mibo intro, internat. feb 21 2011
TRANSCRIPT
Prof. Dr. L. KarstenR.De Vries M.ScA. Visscher M.Sc. (coordinator)
IntroductionFebr 21, 2011
MIBO
How about you ???Where are you from????
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Focus of the course
› Focus in MIBO is mainly on the execution of e.g an internationalization strategy , on the operational management of an international business.
› However , the boundaries between strategy and its execution are fuzzy.
› Most strategies fail because of bad execution.
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MIBO perspectives
• Internationalization as a process• Institutions , management style , culture• Resource based view , market based view• Global integration – local responsiveness
• Special subject : Energy industry
• See Nestor for related lectures, assignments , tutorials
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Exam
• Written exam April 12•20-25 multiple choice questions•3-4 open questions•Exam-relevant: • Gooderham&Nordhaug ch. 1-9• Virtual reader• Lectures (incl guest lectures)
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Tutorials
• At the 1st tutorial , you will be forming teams •5 teams per group, 3-5 persons each•min. 2 nationalities per team
• Teams •Will make the essay•Will summarize and present articles
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Essay
• Assignment of essay : see Nestor –assignment button. Domain : Energy industry.
• Essay is important subject in tutorials , see Nestor
• Hand-in draft essay May 13• Hand-in final essay June 10• Written by teams of 3-5
•Teams self-enrolled•At least two nationalities
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Article Summaries&Presentations
› Per team specified in Nestor (button tutorials )
› Your view and comment on Article is most important part• What did you learn, what’s new about it• Do you agree with the used method• Are the conclusions well founded• What is relevance to the subject , relation with other course
material
› Good performance in this can give you bonus point on the essay
› Copying of Article abstract in the summary or the presentation results in a zero bonus
Grading
• Final grade is 50 % of written exam grade (original value) and 50 % of essay grade
• Essay grade can be enhanced by tutorial bonus
• To pass , EACH has to be 5.5 or more• Resit of exam July 12
• Check all dates in Nestor!
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04/12/23MIBO Internationalization
Theories
International growth of a family business
04/12/23MIBO Internationalization
Theories
International growth of a family business (70% of shares family-owned)
1947 Start by E. Persson , in Sweden1948 Export to Norway1967 Export to Danmark1976 Great Britain1980 Switzerland , Germany
2000 USA
2010 Asia
04/12/23MIBO Internationalization
Theories
Results 2009:• Sales SEK 100 billion*)• Net profit SEK 16.4 billion….not bad for a family business……
--2000 stores• 54000 employees• 90% of sales in Europe (Germany : 25%)
*) 1 SEK = 0.11 Euro
MIBO Internationalization Theories
Internationalization of MNC’s : the processUppsala model (Johanson/Vahlne 1977)• Evolutionary process , uncertainty
avoiding• Learning by doing , accumulation of know-
how• Next step dependant upon current position
•Geographical•Knowledge/market/experience….•“path-dependent process”
04/12/23MIBO Internationalization
Theories
Management discretion
› Some MNC’s do not fit the Uppsala path› By making explicit decisions to do otherwise• Born Globals• Out-of-the-box decisions by
•Stellar Geniuses , or•Reckless Gamblers,depending on the outcome………
04/12/23MIBO Internationalization
Theories
“Born Globals”
Contrary to the stepwise “Uppsala process”, a new breed of (small ) businesses has emerged, who are going global from day one.
Internationalization usually based on relations network of entrepreneur/ owner, these days also Social Media Networks (Linked in, Xing……) are used.
04/12/23MIBO Internationalization
Theories
Not Uppsala , but out of the box: Dow Chemical› Manufacturer of base- and petrochemicals› Till 1960 thoroughly USA based : only 8% of
sales outside US (exports)› 1961: established a big site in Terneuzen ,
NL› In 1970 already 30% of sales outside US› Currently biggest chemical company after
BASF , sales 60 billion $
04/12/23MIBO Internationalization
Theories
Out of the box : Daimler Benz› Till mid 90-ties mainly active in Europe with Mercedes
brand , although some plants in other continents› Bought Chrysler in 1998 for $ 38 billion: Daimler
Chrysler • “truly global reach”• “Mercedes quality & Chrysler low cost
manufacturing”• “entry for MB into US market and Chrysler in EU”
Analysts , economists , consultants etc. were excited
Some notorious pessimists pointed at significant differences in corporate traditions and national culture………
04/12/23MIBO Internationalization
Theories
Daimler-Chrysler or Daimler vs. Chrysler?
