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Principles of International Marketing 9th Edition Chapter 7 Marketing Organization, Implementation, and Control © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizational Structure • The basic functions of an organization are to provide: – A route and locus of decision making and coordination. – A system for reporting and communication. • The types of structures that companies use to manage foreign activities are divided into three categories. – Little or no formal organizational recognition – International division – Global organizations © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizational Structure • Little or no formal organization (Exhibit 7.1) – Ranges from domestic operations handling an occasional international transaction on an ad hoc basis to separate export departments. – In the early stages of international involvement, the share of international operations in the sales and profits of the corporation is minor hence no organizational adjustment takes place. – Transactions are conducted on a case-by-case basis either by the resident expert or with the help of facilitating agents. – Handle by Marketing department: Export Sale section © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizational Structure • International division (Exhibit 7.2) – Centralizes in one entity the total responsibility for international activity. International division who responsible for foreign markets such as Europe ,Asian, – Eliminates possible bias against international operations that exist if domestic divisions are allowed to independently serve international customers. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizational Structure • International division – Concentrates on international expertise, information flows concerning foreign market opportunities, and authority over international activities. – Best serves firms with few products that do not vary significantly in terms of their environmental sensitivity, and when international sales and profits are still quite insignificant compared with those of the domestic divisions. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizational Structure • The five basic types of global structures: – – – – – Product structure Area structure Functional structure Customer structure Mixed structure © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizational Structure • Product structure (Exhibit 7.3) – Gives worldwide responsibility to business units for marketing of their product lines. – Provides improved cost efficiency through centralization of manufacturing facilities. – Provides the ability to balance the functional inputs needed by a product and to react quickly to productspecific problems in the marketplace. – Fragments international expertise within the firm because a central pool of international experience no longer exists. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizational Structure • Area structure (Exhibit 7.4) – Is organized on the basis of geographical area. – Follows the marketing concept most closely because individual areas and markets are given concentrated attention. – Is suited if market conditions with respect to product acceptance and operating conditions vary dramatically. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizational Structure • Functional structure (Exhibit 7.5) – Emphasizes the basic tasks of the firm. – Works best when both products and customers are relatively few and similar in nature. – A variation of this approach is the use of process as a basis for structure. • Customer structure - Operations are structured based on distinct worldwide customer groups. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Organizational Structure • Mixed structure (Exhibit 7.6) – Combines two or more organizational dimensions simultaneously. – May occur in a transitionary period after a merger or an acquisition, or because of a unique customer group or product line. – In the long term, coordination and control across such structures become tedious. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 7.7: Evolution of International Structures © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Implementation • Locus of decision making – Decentralization - Subsidiaries are granted high degree of autonomy. – Centralization - Strategic decision making is concentrated at headquarters. – Coordinated decentralization - Overall corporate strategy is provided from global or regional headquarters, but subsidiaries are free to implement it within the range established in consultation between headquarters and the subsidiaries. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Implementation • Factors affecting structure and decision making – – – – – Degree of involvement in international operations. Business in which the firm is engaged. Size and importance of the markets. Human resource capability of the firm. Firm’s country of origin and the political history of the area. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Implementation • The networked global organization – Companies that have adopted the approach have incorporated the following three dimensions into their organizations: • Development and communication of a clear corporate vision. Understanding Vision • The effective management of human resource tools to broaden individual perspectives and develop identification with corporate goals. Understanding Goals • The integration of individual thinking and activities into the broad corporate agenda. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Implementation • The networked global organization – Avoids the problems of duplication of effort, inefficiency, and resistance to ideas developed elsewhere. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Control • Controls focus on actions to verify and correct actions that differ from established plans. • Within an organization, control serves as an integrating mechanism. • Controls are designed to: – Reduce uncertainty, increase predictability. – Ensure that behaviors originating in separate parts of the organization are compatible and in support of common organizational goals. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Control • Bureaucratic/formalized control – The elements are an international budget and planning system, the functional reporting system, and policy manuals used to direct functional performance. – Budgets - Short-term guidelines in such areas as investment, cash, and personnel. – Plans - Refer to formalized long-range programs with more than a one-year horizon. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Control • Bureaucratic/formalized control – The budget system is used for four main purposes. • Allocation of funds among subsidiaries. • Planning and coordination of global production capacity and supplies. • Evaluation of subsidiary performance. • Communication and information exchange among subsidiaries, product organizations, and corporate headquarters. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Control • Cultural control – Require an extensive socialization process, and informal, personal interaction is central to the process. – The primary instruments of cultural control are the careful selection and training of corporate personnel and the institution of self-control. © 2010 South-Western/Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.