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Organization of the Multinational Firm VK Int. Unternehmensführung SS 2005 Elmar Kiesling, 0008665 Irmgard Krebner, 9804601 Padmini Ranawat, 9905070 Organization of the Multinational Firm Outline 1. 2. 3. 4. 5. 6. 7. 8. Introduction Structural Designs for Global Operations Home-based vs. heterarchical MNC Multidivisional & Network Form (M&N) The Transnational form Case Study: Acer A glimpse at the future: 2 scenarios Discussion Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Global trends and developments • Intense competition among developed countries • Increasing competition through newly industrialized Asian countries • Shift towards market economies (e.g. Eastern Europe, China) • Power blocks (e.g. European Union, YenBlock, NAFTA) Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Today´s Challenges To enable organizations to compete effectively in this global environment MNC´s have to: • be at least as good as a local firm providing similar products or services • approach new organization design possibilities Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Stages of International Development Global Multinational International Domestic Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm International corporate structure model High Economies of global standardization and size Global Transnational International explorer Multidomestic Low High need for localization Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Structural Designs for Global Operations Global product structure • • • CEO Product divisions responsible for global operations Uses globally based advantages Overlook of locally advantages Brand A Geographic area structure • • Each region has functional activities Exploits local advantages Introduction Structural Designs Home/heterarchical M&N President Central Staffs Brand B Brand C CEO Central Staffs European Division Transnational form Asian Division Case Study American Division Scenarios Organization of the Multinational Firm Structural Designs for Global Operations Matrix structure • balances global product and local market concerns • Problems: - complexity - dual reporting structure - confusion over responsibility and decision making • Solution: 3 C’s - clarity of firm’s basic objectives - continuity in commitment to those objectives - Introduction consistency in the work of divisions together Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Structural Designs for Global Operations Horizontal organization • Structured around workflows and processes Process Coordinators • Flat vertical hierarchy • Management tasks delegated to lowest level • Management Customer-driven Team Team Product Development Process Process Coordinator Team Team Order Fulfillment Process Process Coordinator Team Team Logistics Process Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Horizontal organization structure Decision making: • lateral decision processes direct contact, temporary task forces, self-directed teams, … • horizontal network flexible responding to external changes • common decision premises shared set of values Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Horizontal organization structure Differentiation from matrix structure: • • • Coordination more mixed and flexible Internal flexible processes link system elements Latterly resolution of conflicts Advantages: • • Simultaneously achieving global and local advantages reduced barriers among departments Problems: • • Time intensive coordination of decisions „Being stuck in the middle“ Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Home-based vs. heterarchical MNC 1. Home-based: • Core functions (strategic decision making, R&D etc.) in a limited geographic area • Links to - other firms local research and education facilities governmental bodies 2. Heterarchical: • many centers of different kinds • combining diverse technologies worldwide Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Home-based MNC 1. „Simple“ home-based MNC • Home base of all businesses in home country 2. Selective tapping • Core technology in home base • Selective tapping of international environment for support 3. Multi-home-based MNC • Separate bases for individual lines of businesses • Often connected to mergers and acquisitions Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Heterarchical MNC • Many centers: traditional HQ functions geographically dispersed • Holographic structure: information stored in each part of the organization • Interdependencies: tasks of any unit complexly related to the tasks of other units • „firm as a brain“: thinking not only restricted to one exclusive center, but goes in whole enterprise => global competitive advantage Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Multidivisional & Network Form (M&N) Contrasts between the multidivisional and the network : Multidivisional Network Dividing things Combining things permanent structures (departments) Temporary groupings (teams) coordination through managers delegation to lower levels vertical communication lateral dialogue Senior managers as monitors and senior managers