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Chapter 13

Chapter 13. Organization, Implementation, and Control. Learning Objectives. Describe alternative organizational structures for international operations. Highlight factors affecting decisions about the structure of international organizations.

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Chapter 13

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  1. Chapter 13 Organization, Implementation, and Control

  2. Learning Objectives • Describe alternative organizational structures for international operations. • Highlight factors affecting decisions about the structure of international organizations. • Indicate roles for country organizations in the development of strategy and implementation of programs. • Outline the need for and challenges of controls in international operations.

  3. Organizational Structure • Companies must change strategies as their structures evolve from domestic to multinational. The basic functions of an organization are to provide: • A route and locus of decision making and coordination. • A system for reporting and communications.

  4. Organizational Designs Types of structures used by companies to manage foreign activities: Little/No Formal Organization International Division Global Organizations

  5. Little or No Formal Organization • Domestic operations assume responsibility for international activities in the early stages. • The organizational structure reflects the increased demands from the international marketplace. • The export department structure becomes obsolete as the firm becomes more involved in foreign markets.

  6. The International Division • Centralizes in one entity all of the responsibility for international activities. • Best serve firms with few products that do not vary significantly. • Coordination is important.

  7. Types: Most often used by multinational corporations. Improved cost efficiency is a major benefit. Second most used approach. Follows the marketing concept most closely. Global Organizational Structures Product Structure Area Structure

  8. Types: The simplest from the administrative viewpoint. A variation is one that uses processes as a basis for structure. Especially used if customer groups are dramatically different. Global Organizational Structures(continued) Functional Structure Customer Structure

  9. Types: Combines two or more organizational dimensions simultaneously. Integrates the various approaches. Most companies find this arrangement problematic. Complexity of this structure may increase the reaction time of a company. Global Organizational Structures(continued) Mixed Structure Matrix Structure

  10. Implementation • Locus of Decision Making • Decentralized systems have loose and simple controls. Subsidiary operates as a profit center. • Centralized systems have tight controls. Strategic decision making is at headquarters. • Coordinated decentralization calls for overall strategy to come from headquarters. Subsidiaries are free to implement within agreed upon range.

  11. Decision Making Factors that impact structure and decision making. • Degree of involvement in international operations. • Products that the firm markets. • Size and importance of the firm’s markets. • Human resource capability of the firm.

  12. The Networked Global Organization • The network avoids problems of effort duplication, inefficiency, and resistance to ideas. • Subsidiaries are able to make local business development decisions within the global framework.

  13. Internal Cooperation • Success for a global firm involves the ability to move intellectual capital. • Boundarylessness describes a situation in which people can act without regard to status while feeling the freedom to search elsewhere for innovative ideas. • International teams promote cooperation.

  14. Internal Cooperation(contd.) • Greatly assisted by Internet-based technology. • Access to virtual teams.

  15. Country Organizations Contributor Roles: Strategic Leader Black Hole Implementor

  16. Country Organizations • Strategic Leader A competent national subsidiary that may be serving as a partner in developing and implementing strategy. • Contributor Country organization with a distinctive competence.

  17. Country Organizations • Implementor Most entities hold this role. It provides critical mass for the global effort. • Black Hole The international company has a low competence country organization, or none at all.

  18. Controls • Internal benchmarking is of great importance in today’s market. • General instruments of control: • Bureaucratic/Formalized Control • Cultural Control

  19. The Bureaucratic/Formalized Control System Elements: • International budget and planning system. • Functional reporting system. • Policy manuals to direct functional performance.

  20. Cultural Control • Requires personal interaction. • Requires careful selection and training of corporate personnel.

  21. Exercising Controls • Manufacturing subsidiaries tend to be controlled more intensively than sales subsidiaries. • U.S.-based multinationals place more emphasis on quantitative data. • Control systems must consider the impact of the environment.

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