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international structure and control procedures includes different organizational tools and control procedures
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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
