CRITICAL THINKING AND DISCUSSION QUESTIONS

I. CRITICAL THINKING AND DISCUSSION QUESTIONS Question 1. The choice of strategy for a multinational firm must depend on a comparison of the benefits of that strategy (in terms of value creation) with the costs of implementing it (as defined by organizational architecture necessary for implementation. On this basis, it may be logical for some firms to pursue a localization strategy, and still others a transnational strategy”. Is this statement correct? Question 2. Discuss this statement. An understanding of the causes and consequences of performance ambiguity is central to the issue of organizational design in multinational firms. Question 3. Describe the organizational architecture that a transnational firm might adopt to reduce the cost of control. Why did Unilever’s decentralized structure make sense in the 1950s1970s? Why did this structure start to create problems for the company in the 1980s?

I CRITICAL THINKING AND DISCUSSION QUESTIONS

Question 1 The choice of strategy for a multinational firm must depend

on a comparison of the benefits of that strategy (in terms of value creation) with the costs of implementing it (as defined by organizational architecture necessary for implementation On this basis, it may be logical for some firms to pursue a localization strategy, and still others a transnational strategy” Is this statement correct?

Yes, that statement is correct As different business operating in differentindustries faces different pressures Some businesses face high cost pressures withoutfacing high local responsiveness and vice versa, some have to deal with both.Therefore, when a firm considers its strategy, it must take into account the correlationbetween the benefits and the value it generates over the cost of adopting the strategy.Why? Because if that strategy only helps the firm creating a certain amount of valuewhile the cost to apply that strategy is ten times bigger, we can not consider that thatstrategy is suitable for the company It is also impossible to use localization strategyfor an industry where price are the main weapon and the product has a highstandardization over the world because it definitely just increase the cost Eachstrategy has its pros and cons and only responds to certain pressures For example,applying transnational strategy means a very high application cost and lots ofambiguity They must also ensure that the profit and value that the firm will receivemust be higher than the cost Therefore, the choice of strategy must fit the needs ofeach firm, for every firm has different problems and goals

Question 2 Discuss this statement "An understanding of the causes and consequences of performance ambiguity is central to the issue of organizational design in multinational firms."

Statement can be interpreted as making the point that organizational design has

to consider the performance ambiguities that will ultimately be created as result of thedesign Different organizational designs can remove performance ambiguities, shiftthem to a different level in the hierarchy, or create new performance ambiguities Itmakes sense to analyze the cause of performance ambiguities as a part of theorganizational design process It also makes sense to analyze the opportunities forperformance ambiguity that a new design might present

It is important for management to be able to cope with the challenges ofperformance ambiguity, which as Charles Hill explains “exists when the causes of asubunit’s poor performance are not clear” One of the main causes for performanceambiguity is unsatisfactory presentation on some level of the company Companiesoften learn from their mistakes; however, it is critical to understand the reasons for thepoor performance and to address them accordingly Multinational corporations haveindependent units and sometimes resolving performance ambiguity issue could bequite difficult David Kill and Frances Shin suggest that “it is crucial that the sameintegrated pattern recognition paradigm be utilized to map performance to inputfeatures (i.e possible causes) to promote organizational learning”.

Thus when crafting a new organizational design, not only mast the causes ofexisting performance ambiguities be addressed, bur the likely consequences in theform of new performance ambiguities must also be considered Thus, how aninternational company is organized (the architecture) may be the main reason whycompany does or does not perform

Question 3 Describe the organizational architecture that a transnational firm might adopt to reduce the cost of control.

One of the core issues is that businesses must control their operating costs This

is a decisive factor, not only impact on whether or not to cut costs but also play adecisive role in the success or failure of the enterprise Understanding costs, factorsaffecting the cost, enterprises can control the cost, thereby saving costs, spending will

be more effective and ultimately increase the operating profit of enterprises inaccordance with that also increased Therefore, cost management is a top concern formanagers, because the profits are more or less directly affected by the costs

A firm can reduce its costs of control by implementing these control systemswhen and where they are needed Personal controls are generally used in small firms,but the principles translate Directly overseeing subordinates’ actions will givemanagers a better understanding of the individual’s and overall performance Culturalcontrols exist when employees believe in the norms and value systems of that firm.Having bureaucratic controls set in place will give managers a guideline ofparameters to stay within, whether that is their subunits’ budget or how much capital

controls Output controls set goals for subunits to achieve and are expressed inprofitability, productivity, growth, market share, and quality The goals set forsubunits fall within the rules and procedures of how the firm acts

A transnational firm should adopt more bureaucratic and output controls in order

to reduce these costs The ultimate goal is to achieve cultural control, but that cannothappen without a strong and welcoming working environment

Question 4 What is the most appropriate organizational architecture for a firm that is competing in an industry where a global strategy is most appropriate?

When a global strategy is appropriate, a company believes that its market is theworld, and that it seeks economies of scale through the development and manufacture

of a standardized product An appropriate organizational architecture would bemoderate decentralization with worldwide product divisions A worldwide productdivision structure tends to be adopted by firms that are reasonably diversified and,accordingly, originally had domestic structures based on product divisions As withthe domestic product divisional structure, each division is a self-contained, largelyautonomous entity with full responsibility for its own value creation activities Theheadquarters retains responsibility for the overall strategic development and financialcontrol of the firm There needs to be a lot of coordination, many integratingmechanisms, and a strong culture Examples of companies pursuing global strategiesare Intel, Motorola, and Texas Instruments The benefit of the global strategy areeconomical economies of scale: production of large quantities of goods in a shorttime, increase your income per employee: by creating quality products and creatingtrust for consumers and minimize costs due to specified standards

Question 5 If a firm is changing its strategy from an international to a transnational strategy, what are the most important challenges it is likely to face in implementing this change? How can the firm overcome these changes?

