us org in international env
TRANSCRIPT
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Designing Organizations for the
International Environment
Entering the Global Arena
Designing Structure to Fit Global Strategy
Building Global Capabilities
Cultural Differences in Coordination and Control
The Transnational Model of Organization
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Entering the Global Arena
Motivations for Global Expansion
Economic, technological and competitive forces have
combined to push many companies from a domestic to a
global focus. Three primary factors motivate companies toexpand internationally:
Economies of Scale expanding the organisations scale of
operations
Economies of Scope scope referring to the number andvariety of products and services a company offers, as well as
the number and variety of regions, countries and markets it
serves.
Low-Cost Production Factors obtain raw materials and
other resources at the lowest possible cost.
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Stages of International Development
Stage 1 Domestic Stage
The company is domestically oriented, but managers are aware
of the global environment and may want to consider initial foreign
involvement to expand production involvement and realiseeconomies of scale
Stage 2 The International Stage
The company takes exports seriously and begins to think
multidomestically which means competitive issues in each
country are independent of other countries; the company deals
with each country individually
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Stages of International Development
Stage 3 Multinational Stage
The company has extensive experience in a number of
international markets and has established marketing,
manufacturing or research and development facilities in severalforeign countries
Stage 4 Global Stage
The company transcends any signal country truly global
companies no longer think of themselves as having a single
home country and, indeed, have been called stateless
corporations.
See Exhibit 6.1
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Global Expansion Through International Strategic Alliances
Joint venture
Consortia
Global virtual organisation
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Designing Structure to Fit Global Strategy
Model for Global Versus Local Opportunities
When organisations venture into the international domain, managers strive
to formulate a coherent global strategy that will provide synergy among
worldwide operations for the purpose of achieving common organisational
goals.
One dilemma they face is choosing whether to emphasise global
integration versus national responsiveness. Managers must decide
whether they want each global affiliate to act autonomously or whether
activities should be standardised across countries.
These decisions are reflected in the choice between a globalisation versusa multi-domestic global strategy.
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Four Stages of International Evolution
I.
Domestic
II.
International
III.
Multinational
IV.
Global
Strategic
Orientation
Domestically
oriented
Export-oriented,
multidomestic
Multinational Global
Stage of
Development
Initial foreign
involvement
Competitive
positioning
Explosion Global
Structure
Domestic
structure plus
export
department
Domestic structure
plus international
division
Worldwide
geographic,
product
Matrix, trans-
national
Market
Potential
Moderate,
mostly
domestic
Large,
multidomestic
Very large,
multinational
Whole world
Sources: Based on Nancy J. Adler, InternationalDimensions of
OrganizationalBehavior(Boston: PWS-KENT, 1991), 7-8;
and Theodore T. Herbert, Strategy and Multinational Organization
Structure: An Interorganizational Relationships Perspective,
Academyof ManagementReview 9 (1984): 259-71.
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Matching Organizational Structure to International
Advantage
When Forces
for Global
Integration are
. . .
And Forces for
National
Responsiveness
are . . .
Strategy Structure
Low Low Export International
Division
High Low Globalization Global Product
Structure
Low High Multidomestic GlobalGeographic
Structure
High High Globalization and
Multidomestic
Global Matrix
Structure
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International Division
International division typically starts as an export department that grows
into an international division it has equal status to other departments but
has its own hierarchy to handle business in various countries, selling the
products and services created by domestic divisions, opening subsidiary
plants and in general moving the organisation into more sophisticatedinternational operations.
Global product structure the product divisions take responsibility for
global operations in their specific product area
With a global product structure, each divisions manager is responsible for
planning, organising and controlling all functions for the production anddistribution of its products for any market around the world
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Domestic Hybrid Structure with International Division
Scientific
Products
Division
Research &
Development
Human
Resources
Medical
Products
Division
Europe
(Sales)
Electrical
Products
Division
Corporate
Finance
CEO
International
Division
Brazil(Subsidiary)
Mid East
(Sales)
Staff (Legal,
Licensing)
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Global Geographic Division Structure
The global geographic structure divides the world into
geographic regions, with each geographic division reporting to
the CEP. Each division has full control of functional activities
within its geographic area. Companies that use this type of structure have typically been
those with mature product lines and stable technologies. They
can find low-cost manufacturing within countries, as well as
meeting different needs across countries for marketing and
sales.
