Transcript Chapter 8 Organization Structure and Control Systems

Pr Salma CHAD
7/21/2015
8-1
There is no permanent organization chart for
the world. . . . It is of supreme importance
to be ready at all times to take advantage of
new opportunities.
—Robert C. Goizueta, (Former) Chairman and Ceo, Coca-Cola
Company
7/21/2015
8-2
 Internationalization
is the process by which a
firm gradually changes in response to
international competition, domestic market
saturation, and the desire for expansion, new
markets, and diversification.
 Structural Evolution (Stages Model) occurs
when managers redesign the organizational
structure to optimize the strategy’s changes
to work, making changes in the firm’s tasks
and relationships and designating authority,
responsibility, lines of communication,
geographic dispersal of units and so forth
7/21/2015
8-3
A
number of basic structures exist that permit an
MNC to compete internationally


Structure must meet the need of both the local market
and the home-office strategy of globalization
Contingency approach


Balances the need to respond quickly to local conditions
with the pressures for providing products globally
Most MNCs evolve through certain basic structural
arrangements in international operations
7/21/2015
8-4
Pressure for globalization
High
Low
Aircraft
Cameras
Consumer electronics
Computers
Telecommunications
Aerospace
Automobiles
Synthetic fibers
Steel
Clothing
Packaged goods
Cement
Low
High
Pressure for local responsiveness
7/21/2015
8-5
 Global

Global Product Division


Structure under which global operations are organized on a
geographic rather than a product basis
Global Functional Division


Structural arrangement in which domestic divisions are
given worldwide responsibility for product groups
Global Area Division


Structural Arrangements
Structure which organizes worldwide operations primarily
based on function and secondarily on product
Matrix Organization Structure

Structure that is a combination of a global product, area,
or functional arrangement
7/21/2015
8-6
 Domestic
structure plus export
department
 Domestic structure plus foreign subsidiary
 International division
 Global functional structure
 Global product structure
 Global Geographic Structure
7/21/2015
8-7
7/21/2015
8-8
7/21/2015
8-9
7/21/2015
8-10
Chief Executive Officer
Production
Domestic
Division
Paint
Marketing
Domestic
Division
Tools
Japan
Office
Operations
Personnel
Finance
International
Division
Australia
Marketing
7/21/2015
Domestic
Division
Furniture
Italy
Government
Relations
8-11
Domestic
Division
Hardware
Chief Executive Officer
Production
Marketing
North America
Finance
Personnel
Industrial Goods
Manager,
Industrial Goods
North America
Europe
Manager,
Industrial Goods
Europe
7/21/2015
8-12
How would you redesign the structure of the
Faculty of Management at AUL?
7/21/2015
8-13
 The
global functional structure is
designed on the basis of the company’s
functions – production, marketing,
finance, and so forth. Foreign operations
are integrated into the activities and
responsibilities of each department to
gain functional specialization and
economies of scale.
 Matrix Structure is a hybrid organization
of overlapping responsibilities – it is
used by some firms but has generally
fallen into disfavor recently
7/21/2015
8-14
If you misjudge the market [by globalizing],
you are wrong in 15 countries rather than
only in one.
—Ford European Executive
7/21/2015
8-15
 Two
opposing forces in structural decisions
 The
need for differentiation (focusing on
and specializing in specific markets)
 The need for integration (coordinating
those same markets)
 Globalization
– a specific strategy that treats the
world as one market by using a standardized
approach to products and markets
7/21/2015
8-16
 Organizing
to facilitate a globalization
strategy typically involves rationalization and
the development of strategic alliances
 Organizing for global product standardization
necessitates close coordination among the
various countries involved
 The problem facing companies in the future
is that the structurally sophisticated global
networks leave the organization exposed to
the risk of environmental volatility from all
corners of the world
7/21/2015
8-17
 The
Chinese commonwealth is a form of
global network that has become the envy of
Western multinationals



Network of entrepreneurial relationships in Asia
primarily
Includes mainland China, 1.3 billion citizens, and
more than 55 million Chinese in Taiwan,
Indonesia, Hong Kong, and Thailand
Estimated to control $2 Trillion in liquid assets
7/21/2015
8-18
 Most
observers believe that this China-based
informal economy is the world leader in
economic growth, industrial expansion, and
exports
 Comprises most mid-sized, family-run firms
linked by transnational network channels
 Channels move information, finance, goods,
and capital
 Network alliances bind together and draw
from the substantial pool of financial capital
and resources available in the region
7/21/2015
8-19
 Inter-organizational
networks
 The global e-corporation network structure
 The transnational corporation (TNC) network
structure
7/21/2015
8-20
7/21/2015
8-21
 When
does a company need to make a change in
organizational structure?
 Makes a change in goals or strategy
 Makes a change in scope of operations
 Indications of organizational
inefficiency
 Conflicts among divisions and
subsidiaries
 Overlapping responsibilities
 Complaints regarding customer
service
7/21/2015
8-22
7/21/2015
8-23
The establishment of a single currency makes
it possible, for the first time, to establish
shared, centralized accounting and
administrative systems.
—Francesco Caio, CEO, Merloni Elettrodomestici
7/21/2015
8-24
7/21/2015
8-25




Design of appropriate structures
Use of effective staffing practices
Visits by head-office personnel
Regular meetings
7/21/2015
8-26




Sales quotas
Budgets
Other financial tools
Feedback reports
7/21/2015
8-27
 Factors
likely to affect the appropriateness
of monitoring systems include:



Management practices
Local constraints
Expectations regarding: Authority, Time, and
Communication
7/21/2015
8-28
 In
•
•
deciding on appropriate monitoring and
reporting systems, additional factors to
be considered include:
The role of information systems
(adequacy of management information
systems in foreign affiliates, noncomparability of performance data across
countries)
Evaluation variables across countries
7/21/2015
8-29
 Views
the various companies, subsidiaries,
suppliers, or individuals as a relational
networks
 Allows the different network partners to
adopt unique structures that are adapted to
the local context
Return
7/21/2015
8-30
Return
7/21/2015
8-31
 How
much autonomy and control you
would want if you are a subsidiary
manager, and when you run the home
office?
7/21/2015
8-32
 Global

Structural Arrangements (cont.)
Transnational Network Structures
 Multinational structural arrangement that combines
elements of function, product, and geographic
designs, while relying on a network arrangement to
link worldwide subsidiaries
 Dispersed subunits


Subsidiaries that are located anywhere in the world
where they can benefit the organization
Specialized operations
Activities carried out by subunits that focus on a
particular product line, research area, or market area
 Designed to tap specialized expertise or other resources
in the company’s worldwide subsidiaries


Interdependent relationships

Share information and resources throughout the
dispersed and specialized subunits
7/21/2015
8-33

Involves linking foreign operations to each other
and to headquarters in a flexible way

Leverages local and central capabilities
Not a matter of boxes on an organizational
chart; it is a network of company units and a
system of horizontal communication
 Requires the dispersal of responsibility and
decision making to local subsidiaries
 Effectiveness is dependant on the ability and
willingness to share current and new learning
and technology across the network

Return
7/21/2015
8-34