The most important challenges are likely to be related to control, as the firmmoves from at least a partial reliance on output measures and bureaucratic methods toone that will require many formal and informal controls and integration mechanisms.Significant performance ambiguities may occur with transnational strategies A way

to address these challenges is with a very strong culture and many integrating

mechanisms Examples of companies addressing the complex challenges of atransnational strategy are Ford, GM, Caterpillar, and ABB.

Coordination is highest in transnational firms, too Trying to integrate the rightmechanisms can muddy the waters for a firm transitioning strategies Cooperation andcoordination are essential for creating a successful strategy Coordination can behindered due to managers having different tasks Marketing managers concernthemselves with promotion, market share, pricing, etc, whereas production managersworry themselves with production issues like capacity utilization, cost control andquality control Communication between managers can be inhibited due to the factthat marketing managers and production managers “do not speak the same language”.Different managers have different goals when working with an unstandardizedproduct Lack of respect can also become an issue between managers, which is anunnecessary challenge that can arise

These challenges can be overcome Liaison can be created Each person in eachsubunit can be assigned responsibility for coordinating with another subunit on aregular basis People will establish a permanent relationship Integrating this all theway up the hierarchy of power can reduce the lack of respect between others Ifinteraction is high, it may take longer to reach liaison, but firms can counter it byimplementing a matrix structure In a matrix structure, all roles are viewed asintegrated roles Firms can keep a close eye on local responsiveness and the pursuit oflocation and experience curve economies

Question 6 Reread the Management Focus on Walmart's international division and answer the following questions:

a Why did the centralization of decisions at the headquarters on Walmart's international division create problems for the company's different national operations? Has Walmart's response been appropriate?

The headquarter first thought that centralization will help them get into othercountries cause the methods and ways they used were already proved in domesticmarket The centralization wasn’t that bad when they started because there werenot many things to care about

However, by the international division gets bigger, they had to deal with bunch

expansion, it set up an international division to handle all foreign operations.However, over time, this approach proved to be challenging Managers in foreigncountries had to get permission from Bentonville before they could make any changes

in strategy or operations Not only did this approach slow decision-making, alsomeant that decisions were being made by managers who were removed from the localsituation Wal-Mart began to change this approach when it acquired Britain’s ASDAsupermarket chain Today, the company has given greater responsibility to localmanagers particularly in merchandising and operations

Wal-Mart’s main business strategy is EDLP-Every Day Low Priced which is thekey-point of their success To accomplish this strategy, they mainly focused onefficiency of distribution structure All those strategies core values are Timed andResponsed Shorten the time for everything includes distribution, storing, etc directlyaffected lower the price of goods which could be best response to customer need Inother words, Wal-Mart has been successful since they always managed their time andresponse to customer Those points were same for Wal-Mart international divisionstrategy Their international division was like these days at the early stage Theinternational division was centralized so the branches needed to get approval forevery action and decision from headquarter in USA However, this centralizationprocess made whole process slow and it harmed the core value of Wal-Mart Also,they realized that the system can’t be same in other countries It needed to be changedand modified in order to fully get into each local market place By the late 1990dsthey started to change their policy for international division They gave moreresponsibility to each division so that they don’t have to wait for approval andresponse from headquarter By this change, each international divisions could meettheir local market’s need more rapidly and effectively

b Do you think that having an international division is the best structure for managing Wal-mart's foreign operations? What problems might arise with this structure? What other structure might work?

Most students will probably suggest that while the international division mayhave been a good strategy at the beginning of Wal-Mart’s expansion into foreignmarkets, as foreign revenues have grown, approach no longer works Many studentswill probably suggest that Wal-Mart consider moving towards a transnational

approach where it could respond to local markets and at the same time, respond to thepressure to minimize costs That it can negotiate on a global basis with key suppliersand can simultaneously introduce new merchandise into its stores around the worldFor example, the division has developed a knowledge management systemwhereby stores in one country, let's say Argentina, can quickly communicate pictures

of items, sales data, and ideas on how to market and promote products to stores inanother country, such as Japan The division is also starting to move personnelbetween stores in different countries as a way of facilitating the flow of best practicesacross national borders Finally, the division is at the cutting edge of moving Wal-mart away from its U.S.-centric mentality and showing the organization that ideasimplemented in foreign operations might also be used to improve the efficiency andeffectiveness of Wal-mart's operations at home

Question 7 Reread the Management Focus on the rise and fall of the matrix structure at Dow Chemical, then answer the following questions:

a Why did Dow first adopt a matrix structure? What were the problems with this structure? Do you think these problems are typical of matrix structures?

Dow Chemical initially adopted the matrix structure because it would allow thecompany to be responsive to both local market needs and corporate objectives.However, when it was first adopted, the structure did not work well The dual chain ofcontrol led to turf battles and a lack of accountability, however, Dow felt that bymaking the structure more flexible it could still work The company had moved intothe pharmaceuticals business where local responsiveness was important as was theneed to be conscious of costs Many students will probably agree that the dual chain

of command associated with the matrix structure makes it challenging, however atleast according to Dow, there are ways to make it work In fact, Dow credits thestructure for much of its success prior to the mid-1990s

b What drove the shift away from the matrix structure in the late 1990s? Does Dow's structure now make sense given the nature of its businesses and the competitive environment it competes in?

