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ORGANIZING INTERNATIONAL OPERATIONS

ORGANIZING INTERNATIONAL OPERATIONS. The Evolution of the Global Firm. STRUCTURE VS STRATEGY. IT IS OFTEN TIMES SAID THAT STRUCTURE SHOULD FOLLOW STRATEGY, BUT SOMETIMES THAT IS NOT POSSIBLE!. CHANDLER’S FOURS STAGES MODEL. CONGLOMORATE. FUNCTION. GEOGRAPHIC CUSTOMER PRODUCT. MOM AND

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ORGANIZING INTERNATIONAL OPERATIONS

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  1. ORGANIZING INTERNATIONALOPERATIONS The Evolution of the Global Firm

  2. STRUCTURE VS STRATEGY IT IS OFTEN TIMES SAID THAT STRUCTURE SHOULD FOLLOW STRATEGY, BUT SOMETIMES THAT IS NOT POSSIBLE!

  3. CHANDLER’S FOURS STAGES MODEL CONGLOMORATE FUNCTION GEOGRAPHIC CUSTOMER PRODUCT MOM AND POP

  4. The Pre-International Division Structure Chief Executive Officer etc. Production Finance Marketing Personnel R&D Export Manager Or Export Department

  5. The International Division Structure CORPORATE STAFF Chief Executive Officer etc. Production Finance Marketing Personnel R&D LINE MANAGEMENT etc. Product A Domestic Product B Domestic Product C Domestic International Division (All Products)

  6. Conditions Favoring the Global Product Structure • There is a high level of product diversity where the firm manufactures products that require different technologies and that have dissimilar end users • There is little use of common marketing tools and channels of distribution among the various product divisions • There is a significant need to globally integrate production, marketing, and research related to the product • There is little need for local product knowledge and product adaptation as the firm expands into new countries • The products involved need continuous technical service and inputs, and a high level of technological capability, requiring, therefore, close coordination between divisional staff groups and production centers abroad

  7. The Global Area Division Structure CORPORATE STAFF Chief Executive Officer etc. Production Finance Marketing Personnel R&D LINE MANAGEMENT etc. Europe North Amer. Asia Latin Amer. United Kingdom Italy France Etc.

  8. The Global Product Division Structure CORPORATE STAFF Chief Executive Officer etc. Production Finance Marketing Personnel R&D LINE MANAGEMENT etc. Product A Product B. Product C Product D North Asia Europe Latin America America

  9. The International Matrix Structure CORPORATE STAFF Chief Executive Officer etc. Production Finance Marketing Personnel R&D LINE MANAGEMENT Other Area and Product Divisions Europe Tractors Asia GM – Tractors Europe GM – Tractors Asia

  10. Conditions Favoring Adoption of a Matrix Structure • Substantial product and area diversification • Need to be responsive simultaneously to product and area demands • Constraints on resources requiring that they be shared by two or more product, area or functional divisions • Significant problems created and opportunities lost due to emphasis on only the product or area dimension • Formulation of corporate strategy requiring the simultaneous consideration of functional, product, or area concerns

  11. Dimensions of Organizational Form For Multinational Enterprises • Functional Expertise of the value chain activities in which the firm is involved • Product and Technical Know-How of the various lines of business in which the firm is involved • Knowledge of the Countries and Regions, where the firm has business interests • Customer Expertise, regarding similar market segments and major accounts that cut across various regions and countries

  12. Firm Expansion and Organization of Activities Vertically- Integrated Firm Geographically- Diversified Firm Vertical Expansion (growth in new activities for an existing product line) Geographic Expansion (growth into new overseas markets) Product- Diversified Firm Product Expansion (growth into new product markets)

  13. Heterarchy • Decision-making is dispersed throughout the organization and not concentrated at the top levels • Lateral managerial relationships exist as complements to the usual vertical relationships • Firm-level activities are coordinated across multiple dimensions including product, function, and geography

  14. The Strategy-Structure Linkage

  15. Characteristics of Heterarchies • Less systematic • More flexibly coordinated • Nimbler • Less hierarchical These structures have: • Higher levels of interdependency among the subsidiaries • Greater exchange of knowledge, especially informal knowledge • Informal coordination processes • Potentially shifting positions and relationships • Lateral as well as vertical sharing of knowledge • Consensual decision-making

  16. Multiple Hierarchies Structure I II III IV V VI Chinese R&D New Product M&A IJVs/ Major Customer Market Launch SAs Accounts A B C D E F a d b c a e e d b d a a f a c e c e f b

  17. Multiple Hierarchies Network Effect R&D New Product Launch China I II III IV V VI Major Customer Accounts M&A IJVs & SAs Networks of Acquired/Merged Firms Networks of Partners

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