© 2006 prentice hall8-1 chapter 8 organization structure and control systems powerpoint by...

© 2006 Prentice Hall 8-1

Chapter 8 Organization Structure and

Control Systems

PowerPoint byKristopher Blanchard

North Central University


Organizational Structure

Structure needs to “fit” strategy

Most international managers find it easier to determine what to do (strategy) than to decide how to develop the organizational capabilities (structure) to do it.


Evolution and Change in MNCInternationalization 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.Structural Evolution (Stages Model) occurs when managers redesign the organizational structure to optimize the strategy’s changes to work, making changes in the firm’s tasks and relationships and designating authority, responsibility, lines of communication, geographic dispersal of units and so forth


Typical ways that firms organize international activities

Domestic structure plus export department

Domestic structure plus foreign subsidiary

International division

Global functional structure

Global product structure

Global Geographic Structure


Integrated Global Structures

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.Matrix Structure is a hybrid organization of overlapping responsibilities – it is used by some firms but has generally fallen into disfavor recently


Organizing for Globalization

Two opposing forces in structural decisions– The need for differentiation (focusing on and

specializing in specific markets) – The need for integration (coordinating those

same markets)

Globalization – a specific strategy that treats the world as one market by using a standardized approach to products and markets


Organizing for Globalization

Organizing to facilitate a globalization strategy typically involves rationalization and the development of strategic alliancesOrganizing for global product standardization necessitates close coordination among the various countries involvedThe problem facing companies in the future is that the structurally sophisticated global networks leave the organization exposed to the risk of environmental volatility from all corners of the world


Comparative Management Focus: Chinese Global Network

The Chinese commonwealth is a form of global network that has become the envy of Western multinationals– Network of entrepreneurial relationships in

Asia primarily– Includes mainland China, 1.3 billion citizens,

and more than 55 million Chinese in Taiwan, Indonesia, Hong Kong, and Thailand

– Estimated to control $2 Trillion in liquid assets


Comparative Management Focus: Chinese Global Network

Most observers believe that this China-based informal economy is the world leader in economic growth, industrial expansion, and exportsComprises most mid-sized, family-run firms linked by transnational network channelsChannels move information, finance, goods, and capital Network alliances bind together and draw from the substantial pool of financial capital and resources available in the region


Keiretsu and ChaebolKeiretsu: Set of Japanese companies with interlocking business relationships and shareholdings http://en.wikipedia.org/wiki/Keiretsu Chaebol: South Korean business conglomerates http://en.wikipedia.org/wiki/Chaebol Differences – Chaebol are still largely controlled by their founding families, while

keiretsu are controlled by groups of professional managers. – Chaebol are centralized in ownership, while keiretsu are more

decentralized and connected by cross-shareholdings. – Chaebol are prohibited from owning private banks, partly in order to

increase the government's leverage over the banks in areas such as credit allocation. Keiretsu have historically worked with an affiliated bank, giving the affiliated companies almost unlimited access to credit, although this is no longer a universal feature of keiretsu.


Emergent Structural Forms

Inter-organizational networks

The global e-corporation network structure

The transnational corporation (TNC) network structure


Choice of Organizational Form


Organizational Change and Design

When does a company need to make a change in organizational structure?– Makes a change in goals or strategy– Makes a change in scope of operations– Indications of organizational inefficiency– Conflicts among divisions and subsidiaries– Overlapping responsibilities– Complaints regarding customer service


Locus of Decision Making


Monitoring Systems


Direct Coordinating Mechanisms

Design of appropriate structures Use of effective staffing practices Visits by head-office personnel Regular meetings


In-Direct Coordinating Mechanisms

Sales quotas Budgets Other financial tools Feedback reports


Appropriateness of Monitoring and Reporting Systems

Factors likely to affect the appropriateness of monitoring systems include:– Management practices– Local constraints– Expectations regarding: Authority, Time, and

Communication


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, non-comparability of performance data across countries)

• Evaluation variables across countries


Looking Ahead

Chapter 9 – Staffing, Training, and Compensation for Global Operations– Staffing philosophies for global operations

– Global selection

– Training and development

– Compensating expatriates

– Compensating HCNs


Domestic Plus Foreign Subsidiary

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Global Product Division

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Global Geographic Structure

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Inter-organizational networks

Views the various companies, subsidiaries, suppliers, or individuals as a relational networks

Allows the different network partners to adopt unique structures that are adapted to the local context

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Global E-Corporation Network

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Transnational Corporation

Involves linking foreign operations to each other and to headquarters in a flexible way– Leverages local and central capabilities

Not a matter of boxes on an organizational chart; it is a network of company units and a system of horizontal communicationRequires the dispersal of responsibility and decision making to local subsidiariesEffectiveness is dependant on the ability and willingness to share current and new learning and technology across the network

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© 2006 prentice hall8-1 chapter 8 organization structure and control systems powerpoint by...

Documents

organization structure

matrix structure

form of global network

global product standardization

sophisticated global

firms tasks

specific strategy

functional specialization