In the mid-1990s, Dow divested itself of its pharmaceuticals activities, andchanged its structure to reflect its new strategy The company shifted to global

that given its new focus on bulk chemicals, the new structure would work better Thechange was also driven by realization that the matrix structure was just too complexand costly to manage in the intense competitive environment of the 1990s,particularly given the company's renewed focus on its commodity chemicals wherecompetitive advantage often went to the low-cost producer.

Question 8 Reread the Management Focus on Lincoln Electric, then answer the following questions:

a To what extent are the organization culture and incentive systems of Lincoln Electric aligned with the firm’s strategy?

Lincoln had a strong respect for the ability of the individual and believe that,correct motivated, ordinary people could achieve extraordinary performance LincolnElectric stresses that individuals should be rewarded for their individual efforts, andthat everyone who works for the company should be treated equally Accordingly,employee pay depends on individual output, everyone eats in the same cafeteria,parks in the same lot, and so on Because employees can boost their pay significantly

by working harder and being innovative, the company as a whole becomes moreproductive Lincoln competes in a business that is very competitive, where costminimization is a key source of competitive advantage Lincoln's culture andincentive systems both encourage employees to strive for high levels of productivity,which translates into the low costs that arc critical for its success These aspects ofLincoln's organizational architecture are aligned with the low-cost strategy of thecompany

b How was the culture at Lincoln Electric created and nurtured over time?

Lincoln Electric has a long tradition of equality and fairness Lincoln has astrong respect for the ability of the individual and believe that, correctly motivated,ordinary people could achieve extraordinary performance He emphasized thatLincoln should be a meritocracy where people were rewarded for their individualeffort Strongly egalitarian, Lincoln removed barriers to communication betweenworkers and managers, practice an open-door policy Since 1934, employees havebeen assessed both objectively and subjectively Objective criteria include the leveland quality of an individual’s output- production workers receive no base salary butare paid according to the number of pieces they produce, while subjective criteria

include attitudes and dependability- workers have responsibility for the quality oftheir output and must repair any defects spotted by quality inspectors before thepieces are included in the piecework calculation Workers actually have the ability todouble their base pay- Lincoln’s factory workers have been able to earn a pay thatoften exceeds the average manufacturing wage in the area by more than 50 percentand receive a bonus on top of this that in good years could double the base pay Even

so, because productivity is so high, Lincoln Electric is the low cost leader in theindustry

c Why did the culture and incentive systems work well in the United States? Why did it not take in other country?

In the United States, a country that encourages individualism, Lincoln Electric’semphasis on individual performance has been very successful However, in othercountries, this approach has met with some resistance In some countries, LincolnElectric’ pay-per-output approach was considered exploitative In Germany, it wasactually illegal! In addition, in some countries the incentive of more money for moreoutput was not valued In countries where Lincoln Electric expanded throughacquisition, unionized employees opposed the compensation approach

II CLOSING CASE

Question 1 Why did Unilever’s decentralized structure make sense in the 1950s-1970s? Why did this structure start to create problems for the company in the 1980s?

Unilever’s decentralized structure made sense in the 1950s-1970s because atthose times, many markets were still segmented from each other by high barriers tocross-border trade, and given that national differences in business practices oftenrequired considerable localization Therefore, decentralized one allowed eachsubsidiary the opportunity to cater to local needs So, product offerings and marketingstrategy was matched to local tastes and preferences, and distribution strategies werelinked to the prevailing retail system in each market Furthermore, there was almost

no competition in the markets Unilever was targeting, they mostly maintained thelargest market share and there was probably not so much international influence fromother multinationals

But as time changes, this structure no longer worked well like in the 1950s –1970s when the competitive environment changed to one where there was highpressure for cost reductions At the late of 1980s and the mid-1990s, as the collapse ofUSSR and the Socialist bloc in the West as well as the rise of some “Asian Tigers”like China, South Korea,… countries began to accelerate the process of opening upthe self - economy as well as integrate into a big global economy Some Unilever’srivals kept up the trends and had more success It means their competitor focus onreleasing global products, they have few subsidiaries and their subsidiaries didproduce few products So its competitor – Nestle and Procter & Gamble – couldreduce cost and they had global brand while Unilever was behind them Unilever’sdecentralized structure pushed to adapt the trend but lots of duplication, particularly

in manufacturing; a lack of scale economies And a high-cost structure – thoseaccompanied with decentralized structure when step into global integration – hasswept away all the efforts And those’re why that structure didn’t fit anymore

Question 2 What was Unilever trying to do when it introduced a new structure based on business groups in the mid-1990s? Why do you think this structure failed to cure Unilever’s ills?

In the mid-1990s, Unilever introduced a new structure that was based onregional groupings Within the European Business Group, for example, there was adivision for detergents, a division for ice cream and frozen foods, and so on LeverEurope was established to consolidate the company's detergent operations The 17European companies reported directly to Lever Europe It means Unilever at that timewas trying to reduce the cost and provide global brand in order to catch up with itsrivals by decreasing their duplication product, particularly in manufacturing andimprove their scale economies.

This structure failed to help Unilever's problems because the managers were nolonger allowed to match product offerings and as well as developing specificmarketing strategies based on local tastes and preferences Although they had theright idea in changing their business strategy from localization to transnational, thechanges weren't drastic enough to keep up with their competitors Unilever tried toimprove its product availability and flexibility for its local responsiveness, and at the

same time wanted to reduce operation costs while creating global brands (an ideal but

very daunting task)

Question 3 In the 2000s Unilever has switched to a structure based on global product divisions? What do you think is the underlying logic for this shift? Does this structure make sense given the nature of competition in the detergents and food business?