Back in the box : Daimler Benz› In 2007 Chrysler was sold to a private equity group
with a donation of 800 million $› After several years of big losses› Synergy benefits of marketing , manufacturing etc.
did not materialize
Quote “These two cultures were bound to collide…”Analysts , economists , consultants etc. :“We told you
so…”
04/12/23MIBO Internationalization
Theories
› Ford's Mission Statement › Our Vision
To become the world's leading consumer company for automotive products and services.
› Our Mission
We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world.
04/12/23MIBO Internationalization
Theories
Degree of internationalization› Rugman/Verbeke investigation(2004)› 365 of Fortune-500 MNC’s• Based on sales figures• Truly global if sales in all triadregions(Asia ,
Americas , Europe) >20% of total• And no single region >50% of total MNC
sales
Finding : Only 9 out of 365 MNC’s truly global
04/12/23MIBO Internationalization
Theories
Degree of internationalization› 320 MNC’s home oriented (>50% in home region)
• Wal-Mart, GM, Ford , GE, Mitsubishi, VW,Siemens………
› 25 MNC’s bi-regional (>20% in two regions)• BP, Toyota , Nissan , Unilever, Motorola……
› 11 MNC’s host oriented (>50% in non-home regions)• Daimler-Chrysler,ING, Ahold, Honda……
› 9 MNC’s global • IBM, Sony, Philips,Nokia,Intel,Canon,Coca –Cola,
Flextronics , LVMH
04/12/23MIBO Internationalization
Theories
04/12/23MIBO Internationalization
Theories
A question to you….
› Looking at the above findings re degree of internationalization , this seems to :a: Confirm the Uppsala modelb: Confirm that some firms stepped “out of
the box”c: Both of above d: Confirm , that there is no relation with
internationalization theories
Degree of internationalization› Comments on Rugman/Verbeke
• Cut-off percentages rather arbitrary• No weight of country taken into account , e.g. USA is as much a
“home country” as Montenegro
However , new research with more elaborate measurement , has confirmed the finding:
Most MNC’s are operating in their home-region markets : Asia , America , Europe (C.G.Asmussen ,JIBS 2009)
So , the truly global MNC is still a rarity…….
International flavour› Harzing/Sorge : To what extent is MNC’s
organizational style and structure dependent upon country of origin?
• Convergence : universal model• Divergence : different models dependant
on home country , industry ….
04/12/23MIBO Internationalization
Theories
International flavourMeasured by › Structure
• Degree of local responsiveness• Interdependence HQ-subsidiary
› Style• Central/decentral decision making• Personal control mechanisms• Formal control procedures
04/12/23MIBO Internationalization
Theories
International flavour
Harzing /Sorge findings: › Country of origin has a strong impact on style
and (little bit less ) on structure› Even between MNC’s of various EU-countries
large differences
04/12/23MIBO Internationalization
Theories
A question to you….› Considering the above theory about international
flavour , which quote is the most appropriate :a)”MNC’s operating in divergent cultures have a
multicultural management style”b)”MNC’s are international companies with national
operations”c)”MNC’s are national companies with international
operations”d)”In global firms like MNC’s , the home country is
irrelevant”
Break
Quo Vadis : global, local or both ? | 33
Case Story : Business Unit Deco
› Part of Akzo Nobel› Architectural paints for profs and DIY› Europe wide : 17 countries , 15 sites› Sales approx. Euro 1.2 billion › 7000 employees› Comprehensive organization with commerce,
manufacturing , R&D and supporting› Sales mainly to wholesalers and DIY chains
Deco business challenges
› Local differences in brands ,properties , prof/DIY relations, but:• Global need for lower solvent
content ,better durability , ease-of-use • Increased international specialization in
manufacturing plants • International concepts , colour trends
Paint brands in e.g. Akzo Nobel Belgium
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Business Unit organization till 2000 | 37
Sales,
marketing
Production
R&D
Sales,
marketing
Production
R&D
Sales,
marketing
Production
R&D
MNC organization structures(Nohria&Ghoshal p183. G&N p 45-55)
Localization low
Localization high
Organizational Integration high
STRUCTURAL UNIFORMITY (global prod.div)
DIFFERENTIATED NETWORK (transnational)
OrganizationalIntegration low
AD HOC (internat. div.)
