Post on 25-Dec-2015
Advance Topics in Change Management
Lecture 28: Designing International Organization Structures
Objectives
• To discuss the different structures that MNCs can adopt
• To discuss the advantages and disadvantages of those structures
MOTHER-DAUGHTER STRUCTURE
MNCs WITH AN INTERNATIONAL DIVISION
WORLDWIDE FUNCTIONAL STRUCTURE
Questions
• What are the advantages of a world-wide functional structure?
• What are the disadvantages of a world-wide functional structure?
WORLDWIDE FUNCTIONAL STRUCTURE
• Similar advantages and disadvantages to domestic functional structures (economies of scale within functions, skill development, but slow response and decision-making).
• But less effective in many MNCs: inability to adapt readily to the greater local diversity of business environments.
• Typically found in firms with narrow product ranges in relatively stable technical environments where technical excellence is crucial.
WORLDWIDE GEOGRAPHIC GROUPS
Question
• What sort of industry characteristics might lead MNCs to establish world-wide geographic groups?
WORLDWIDE GEOGRAPHIC GROUPS
• Typically found in low technology industries where sales and marketing are key functions and vary regionally. Product range diversity tends to be limited in such MNCs and products are often modified extensively to suit local markets.
WORLDWIDE GEOGRAPHIC GROUPS An Example: Unilever
• Unilever Executive• is responsible for managing profit and loss, and delivering growth
across our regions, categories and functions.• Paul Polman - Chief Executive Officer• James A Lawrence - Chief Financial Officer• Sandy Ogg - Chief HR Officer
• Professor Geneviève Berger - Chief Research & Development Officer
• Manvinder Singh (Vindi) Banga - President Foods
• Douglas Anderson Baillie - President of Western Europe • Harish Manwani - President, Asia Africa• Michael B. Polk - President, Americas
Worldwide Product Structure
Questions
• When do you think that a world-wide product structure would be appropriate?
• Why do you think that it might be appropriate under those conditions?
Worldwide Product Structure
• Often found in large MNCs that have a variety of diverse product ranges that need little adaptation for different markets, and where technological scale economies are important.
Worldwide Product Structure An Example: Lafarge
• Chairman and Chief Executive Officer• Chief Financial Officer• Vice-President Organization and Human
Resources• Vice-President Strategy, Business Development
and Public Affairs• Vice-President Communications
• Co-President of the Cement Business * 3• Co-President of the Aggregates and Concrete
Business * 2• President of the Gypsum Business
Worldwide Matrix
Proctor and Gamble – A Matrix?• Chairman of the Board • President and Chief Executive Officer• Chief Financial Officer• Senior Vice President and Treasurer• Chief Technology Officer • Global Product Supply Officer• Vice Chair - Global Operations• President - Global Prestige Products• Group President - Global Hair Care• Group President - Global Fabric Care• Vice Chair - Global Health and Well-Being • Group President - Global Home Care• President - Greater China• President - Western Europe• Group President - North America• Group President - Asia• Group President - Central and Eastern Europe, Middle East and Africa• President - Latin America• President - Global Wal*Mart Team• President - Special Assignment • Corporate Officer - Special Assignment
Questions
• What information on the preceding slide suggests that Proctor and Gamble has a matrix structure?
• What reasons lie behind this choice of structure?
Proctor and Gamble – A Matrix?• Chairman of the Board • President and Chief Executive Officer• Chief Financial Officer• Senior Vice President and Treasurer• Chief Technology Officer • Global Product Supply Officer• Vice Chair - Global Operations• President - Global Prestige Products• Group President - Global Hair Care• Group President - Global Fabric Care• Vice Chair - Global Health and Well-Being • Group President - Global Home Care• President - Greater China• President - Western Europe• Group President - North America• Group President - Asia• Group President - Central and Eastern Europe, Middle East and Africa• President - Latin America• President - Global Wal*Mart Team• President - Special Assignment • Corporate Officer - Special Assignment
Proctor and Gamble – A Matrix?• Chairman of the Board • President and Chief Executive Officer• Chief Financial Officer• Senior Vice President and Treasurer• Chief Technology Officer • Global Product Supply Officer• Vice Chair - Global Operations• President - Global Prestige Products• Group President - Global Hair Care• Group President - Global Fabric Care• Vice Chair - Global Health and Well-Being • Group President - Global Home Care• President - Greater China• President - Western Europe• Group President - North America• Group President - Asia• Group President - Central and Eastern Europe, Middle East and Africa• President - Latin America• President - Global Wal*Mart Team• President - Special Assignment • Corporate Officer - Special Assignment
Proctor and Gamble – A Matrix?• Chairman of the Board • President and Chief Executive Officer• Chief Financial Officer• Senior Vice President and Treasurer• Chief Technology Officer • Global Product Supply Officer• Vice Chair - Global Operations• President - Global Prestige Products• Group President - Global Hair Care• Group President - Global Fabric Care• Vice Chair - Global Health and Well-Being • Group President - Global Home Care• President - Greater China• President - Western Europe• Group President - North America• Group President - Asia• Group President - Central and Eastern Europe, Middle East and Africa• President - Latin America• President - Global Wal*Mart Team• President - Special Assignment • Corporate Officer - Special Assignment
Proctor and Gamble – A Matrix?• Chairman of the Board • President and Chief Executive Officer• Chief Financial Officer• Senior Vice President and Treasurer• Chief Technology Officer • Global Product Supply Officer• Vice Chair - Global Operations• President - Global Prestige Products• Group President - Global Hair Care• Group President - Global Fabric Care• Vice Chair - Global Health and Well-Being • Group President - Global Home Care• President - Greater China• President - Western Europe• Group President - North America• Group President - Asia• Group President - Central and Eastern Europe, Middle East and Africa• President - Latin America• President - Global Wal*Mart Team• President - Special Assignment • Corporate Officer - Special Assignment
Question
• Take a look at the next two slides on Google and Microsoft.