The logic for Unilever’s shift is they wanted to reduce their cost more than theirprevious structure They planned to cut down their manufacturing plants from 380 to

280 by 2004, and that was their time to reduce their products as well as their cost,focus on releasing global brands fast because competitors also know 2000s is thecentury for global brands

Yes, Unilever’s new structure based on global product divisions makes a lot ofsense given the nature of the products involved Unilever sells food and personal careproducts –products that demand a high level of local responsiveness Each of theglobal product division has regional business groups that can respond to local needswithin a given region In addition, the company eliminated a significant number ofbrands allowing it to focus on just a few I may suggest that in the future, Unilever

III RESEARCH TASK

Exercise 1 Fortune conducts an annual survey and publishes the rankings

of its "Most Admired Companies" in the world Locate the most recent ranking available and focus on the methodology used to determine which companies are most admired Prepare an executive summary of the strategic and organizational success factors involved in this survey.

The FORTUNE World’s Most Admired Companies study surveys top

executives and directors from eligible companies, along with financial analysts, toidentify the companies that enjoy the strongest reputations within their industries andacross industries

FORTUNE determines the industry groupings by using the Fortune 1000 listing

and the Global 500 listing The number of companies within an industry ranges from

a minimum of 6 companies to a maximum of 15 Companies must haveapproximately $10 billion in revenue and rank among the largest by revenue withintheir industry The more companies competing internationally, the more companies in

an industry grouping

These are the key attributes to the evaluate the world most admired company:

 Ability to attract and retain talented people

 Quality of management

 Social responsibility to the community and the environment

 Innovativeness

 Quality of products or services

 Wise use of corporate assets

 Financial soundness

 Long-term investment value

 Effectiveness in doing business globally

And here are the top ten most admired companies in 2018:

1 Apple (Computers)

2 Amazon (Internet Services and Retailing)

3 Alphabet (Internet Services and Retailing)

4 Berkshire Hathaway (Insurance: Property and Casualty)

5 Starbucks (Food Services)

6 Walt Disney (Entertainment)

7 Microsoft Computer (Software)

8 Southwest Airlines (Airlines)

of major processes such as R&D in headquarter and production in China, Apple hassuccessfully realized the location and experience economies Moreover, by makinguse the talented R&D team, Apple has been able to position its products as the best interms of innovativeness, performance and reliability while compared to similarproducts in the market which help them always keep high price Thanks to that, Applecan enjoy more and more profits Futhermore, Apple standardized all the products forthe whole world, which help them establishing a global brand with a strong identity.From that point, we can consider Apple as an global standardization company.However, Apple’s strategic positioning choice is to have high valued electronics thatall customers want Apple products are unique compared to the rest of the world.Many people are willing to buy Apple products because they are well produced, have

a high quality and are known as a luxury item to the customers of Apple Apple’smain goal is to maximize all values for the firm Their main strategy to increase profit

is to add value, raise prices and to enter new markets It shows that Apple is neitherreally in the cost competition with rivals nor in the high local responsiveness demand

as they standardized their products as well as their distribution channels all over theworld At this point, it’s much likely to say that Apple is following an internationalstrategy

 Apple’s Organizational Structure Type and Characteristics

Apple Inc has a hierarchical organizational structure, with notable divisionalcharacteristics and a weak functional matrix The hierarchy is a traditional structuralfeature in business organizations The divisional characteristics refer to the product-based grouping within Apple, such as for iOS and macOS The weak functionalmatrix involves inter-divisional collaboration, while the hierarchy is preserved.Generally speaking, we can consider as functional organization This approach is kind

of unusual for a company the size of Apple, with more than 100.000 employeesworldwide but it is very frequent with startups

 Extensive Research & Development

Apple started the building of Infinite Loop campus and each activity on thecampus was constrained to R&D In the campus every building was named as R&D 1

to R&D 6 Apple increased its workforce by 127600 employees for the year 2010 asthe technology oversize strengthened its R&D activities

 Well Recognized and Cherished Brand Name

Apple is the king of brand names around the globe and is placed at number one

in the US Apple and Google do a substitute for the international market withAmazon, Samsung and Facebook rounding out the top five Tiger as well as did theiMac made Apple top on the radar catalog for individual Apple's brand namerecognition is overturn on the high

 Apple Financial Soundness

Apple Inc has a very sound financial statement As in 2017 fiscal year, forliquidity ratio, this is a healthy 1.08, indicating the company has enough currentassets on hand to cover its current liabilities Apple’s debt-to-equity ratio of about 32

is certainly a conservative ratio and gives it lots of breathing room As for thecompany’s profitability, it has obtained a healthy return on the equity it has on itsbalance sheet, generating a net profit of more than $39 billion on its sales and makingfor a return on equity of about 35 percent All of those things has proven the healthyfinancial statement of Apple and has contributed to the success of Apple

 Apple’s success in retaining great employees

We’re all familiar with this consumer electronics giant that hires only the bestand brightest tech employees on the planet And sure, the transformative technology

that Apple continues to create each year is a strong driver of the magnetic pull forincredibly qualified applicants, but something that really stands out among Apple’srecruiting strategy is their firm commitment to diversity hiring Within 2016, they’vehired more diverse candidates than any other year, and devoted an entire landingpage on their website to show their progress toward creating a “truly inclusiveApple.” They treat their employees well, provide employee training and hire freeagents All could drive to the great employees retention in Apple.

