CHAPTER 15

COMPARATIVE STRATEGIC MANAGEMENT AND

ORGANIZATION DESIGN:

UNDERSTANDING COMPETITORS

AND

COLLABORATORS

ORGANIZATIONS ALIKE:ORGANIZATIONS ALIKE:

GLOBALIZATION AND GLOBALIZATION AND CONVERGENCECONVERGENCE

CONVERGENCECONVERGENCE

• The increasing similarity of management practices

EXHIBIT 15.1 The Effects of Globalization on

the Convergence of Strategy and Structure

World WideKnowledge of

SuccessfulStrategies and

Designs

GlobalIsomorphism

Managers Copy SuccessfulPractices Regardless of

National Origin

Similar Strategiesand Designs in All

Nations

GLOBALIZATIONGlobal products/

customersSimilar customer

needsCross boardermergers andacquisitions

Rise of "foreign"CEOs and Managers

WHY CONVERGENCE?WHY CONVERGENCE?

• Global customers and products• Growing levels of

industrialization and economic development

• Global competition and global trade

Why convergence? (continued)Why convergence? (continued)

• Cross-border mergers, acquisitions, and alliances

• Cross-national mobility of managers

• Internationalization of business education

WHY DO MANAGEMENT WHY DO MANAGEMENT PRACTICES DIFFER?PRACTICES DIFFER?

• National context - includes national culture, the country’s available labor and other natural resources

NationalCulture

andBusinessCulture

NaturalFactor

Conditions

InstitutionsCreate

IsomorphicPressures

BusinessEnvironment

ResourcePool

StrategyFormulation

StrategyContent

HelpsCreate

National Differences in Strategy Formulation andContent and Organization Design

National Context

InducedFactor

Conditions

Influences

OrganizationDesign

COMPARATIVE STRATEGY COMPARATIVE STRATEGY FORMULATION: FORMULATION:

EXAMPLES FROM EXAMPLES FROM AROUND THE WORLDAROUND THE WORLD

• US model: used as basis for comparison – represents the attempt of a rational decision making process

THE US MODEL OF THE US MODEL OF STRATEGY FORMULATIONSTRATEGY FORMULATION

1-Define the business and its mission

2- Define objectives3- Assess the company's situation:

SWOT, competitors' actions 4- Craft strategy content

DEFINING THE BUSINES DEFINING THE BUSINES AND ITS MISSIONAND ITS MISSION

• The mission statement tells the organizational members and outsiders what the company does and why it exists

US MISSION STATEMENTSUS MISSION STATEMENTS

• Often emphasize market issues closely related to key elements of success in their respective industries

FRENCH AND BRITISH FRENCH AND BRITISH MISSION STATEMENTSMISSION STATEMENTS

• British mission statements–focus on strategic issues, emphasize shareholder returns

• French mission statements–reflect a national context in a social democracy

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EX 15.3

DEFINING OBJECTIVESDEFINING OBJECTIVES

• National differences exist mostly in priorities •financial or strategic

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EXHIBIT 15.4 FINANCIAL AND STRATEGIC OBJECTIVES OF U.S., JAPANESE, AND BRITISH SUBSIDIARIES

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Increase Profit

Increase Cash Flow

Defend and Maintain Market Share

Steadly Grow Market Share

Agressively Grow Market Share

Win and Dominate

Build Upper End Market Share

British

Japanese

U.S.

ASSESSING THE ASSESSING THE COMPANY'S SITUATIONCOMPANY'S SITUATION

• Management's assessment of the situation faced by their companies

• US managers favor techniques such as the SWOT and competitive analyses

GERMAN AND BRITISH GERMAN AND BRITISH EXAMPLES EXAMPLES

• Successful companies from both countries identified the same key success factors

• Differences: the organizational characteristics that managers believe achieve the key success factors

NATIONAL DIFFERENCES NATIONAL DIFFERENCES IN STRATEGY CONTENT: IN STRATEGY CONTENT:

KEIRETSUKEIRETSU

• Compete with a high ratio of

products where the company can add value with knowledge

• Emphasize production to improve productivity

• Use the resources of networks

COMPARATIVE COMPARATIVE ORGANIZATION DESIGNORGANIZATION DESIGN

• Multinational managers must deal with organizations from different societies

• Each society provides a unique national context for the design of organizations

BASIC CONCEPTS IN BASIC CONCEPTS IN COMPARATIVE COMPARATIVE

ORGANIZATIONAL DESIGNORGANIZATIONAL DESIGN

• Vertical differentiation• Horizontal differentiation • Span of control • Integration• Standardization

• Formalization• Mutual adjustment

Basic concepts in comparative Basic concepts in comparative organizational design, continuedorganizational design, continued

TurkeyPakistanChinaIndiaAustriaEthiopiaMexico

NigeriaSpainBelgiumThailandFranceGreeceArgentina

JapanPortugalItalyFinlandIrelandUK

GermanySwitzerlandAustraliaSweden

NorwayDenmarkCanadaUSA

EXHIBIT 15.6 PREFERRED ORGANIZATIONAL HIERARCHIES

CONTROL MECHANISMSCONTROL MECHANISMS

• Link the organization vertically • Five broad types of control:

