Slide international business ch08

Chief Executive OfficerHQ Departments Finance Production Marketing HRM VP Int’l Operations Subsidiaries... Global Functional Structurethe basis of the company’s functions – production, m

Chapter 8 - 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

Hall 2003

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

Structuring International Activities

Chief Executive Officer

HQ Departments Finance Production Marketing HRM

VP Int’l Operations

Subsidiaries

Global Functional Structure

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

Hall 2003

Global Product (Divisional) Structure

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

Global Product (Divisional) Structure

(Exhibit 8-2)

CEO

Corporate Functional Staff

Area Specialists: North America Latin America Europe

Far East

Finance Production Marketing

Prentice

Hall 2003

Global Geographic (Area) Structure

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

Global Geographic Structure

(Exhibit 8-3)

Board of Directors

Chair CEO

VP Pacific

VP Plastics

VP Agriculture

Finance Production Marketing

Prentice

Hall 2003

Opposing Forces in Structural Choices

specializing in specific markets)

same markets)

Emergent Structural Forms

structure

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

The Global E-Corporation Network

Structure(Exhibit 8-6)

Wholesale distributors

Logistics exchanges

Logistics providers

Logistics providers

Customer exchanges

Customers

Supply Chain Network

Information flow

Prentice

Hall 2003

Choice of Organizational Form

and design of an organization are the

opportunities and need for

Organizational Alternatives and Development for Global Competition

(Exhibit 8-7)

Global product structure

International company

Domestic functional with int’l division

Global company MNC

Matrix structure

TNC

Horizontal organization, alliances and networks

Transnational structure

Geographic area

HQ management makes decision and recommends

to local managers

HQ and local managers consult on decisions

Local managers present problem and solution to

HQ for decision

Local managers make decision and “sell” to HQ

Local managers make decision and inform HQ

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

 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 do not – should also be heeded as a

warning In other words, management by exception has replaced standard operating procedures

When is Change Needed?

(contd.)

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

 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

ill-defined executive responsibilities

Coordinating Mechanisms

Direct coordinating mechanisms

Examples

Managing Effective Monitoring Systems

Factors likely to affect the appropriateness of monitoring systems include:

Prentice

Hall 2003

Managing Effective Monitoring Systems

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