Transcript Chapter 8 Organization Structure and Control

Chapter 8
Organization Structure and
Control Systems
PowerPoint by
Kristopher Blanchard
North Central University
© 2006 Prentice Hall
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Organizational Structure
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
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Evolution and Change in MNC
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
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Basic Organizational Structures
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
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Organizational Consequences of
Internationalization
Pressure for globalization
High
Low
Aircraft
Cameras
Consumer electronics
Computers
Telecommunications
Aerospace
Automobiles
Synthetic fibers
Steel
Clothing
Cement
Low
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Packaged goods
High
Pressure for local responsiveness
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Basic Organizational Structures (cont.)
Global Structural Arrangements
– Global Product Division
• Structural arrangement in which domestic divisions are given
worldwide responsibility for product groups
– Global Area Division
• Structure under which global operations are organized on a
geographic rather than a product basis
– Global Functional Division
• 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
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Typical ways that firms organize
international activities
Domestic structure plus export department
Domestic structure plus foreign subsidiary
International division
Global functional structure
Global product structure
Global Geographic Structure
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Domestic Plus Foreign Subsidiary
Return
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Global Product Division
Return
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Global Geographic Structure
Return
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International Division Structure
Chief Executive Officer
Production
Marketing
Domestic
Division
Paint
Domestic
Division
Tools
International
Division
Japan
Australia
Office
Operations
Marketing
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Personnel
Finance
Domestic
Division
Furniture
Domestic
Division
Hardware
Italy
Government
Relations
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Multinational Matrix Structure
Chief Executive Officer
Production
Marketing
North America
Industrial Goods
Manager,
Industrial Goods
North America
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Finance
Personnel
Europe
Manager,
Industrial Goods
Europe
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Integrated Global Structures
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
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Organizing for Globalization
If you misjudge the market [by globalizing],
you are wrong in 15 countries rather than
only in one.
—Ford European Executive
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Organizing for Globalization
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
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Organizing for Globalization
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
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Comparative Management Focus:
Chinese Global Network
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
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Comparative Management Focus: Chinese
Global Network
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
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Emergent Structural Forms
Inter-organizational networks
The global e-corporation network structure
The transnational corporation (TNC)
network structure
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Choice of Organizational Form
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Organizational Change and Design
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
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Organizational Change and Design
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Control Systems for Global
Operations
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
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Monitoring Systems
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Direct Coordinating Mechanisms
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Design of appropriate structures
Use of effective staffing practices
Visits by head-office personnel
Regular meetings
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In-Direct Coordinating Mechanisms
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Sales quotas
Budgets
Other financial tools
Feedback reports
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Appropriateness of Monitoring and
Reporting Systems
Factors likely to affect the appropriateness
of monitoring systems include:
– Management practices
– Local constraints
– Expectations regarding: Authority, Time, and
Communication
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Managing Effective Monitoring
Systems
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, non-comparability of performance data
across countries)
• Evaluation variables across countries
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Inter-organizational networks
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
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Global E-Corporation Network
Return
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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
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Transnational Corporation
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
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Looking Ahead
Chapter 9 – Staffing, Training, and
Compensation for Global Operations
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Staffing philosophies for global operations
Global selection
Training and development
Compensating expatriates
Compensating HCNs
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