section four: The organizational environment

Busi zionali 18 Affaires Internationales عمل دوليّة negócios internacionales Παγκοσμιο 國際事務 InternationalesGeschäft مل دوليّة zionali Bu международ GliAffa 事務 Los negóci Intern عمل διεθνής ä ft Business Παγκο Aff cionales Ый бизнес 國際事務 Busine section four: The organizational environment Chapter Eighteen Organizational Design and Control

Organizational Structure • Organizational structure • The way organization arranges its various domestic and international units and activities • The relationships among these components • Determines where formal power and authority will be located • Presented in an organization chart

Organization Design • Organization design deals with how an international business should be organized in order to ensure its worldwide business activities are able to be integrated in an efficient and effective manner • Structures and systems must be consistent with each other and with the environmental context • Size and complexity of the organization must be considered in design • Structure must be able to evolve over time in order to respond to change

International Division A division in the organization that is at the same level as the domestic division and is responsible for all non-home country activities Organization on a regional or geographic basis As overseas operations grow global structures are formed Management changes to global product or global geographic form to Be more capable of developing competitive strategies Obtain lower production costs Enhance technology transfer and the allocation of resources Evolution of the International Company

Global Corporate Form • Product • Product divisions responsible for the worldwide operations such as marketing and production of products • Each division generally has regional experts • Eliminates duplication of product experts • Creates a duplication of area experts

Global Corporate Form • Geographical Regions • Responsibilities for all activities under area managers who report directly to the CEO • This kind of organization simplifies the task of directing worldwide operations • Every country is clearly under the control of someone who is in contact with headquarters • Creates duplication of product and functional specialists

Function Few firms are organized by function at the top level Senior executives responsible for each functional area report to CEO Users of the functional form are those with a narrow and highly integrated product mix Hybrid Forms A mixture of the organizational forms is used at the top level and may or may not be present at the lower Often result of regionally organized company introducing new and different product line or Firm selling to sizable, homogeneous class of customers Global Corporate Form

Global Corporate Form • Matrix Organization • Organization based on one or two dimensions superimposed on organization based on another dimension • Evolved from attempt to mesh product, regional, and functional expertise • Requires multiple managers to agree on decision • Matrix overlay attempts to correct this problem

Virtual Corporation Coordinates activity to deliver value to customers using resources outside traditional boundaries Relies to a great extent on third parties to conduct its business Also called a network corporation Advanced by technology Advantages Permits greater flexibility Forms a network of dynamic relationships taking advantage of the competencies of other organizations Disadvantage Potential to reduce management’s control over the corporation’s activities Current Organizational Trends

Control • Where Are Decisions Made? • All at IC headquarters • All at subsidiary level • Combination • Variables determining the location of decision making • Product and Equipment • Competence of subsidiary management • Size of the international company and how long it has been one

Product and Equipment Standardized product affiliates have to follow company policy Without global product policy, still attempt to standardize as much as possible If profit potential greater when subsidiary customizes, subsidiary can proceed with parent approval Competence of Subsidiary Management depends on How well do executives know one another How well do they know company policies Understanding of host country conditions Distances between home and host countries Size and age of parent company Control

Control • Greater reliance on subsidiary management if • Executives are moved around between headquarters and subsidiaries • HQ less familiar with host country • Greater distance • Smaller company lacks internationally experienced managers and cannot afford to hire them

Busi zionali 19 Affaires Internationales عمل دوليّة negócios internacionales Παγκοσμιο 國際事務 InternationalesGeschäft مل دوليّة zionali Bu международ GliAffa 事務 Los negóci Intern عمل διεθνής ä ft Business Παγκο Aff cionales Ый бизнес 國際事務 Busine section four: The organizational environment Chapter Nineteen Human Resource Management

Worldwide Labor Conditions • In 2004 • 47% of the world’s six billion people under the age of 24 • 6.2% of the total population unemployed and looking for work • 11% decline in manufacturing jobs worldwide • Global industrial output up 30% • Worldwide increased participation of women in the work force • Largest pool of skilled workers in the U.S. • Still only represent 11.2% of corporate officers in the U.S. • 59% of business worldwide include women in senior management • More women starting their own business • Attitudes toward women vary tremendously worldwide

Immigrant Labor Large movement of unskilled labor between nations Significant illegal immigrant populations In U.S. number of immigrant workers increasing EU has huge influx from Eastern Europe Child Labor One out of six children worldwide work Often dangerous or filthy conditions and little or no compensation Majority in Asia and Africa Have no other option in poor countries ILO and UNICEF campaign against Worldwide Labor Conditions

Worldwide Labor Conditions • Forced Labor • Most common in Asia, Africa and Latin America • Generally women, children, and low-income men • Rural to Urban Shift • Difficult to teach workers from farms and villages how to adjust to factory life • Regional or Cultural Differences in Labor Conditions • Too many to discuss all

Staffing: The Good Newsand the Difficulties • The successful manager of a foreign affiliate must be able to • Understand the home country and the host country • Speak the language • Such managers exist, and may be found in • The home country • The host country • A third country

Ethnocentric Staffing International strategic orientation Most decisions made at headquarters Utilize citizens of their own country in key foreign positions May encounter difficulties overcoming cultural biases Broadens their experience Polycentric Staffing Multidomestic orientation Use HCNs for subsidiaries and and PCNs for HQ HCNs familiar with local customs, culture and language Generally lower cost Some countries require hiring of local nationals The International HRM Approach

Regiocentric Staffing Regional strategic approach Regional employees selected for key positions Can use Third Country Nationals (TCNs) Salaries may actually be higher Similarity in language does not mean similarity of culture Geocentric Staffing Transnational strategic orientation Select the best person for each job without regard for national origin Capitalizes on each staffing policy HRM strategy consistent across all subsidies The International HRM Approach

Training • Host Country National (HCN) • Hired in the home country • Students graduating from home country business schools • First sent to IC headquarters • Hired in the host country • May set up in-house training programs in the host country • May use business courses in the host country’s universities • May send to home country school or training

Training • Third Country National (TCN) • Third country nationals may accept lower wages and benefits than will employees from the home country • They may also come from a culture similar to that of the host country • May have worked for another unit of the IC and be familiar with policies, procedures and people • Common approach in developing countries • May not be welcome by host country • May come from an international agency • Will see greater use of TCNs as companies take the geocentric view

Expatriates • A person living outside of his or her country of citizenship • Arrange mentor • Cleary define expectations • Learn the new market • Learn the language • Network • Excellent training opportunity

Family Nine out of ten expatriate’s failures are family-related Unhappy spouses are the biggest reason for employees asking to go home early The company will be losing a “million-dollar corporate-training investment” in the executive Children Can wreak havoc with children’s lives Personal computers and email help Trailing Spouses Two-career families complicate matters More companies trying to help spouses with job search Spouse may not be allowed to work Expatriates

Best Practices • Provide cross-cultural and language training • Provide benefits package suitable to assigned region • Provide cross-cultural assistance for family members • Provide regular communication regarding health and safety issues • Provide assistance in balancing personal and professional needs

section four: The organizational environment