems

6. Business planning 131

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 5. Control systems

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What are the control systems (depending on the
organisation, culture and strategy)

1.Market

2.Bureaucracy A
3.Peer Control (guidance)

Mechanisms for control include:

4. Report (what is reporting strategy and what
does a report look like?)

5. Visits (to subordinates) B

6. Evaluations
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1.Market A
External (objective not subjective interpretations)
market mechanisms, such as profitability
or market share establish performance
benchmarks.

Using these create universal metrics that work globally,

profitability and market share are measured in the same
way everywhere.

134
2. Bureaucracy A
Rules and regulations that work in
an organisation’s structure and
relies on standardisation, e.g. TQM
(Total Quality Management)

135
3. Peer control A
This is the preferred way of doing things (‘the way
we do things around here’).

Developed from the shared values of employees and it

influences their shared behaviour. It relies heavily on beliefs
and norms of the group (culture), e.g. The Toyota Way, and is
coordinated and harmonised by mutual adjustment.

Intrisically it must include highly flexible and aware managers/

supervisors.

Toyota way:
Hansei, Hemawashi, Genchi, Genbutsu, 5S, Jidika, Heijunka, Muda,
Mura, Kaizen, JIT …

136
Mechanisms for control include:
B
1. Report (what is reporting strategy and
what does a report look like?)

2. Visits (to subordinates)

3. Evaluations

137
1.Reporting B
Managers rely on frequent, accurate and real-
time reports to allocate resources, monitor
performance and reward successes, which also provide
early warning of ‘challenges.’

Reports can be formal or informal and often are, in

European companies, made as presentation slides.

It takes away to time write in detail and presentation slides make it

easier to compare, with software help, e.g. SAP, Oracle, Microsoft
Reports

Example: Scorecards

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Consulting for NEU - EBBA 138
Business unit: Sales B2B Europe
Scorecard
AC 2012 BP 2012 Deviation FC Q1 BP FY Deviation
Comments and corrective
Category KPI Metric YTD YTD AC/BP YTD 2012 2012 BP/FC 2012 actions AC/BP and BP/FC

KPI EBIT MSEK 101 63 38 l 216 162 54 l

Financials

PI RONA Percent 0 0 0 0 0 0

KPI OPEX MSEK -294 -331 38 l -1.243 -1.317 74 l

PI Cash flow * MSEK 108 71 37 l 244 194 50 l

KPI Customer Satisfaction Score 0 0 Contracted Gross Margin:

Percepti
Custom

AC/BP - mainly Mega Nordic

on
er

PI No of customers # 0 0 0 0 0 0

PI Contracted Gross Margin MSEK 254 281 -28 l 1.418 1.461 -43 l (temporary)
BP/FC –FC in line with BP;
deviation is explained
KPI Procurement Savings MSEK 0 0 0 0 0 0 FX-effect
Proc

ellen
Exc
ess

KPI % of compl. initiatives from F4S % 0% 0% 0% 0% 85% -85%

LTIF – rolling 12 month

KPI Number of employees # 412 456 44 l 439 456 17 l accidents in 2011
PI Percentage of Female Managers % 21% 18% 3% l 19% 18% 1% l FC – LTIF need to be checked
Cap & Learning

KPI Employee satisfaction # 0 63 -63

KPI Leadership Capabilities # 0 0 0

KPI MyOpinion Based Improvements % 0% 5% -5%

KPI Safety LTIF 4,0 4 l 0,5

4,0 0,5 0,54 l
PI Sickness Leave % 4% 4% 4% 5% 1% l

* Cash Flow = EBIT + depreciation / investment

Confidentiality - High (C3) 139 | Monthly follow up | BU Sales B2B | 2012.04.13

Rounding differences possible
Category
Financials

KPI
3 Metric
Scorecard
Level
2011 2012 2013 2014 2015 2016 Comments

KPI EBIT MSEK 105,0 136,0 145,0 162,0 175,0 184,0

KPI OPEX MSEK 165 163 163 163 163 163

PI Cash flow (FFO) MSEK 113 122 125 147 160 169
Perception

KPI Customer Satisfaction Score 71,0 72,0 72,0 74,0 75,0 75,0
Customer
Excellence