 Apple high quality of manangement

The senior management of Apple believes that communication is the key toestablish a system of Total Quality Management The principles of Total QualityManagement enable Apple to establish an open culture of trust and innovation Withthe focus on TQM, Apple Inc has been able to minimize the waste in the overallsupply chain Apple Inc has been able to obtain a balance between efficiency andresponsiveness with the focus on TQM principles With a framework of Total QualityManagement, Apple Inc has been able to bring all the stakeholders together When anorganization is able to include all stakeholders in the strategic planning and leavesroom for self-improvement the employees are able to see what’s in it for them(Lazaroiu, 2015)

 Pay attention to CSR and environment.

Apple corporate social responsibility (CSR) programs and initiatives are led byLisa Jackson, Vice President of Environmental Initiatives, reporting directly to CEOTim Cook They supported Local Communities by launching “Global VolunteerProgram” to encourage employees to volunteer in local communities (with more than

USD 78 billion donated) Apple not only paid attention to educating and empowering

workers but also human rights and employee health and safety They also pioneered inprotecting natural environment by reducing energy consumption and carbon emission,

by creating sustainable sources for future By giving more and more care about CSRand environment, Apple has gradually succeeded in building a strong brand

 Leading the Innovation

Apple is widely considered as the #1 innovative company in the world Thecompany’s innovation strategy involves terrific new products and innovative businessmodels

The company delivers consumers with a succession of presents – great software

in fabulous hardware in beautiful packaging (“really good ideas wrapped up in otherreally good ideas,” as Michael Lopp, senior engineering manager at Apple puts it).Apple also pioneers into a new business spaces and creates new market niches Thecompany created game-changing innovations such as the iPod, iTunes, iPhone, andiPad Such that innovation has contributed to the successful differentiation strategythat Apple are following

 Quality of products or services

Quality products support Apple's margins and its profit Apple's consistent topmarks in satisfaction surveys mean customer retention, word of mouth and trust.Apple's quality reputation also makes iOS the priority platform even for cross-platform developers Moreover, Apple's reputation for quality aids entry into newmarket segments Besides, Apple still has an incredible customer service Their retailstores are everywhere And when you buy an Apple product, it’s Apple’sresponsibility to make sure your loved ones including your spouse, children, parents,and grandparents share an equal responsibility in carrying on that continuum Theseare insanely lofty goals for any company and Apple is the only company that can do it

so well at so much scale

 Wise use of corporate assets and long-term investment

The company has developed a business philosophy of purchasing smallcompanies that they can easily integrate into their current line of products As ofMay 2018, Apple had made 97 different acquisitions according to Crunchbase Some

of the notable acquisitions that Apple has made over the years are Shaza, Siri, BeatsElectronics,… Besides, the Apple Asset Utilization Index thoughout the years alwaysfluctuate from 0.875 to nearly 1.2 means that Apple has been generating moneyefficiently over the years, contributing to the whole strategy and operations of Apple

 Apple do business globally

After slaying competitors in developed countries, Apple is focusing more onemerging markets Although all the Apple’s products are globally standardized, Applestill localizes some of their activities such as marketing,… to fit with each market.Apple has successfully dominated in most of the local and regional markets andChina and India are becoming those potential market for Apple

Amazon was founded in June 1994 by Jeff Bezos (Bezos) At that time, theinternet was gaining popularity and was being considered as a potential businessmedium At the beginning, Amazon’s business model was based on the “sell all, carryfew” strategy wherein Amazon offered more than a million books online, though itactually stocked only about 2000 The remaining titles were sourced predominantlythrough drop-shipping wherein Amazon forwarded customer orders to bookpublishers, who then shipped the products directly to the consumers

As Amazon expanded internationally, it met the tough competition from itsrivals, which put Amazon into lower – the – cost situation At the very beginning,Amazon mostly exported products from its warehouses in USA, but it soon struggled

to reduce the time and cost of shipping, which forced Amazon to set up more andmore warehouses and logistic services in target market They done it by acquiringother supply chain companies and built wholly new logistic services and warehouses.Actually, Amazon and those new dot-com firms can not fit with the traditionalstrategy, it is likely to be the boundaryless organizations Boundaryless organizationseliminate internal boundaries among subsystems and external boundaries with theexternal environment Virtual form has emerged in the 21st century as a consequence

of the globalization forces Simply it is a combination of team and network structures,with the addition of “temporariness” The virtual form uses strategic alliances,external partnerships, mass collaboration, and dominant exchange strategies toachieve high levels of global integration and local responsiveness through co-operative strategies On a first approximation, the virtual model resembles thetransnational form but uses external partners, global experts, opinion leaders and

collaborators instead of corporate subsidiaries The virtual form tends to focus more

on intangible assets rather than tangible/capital intensive assets

Amazon’s generic corporate strategy can be described as concentric diversification This strategy is based on leveraging technological capabilities for

business success and following a cost leadership strategy aimed at offering themaximum value for its customers at the lowest price in addition to wrapping itsbusiness around the customers wherein they find Amazon to be the go-to portal fortheir online shopping needs

Indeed, this strategy has paid off well as can be seen from the fact that it is theworld’s largest online retailer and has consistently been the leader in the marketsegments in which it operates Having said that, it must also be noted that costleadership can follow the law of diminishing returns wherein firms following thisstrategy find that they are unable to sustain growth or increase profitability once the