– personal – output– bureaucratic – decision making – cultural

NATIONAL CULTURE AND NATIONAL CULTURE AND ORGANIZATIONSORGANIZATIONS

• Hofstede: power distance and uncertainty avoidance the most important– influence basic problems of organizational design--differentiation and integration

See Exhibit 15.7 next

Cultural Context: LowPower Distance and LowUncertainty Avoidance

Preferred Design:Adhocracy

Example Country: GreatBritain

Cultural context: HighPower Distance and LowUncertainty Avoidance

Preferred Design: FamilyBureaucracy

Example Country: China

Cultural Context: LowPower Distance and HighUncertainty Avoidance

Preferred Design:Professional Bureaucracy

Example Country:Germany

Cultural Context: HighPower Distance and HighUncertainty Avoidance

Preferred Design:Full Bureaucracy

Example Country: Fran ce

Low PowerDistance

High PowerDistance

Low UncertaintyAvoidance

High UncertaintyAvoidance

ADHOCRACYADHOCRACY

• Low power distance + low uncertainty avoidance = adhocracy

• Fits cultures where people can tolerate ambiguity and have less need for formalized rules and regulations

THE ADHOCRACY DESIGNTHE ADHOCRACY DESIGN

• Vertical and horizontal differentiation: fewer levels and wider span of control

• Control mechanisms: mutual adjustment

• Decision making: Participative or consultative

PROFESSIONAL BUREAUCRACYPROFESSIONAL BUREAUCRACY

• Small power distance + high uncertainty avoidance norms = professional bureaucracy

THE PROFESSIONAL THE PROFESSIONAL BUREAUCRACY DESIGNBUREAUCRACY DESIGN

• Vertical and horizontal differentiation: moderate levels

• Control mechanisms: standardization of skills.

• Decision making: centralized decision making

FULL BUREAUCRACYFULL BUREAUCRACY

• High power distance + high uncertainty avoidance = full bureaucracy

• Full bureaucracy is the most formalized of the Hofstede organization types

FULL BUREAUCRACY DESIGNFULL BUREAUCRACY DESIGN

• Vertical and horizontal differentiation: Tall pyramids and narrow spans of control

• Control mechanisms: Standardization and a high degree of formalized rules

• Decision making: Highly centralized

FAMILY BUREAUCRACYFAMILY BUREAUCRACY

• Occurs in countries with large power distance norms and low uncertainty avoidance norms.

• It most parallels an extended family with a dominant patriarch or father figure.

FAMILY BUREAUCRACY DESIGNFAMILY BUREAUCRACY DESIGN

• Vertical and horizontal differentiation: small and low specialization

• Control and coordination mechanisms: direct contact Decision making: highly centralized

• See key relationships in Exhibit 15.9 next

OlderBrother

Master

Friend

Husband

Father

Wife

Follower

Friend

Son

YoungerBrother

PROTECT & CONSIDER

RESPECT AND OBEY

FOLLOW AND MODEL

TAKE CARE OF

BE LOYAL

BE COURTEOUS

TRUST

TRUST

SUBMIT

MEET OBLICATIONS

THE JAPANESE CONSENSUS THE JAPANESE CONSENSUS BUREAUCRACY: A SPECIAL BUREAUCRACY: A SPECIAL

CASE?CASE?• Should favor the full

bureaucracy • Unique style of group

orientation = consensus bureaucracy

JAPANESE CONSENSUS JAPANESE CONSENSUS BUREAUCRACY DESIGNBUREAUCRACY DESIGN

• Vertical differentiation: little job specialization for individuals

• Control mechanisms: favor cultural control over bureaucratic control

• Decision making: consensual - see Exhibit 15.10 next

4. MakeFormalProposal

Strategic andOperationalIdeas (Mostlyfrom MiddleManagement

1. TheInformalProposal

5. CirculateRingisho

2.Nemawashi

Test Proposal withSupervisors, thoseAffected; Get MoreInformation

3. ReachConsensus

6. Top Mgt.Approval

SOCIAL INSTITUTIONS SOCIAL INSTITUTIONS ANDTHE KOREAN ANDTHE KOREAN CHAEBOLCHAEBOL

DISTINCT DISTINCT ORGANIZATIONAL ORGANIZATIONAL

FEATURES FEATURES • Family-dominated and multi-

industry conglomerates• Extensive family control • Paternalistic leadership • Centralized planning - reports

directly to the chairman • Dominated much of Korean

business

INSTITUTIONAL CHANGE AND INSTITUTIONAL CHANGE AND THE THE CHAEBOLCHAEBOL

• Coercive isomorphism - government support fostered the growth of the Korean chaebol–Close relationships with banks for financing

–Protection by the government

Institutional change and the Institutional change and the chaebol, continuedchaebol, continued

• Recent government policies–reduced support–breaking networks–allowed to fail

CONCLUSIONSCONCLUSIONS

• Understanding different approaches to strategy and organization design:– helps to deal with international

competitors– helps a company become better

collaborators– facilitates local operations

Conclusions, continued

• Pressures for convergence• National cultural and social

institutional lead to differences