See Exhibit 6.5
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Partial Global Product Structure Used by Eaton Corporation
Engineering President InternationalLaw &
Corporate
Relations
Chairman
Finance &
Administration
Regional
Coordinators
Global
Automotive
Components
Group
Global
Industrial
Group
Global
Instruments
Product
Group
Global
Materials
Handling
Group
Global
Truck
Components
Group
Source: Based onNew Directions in MultinationalCorporate
Organization (New York: Business International Corp., 1981).
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Global Matrix Structure
Global matrix structure same as a regular matrix structure,
except that for multinational corporations the geographic
distances for communication are greater and co-ordination is
more complex The matrix works best when pressure for decision-making
balances the interests of both product standardisation and
geographic localisation and when co-ordination to share
resources is important.
See Exhibit 6.6
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Global Matrix Structure
International
Executive
Committee
Power
Transformers
Germany NorwayArgentina/
Brazil
Spain/
Portugal
Transportation
Industry
Business
Areas
Country Managers
Local
Companies
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Building Global Capabilities
The Global Organizational Challenge
Increased Complexity and Differentiation
Need for Integration
Knowledge Transfer
Global Coordination Mechanisms
Global Teams
Headquarters Planning
Expanded Coordination Roles
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Cultural Differences in Coordination and Control
National Value Systems
Power Distance
Uncertainty Avoidance
Three National Approaches to Coordination and Control
Centralized Coordination in Japanese Companies
European Firms Decentralized Approach
The United States: Coordination and Control through Formalization
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Cultural Differences in Coordination and Control
Just as social and cultural values differ from country to
country, the management values and organisational norms of
international companies tend to vary depending on the
organisations home country. Organisational norms and values are influenced by the values
in the larger national culture, and these in turn influence the
organisations structural approach and the ways managers co-
ordinate and control and international firm.
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National Value Systems
Two dimensions that seem to have strong impact within
organisations are power distance and uncertainty avoidance.
High Power distance means that people accept inequality
in power among institutions, organisations and people. High Uncertainty and Avoidance means that members of
a society feel uncomfortable with uncertainty and ambiguity
and thus support beliefs that promise certainty and conformity.
Low uncertainty avoidance means that people have a hightolerance for the unstructured, the unclear and the
unpredictable.
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National Value Systems
The values are reflected within organisations in terms of beliefs
regarding the need for hierarchy, centralised decision making,
and control, formal rules and procedures, and specialised jobs.
Examples
Centralised co-ordination in Japanese Companies
European Firms Decentralised Approach
The United States: Coordination and Control Through
Formalisation
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The Transnational Model of Organisation
The transnational model represents the most advanced kind of
international organisations.
The transnational model is useful for large, multinational companies with
subsidiaries in many countries to exploit both global and local advantages
as well as technological advancements, rapid innovation, and globallearning and knowledge sharing.
The transnational model creates an integrated network of individual
operations that are linked together to achieve the multidimensional goals
of the overall organisation. The management philosophy is based on
interdependence rather than either full divisional interdependence or totaldependence of these units on headquarters for decision making and
control
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The Transnational Model of Organisation
Several characteristics distinguish the transnational organisation from other
global organisational forms such as the matrix. These are:
1. Assets and resources are dispersed worldwide into highly specialised
operations that are linked together through interdependent relationships
2. Structures are flexible and ever changing flexible centralisation
3. Subsidiary managers initiate strategy and innovations that become strategy
for the corporation as a whole.
4. Unification and coordination are achieved primarily through corporate
culture, shared vision and values, and management style rather thanformal structures and systems