Us Org in International Env

8/6/2019 Us Org in International Env

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Designing Organizations for the

International Environment

Entering the Global Arena

Designing Structure to Fit Global Strategy

Building Global Capabilities

Cultural Differences in Coordination and Control

The Transnational Model of Organization


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Entering the Global Arena

Motivations for Global Expansion

Economic, technological and competitive forces have

combined to push many companies from a domestic to a

global focus. Three primary factors motivate companies toexpand internationally:

Economies of Scale expanding the organisations scale of

operations

Economies of Scope scope referring to the number andvariety of products and services a company offers, as well as

the number and variety of regions, countries and markets it

serves.

Low-Cost Production Factors obtain raw materials and

other resources at the lowest possible cost.


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Stages of International Development

Stage 1 Domestic Stage

The company is domestically oriented, but managers are aware

of the global environment and may want to consider initial foreign

involvement to expand production involvement and realiseeconomies of scale

Stage 2 The International Stage

The company takes exports seriously and begins to think

multidomestically which means competitive issues in each

country are independent of other countries; the company deals

with each country individually


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Stages of International Development

Stage 3 Multinational Stage

The company has extensive experience in a number of

international markets and has established marketing,

manufacturing or research and development facilities in severalforeign countries

Stage 4 Global Stage

The company transcends any signal country truly global

companies no longer think of themselves as having a single

home country and, indeed, have been called stateless

corporations.

See Exhibit 6.1


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Global Expansion Through International Strategic Alliances

Joint venture

Consortia

Global virtual organisation


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Designing Structure to Fit Global Strategy

Model for Global Versus Local Opportunities

When organisations venture into the international domain, managers strive

to formulate a coherent global strategy that will provide synergy among

worldwide operations for the purpose of achieving common organisational

goals.

One dilemma they face is choosing whether to emphasise global

integration versus national responsiveness. Managers must decide

whether they want each global affiliate to act autonomously or whether

activities should be standardised across countries.

These decisions are reflected in the choice between a globalisation versusa multi-domestic global strategy.


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Four Stages of International Evolution

I.

Domestic

II.

International

III.

Multinational

IV.

Global

Strategic

Orientation

Domestically

oriented

Export-oriented,

multidomestic

Multinational Global

Stage of

Development

Initial foreign

involvement

Competitive

positioning

Explosion Global

Structure

Domestic

structure plus

export

department

Domestic structure

plus international

division

Worldwide

geographic,

product

Matrix, trans-

national

Market

Potential

Moderate,

mostly

domestic

Large,

multidomestic

Very large,

multinational

Whole world

Sources: Based on Nancy J. Adler, InternationalDimensions of

OrganizationalBehavior(Boston: PWS-KENT, 1991), 7-8;

and Theodore T. Herbert, Strategy and Multinational Organization

Structure: An Interorganizational Relationships Perspective,

Academyof ManagementReview 9 (1984): 259-71.


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Matching Organizational Structure to International

Advantage

When Forces

for Global

Integration are

. . .

And Forces for

National

Responsiveness

are . . .

Strategy Structure

Low Low Export International

Division

High Low Globalization Global Product

Structure

Low High Multidomestic GlobalGeographic

Structure

High High Globalization and

Multidomestic

Global Matrix

Structure


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International Division

International division typically starts as an export department that grows

into an international division it has equal status to other departments but

has its own hierarchy to handle business in various countries, selling the

products and services created by domestic divisions, opening subsidiary

plants and in general moving the organisation into more sophisticatedinternational operations.

