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1. Strategic Planning, Organizational Design, and Control of the Firm 20-1 twenty Concept Preview After reading this chapter, you should be ableto 1. describe the steps in the global planning process. 2. understand the importance of corporate mission statements, objectives, quantified goals, and strategies. 3. describe the new directions in strategic planning. 4. discuss the various organizational forms. 5. understand the concept of the virtual corporation. 6. explain why decisions are made where they are among parent and subsidiary units of an international company. 7. understand how an IC can maintain control of a joint venture, or of a company in which the IC owns less than 50 percent of the voting stock . 8. list the types of information that an IC needs to have reported to it by its units around the world. 9. explain why successful managers must sometimes relinquish control in a world out of control, as exemplified by the Internet. chapter

2. Global Strategic Planning 20-2 • Why plan globally? • standardization and planning • Process • analyze the company’s external environments • analyze the company’s internal environments • define the company’s business and mission • set corporate objectives • quantify goals • formulate strategies • make tactical plans • Global and domestic planning processes similar

3. Analyze Domestic, International, and Foreign Environments 20-3 • Present values of forces • Trends • Continuous • Uncontrollable

4. Analyze Corporate Controllable Variables 20-4 • Situational analysis and forecast • recently this analysis was updated by Porter—value chain • In the 1960’s—transvection analysis • What are the strengths and weaknesses? • What are our human and financial resources? • Where are we with respect to our present objectives? • Should we delete goals, alter them, or add new ones?

5. Formulate Corporate Strategies 20-5 • Alternate corporate strategies (action plans) that seem plausible given the environment • Strategies may be general • Scenarios are multiple, plausible stories for probable futures • Contingency plans for worst- and best-case scenarios and critical events as well • Tactical (operational) plans spell out the details of how to reach the objectives

6. Management Tools 20-6 Percent Most Used Tool used Mission statement 90 Customer Satisfaction Survey 90 Total Quality Management 76 Competitor Profiling 74 Percent Least Used Tool used Value chain analysis 27 Five forces analysis 24 Mass customization 20 Dynamic simulations 20

7. Plan Implementation Facilitators 20-7 • Policies • broad guidelines issued by management • to assist lower-level managers in handling recurring problems • permit discretionary action and interpretation • economizes managerial time • promotes consistency among the operating units • Procedures • procedures prescribe how certain activities will be carried out • ensures uniform action on part of all corporate members • example—budgets and annual reports for subsidiaries

8. Strategic Plans 20-8 • Kinds of strategic plans • time horizon • organizational level • Methods of planning • Top-down • Bottom-up • Iterative • New directions in strategic planning • who does the planning • how it is done • contents of the plan

9. 3M Strategic Planning Cycle Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Business Market Divisions Groups Markets Corporate Figure 20.2 20-9 Operating reviews Call for plans Feedback and direction Strategicreviews Operating plans and budgets Plan development Inputs

10. Summary of the Planning Process 20-10 • Top management must assume a more explicit strategic decision-making role • The nature of planning must undergo a fundamental change from an exercise in forecasting to an exercise in creativity • Planning processes and tools that assume a future much like the past must be replaced by a mind-set that is obsessed with being the first to recognize change and turn it into a competitive advantage. • The role of the planner must change from being a purveyor of incrementalism to being a crusader for action and an alter ego to line management. • Strategic planning must be restored to the core of line management responsibilities.

11. Organizational Design 20-11 • Find the most effective way to departmentalize to take advantage of the efficiencies gained from the specialization of labor. • Coordinate the activities of those departments to enable the firm to meet its overall objectives

12. International Division Figure 20.3 20-12 CEO Product Division A Product Division B Product Division C International Europe Africa Asia Latin America

13. Global Corporate Form—Product Figure 20.4 20-13 CEO Corporate Staff— includes International Division with area experts Worldwide Product Division B Worldwide Product Division A Worldwide Product Division C

14. Global Corporate Form— Geographical Regions Figure 20.5 20-14 CEO Asia/Pacific Division Europe/Africa/ Mideast Division Latin American Division North American Division Corporate Staff—includes Product Specialists

15. Global Corporate Form—Function Figure 20.6 20-15 CEO Administration Engineering Finance Marketing Manufacturing

16. Hybrid Organizational Form Corporate Staff Domestic Division B Domestic Division A International Division Figure 20.7 20-16 CEO Serves Products A & B in locations other than in the Pacific Pacific Division (Products A & B) Worldwide Product Division C Original Equipment (Products A & B)

17. Other Organizational Designs 20-17 • Matrix • multiple organizational dimensions • multiple reporting responsibilities • overlapping responsibilities • Virtual corporation • network corporation • resources outside traditional organizational boundaries • Horizontal corporation • utilizes teams drawn from different areas of the organization • removes the constraints of traditional corporate structure • empowerment at middle management levels

18. Control Subsidiaries, 100 % owned Where are decisions made? product and equipment competence of the subsidiary management reliance of the subsidiary management by the international corporation headquarters detriment of a subsidiary for the benefit of the enterprise subsidiary frustration Joint ventures and subsidiaries, less than 100% owned Where are decisions made? Headquarters does not have as much freedom in this ownership situation management contract control of the finances control of the technology placing people from the IC headquarters in important executive positions 20-18

19. “De-jobbing” Jobs created by mass production and large organizations are disappearing Technology enables automation Project-specific tasks versus jobs Hierarchy implodes Traits of companies Encourage workers to make kinds of operating decisions that used to be reserved for managers give employees the information they need to make such decisions give employees lots of training to create the kind of understanding of business and financial issues that used to concern only an owner or executive. give employees a stake in the fruits of their labor—a share of profits 20-19

20. Managing in a World Out of Control 20-20 • Do simple things first • Learn to do them flawlessly • Ad new layers of activity over the results of the simple task • Don’t change the simple things • Make the new layer work as flawlessly as the simple • Repeat ad infinitum