organization of the multinational firm
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Organization of the Multinational Firm
VK Int. Unternehmensführung SS 2005
Elmar Kiesling, 0008665Irmgard Krebner, 9804601
Padmini Ranawat, 9905070
Organization of the Multinational Firm
Outline
1. Introduction2. Structural Designs for Global Operations3. Home-based vs. heterarchical MNC4. Multidivisional & Network Form (M&N)5. The Transnational form6. Case Study: Acer7. A glimpse at the future: 2 scenarios8. Discussion
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Global trends and developments
• Intense competition among developed countries
• Increasing competition through newly industrialized Asian countries
• Shift towards market economies (e.g. Eastern Europe, China)
• Power blocks (e.g. European Union, Yen-Block, NAFTA)
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Today´s Challenges
To enable organizations to compete effectively in this global environment MNC´s have to:
• be at least as good as a local firm providing similar products or services
• approach new organization design possibilities
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Stages of International Development
Domestic
International
Multinational
Global
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
International corporate structure model
Global Transnational
MultidomesticInternational
explorer
need for localization
Low High
High
Economies of global standard-
ization and size
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Structural Designs for Global Operations
Global product structure
• Product divisions responsible for global operations
• Uses globally based advantages• Overlook of locally advantages
Geographic area structure
• Each region has functional activities
• Exploits local advantages
CEO
EuropeanDivision
AmericanDivision
Asian Division
CentralStaffs
CEO
President
Brand A Brand CBrand B
CentralStaffs
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Structural Designs for Global Operations
Matrix structure
• balances global product and local market concerns
• Problems: - complexity- dual reporting structure- confusion over responsibility and decision making
• Solution: 3 C’s- clarity of firm’s basic objectives- continuity in commitment to those objectives
- consistency in the work of divisions together
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Structural Designs for Global Operations
Horizontal organization
• Structured around workflows and processes
• Flat vertical hierarchy
• Management tasks delegated to lowest level
• Customer-driven
ProcessCoordinator
ProcessCoordinator
ProcessCoordinators
Team Team
TeamTeam
TeamTeam
Logistics Process
Order Fulfillment Process
Product Development Process
Management
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Horizontal organization structure
Decision making:
• lateral decision processes direct contact, temporary task forces, self-directed teams, …
• horizontal network flexible responding to external changes
• common decision premises shared set of values
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Horizontal organization structure
Differentiation from matrix structure:• Coordination more mixed and flexible• Internal flexible processes link system elements• Latterly resolution of conflicts
Advantages:
• Simultaneously achieving global and local advantages• reduced barriers among departments
Problems:• Time intensive coordination of decisions• „Being stuck in the middle“
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Home-based vs. heterarchical MNC
1. Home-based: • Core functions (strategic decision making,
R&D etc.) in a limited geographic area • Links to
- other firms- local research and education facilities- governmental bodies
2. Heterarchical:• many centers of different kinds• combining diverse technologies worldwide
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Home-based MNC
1. „Simple“ home-based MNC• Home base of all businesses in home country
2. Selective tapping• Core technology in home base• Selective tapping of international
environment for support
3. Multi-home-based MNC• Separate bases for individual lines of
businesses• Often connected to mergers and acquisitions
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Heterarchical MNC
• Many centers: traditional HQ functions geographically dispersed
• Holographic structure: information stored in each part of the organization
• Interdependencies: tasks of any unit complexly related to the tasks of other units
• „firm as a brain“: thinking not only restricted to one exclusive center, but goes in whole enterprise => global competitive advantage
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Multidivisional & Network Form (M&N)
Contrasts between the multidivisional and the network :
Multidivisional Network
Dividing things Combining things
permanent structures (departments)
Temporary groupings (teams)
coordination through managers delegation to lower levels
vertical communication lateral dialogueSenior managers as monitors and resource allocators
senior managers as technical, human and knowledge catalysts
Development diversifying into separate organizational units.