Global product structure the product divisions take responsibility for

global operations in their specific product area

With a global product structure, each divisions manager is responsible for

planning, organising and controlling all functions for the production anddistribution of its products for any market around the world


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Domestic Hybrid Structure with International Division

Scientific

Products

Division

Research &

Development

Human

Resources

Medical

Products

Division

Europe

(Sales)

Electrical

Products

Division

Corporate

Finance

CEO

International

Division

Brazil(Subsidiary)

Mid East

(Sales)

Staff (Legal,

Licensing)


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Global Geographic Division Structure

The global geographic structure divides the world into

geographic regions, with each geographic division reporting to

the CEP. Each division has full control of functional activities

within its geographic area. Companies that use this type of structure have typically been

those with mature product lines and stable technologies. They

can find low-cost manufacturing within countries, as well as

meeting different needs across countries for marketing and

sales.

See Exhibit 6.5


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Partial Global Product Structure Used by Eaton Corporation

Engineering President InternationalLaw &

Corporate

Relations

Chairman

Finance &

Administration

Regional

Coordinators

Global

Automotive

Components

Group

Global

Industrial

Group

Global

Instruments

Product

Group

Global

Materials

Handling

Group

Global

Truck

Components

Group

Source: Based onNew Directions in MultinationalCorporate

Organization (New York: Business International Corp., 1981).


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Global Matrix Structure

Global matrix structure same as a regular matrix structure,

except that for multinational corporations the geographic

distances for communication are greater and co-ordination is

more complex The matrix works best when pressure for decision-making

balances the interests of both product standardisation and

geographic localisation and when co-ordination to share

resources is important.

See Exhibit 6.6


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Global Matrix Structure

International

Executive

Committee

Power

Transformers

Germany NorwayArgentina/

Brazil

Spain/

Portugal

Transportation

Industry

Business

Areas

Country Managers

Local

Companies


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Building Global Capabilities

The Global Organizational Challenge

Increased Complexity and Differentiation

Need for Integration

Knowledge Transfer

Global Coordination Mechanisms

Global Teams

Headquarters Planning

Expanded Coordination Roles


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National Value Systems

Power Distance

Uncertainty Avoidance

Three National Approaches to Coordination and Control

Centralized Coordination in Japanese Companies

European Firms Decentralized Approach

The United States: Coordination and Control through Formalization


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Just as social and cultural values differ from country to

country, the management values and organisational norms of

international companies tend to vary depending on the

organisations home country. Organisational norms and values are influenced by the values

in the larger national culture, and these in turn influence the

organisations structural approach and the ways managers co-

ordinate and control and international firm.


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Two dimensions that seem to have strong impact within

organisations are power distance and uncertainty avoidance.

High Power distance means that people accept inequality

in power among institutions, organisations and people. High Uncertainty and Avoidance means that members of

a society feel uncomfortable with uncertainty and ambiguity

and thus support beliefs that promise certainty and conformity.

Low uncertainty avoidance means that people have a hightolerance for the unstructured, the unclear and the

unpredictable.


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The values are reflected within organisations in terms of beliefs

regarding the need for hierarchy, centralised decision making,

and control, formal rules and procedures, and specialised jobs.

Examples

Centralised co-ordination in Japanese Companies

European Firms Decentralised Approach

The United States: Coordination and Control Through

Formalisation


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The Transnational Model of Organisation

The transnational model represents the most advanced kind of

international organisations.

The transnational model is useful for large, multinational companies with

subsidiaries in many countries to exploit both global and local advantages

as well as technological advancements, rapid innovation, and globallearning and knowledge sharing.

The transnational model creates an integrated network of individual

operations that are linked together to achieve the multidimensional goals

of the overall organisation. The management philosophy is based on

interdependence rather than either full divisional interdependence or totaldependence of these units on headquarters for decision making and

control


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The Transnational Model of Organisation

Several characteristics distinguish the transnational organisation from other

global organisational forms such as the matrix. These are:

1. Assets and resources are dispersed worldwide into highly specialised

operations that are linked together through interdependent relationships

2. Structures are flexible and ever changing flexible centralisation

3. Subsidiary managers initiate strategy and innovations that become strategy

for the corporation as a whole.

4. Unification and coordination are achieved primarily through corporate

culture, shared vision and values, and management style rather thanformal structures and systems

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Us Org in International Env