DIFFERENTIATED FIT (multi-domestic)
Organization till 2000………
› Clear authority , strong profit control› Excellent local responsivenessBut:› sBU managers were local “Barons “› Cooperation via R&D , manufacturing projects
difficult due to local priorities› International diffusion of concepts slow :”not-
invented-here syndrome”
From 2000: Pan-European organization
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BU-MT
Sales, marketin
g
Production R&D
Staff
Germany
Belgium
Netherlands
Waterbased
Solventbased
Woodprotection
Cologne
Vilvoorde
Rotterdam
Country coordinators
Fin./Adm.
Germany
Belgium
Neth.
MNC organization structures(Nohria&Ghoshal p183 , G&N p 45-55)
Localization low
Localization high
Organizational Integration high
STRUCTURAL UNIFORMITY
DIFFERENTIATED NETWORK
OrganizationalIntegration low
AD HOC
DIFFERENTIATED FIT
Results
› Positive :• Better diffusion of concepts , products• Overall production costs decreased
Negative :• Delivery service deteriorated • Financial control fragmented• Upward delegation of operational problems-
integration only on BU level• Financial performance declined significantly
Imagine……
› You were the BU manager in control of this business , what would you do?????
Options……
a) Introduce a Matrix organization b) Centralize logistics management (resp for delivery
service) on European scale in one unit in HQc) Introduce clusters of operating units on regional
scale d) Fire the Financial Manager and appoint one , who
is more assertive in his/her controle) Improve intra-organizational competenciesf) …………………………………
BoM decision 2006: back to prior organization!!
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Analysis: flaws of the organization structure
› Local needs were not met with local authority: Country coordinators were toothless
› Optimization within functions , at the cost of cooperation between functions (“silo thinking”)
› More global integration was reached at the detriment of local responsiveness, instead of keeping the latter , and adding more of the first.
MNC organization structures(Nohria&Ghoshal p183, G&N p 45-55)
Localization low
Localization high
Organizational Integration high
STRUCTURAL UNIFORMITY
DIFFERENTIATED NETWORK
OrganizationalIntegration low
AD HOC
DIFFERENTIATED FIT
Differentiated network: Transnational
› There is no straightforward organizational solution for the differentiated network • Matrix organization : case ABB, G&N p. 64 etc.
› Transnational is a concept comprising of:• Organizational set-up• Employee attitudes• Processes and decision making ruleswhich strikes the right balance in the
glocalization dilemma (and resolves the power struggles)
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1.Possible organizational set-up : RHQ | 49
International management
board
RHQ Americas
RHQ Asia-Pac.
RHQ Europe
Located at HQ
Organizational set up : Regional Head Quarters
› RHQ report to board of BU Managers› Profit responsible for all products in their regions› Operational control of local units*) in their regions› Strategy, R&D , marketing strategy at BU level
*) local units may be organized functional , geographical or both.
Paik,Sohn (2004) : Striking a balance beteeen global integration and local responsiveness etc.
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2.Employee attitudes› Needed: Managers , who can hold responsibilities
over and above their formal positions› Example :Country manager• Coordinates , but does not manage businesses in
host country• Manages local HR, legal , finance functions• Has certain responsibilties at RHQ or HQ level,e.g.
• Management development• Global projects, etc.
(Ghislanzoni et al (2008): The multilocal challenge)
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Back to the Akzo Nobel case: what would have improved the Pan-European structure
› Functional organization OK , but only in limited areas with regional bosses : RHQ structure
› Country coordinators OK , but with added authority in overall business functions
› Business Proces management to be empowered , especially on primary process
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If only they would have followed a MIBO course………..
Finito!