“low-hanging fruit” are plucked

 Features of Amazon Organizational Structure

Amazon.com Inc has a functional organizational structure This structure

focuses on business functions as bases for determining the interactions amongcomponents of the organization The following characteristics are the most significant

in Amazon’s corporate structure:

Global Function-Based Groups Function-based groups are the strongest

characteristic of Amazon’s organizational structure Each major business function has

a dedicated group or team, along with a senior manager The strategic objective inhaving this structural characteristic is to enable Amazon.com to facilitate successful e-commerce operations management throughout the entire organization Considering itsongoing global expansion, the company grows through this feature of the corporatestructure in terms of ease of establishing operations in new markets

Global Hierarchy Hierarchy is a traditional organizational structural

characteristic In the case of Amazon.com Inc., such characteristic is expressed interms of a global system of vertical lines of command and authority that influence theonline retail firm For example, senior managers’ directives are applied throughout theorganization, affecting all relevant offices of the company worldwide The strategic

objective of this feature of the corporate structure is to facilitate managerial control ofAmazon’s entire organization.

Geographic Divisions Amazon’s organizational structure also involves

geographic divisions In this structural characteristic, groups are based on geographicregions and related business goals For example, Amazon.com Inc uses geographicdivisions to make it easier to manage the e-commerce business based on economicconditions of certain regions The strategic objective in having this characteristic ofthe organizational structure is to enable the company to address issues or concernsrelevant to each geographic region, considering differences among regional markets.Amazon has a simple approach for this structural feature, involving the followinggeographic divisions in its operations:

 International

 Ability to attract and retain talented people

How can Amazon attract and retain talented people? First, Amazon give toptalent ownership of what they’re working on Empowering new employees to take onand own the development of difficult work is one tactic tech companies are taking—not only to attract and retain talent but to add team members who can approach aproblem in new and creative ways Second, Amazon have positioned themselves inthe tech-hiring landscape alongside Google Facebook and Apple, as pioneers, who areworking on the most exciting technological projects Third, Amazon forge strategicpartnerships with talent pipelines To be truly successful in recruiting tech talent,employers need to be invested in the education of those candidates and ensuring theirdiversity Thanks to these things, amazon can retain talented workforce forthemselves despite harsh competition

 Innovation of Amazon

Amazon’s success largely stems from its innovative technologies and practices,many of which were championed by its CEO, Jeff Bezos The company has changedthe way people live and shop, but when it comes to innovation, Amazon stands apartfrom others because of some pretty unique cultural elements that make it a perfectplace for cultivating innovation They has been always embracing continuous

one are Prime and Amazon Go Amazon always try their best by repeatedly remakingitself and striving to remake their customers' expectations to lead the market whereit’s standing.

Jeff Bezos didn’t stumble into becoming the CEO of Amazon, he previouslyworked for an investment company and has always been incredibly talented He hasalso hired particularly well, and that’s created an outstandingly gifted team of seniormanagers who have steered the direction of the company from the top

Without proper management, it’s nearly impossible for a company to achieveanything, a group rots from the head, and that’s why senior management is vital toAmazon’s success Amazon gets everything right when executing customer orders.They select products and services that customers want and need—and leveragedistribution centers across the globe that allow them to quickly ship products.Amazon also has excellent vendor relationships that allow them to offer customersdiscounted pricing The world’s largest online retailer is also ramping up plans toinvest more across Europe this year, employing thousands of more employees.They’re also looking to implement brick-and-mortar stores that will have thecapability of same-day-delivery via drones!

 Amazon CSR and environment.

Interestingly, despite the size and the scope of its business, Amazon does notrelease an annual sustainability or CSR report In 2016 Amazon launched its firstnationwide initiative with Feeding America in its U.S fulfilment centres to donateexcess food to Feeding America Besides, Amazon Career Choice Program pre-pays95% of tuition for employees “to take courses for in-demand fields, such as airplanemechanic or nursing, regardless of whether the skills are relevant to a career atAmazon” Up to date the program has been attended by more than 16000 employeesworldwide About natural environment, Amazon Wind Farm Texas, launched in 2017generates more than 1,000,000 megawatt hours of clean energy annually from over

100 turbines

 Excellent customer service

Because of its commitment to world-class customer service, Amazon hasdeveloped a range of helpful tools users can employ to track packages and quickly

return or exchange ordered items, bringing simplicity and convenience to their onlineshopping experiences Amazon’s Customer Service team has won multiple awards forits dedication to preventing and swiftly addressing problems for customers One ofAmazon’s overarching missions is to become the planet’s most customer-centriccompany—and the brand’s dedication to this goal has paid dividends.

Social media is another powerful tool that Amazon employs to engage withshoppers and enhance the quality of its customer service When done right, socialmedia channels can help your e-commerce business address customer concerns andbuild a solid foundation of loyal and passionate followers who advocate your brand.That’s why many e-commerce companies work with Snap’s Social Media Team torefine and grow their social presence

 Amazon financial soundness

Amazon has a very strong financial statement Amazon gross profit increaseddramatically year by year from nearly 2 billion USD in 2005 to nearly 66 billion USD

in 2017 Its working capital ratio values between 1.45 to 1.62 – a very impressivenumber while that number in the same industry is just above 1.21 Amazon is doingreally well to drive their investors’ faith into the company In the last five years, thesales of Amazon increased by 140% – a whopping $178 Billion in 2017 – from $74billion in 2013 In 2017 alone, the revenue grew 31% when compared to 2016 Theirfinancial position seems to be unbreakable and creates a very safe and sound statusfor Amazon

