chapter 13: the organization of international business international business october 15, 2007 park,...
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Chapter 13: The Organization of
International BusinessInternational Business
October 15, 2007
Park, Du-jung Liu, Jia
Naran, Zorigt Ganaa
Content
Organizational Structure
Organizational Architecture Park, Du-jung
Liu, Jia
Control systems and Incentives & Process
Naran, Zorigt
Organizational Culture & Change Ganaa
Organizational Architecture(1)
Structure
ProcessesIncentives
AndControls
People
Culture
Organizational Architecture(2)
Maximizing its profitability
=>Internal consistency
=>Consistency between architecture and strategy
=>Consistency to competitive condition
Organizational Structure Vertical differentiation
Horizontal differentiation
Integrating mechanisms
Vertical differentiation Arguments for Centralization
Arguments for Decentralization
Strategy and Centralization in an International Business
Global Matrix(“Grid”)
InternationalDivision
Alternate Pathsof Development
AreaDivision
WorldwideProductDivision
Foreign Sales as a Percentage of Total Sales
ForeignProductDiversity
International Structural Stages Model
Horizontal differentiation
Integrating Mechanisms(1)
Strategy and Coordination in the International Business
Need of coordinationLaw High
Localizationfirms
Internationalfirms
Globalfirms
Transnationalfirms
Integrating Mechanisms(2)
Impediments to Coordination- Different orientations- Different goals
Formal Integrating Mechanisms- Direct contact
- Liaison roles
- Teams - Matrix structure Informal Integrating Mechanism
=> Knowledge Networks : network for transmitting information
Types of control system. Personal control is control by personal contact
with subordinates Bureaucratic Controls is control through a system
of rules and procedures that directs the actions of subunits
Output controls involves setting for subunits to achieve and expressing those goals in term of relatively objective performance metrics such as profitability, productivity, growth, market share, and quality.
Cultural Controls exist when employee “buy into” the norms and value system of the firm. When this occurs, the employee tend to control their own behavior, which reduces the need of other controlling systems.
Incentive refers to the devices used to reward appropriate employee behavior.
Important points to consider when using incentive system.The type of incentive used often varies depending
on the employees and their tasks. Most firms use a formula for incentives that links a
portion of incentive pay to the performance of subunit in which a manager or employee works and portion to the performance of the entire firm, or some level other higher level organization unit.
The incentive system used within a multinational enterprise often have to be adjusted to account for national differences in institutions and culture.
Unintended consequences
Performance ambiguity is a function of the interdependence of subunits in an organization. Cost control can be defines as the amount of
time top management must devote to monitoring and evaluating subunits’ performance.
Strategy Interdependence
Performance Ambiguity
Costs of control
localization Low Low Low
International Moderate Moderate Moderate
Global High High High
Transnational
Very high Very high Very high
Process is defined as manners in which decisions are made and work is performed within the organization.
Organizational Culture: -Creating and Maintaining
Organizational Culture
-Organizational Culture and Performance in the international Business
Synthesis: Strategy and Architecture -Localization Strategy -International Strategy
- Global Standardization Strategy - Transnational Strategy - Environment, strategy, Architecture
and Performance Organizational Change: - Organizational Inertia - Implementing Organizational Change
Organizational CultureCreating and Maintaining Organizational
CultureInfluences on Organizational Culture
1.Important leaders can have a profound impact on an organizations culture.
Example: Japanese from Matsushita: - Natural Service through Industry - Fairness - Harmony and cooperation - Struggle for betterment - Courtesy and humility - Adjustment and assimilation - Gratitude
2.Broader social culture of the nation where the firm was founded
3.History of the enterprise, which over time may come to shape the values of the organization.
Culture is maintained by a variety of mechanisms.
1. Hiring and promotional practices of the organization
2. reward strategies
3. Socialization Process
4. Communication Strategy
Organizational Culture & Performance in the International Business
firms with strong Strong Culture A culture can be culture are normally + - strong but badseen by outsiders Example:1980Generalas having a certain Motors had a strong culturestyle or way of doing things
Adaptive Culture Most Managers care deeply about and value costumers, stock-holders, and e
mployees
Environment, Strategy, Architecture and Performance
A firm to succeed, two conditions must be fulfilled.
1. The firm’s strategy must be consistent with the environment in which the firm operates.
2. The firm’s organization architecture must be consistent with its strategy.
Organizational Change Organizational Inertia Inertia forces come from a number of sources.
1. Existing distribution of power and influence with on organization
2. Existing culture, as expressed in norm and value system
3. Senior managers’ preconceptions about the appropriate business model or paradigm.
4. Institutional constrains might also act as a source of inertia
Implementing Organizational Change
The Basic Principles for successful Organizational damage
Unfreezing the organization Moving to the new State Refreezing the Organization
Whose power is threatenedby change can too easilyresist incremental change
Movement requires a substantial change in theform of a multinational’sorganization architecture
so that it matches the desired new strategic
postures
Refreezing requires thatemployees be
socialized into the newway of doing things
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