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Chapter 8:Organization Structure and Control Systems

PowerPoint by

Hettie A. Richardson

Louisiana State University

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Organizational Structure

Must evolve to accommodate internationalization

Must “fit” with strategy

Should be contingency based

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Evolution and Change in Structures

Stages model

Alcoa Created smaller units Linked geographically dispersed, but

similar businesses (e.g., Brazil and Australia)

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Domestic Structure Plus Foreign Subsidiary

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International Division

Organized along functional, product, or geographic lines

IBM World Trade

Pepsi Cola International

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Global Functional Structure

Designed on the basis of the company’s functions

Allows for functional specialization and economies of scale

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Global Product (Divisional) Structure

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Global Geographic (Area) Structure

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Organizing for Globalization

Need for differentiation

Need for globalization IBM Rationalization Development of alliances

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Comparative Management in Focus: The Overseas Chinese Global Network

“Chinese commonwealth”

Overseas Chinese Control $2 trillion in liquid assets Contribute 80% of the capital for the PRC Contribute 70% of the private sector in

Malaysia, Thailand, Indonesia, and the Philippines

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Comparative Management in Focus: The Overseas Chinese Global Network

The Overseas Chinese business culture Business largely confined to family and

trusted friends—guanxi Adherence to patriarchal authority Thrift and a high savings level Investment in tangible goods Wary outlook

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Organizing to “Be Global, Act Local”

Colgate-Palmolive Primary structure is geographic CEO oversees centralized operations

Levi Strauss Allows managers to act independently Keeps some centralized control, but

decentralizes control of foreign subsidiaries

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Management Focus: Proctor and Gamble’s Structure

P&G/Gillette merger: Gillette adopts P&G’s organizational structure

P&G’s structure: Global Business Unit (GBU) Market Development Organization (MDO) Global Business Services (GBS)

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Emergent Structural Forms

Interorganizational networks Royal Philips Electronics Intel

Global e-corporation network structure

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Emergent Structural Forms

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Emergent Structural Forms

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Emergent Structural Forms

Transnational corporation (TNC) network structure Asea Brown Boveri (ABB)

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Choice of Organizational Form

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Assignment

Compare fig 8.6 above with fig 8.7 in the book

Prepare a plan for differentiation / integration for each of the 5 alternatives in fig 8.6

Use the PowerPoint slides about differentiation and integration to support your reflections

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When is Change Needed?

Clashes among divisions, subsidiaries, or individuals over territories or customers

Duplication of administrative or personnel services, sales offices, account executives

An increase in overseas customer service complaints

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When is Change Needed?

A shift in operational scope

Conflict between overseas and domestic staff

Centralization leads to excessive and, thus, misused or misunderstood data

Unclear reporting relationships

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Locus of Decision Making

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Monitoring Systems

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Direct Coordinating Mechanisms

McDonald’s in Moscow Problem: Quality control Solution: Built processing plant in Moscow

and provided managerial training

Other options: Visits by head-office personnel and regular meetings

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Indirect Coordinating Mechanisms

Examples: sales quotas, budgets, and financial tools and reports

Three financial statements One for accounting standards in host

country One for the standards in the home country One for consolidation

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The Appropriateness of Systems

Where are top managers from?

US individualism vs. Japanese collectivism

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The Role of Information Systems

US MNCs monitor via specific functional reports

Inaccurate information, different norms, MIS adequacy

Noncomparability of performance data

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Evaluation Variables across Countries

Adjust statements to reflect variables unique to each country

Take nonfinancial measures into account