 Diversification

Starting off as an online bookstore, Amazon now offers everything from soup tonuts Literally, a search of the site reveals over 3,000 listings for vegetable soup.Search the term “nuts” and you’ll see over 37,000 results Amazon now carriesproducts in music, books, electronics, health and beauty, automotive, grocery andclothing Business owners can contract with Amazon’s network of pros to get ITsupport, furniture assembly and even A/V services By diversifying its offerings,Amazon is continuously driving reach and relevance

Regardless of your industry, you should be fearless in the pursuit ofdiversification Expanding into new markets and product categories will help you

diversify your digital growth initiatives when possible For example, Amazoncurrently boasts an impressive 3.6 billion backlinks and 3.8 million referringdomains A highly diversified link portfolio plays a pivotal role to any successful SEOcampaign That’s why many e-commerce companies partner with us to optimize theirlink building strategies.

 Outstanding user experiences

A strong UX makes it easy for e-commerce customers to find what they’relooking for and move further down the conversion funnel, resulting in more sales.That’s why Amazon employs a full UX team comprised of professionals in everythingfrom user research and interaction design to web development These UX expertscollaborate with Amazon’s engineers, product managers and executives to createseamless user experiences that drive customer conversions

Fortunately, any company can improve its online UX with help from the rightdigital marketing partner Snap Agency’s Design Team offers comprehensive webdesign and CRO (conversion rate optimization) solutions to help you perfect yourwebsite’s UX and UI Our human-centered design process will boost the conversionimpact of your online presence through user experiences that inspire and engage

 Long – term investment.

Amazon remains the long-term leader among industry titans, according to MKMPartners, with the e-commerce company set to nearly triple its share of the U.S retailmarket over the next seven years Amazon also recently teamed with BerkshireHathaway and JPMorgan Chase & Co to disrupt health care, and fields like search,travel and entertainment are on notice as well Its culture, powerful platform andresultant insights, and long-term approach make disruption a sustainable competitiveadvantage WE can consider the future of investment into Amazon is quite bright andsafe and sound

ranges of products and services including self-driving cars, indoor and outdoorcameras, learning thermostats, and smoke alarms and even products to stopmosquitoes in their tracks First mover advantage is the main Alphabet (Google)competitive advantage in relation to the majority of these products and services.

Google’s mantra “Don’t be Evil” explains its major strategy used: respect theusers Unlike many other search engines, which earn profits by mixing search resultswith sponsored advertisement or clustering loads of advertisement into the frontinterface, Google keeps its layout clean and simple, and only put advertisement in theform of keywords separated from the search result These acts, which show respect tousers, gain much support and popularity of the search engine

 Quality management in Alphabet.

Alphabet has benefited from the practices of TQM to a larger extent Especially

if we look at the working environment at alphabet, it is total compliance with theprinciples of Total Quality Management All the employees are free to choose theirworking hours There are not mental pressures exerted on the employees to generate

an environment of fear This is a great strategy as the employees have a fresh mindalways to work on the operations and tasks they are responsible for Alphabetencourages their employees to come up with innovative ideas that help theorganization grow rapidly One of the TQM principles is to engage all the employees

in the organizational decision making process Alphabet has done exactly the same.All the employees enjoy some power in the organizational decision making process(Jarrod, 2012) Alphabet, especially Google has a decentralized organizationalstructure that facilitates creativity and loyalty from its employees This strategy hasalso been adopted by Facebook and Twitter and has contributed to their success aswell

 Social responsibility to the community and the environment

For many people, their first exposure to a corporation working for “good” wasrelated to Google The search giant has made aggressive moves on multiple frontstoward good citizenship, but it is clear that, as one of the world’s largest corporations,every single effort is paying off For example, Google Green is a corporate effort

to use resources efficiently and support renewable power But recycling and turning

real-world effects on the bottom line Google has seen an overall drop in powerrequirements for their data centers by an average of 50 percent These savings canthen be redirected to other areas of the business or to investors You don’t have to be aGoogle-size company to benefit from being green and practicing corporate socialresponsibility Installing energy-efficient lights, allowing telecommuting, andrecycling will not only improve your world, it will result in quantifiable cost savingsthat you can see in the bottom line.

 Alphabet Innovativeness.

When it comes to innovation, Alphabet has long been a benchmark againstwhich other companies measure themselves From its search engine origins, thecompany expanded into everything from mobile operating systems to self-drivingcars and balloon-based internet access Perhaps the most famous of Google’semployee (and latterly is Alphabet) innovation initiatives is its “20 Percent Time”policy The concept allows employees to dedicate 20% of their working hours toprojects they think will most benefit Google

Alphabet has always had funky offices, but took some time before the companycould really start putting a stamp on the architecture of the spaces it owns Once it didthough, it absorbed lessons from history, crafting spaces that foster collaboration andinnovation Even when you’re interacting and collaborating with people fromdifferent departments, the fact is you’re still spending most of your working hourswith people from the same company Perhaps most importantly though, alphabet does

a lot of work around empowering its employees across the board

It regularly surveys employees on the performance of managers, for instance.This helps it identify the best managers and use them as teachers and role-models forthe next year The worst-performing managers meanwhile are coached intensely,with 75% showing significant improvement

