International business notes

intern

ation

al bu

siness, 5

th edition

chapter 14international organization design and control

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Chapter Objectives 1

• Define and discuss the nature of international organization design and identify and describe the initial impacts of international business activity on organization design

• Identify and describe five advanced forms of international organization design and discuss hybrid global designs

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Chapter Objectives 2

• Identify and describe related issues in global organization design

• Explain the general purpose of control and the levels of control in international business

• Describe how international firms manage the control function

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Organization Design

Organization design (or organization structure) is the overall pattern of

structural components and configurations used to manage the

total organization.

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Factors Affecting Design

Strategy

Technology

Environment

SizeCountryculture

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Functions of Firm Design

• Allocates organizational resources

• Assigns tasks to its employees

• Informs employees about firm’s rules, procedures, and expectations

• Collects and transmits information

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Types of Knowledge Affecting Design

Area knowledge

Functionalknowledge

Product knowledge

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Forms of Global Organization Design

Product

Area

FunctionalCustomer

Matrix

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Managerial Philosophies Affecting Design

Ethnocentric

GeocentricPolycentric

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Global Product Design

The global product design assigns worldwide responsibility for

specific products or product groups to separate operating divisions

within a firm.

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Figure 14.1 Samsung’s Global Product Design

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Global Product Design

Advantages

• Managerial expertise

• Production efficiencies

• Production flexibilities

• Flexible response to change

• Marketing flexibility

Disadvantages

• Unnecessary duplication

• Coordination and cooperation difficult

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The Danone Group uses a global product design.

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Global Area Design

The global area design organizes the firm’s activities around specific

areas or regions of the world.

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Figure 14.2 Global Area Design

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Disadvantages of Global Area Design

• Firm may sacrifice cost efficiencies

• Diffusion of technology is slowed

• Design unsuitable for rapid technological change

• Duplication of resources

• Coordination across areas is expensive

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Global Functional Design

The global functional design calls for a firm to create departments or

divisions that have worldwide responsibility for the common

organizational functions—finance, operations, marketing, R&D, and human resources management.

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Figure 14.3 Global Functional Design

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Global Functional Design

Advantages

• Transference of expertise

• Highly centralized control

• Focused attention of key functions

Disadvantages

• Practical only when firm has few products or customers

• Coordination difficult

• Duplication of resources

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Global Customer Design

The global customer design is used when a firm serves different

customers or customer groups, each with specific needs calling for special

expertise or attention.

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Figure 14.4 Eastman Kodak’s Global Customer Design

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Global Matrix Design

A global matrix design, the most complex of designs, is the result of

superimposing one form of organization design on top of an

existing, different form.

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Global Matrix Design

Advantages

• Brings together the functional area and product expertise

• Promotes organizational flexibility

• Provides access to all advantages of other designs

Disadvantages

• Appropriate for firms with many products and unstable environments

• Employees accountable to multiple supervisors

• Decisions may take longer

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Figure 14.5 A Global Matrix Design

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Global Hybrid Design

Most firms create a hybrid design, rather than pure design, that best

suits their purposes, given the firms’ size, strategy, technology,

environment, and culture, and blends elements of all the designs discussed.

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Figure 14.6 Nissan’s Hybrid Design

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Coordination

Coordination is the process of linking and integrating functions and activities of different

groups, units, or divisions.

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Control

Control is the process of monitoring ongoing performance and

making necessary changes to keep the organization

moving toward its performance goals.

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Control Function

• Process of monitoring ongoing performance and making necessary changes to keep the organization moving toward its performance goals

• Three levels

– Strategic

– Organizational

– Operations

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Figure 14.7 Levels of International Control

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Figure 14.8 Steps in International Control

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Essential Control Techniques

Accounting systems

Procedures

Performance ratios

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Reasons for Resistance to Control

Overcontrol

Increased accountability

Inappropriately focused control