• Why do they appear to have different organizational structures?
Google’s Executive Officers• Eric Schmidt, Chairman of the Board and Chief Executive
Officer • Sergey Brin, Co-Founder and President, Technology • Larry Page, Co-Founder and President, Products • Nikesh Arora, President, Global Sales Operations and
Business Development • Shona L. Brown, Senior Vice President, Business Operations • David C. Drummond, Senior Vice President, Corporate
Development and Chief Legal Officer • Alan Eustace, Senior Vice President, Engineering and
Research • Patrick Pichette, Senior Vice President and Chief Financial
Officer • Jonathan Rosenberg, Senior Vice President, Product
Management
Microsoft’s Senior Leaders• Steve Ballmer Chief Executive Officer• Lisa Brummel Senior Vice President, Human Resources• Jean-Philippe Courtois President, Microsoft International• Kurt DelBene President, Microsoft Office Division• Peter Klein Chief Financial Officer• Andrew Lees President, Mobile Communications Business• Qi Lu President, Online Services Division• Mich Mathews Senior Vice President, Central Marketing Group• Don A. Mattrick President, Interactive Entertainment Business• Bob Muglia President, Server and Tools Business• Craig Mundie Chief Research and Strategy Officer• Ray Ozzie Chief Software Architect• Rick Rashid Senior Vice President, Research• Eric Rudder Senior Vice President, Technical Strategy• Steven Sinofsky President, Windows and Windows Live Division• Brad Smith (LCA) General Counsel and Senior Vice President, Legal and
Corporate Affairs• B. Kevin Turner Chief Operating Officer• Hank Vigil Senior Vice President, Consumer Strategy and Partnerships
Question
• Look at the next slide on Subway.
• What does the information tell us about Subway?
Subway’s Departments• Franchise Sales • New Business Development• Subway Real Estate Corp• Store Design• Franchisee Services• Operations• Creative Services• Customer Care• Public and Community Relations• Publications • Profit Building & Local Marketing• Meetings and Events• Research & Development• International
Subway Stores Locations – Selected Countries
Country # of Stores Country # of Stores
AUSTRALIA 1301 MEXICO 541
BRAZIL 740 NEW ZEALAND 239
CANADA 2704 RUSSIAN FEDERATION 298
CHINA 262 SAUDI ARABIA 46
FRANCE 303 SINGAPORE 94
GERMANY 613 UNITED KINGDOM 1426
INDIA 242 UNITED STATES 24728
JAPAN 293 TOTAL 35874
US as a percentage of Total 69%
ERNST AND YOUNG’S PRE-2008 ORGANIZATIONAL STRUCTURE: MOTHER-
DAUGHTER (FRANCHISING)
Questions
• Why did Ernst and Young (and other auditors) have this company structure?
• What are the disadvantages of such a structure?
ERNST AND YOUNG’S 2008 ORGANIZATIONAL STRUCTURE: WORLDWIDE GEOGRAPHIC GROUPS
Intended Consequences of New Structure
• Facilitate greater consistency in service quality• Meet the demands of multi-national customers
better• Streamline processes and programmes within
Ernst and Young• Promote learning between partnerships• Bring ‘smaller country practices together with
larger ones’ to allow for ‘greater sharing of resources and knowledge.
First SolarQuick Facts and Figures• Formed in 1999 • Largest manufacturer of thin film solar modules• Fastest energy payback time of any PV technology • Common stock is traded on the NASDAQ Stock Market• Number of employees: 5,500+• Headquarters: Arizona, US• Manufacturing facilities: Germany, Malaysia, and the US• Sales and Marketing: Australia, France, Germany, Spain,
and the US• Project development: Canada, China, and the US• Government affairs: Belgium, Germany, and the US
Questions
• How might first Solar be structured?
• What are your reasons for thinking this?
First Solar – Executive Management• Executive Chairman• Chief Executive Officer• President• Executive Vice President, Human Resources• Executive Vice President, General Counsel
Corporate Secretary• Executive Vice President, Marketing and Product
Management• Executive Vice President, Public Affairs• President, Utility Systems and Chief Financial Officer• Chief Accounting Officer• Chief Technology Officer• Vice President for Sales, Managing Director of First
Solar GmbH
FORMS OF INTERNATIONAL CO-ORDINATION IN FOUR TYPES OF PROFESSIONAL SERVICES FIRMS
Reciprocity-Based International
Networks of Firms
Collegially Co-ordinated
International Firm
Financially Controlled
International Firm
Hierarchically Controlled
International Firm
Type of International Governance
N/A Committee Public limited company
Private company
Strength and Type of Control Mechanisms
Weak (social) Weak, (bureaucratic) Relatively strong, financial
Relatively strong, bureaucratic
Focus of Training
Very limited training, if any
Consistency Limited training Firm-specific technical and behavioural standards
Degree of Standardization of Routines
Very limited Very limited Limited Relatively high
Career systems Specific to individual firms in network
Firm specific, ‘up or out’ system
Industry specific, high mobility across firms
Firm specific, ‘up or out’ system
Aims of Employees
Become a partner Short-term financial rewards
Become a partner
Conclusions
• There are similarities between the advantages and disadvantages associated with international organizational structures and corresponding national organizational structures that we examined earlier
• However, international structures are likely to be more complex as the organization faces a wider range of challenges (different product markets, governments, and regulations).