© mcgraw hill companies, inc., 2000 the organization of international business chapter 13
TRANSCRIPT
© McGraw Hill Companies, Inc., 2000
The Organization of International Business
Chapter 13
© McGraw Hill Companies, Inc., 2000
Royal Dutch Shell Shell organizational structure
Double matrix: Region/Business Activity. McKinsey and Company
Business consequence: Decision by consensus. Structure decentralized decision making.
Reorganized along divisional lines. No international division.
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Shell Organizational Structure - 1998
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Wiring Diagrams What are they? Why use wiring diagrams?
Important to the company. Important to the manager
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Vertical Differentiation Concerned with where decisions are made.
Where is decision making power concentrated?
Two Approaches Centralization Decentralization
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Centralization
Pros: Facilitate coordination. Consistency of decisions. Easier to make changes. Avoids duplication.
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Centralization
Cons: Overburdened top management. Motivational research favors decentralization. Decentralization permits flexibility. Decentralization lets decisions be made closer
to the information source. Decentralization can increase control.
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Strategy and Centralization Global strategy - centralization. Multi-domestic firms - decentralization. International firms - centralize for core
competencies (R&D) and decentralize for operating decisions.
Transnational - use both.
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Vertical Differentiation - Decentralization
Top is over-burdened and makes poor decisions.
Increased motivation at lower levels. Greater flexibility. Better on-the-spot decisions. Increased accountability and control.
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Horizontal Differentiation
How a firm divides itself into sub-units - value creation activities. Demands to great for one individual. Firm diversifies its product offerings.
Typically: function, business area or geography.
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A Typical Functional Structure
Figure 13.1
Purchasing Manufacturing Marketing Finance
TopManagement
Buying units
Plants Branchsales units
Accountingunits
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Horizontal Differentiation Usually firms start with an international
division. Leads to coordination problems, and Conflict between domestic and foreign
operations.
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A Typical Product Division Structure
Figure 13.2
DepartmentPurchasing
Departmentmanufacturing
Departmentmarketing
Departmentfinance
Buying units
Plants Branchsales units
Accountingunits
Division productline A
Headquarters
Division productline B
Division productline C
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One Company’s International Division Structure
Figure 13.3
DomesticDomesticdivisiondivisionGeneral General manager manager
Product line AProduct line A
InternationalInternationaldivisiondivisionGeneralGeneralmanagermanagerarea linearea line
HeadquartersHeadquarters
DomesticDomesticdivisiondivisionGeneral General manager manager
Product line BProduct line B
DomesticDomesticdivisiondivisionGeneral General manager manager
Product line CProduct line C
Country 1Country 1GeneralGeneralmanagermanager
(product A, B, (product A, B, and / or C)and / or C)
Country 2Country 2GeneralGeneralmanagermanager
(product A, B, (product A, B, and / or C)and / or C)
Functional units
Functional units
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The International Structural Stages Model
Global Matrix
(“Grid”)
Area Division
Worldwide Product Division
International Division
Alternate Paths of Development
Foreign Product Diversity
Foreign Sales as a Percentage of Total Sales
Figure 13.4
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Horizontal Differentiation - Two Structures (A)
Worldwide area. Used by firms with
Little diversification. Domestic structure based on function.
Fits multi-domestic strategy because of local responsiveness capability.
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Worldwide Area Structure
Europeanarea
Middle East /Africa area
Far East area
Headquarters
Figure 13.5
North Americanarea
Latin Americanarea
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Horizontal Differentiation - Two Structures (B)
Worldwide product division. Used by firms with structure based on
product divisions. Fits global strategy because of realization of
experience curve and location economies.
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A Worldwide Product Division Structure
Worldwideproduct groupor division A
Worldwide product group or division C
Headquarters
Worldwide product group or division B
Area 1
(domestic)
Area 2
(international)
Functional units
Figure 13.6
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Matrix Structures Multinational and Transnational attempt to
use a matrix structure. High failure rate because of bureaucratic
(turf) problems.
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A Global Matrix Structure
Figure 13.7
HeadquartersHeadquarters
Area 1Area 1 Area 2Area 2 Area 3Area 3
Product Product division Adivision A
Product Product division Bdivision B
Product Product division Cdivision C
Manager herebelongs to division Band area 2
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Dow Chemical Triple matrix structure.
Function Business Geography
Flexibility.
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Japanese Organizational Structure
NEC Regional ‘optimum
locations’ manufacture.
Work together, with or w/o support from Japan.
Matsushita Rearranging 69
overseas plants into a ‘global localization’ plan to supply four major ‘poles’: NA, Europe, Japan, rest of Asia.
Japanese accustomed to strong central control.
Problems dealing with minorities.
Problems with labor unions.
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Formal Integrating Mechanisms
Increasing complexityof integrating mechanism
Direct contact
Liaison roles
Teams
Matrix structures
Figure 13.8
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Formal Integrating Mechanisms
Communications. Inter and Intranets.
Direct contact and liaison - requires leadership.
Management schools. creates networks. imposes culture.
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Informal Integrating Mechanisms
Management networks. Organization Culture.
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A Simple Management Network
B
C D
A
G
F
E
Figure 13.9
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Control Systems Personal.
Personal contact.
Bureaucratic. Rules and procedures.
Output. Goal-setting.
Cultural. Establishment of value system.
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Interdependence, Performance Ambiguity, and the Costs of Control for the Four International
Business Strategies
Strategy Inter-depend-ence
PerformanceAmbiguity
Costs ofControl
Multi-domestic Low Low Low
International Moderate Moderate Moderate
Global High High High
Transnational Very high Very high Very high
Table 13.1
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A Synthesis of Strategy, Structure and Control Systems
Structure and
control Multi-domesticInternational Global TransnationalVertical
differentiationDecentralized Core competency;
rest decentralizedSomecentralized
Mixedcentralized anddecentralized
Horizontaldifferentiation
Worldwidearea structure
Worldwide productdivision
Worldwideproductdivision
Informal matrix
Need forcoordination
Low Moderate High Very high
Integratingmechanisms
None Few Many Very many
Performance
ambiguityLow Moderate High Very high
Need forcultural
controls
Low Moderate High Very high
Table 13.2
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