KPI Procurement Savings MSEK 13

Process

KPI % of compl. initiatives from F4S %

KPI Number of employess # 1 908 1 900 1 906 1 850 1 855 1 830

PI Percentage of Female Managers % 11 12 12 14 14 14

Cap & Learning

KPI Employee satisfaction # 57 63 68 69 70 71

KPI Leadership Capabilities # 40 15 10 8 8 8

KPI MyOpinion Based Improvements % 30 50 55 60 65 70

KPI Safety LTIF 3,4 3,0 2,6 2,3 2,0 2,0

PI Sickness Leave % 2,4 2,4 2,4 2,4 2,4 2,4

PI CO2-Emissions decrease/y -1% -1% -1% -1% -1% -1%

Confidentiality - High (C3) 140 | BP Presentation | BU ERS Nordic | 2011.10.19

 B
2. Visits
These include coordination for adjusting and
controlling (e.g. peer), face-to-face (F2F),
teleconferencing, webinars, meetings, formal
budget reviews, planning seminars, etc.

These are done to promote communication

and commonality to strengthen control
systems.

©Provox Training and Consulting for NEU - EBBA 03/12/2024 141

 B
3. Evaluation metrics
Financial metrics, budget,
productivity, and profitability
performance.

Controls help: all reports, observations and

controls, headquarters to decide strategies, e.g.
decisions to not expand further in a country
because of its slow growth.

Help evaluate local conditions and global

trends and managers’ performance.

142
EXTRA

143
 Do you know what a business plan looks
like?

Do you know what a business model is?

Barringer-Ireland (business model canvas?

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145
 What does a practical business model
include (Barringer-Ireland)?

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A business model is a firm’s plan or recipe
for how it creates, delivers and captures
value for its stakeholders.

What are its: a. Core strategy, b.

Resources, c. Financials, d. Operations

Core strategy – how the firm plans to compete

relative to its competitors

Principle elements being: business mission, basis of

differentiation, target market and product/market scope

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 CORE STRATEGY
Business Mission Basis of differentiation

Target market Product/market scope

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 Resources – the inputs a firm has to produce,
sell, distribute and service a product or a
service.

The core competencies are the specific factors or

capabilities that sets it apart from its rivals (e.g. patent,
technical know-how, trusting relationship with a customer
an efficient process, etc.)

The key assets are the assets a firm owns that enables
its business model to work. These assets can be financial,
intellectual, physical or human)

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 RESOURCES
Core competence Key assets

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 Financials – how the firm earns money; the revenue
streams, cost structure and financing/funding

Revenue streams – singular or many (advertising,

commissions, download fees, matchmaking, licensing, product
sales, renting/leasing, service sales, subscription services …)

Cost structure – is the business cost-driven (therefore

minimising costs) or value-drive (focus on high-quality
products/services)? Identify business costs and major cost
categories.

Financing / funding – what do they need to bring the business

model to life?

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 FINANCIALS
Revenue stream

Cost structure Financing / funding

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Operations– How the company works on a day-to-
day basis! Primary elements of operation being;
Product / service production, channels and key
partners

How are products or services produced – in-house, out-

sourced?

Channels – How is the product / service delivered? Direct,

indirect, store, on-line …?

Key partners – start-ups in particular have a core competence

and rely on other providers to perform tasks needed to make
the business model work. E.g. a supplier plays a vital role!

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 OPERATIONS
Product or service Channels
production

Key partners

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 1. Industrial types, clusters & opportunities

2. Analysis of business

3. Risk

4a. Industrial clusters and

4b. Organizational structures (architecture)

5. Control (monitor) systems

6. Business planning 155

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 Business planning depends on
your knowledge of what really
happens in a business.

The plan!

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 BUSINESS PLAN
Getting started
Whose plan is this?

Business and owner details:

Business name:

Owner(s) name:
Business address and postcode:

Business telephone number:

Business email address:

Home address and postcode (if different from above):

Home telephone number (if different from above):

Home email address (if different from above):

Section one
Executive summary

1.1 Business summary:

1.2 Business aims:
1.3 Financial summary:

Section two
Owner’s background

2.1 Why do you want to run your own business?

2.2 Previous work experience:
2.3 Qualifications and education:
2.4 Training:

Details of future training courses you want to complete:

2.5 Hobbies and interests
2.7 Additional information: 157
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 Getting Section three
Products and services

