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Transcript of 11-1 McGraw-Hill/Irwin© 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved.
11-1
McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc.,All Rights Reserved.
11-2
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Part Three: International Strategic
Management
International Management,5th ed.
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International Management,
5th ed.
Hodgetts and Luthans
Chapter Eleven
Organizing International Operations
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EXAMINE the major types of organizational structures used in handling international operations
ANALYZE the advantages and disadvantages of each type of organizational structure, including the conditions that make one preferable to others
DESCRIBE the recent, nontraditional organizational arrangements coming out of mergers, joint ventures, keiretsus, and other new designs including electronic networks and product development structures
DISCUSS the value of subsidiary boards of directors in overseas operations
EXPLAIN how organizational characteristics such as formalization, specialization, and centralization influence how the organization is structured and functions
Objectives of the Chapter
11-5
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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
11-6
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Figure 11-1 Organizational Consequences of Internationalization
Pressure for local responsivenessLow High
Pre
ssur
e fo
r gl
obal
izat
ion
Low
High Aircraft Cameras Consumer electronics Computers
Automobiles
Telecommunications
Aerospace
Synthetic fibers
Cement
Steel
Clothing
Packaged goods
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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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Figure 11-2 Use of Subsidiaries during the Early
Stage of Internationalization
PersonnelProduction Marketing Finance
Chief Executive Officer
France Japan Egypt Australia Argentina
V.P. InternationalOperations
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Figure 11-3 International Division Structure
PersonnelProduction Marketing Finance
Chief Executive Officer
DomesticDivision
Paint
DomesticDivision
Tools
InternationalDivision
DomesticDivision
Furniture
DomesticDivision
Hardware
Japan Australia Italy
OfficeOperations
Marketing GovernmentRelations
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Figure 11-4 Global Product Division Structure
PersonnelProduction Marketing Finance
Chief Executive Officer
ProductDivision
A
ProductDivision
B
ProductDivision
ProductDivision
D
ProductDivision
EC
SouthAmerica Africa Europe Australia Far East
Marketing Finance Personnel
Great Britain FranceItaly
NetherlandsGermany
ProductionAmericaProduction
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Figure 11-5 Global Area Division Structure
PersonnelProduction Marketing Finance
Chief Executive Officer
NorthAmerica
SouthAmerica
Europe Asia Africa
Great Britain FranceItaly
Netherlands
Germany
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Figure 11-6 Global Functional Structure
Domestic
Production
Product A
Product BProduct CProduct D
Foreign
Production
Product A
Product BProduct CProduct D
Production
Domestic
Production
Product A
Product BProduct CProduct D
Foreign
Production
Product A
Product BProduct CProduct D
Marketing Finance
Chief Executive Officer
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Figure 11-6 Global Functional Structure
Domestic
Production
Product A
Product BProduct CProduct D
Foreign
Production
Product A
Product BProduct CProduct D
Production
Domestic
Marketing
Product A
Product BProduct CProduct D
Foreign
Marketing
Product A
Product BProduct CProduct D
Marketing Finance
Chief Executive Officer
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Figure 11-7 Multinational Matrix Structure
PersonnelProduction Marketing Finance
Chief Executive Officer
North America Industrial Goods Europe
Manager,Industrial GoodsNorth America
Manager,Industrial Goods
Europe
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Basic Organizational Structures (cont.)
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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Nontraditional Organizational Arrangements
Mergers and Acquisitions Purchasing MNC attempts to promote synergy while
encouraging local initiative by the acquired firm Joint Ventures and Strategic Alliances
Each party contributes to the undertaking and coordinates its efforts for the overall benefit
Keiretsu Large, often vertically integrated group of companies
that work closely with each other Members bound by cross-ownership, long-term
business dealings, interlocking directorates, and social ties
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Figure 11-10 Comparison of Asian and Western
Management Features
WESTERN
ASIAN RationalityStructuredDirectiveDoing Relationships
Flexible AdaptiveUnderstanding
Management Style
WESTERN
ASIAN Short TermControlConflictOne ProductService- focused
Long TermHuman ResourceCollaborativeCustomer- focused
Action
WESTERN
ASIAN FormalFragmentedHierarchicalCompetitive
InformalGeneralistIntegratedCooperative
Organization
WESTERN
ASIAN Individual LegalConfrontationAnalytic
Group Trust CompromiseFluid
Basic Values
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Nontraditional Organizational Arrangements (cont.)
Electronic Network Form of Organization Electronic freelancers
Individuals who work on a project for a company, usually via the Internet
Move on to new employment at the completion of an assignment
Deliver outsourcing function on-line
Organizational Synergy MNCs leverage their knowledge and resources
worldwide Increased movement toward making synergy work
correctly
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Nontraditional Organizational Arrangements (cont.)
Organizing for Product Integration Toyota’s system based on several organizational
mechanisms Mutual adjustment Direct, technically skilled supervision Integrative leadership
Role of Information Technology (IT) in Organizing Integration of IT into the overall organizing process can
have a dramatic effect on organizational performance Japanese leading the way on the use of IT
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Use of Subsidiary Boards of Directors
Subsidiary board A board that overseas and monitors the
operations of a foreign subsidiary Used to:
Advise, approve, and appraise local management Help the unit to respond to local conditions Assist in strategic planning Supervise the subsidiary’s ethical conduct
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Organizational Characteristics of MNCs
Formalization Use of defined structures and systems in decision
making, communicating, and controlling
Specialization Organizational characteristic that assigns individuals to
specific, well-defined tasks Horizontal specialization
Assignment of jobs so that individuals are given a particular function to perform and tend to stay in this area
Vertical specialization Assignment of work to groups or departments where
individuals are collectively responsible for performance
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Organizational Characteristics of MNCs (cont.)
Centralization Centralization
Management system under which important decisions are made at the top
Decentralization Pushing decision making down the line and getting the lower-
level personnel involved
Putting Organizational Characteristic in Perspective MNCs tend to organize international operations in a
manner similar to that used at home Future challenge is to bring subsidiary organizational
characteristics into line with local customs and cultures
