Slide international business ch08

Organization Structure and Control Systems Chapter Prentice Chapter Chapter - Overview        Organization structure Evolution and change in MNC organizational structures Organizing for globalization Emergent structural forms Choice of organizational form Control systems for global operations Managing effective monitoring systems Prentice Chapter Internationalization  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 Prentice Chapter Structuring International Activities      Domestic structure plus export department Domestic structure plus foreign subsidiary International division Global functional structure Global product structure Prentice Chapter Domestic Structure Plus Foreign Subsidiary (Exhibit 8-1) Chief Executive Officer HQ Departments Finance Production Marketing HRM VP Int’l Operations Overseas Subsidiaries Prentice Japan Chapter Germany Mexico Global Functional Structure  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 Prentice Chapter Global Product (Divisional) Structure  In the global product (divisional) structure, a single product (or product line) is represented by a separate division Each division is headed by its own general manager, and each is responsible for its own production and sales functions Prentice Chapter Global Product (Divisional) Structure (Exhibit 8-2) CEO Corporate Functional Staff Product Division Area Specialists: North America Latin America Europe Far East Product Division Country A Finance Prentice Chapter Product Division Country B Production Marketing Global Geographic (Area) Structure  In the global geographic (area) structure – the most common form of organizing foreign operations – divisions are created to cover geographic regions Each regional manager is then responsible for the operations and performance of the countries within a given region Prentice Chapter Global Geographic Structure (Exhibit 8-3) Board of Directors Chair CEO VP Finance Group VP VP Plastics VP N America VP Agriculture VP S America VP VP Europe Pacific France Finance Production Prentice Chapter 10 UK Marketing Opposing Forces in Structural Choices  The need for differentiation (focusing on and specializing in specific markets)  The need for integration (coordinating those same markets) Prentice Chapter 11 Emergent Structural Forms  Interorganizational networks  The global e-corporation network structure  The transnational corporation (TNC) network structure Prentice Chapter 12 Information Technology’s Impact on Organizational Forms  “Competitive companies in the future will be elaborate networks of people and information, each exerting an influence on the other [These networks will comprise] a small hub of staff connected to each other by their physical proximity, which is electronically connected to global associates who help control assets and negotiate agreements to extend the company’s business influence.” Kilmann Prentice Chapter 13 The Global E-Corporation Network Structure (Exhibit 8-6) Suppliers Manufacturers Supplier exchanges Wholesale distributors Supply Chain Network Logistics providers Logistics exchanges Customers Customer exchanges Virtual manufacturers Contract manufacturers Prentice Logistics providers Chapter Information flow Goods flow 14 Choice of Organizational Form  Two major variables in choosing the structure and design of an organization are the opportunities and need for • globalization and • localization Prentice Chapter 15 Opportunities and Need for Globalization Organizational Alternatives and Development for Global Competition (Exhibit 8-7) TNC Global product structure Global company MNC Horizontal organization, alliances and networks Transnational structure Matrix structure International company Domestic functional with int’l division Geographic area structure Opportunities and Need for Localization Prentice Chapter 16 Locus of Decision Making in an International Organization (Exhibit 8-10 Subsidiary/local unit authority Area of control by headquarters Area of control at local level HQ management makes decision and informs local managers HQ management makes decision and “sells” to subsidiary managers Prentice HQ management makes decision and recommends to local managers Chapter Local managers present problem and solution to HQ for decision HQ and local managers consult on decisions Decentralized Centralized Headquarters authority Local managers make decision and inform HQ Local managers make decision and “sell” to HQ 17 When is Change Needed? (Exhibit 8-9)  A change in the size of the corporation – due to growth, consolidation, or reduction  A change in key individuals – which may alter management objectives, interests, and abilities  A failure to meet goals, capitalize on opportunities, or be innovative  An inability to get things done on time  A consistently overworked top management that spends excessive hours on the job  A belief that costs are extravagant or that budgets are not being met  Morale problems  Lengthy hierarchies that inhibit the exercise of strategic control Prentice Chapter 18 When is Change Needed? (contd.)  Planning that has become increasingly staff-driven and is thus divorced from line management  Innovation that is stifled by too much administration and monitoring of details  Uniform solutions that are applied to nonuniform situations The extreme opposite of this condition – when things that should or could function in a routine manner not – should also be heeded as a warning In other words, management by exception has replaced standard operating procedures Prentice Chapter 19 When is Change Needed? (contd.)  The following are a few specific indicators of international organizational malaise:  A shift in the operational scope – perhaps from directing export activities to controlling overseas manufacturing and marketing units, a change in the size of operations on a country, regional, or worldwide basis, or failure of foreign operations to grow in accordance with plans and expectations  Clashes among divisions, subsidiaries, or individuals over territories or customers in the field  Divisive conflicts between overseas units and domestic division staff or corporate staff Prentice Chapter 20 When is Change Needed? (contd.)  Instances wherein centralization leads to a flood of detailed data that is neither fully understood nor properly used by headquarters  Duplication of administrative personnel and services  Underutilization of overseas manufacturing or distribution facilities  Duplication of sales offices and specialized sales account executives  Proliferation of relatively small legal entities or operating units within a country or geographic area  An increase in overseas customer service complaints  Breakdowns in communications within and between organizations  Unclear lines of reporting and dotted-line relationships, and illdefined executive responsibilities Prentice Chapter 21 Coordinating Mechanisms     Direct coordinating mechanisms Examples Design of appropriate structures Use of effective staffing practices Visits by head-office personnel Regular meetings Prentice Chapter 22 Coordinating Mechanisms (contd.)     Indirect coordinating mechanisms Examples Sales quotas Budgets Other financial tools Feedback reports Prentice Chapter 23 Managing Effective Monitoring Systems Factors likely to affect the appropriateness of monitoring systems include:  Management practices  Local constraints  Expectations regarding • Authority • Time • Communication Prentice Chapter 24 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, noncomparability of performance data across countries) • Evaluation variables across countries Prentice Chapter 25 ... effective monitoring systems Prentice Chapter Internationalization  Internationalization is the process by which a firm gradually changes in response to international competition, domestic market... diversification Prentice Chapter Structuring International Activities      Domestic structure plus export department Domestic structure plus foreign subsidiary International division Global functional... structure International company Domestic functional with int’l division Geographic area structure Opportunities and Need for Localization Prentice Chapter 16 Locus of Decision Making in an International