3.1 What are you going to sell?

a product
a service
both
3.2 Describe the basic product/service you are going to sell:
3.3 Describe the different types of product/service you are going to be selling:
3.4 If you are not going to sell all your products/services at the start of your business, explain why
not and when you will start selling them:
3.5 Additional information:

Section four
The market

4.1 Are your customers:

individuals
businesses
both
4.2 Describe your typical customer:
4.3 Where are your customers based?
4.4 What prompts your customers to buy your product/service?
4.5 What factors help your customers choose which business to buy from?
4.6 Have you sold products/services to customers already?
yes
no
If you answered “yes”, give details:
4.7 Have you got customers waiting to buy your product/service?
yes
no
If you answered “yes”, give details:
4.8 Additional information:

Section five
Market research
5.1 Key findings from desk research:
5.2 Key findings from field research – customer questionnaires:
03/12/2024 5.3 Key findings from field research – test trading: 158
5.4 Additional information:
 Section six
Marketing strategy

What are you going to do? Why have you chosen this marketing method? How much will it
cost?

TOTAL COST

Section seven
Competitor analysis
7.1 Table of competitors

Name, location Product/service Price Strengths Weaknesses

and business size

7.2 SWOT analysis :

Strengths Weaknesses

Opportunities Threats

7.3 Unique Selling Point (USP):

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 Section eight
Operations and logistics
8.1 Production:
8.2 Delivery to customers:
8.3 Payment methods and terms:
8.4 Suppliers:

Name and location of supplier Items required Payment arrangements Reasons for choosing supplier
and prices

8.5 Premises:
8.6 Equipment

If being bought

Item required Already owned? New or second hand? Purchased from Price

8.7 Transport:
8.8 Legal requirements:
8.9 Insurance requirements:
8.10 Management and staff:
8.11 Additional information:

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 Section nine
Costs and pricing strategy

Product/service name

A Number of units in calculation

Product/service components Components cost

B

C Total product/service cost

D Cost per unit

E Price per unit

F Profit margin (£)

G Profit margin (%)

H Mark up (%)

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 Section ten
Financial forecasts

10.1 Sales and costs forecast

Month 1 2 3 4 5 6

A Month name

Sales forecast

B Product/service

C Product/service

Costs forecast

D Product/service

E Assumption
s
(e.g.
Seasonal
trends)

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 10.2 Personal survival budget

Section Monthly costs

A Mortgage/rent
Estimated costs

Local tax

Power (Gas, electricity and oil) costs

Water costs

All personal and property insurances

Clothing

Food and housekeeping

Telephone

Hire/rent charges

Subscriptions (clubs, magazines etc.)

Entertainment (meals and drinks)

Car tax, insurance, service and maintenance

Credit card, loan and other personal debt repayments

Insurance

Other

B Total costs

D Total income

E Total survival income required

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 10.3 Cash flow forecast

Month Pre-start 1 2 3 Total

A Month name
Money in
B Funding from ……..
Funding from
other sources
Own funds
Incomes from Sales
Other
C Total Money in (£)
Money out
Loan repayments
D ………

Personal drawings

E Total money out (£)

F Balance (£)
Opening balance
Closing balance

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 10.4 Costs table

Cost item What is included and how you worked it out Total cost

Section eleven
Back-up Plan

11.1 Short-term plan:

11.2 Long-term plan:
11.3 Plan B:
11.4 Plan B continued...:

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 To be successful with the launch
of a business, enterprise or
organisation depends on the
‘gap’ in the market.

Which also depends on careful

analysis of the industry you are
in and the feasibility of entering
the market, i.e. a good plan &
strategy.
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 What are your
conclusions
from the lecture?

03/12/2024 167
 Homework questions

• Review and read through all lecture slides.

• Do background reading and research. (increase your

knowledge)

• Make sure you have assimilated knowledge and

information so you can think about how to solve
international business challenges, AND you have ideas
to help reach conclusions.

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168
1 2 3 4 5 6 7 8 9 10 11
Final
Hand-in exam
Country
Briefing
deadline

Warm up
and prep
Lecture
+ Q&A

Discuss

Individual x x x x x x x x
presents

Case/
Activity/
Mid- A B (C)
course
test exam Final
Vietnamese exam
Opportunity

03/12/2024 169
170
 Breakout room presentation & seminar
discussion groups

03/12/2024 171
Case, activity or exercise -
discussion

172
 CASE

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