development combining rich areas of knolewdge
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
The Transnational form
• Network form:philosophy of responsiveness, flexibility and ability to learn of a MNC in a borderless world
• Objective: respond to the MNC´s central dilemma of having to be globally integrated but locally responsive at the same time
Global form
Transnational form
Multidomestic form
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
The Transnational form
Asymmetrical organizational form:
• Multilateral communications between all levels and layers
• Resources, responsibilities and decision-making dispersed across all types of units
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Case Study: Acer Group
• Taiwanese company founded 1979
• PC and computer component manufacturer
• 1992: „global brand, local touch“ • First corporate re-engineering• Decentralized its organization towards network structure
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Client-server organization (1994)
Acer GroupChairman and CEO
Acer America Acer Inc.
Acer Europe Acer Peripherals
Acer Latin America TI-Acer
Acer Sertec Acer Labs
RegionalBusiness Units
StrategicBusiness Units
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
RBUs SBUs
Organization of the Multinational Firm
Restructuring 1997-1998
• External challenges:• Direct vendors, price cuts of market leaders• New price war (sub-$1000 PCs)
• Internal problems:• Service and support• Serious coordination problems• Redundant functions• Duplicate investments • Inefficient use of enterprise resources.• Lack of IT infrastructure• No common information system
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
Organizational structure 1998
Acer GroupChairman and CEO
Special Teams- IT- Logistics- Brand Mgmnt- Customer Services
CorporateFunctions
InternationalServices Group
Sales & ServiceGroup
SemiconductorGroup
InformationProduct Group
PeripheralsGroup
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
1997-98: simplification of organization structure restructuring into 5 core businesses:
Organization of the Multinational Firm
Organizat. structure since 2001
Acer GroupChairman and CEO
High TrustTechnology
ServicesTWP Acer Inc.
Sertek WeblinkApacer
• Flexible, cell based organization structure• Interaction of semi-autonomous firms
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
A glimpse at the future: 2 scenarios for 2015
• Elaborated by MIT Scenario Working Group between 1994 and 1997
• Main focus: size of companies
Two extreme scenarios for 2015:1. Small companies, large networks
nearly every task is performed by autonomous teams
2. Virtual countriesdominance of keiretsu-style alliances
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
1. Small companies, large networks
• Linked by fluid networks• Temporary combinations for each project• Importance of electronic markets• Rapid innovation in dynamically changing
markets
e.g. radical outsourcing in producing athletic shoes, computer displays and software
Autonomous and self-organizing teams of 1-10
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
1. Small companies, large networks
Stable communities providing:• health insurance• protection against unemployment and income
fluctuation• professional development• sense of belonging
Comparable to guilds of pre-industrial times
e.g. guilds in film industry
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Organization of the Multinational Firm
2. Virtual countries
• Providing job-security, health care etc.• Pervasive role of firms in employees‘ lives• Employee ownership of firms• Employee selection of firm management• Oligopolistic structure in most sectors• Minimal national allegiance
e.g. Merger wave
Large vertically- and horizontally-integrated firms each with operating companies in
almost every industry
Introduction Structural Designs Home/heterarchical M&N Transnational form ScenariosCase Study
Discussion
Thank you for your attention!
Organization of the Multinational Firm
References
• Daft, R. (1998), Organization Theory and Design, Chicago, Chap. 7.
• White, R. E., T. A. Poynter (1991), Organizing for World-wide Advantage, in: C. A. Bartlett, Y. Doz, G. Hedlund (eds.), Managing the Global Firm, London, 95- 113.
• Söllvell, Zander (1995) Organization of the Dynamic Multinational Enterprise, Int. Studies of Organization and Mangement, 25. 17 - 38.
• Segal-Horn & Falkner (1999), The Dynamics of International Strategy, Ch. 9.
• Laubacher, R. J., T. W. Malone (1999), Two Szenarios for 21st Century Organizations: Shifting Networks of Small Firms or All-Encompassing ‚Virtual Countries‘, Working Paper, MIT.
• Dedrick, J., K. L. Kraemer, T. Tsal (1999), Acer: an IT company learning to use Information Technology to compete, Center for research on IT and organization, University of California
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