as technical, resource allocators human and knowledge catalysts Development diversifying into separate organizational units. Introduction Structural Designs Home/heterarchical development combining rich areas of knolewdge M&N Transnational form Case Study Scenarios Organization of the Multinational Firm The Transnational form • Network form:philosophy of responsiveness, flexibility and ability to learn of a MNC in a borderless world • Objective: respond to the MNC´s central dilemma of having to be globally integrated but locally responsive at the same time Multidomestic form Global form Transnational form Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm The Transnational form Asymmetrical organizational form: • Multilateral communications between all levels and layers • Resources, responsibilities and decisionmaking dispersed across all types of units Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Case Study: Acer Group • Taiwanese company founded 1979 • PC and computer component manufacturer • 1992: „global brand, local touch“ • • Introduction First corporate re-engineering Decentralized its organization towards network structure Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Client-server organization (1994) Acer Group Chairman and CEO Acer America Acer Inc. Acer Europe Acer Peripherals Acer Latin America TI-Acer Acer Sertec Acer Labs Regional Business Units Strategic Business Units RBUs Introduction Structural Designs Home/heterarchical SBUs M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Restructuring 1997-1998 • External challenges: • Direct vendors, price cuts of market leaders • New price war (sub-$1000 PCs) • Internal problems: • Service and support • Serious coordination problems • Redundant functions • Duplicate investments • Inefficient use of enterprise resources. • Lack of IT infrastructure • No common information system Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm Organizational structure 1998 1997-98: simplification of organization structure restructuring into 5 core businesses: Acer Group Chairman and CEO Corporate Functions Special Teams - IT - Logistics - Brand Mgmnt - Customer Services International Services Group Introduction Sales & Service Group Semiconductor Group Structural Designs Home/heterarchical M&N Information Product Group Transnational form Peripherals Group Case Study Scenarios Organization of the Multinational Firm Organizat. structure since 2001 Acer Group Chairman and CEO High Trust Apacer Technology Services TWP Sertek Acer Inc. Weblink • Flexible, cell based organization structure • Interaction of semi-autonomous firms Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm A glimpse at the future: 2 scenarios for 2015 • Elaborated by MIT Scenario Working Group between 1994 and 1997 • Main focus: size of companies Two extreme scenarios for 2015: 1. Small companies, large networks nearly every task is performed by autonomous teams 2. Virtual countries dominance of keiretsu-style alliances Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm 1. Small companies, large networks Autonomous and self-organizing teams of 1-10 • • • • Linked by fluid networks Temporary combinations for each project Importance of electronic markets Rapid innovation in dynamically changing markets e.g. radical outsourcing in producing athletic shoes, computer displays and software Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm 1. Small companies, large networks Stable communities providing: • health insurance • protection against unemployment and income fluctuation • professional development • sense of belonging Comparable to guilds of pre-industrial times e.g. guilds in film industry Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Organization of the Multinational Firm 2. Virtual countries Large vertically- and horizontally-integrated firms each with operating companies in almost every industry • • • • • • Providing job-security, health care etc. Pervasive role of firms in employees‘ lives Employee ownership of firms Employee selection of firm management Oligopolistic structure in most sectors Minimal national allegiance e.g. Merger wave Introduction Structural Designs Home/heterarchical M&N Transnational form Case Study Scenarios Discussion Thank you for your attention! Organization of the Multinational Firm References • • • • • • Daft, R. (1998), Organization Theory and Design, Chicago, Chap. 7. White, R. E., T. A. Poynter (1991), Organizing for Worldwide Advantage, in: C. A. Bartlett, Y. Doz, G. Hedlund (eds.), Managing the Global Firm, London, 95- 113. Söllvell, Zander (1995) Organization of the Dynamic Multinational Enterprise, Int. Studies of Organization and Mangement, 25. 17 - 38. Segal-Horn & Falkner (1999), The Dynamics of International Strategy, Ch. 9. Laubacher, R. J., T. W. Malone (1999), Two Szenarios for 21st Century Organizations: Shifting Networks of Small Firms or All-Encompassing ‚Virtual Countries‘, Working Paper, MIT. Dedrick, J., K. L. Kraemer, T. Tsal (1999), Acer: an IT company learning to use Information Technology to compete, Center for research on IT and organization, University of California