 Quality of products or services

The quest for quality at Google follows a different path than that used by mostorganizations Google does not have a large testing department, but rather testing ispartially assigned to the developers They want to assure that their products andservices are the best in the market And they succeeded! Google's Gmail hassurpassed a billion users Google kept Gmail relevant by evolving email over the

years Investing in indexing the world's information and allowing you to share thatinformation anywhere, on any device, puts Google and its parent company Alphabet

in the interesting position of competing directly with Apple and Facebook, amongothers Though if today's earnings call made anything clear, it's that Alphabet —andmore importantly, Google— is more than up for the challenge

 Wise use of corporate assets

Alphabet Inc., through its subsidiaries, provides online advertising services inthe United States and internationally Since starting in 1998 in United States, thecompany has now grown to a market cap of US$701.92B There’s no stopping theAlphabet Inc (NASDAQ:GOOGL) growth train, with analysts forecasting high top-line growth in the near future

 Financial soundness

Google’s liquidity ratios are 3.83 (2014) The higher the ratio, the better,

meaning that Google is able to cover its current liabilities with its current assets Its

annual sales grew $20.5 billion to $110.8 billion in 2017, vaulting it into the top 25 ofthe Fortune 500 list But last year’s $12.7 billion profit was 34% lower than a yearbefore, partly because of a $2.7 billion antitrust fine by European regulators WhileAlphabet’s shares have fluctuated over the past year, they managed to rise 18% over

the 12 months ending in May.

 Long-term investment value

Google is one of the most successful stocks of the 21st century, launching at justover $50 a share in August 2004 before reaching an all-time high of $1,004 in June

2017 Despite its non-dividend paying status, investors of all stripes have flocked toGoogle and helped transform it into a $660 billion company Google’s investmentgains should not be removed or ignored, however According to CrunchbaseNews, Alphabet was the most active and largest corporate investor in the tech sector

in 2017, surpassing both SoftBank Group Corp 9984, -4.40% of Japan and IntelCorp.’s INTC, +2.88% Intel Capital

Early investments from Google’s GV and CapitalG investment arms are starting

to pay off, in both initial public offerings and acquisitions Since January, 20 backed companies have had liquidity events according to Crunchbase data; there have

Google-been more than 50 since 2016 Alphabet declined to comment on the gain or itsinvestments, including disclosing the major components of the gains.

Alphabet’s investments gained more than $3 billion in the first quarter, when thecompany began following the new accounting rules, thanks to a fresh UberTechnologies Inc stake it collected in the Waymo lawsuit, among other gains Withthe $1 billion-plus disclosed Monday, the total gains for Alphabet’s investments in thefirst half of the year account for nearly one-third of Google’s GAAP net incomefigure for that period

 Effectiveness in doing business globally

Google as well as Microsoft are granted as a key element for a substantialglobalization and connection Google handles more than 200 million queries a dayfrom around the world Increasingly, these queries are not in English Over the pastfew years, Google has aggressively localized its search engine for more than 60languages These language-specific search engines are very important to Google’scontinued growth, since the majority of new Internet users are not native-Englishspeakers That localization has changed how customers use web search as well as howthey find their information – leading to global success of Alphabet

 Strategies for Reaching Global Markets

Because Berkshire Hathaway is a holding company, not a retailer ormanufacturer, their global strategy is somewhat different from that of a company such

as Apple or Nike Warren Buffett, Berkshire Hathaway’s CEO and chairman, isfamous for being a value investor And with the uncertainty of foreign markets andcurrency exchange rates, he is not about to risk his billions overseas So how doesBerkshire Hathaway create a global presence? By purchasing stock in Americancompanies that have strong international sales For example, Coke, Anheuser Busch,and Proctor & Gamble are all companies with a large foreign market and togetherrepresent a substantial holding for Berkshire Hathaway

With this play-it-safe strategy, Berkshire Hathaway does not need to limit itself

to a specific region of the world, they can truly have a global presence For example,the insurance company General Re is wholly owned by Berkshire Hathaway and hasdozen of offices and subsidiaries all over the world even though it is based in

Connecticut Buffett’s conglomerate owns half of Heinz, headquartered inPennsylvania but also found in over 200 countries around the world It is clear thatBuffett is much more concerned with making good investments than establishing aglobal presence.

 The leadership wisdom of Warren Buffett

It’s undeniable that Warren Buffet and the management system has been doingreally well They invest in the business, not in growing corporate staff They justconcentrate on the effectiveness of business but increasing more and more people

Berkshire Hathaway also makes sure board members can really relate to shareholders.

Buffett talked about what sets his board of directors apart They’re paid only tokenfees rather than big sums for their work as directors, for instance Buffet also see thebenefits to splitting the CEO and chairman role Buffett and Munger have put theirtrust in their managers, which has allowed them to produce more "than would beachieved by streams of directives, endless reviews and layers of bureaucracy.” Thecompany also shower the people who work for it with praise

 Consistency between organizational structure and company strategy.

Berkshire Hathaway owned was unique in its diversity It was a model based onextreme decentralization of operating authority, with responsibility for businessperformance placed entirely in the hands of local managers While many publiccorporations implemented strict controls and oversight mechanisms to ensuremanagement performance and regulatory compliance, Berkshire Hathaway moved inthe opposite direction The company had only two main requirements for operatingmanagers: submit financial statement information on a monthly basis and send freecash flow generated by operations to headquarters Management was not required tomeet with executives from corporate headquarters or participate in investor relationsmeetings; nor was it required to develop strategic plans, long-term operating targets,

or financial projections Instead, local managers were left to operate their businesseslargely without supervision or corporate control Vice Chairman Charles T Mungerdescribed the Berkshire Hathaway system as “delegation just short of abdication.”