Chapter 8: Organization Structure and Control Systems

PowerPoint by Hettie A. Richardson Louisiana State University © 2008 Pearson Prentice Hall 8-1

Organizational Structure

 Must evolve to accommodate internationalization  Must “fit” with strategy  Should be contingency based © 2008 Pearson Prentice Hall 8-2

Evolution and Change in Structures  Stages model  Alcoa  Created smaller units  Linked geographically dispersed, but similar businesses (e.g., Brazil and Australia) © 2008 Pearson Prentice Hall 8-3

Domestic Structure Plus Foreign Subsidiary © 2008 Pearson Prentice Hall 8-4

International Division

 Organized along functional, product, or geographic lines  IBM World Trade  Pepsi Cola International © 2008 Pearson Prentice Hall 8-5

Global Functional Structure

 Designed on the basis of the company’s functions  Allows for functional specialization and economies of scale © 2008 Pearson Prentice Hall 8-6

Global Product (Divisional) Structure © 2008 Pearson Prentice Hall 8-7

Global Geographic (Area) Structure © 2008 Pearson Prentice Hall 8-8

Organizing for Globalization

 Need for differentiation  Need for globalization  IBM  Rationalization  Development of alliances © 2008 Pearson Prentice Hall 8-9

Comparative Management in Focus: The Overseas Chinese Global Network  “Chinese commonwealth”  Overseas Chinese  Control $2 trillion in liquid assets  Contribute 80% of the capital for the PRC  Contribute 70% of the private sector in Malaysia, Thailand, Indonesia, and the Philippines © 2008 Pearson Prentice Hall 8-10

Comparative Management in Focus: The Overseas Chinese Global Network  The Overseas Chinese business culture  Business largely confined to family and trusted friends —

guanxi

 Adherence to patriarchal authority  Thrift and a high savings level  Investment in tangible goods  Wary outlook © 2008 Pearson Prentice Hall 8-11

Organizing to “Be Global, Act Local”  Colgate-Palmolive  Primary structure is geographic  CEO oversees centralized operations  Levi Strauss  Allows managers to act independently  Keeps some centralized control, but decentralizes control of foreign subsidiaries © 2008 Pearson Prentice Hall 8-12

Management Focus: Proctor and Gamble’s Structure  P&G/Gillette merger: Gillette adopts P&G’s organizational structure  P&G’s structure:  Global Business Unit (GBU)  Market Development Organization (MDO)  Global Business Services (GBS) © 2008 Pearson Prentice Hall 8-13

Emergent Structural Forms

 Interorganizational networks  Royal Philips Electronics  Intel  Global e-corporation network structure © 2008 Pearson Prentice Hall 8-14

Emergent Structural Forms

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Emergent Structural Forms

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Emergent Structural Forms

 Transnational corporation (TNC) network structure  Asea Brown Boveri (ABB) © 2008 Pearson Prentice Hall 8-17

Choice of Organizational Form

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Assignment  Compare fig 8.6 above with fig 8.7 in the book  Prepare a plan for differentiation / integration for each of the 5 alternatives in fig 8.6

 Use the PowerPoint slides about differentiation and integration to support your reflections © 2008 Pearson Prentice Hall 8-19

When is Change Needed?

 Clashes among divisions, subsidiaries, or individuals over territories or customers  Duplication of administrative or personnel services, sales offices, account executives  An increase in overseas customer service complaints © 2008 Pearson Prentice Hall 8-20

When is Change Needed?

 A shift in operational scope  Conflict between overseas and domestic staff  Centralization leads to excessive and, thus, misused or misunderstood data  Unclear reporting relationships © 2008 Pearson Prentice Hall 8-21

Locus of Decision Making

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Monitoring Systems

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Direct Coordinating Mechanisms

 McDonald’s in Moscow  Problem: Quality control  Solution: Built processing plant in Moscow and provided managerial training  Other options: Visits by head-office personnel and regular meetings © 2008 Pearson Prentice Hall 8-24

Indirect Coordinating Mechanisms  Examples: sales quotas, budgets, and financial tools and reports  Three financial statements  One for accounting standards in host country  One for the standards in the home country  One for consolidation © 2008 Pearson Prentice Hall 8-25

The Appropriateness of Systems  Where are top managers from?

 US individualism vs. Japanese collectivism © 2008 Pearson Prentice Hall 8-26

The Role of Information Systems  US MNCs monitor via specific functional reports  Inaccurate information, different norms, MIS adequacy  Noncomparability of performance data © 2008 Pearson Prentice Hall 8-27

Evaluation Variables across Countries  Adjust statements to reflect variables unique to each country  Take nonfinancial measures into account © 2008 Pearson Prentice Hall 8-28