1. Irwin/McGraw-Hill [Modified by EvS] Mgt 485 CHAPTER 11 ORGANIZING INTERNATIONAL OPERATIONS

2. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-2

3. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-3 Organizational Consequence of Internationalization Aircraft Cameras Electronics Computers Telecommunications Aerospace Autos Synthetic fibers Cement Steel Clothing Packaged goods High Low High Pressure for Local Responsiveness Pressure for Globalization

4. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-4 Goals and Strategy EnvironmentSize Culture Technology Structure 1. Formalization 2. Specialization 3. Standardization 4. Hierarchy of Authority 5. Complexity 6. Centralization 7. Professionalism 8. Personnel Ratios

5. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-5 Initial Division Structure Used for Initial Entry into International Markets –Exporting  Common first choice for manufacturers of technologically advanced products  Firm can charge premium price due to little competition –Subsidiary  A common for handling finance-related businesses or other operations that require an on-site presence from the start

6. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-6 Subsidiaries During the Early Stage of Internationalization Home Office Departments Overseas Subsidiaries CEO ProductionMarketingFinancePersonnel V.P. International Operations FranceJapanEgyptAustraliaArgentina

7. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-7 International Division Structure  Advantages –Takes burden off the CEO –Receives top management attention –Promotes overall unified approach –Develops internationally experienced managers  Disadvantages –Separating domestic and international managers may cause differing objectives –Home office may not be able to allocate resources globally, thereby penalizing growth

8. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-8 Home Office Departments Operating Divisions CEO ProductionMarketingFinancePersonnel Domestic Division Domestic Division Domestic Division Domestic Division International Division AustraliaJapanItaly Office Operations Marketing Government Relations International Division Structure

9. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-9 Global Product Division  Advantages –Helps to manage diversity –Able to cater to local needs –Marketing, production, and finance can be co-ordinated on a product-by-product global basis  Disadvantages –Duplication of facilities and staff personnel –Managers may pursue attractive short-term sites instead of long-term sites –Managers spend to much time trying to tap local instead of international markets Domestic divisions are given worldwide responsibility for product groups

10. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-10 Global Product Division Structure CEO ProductionMarketingFinancePersonnel South America AfricaEuropeAustraliaFar East Product Division A Product Division B Product Division C Product Division D Product Division E ProductionMarketingFinancePersonnel Great Britain France Germany Italy Netherlands

11. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-11 Global Area Division  Advantages –Reduces cost per unit –Caters to local markets –Makes rapid decisions to accommodate environmental changes  Disadvantages –Difficulty reconciling a product emphasis with geographic orientation –Ignores new research and development by division groups Based on geographic rather than product orientation

12. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-12 Global Area Division Structure Home Office Departments Operating Divisions CEO ProductionMarketingFinancePersonnel North America South America EuropeAsiaAfrica Great Britain France Germany Italy Netherlands

13. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-13 Global Functional Division  Advantages –Emphasizes functional expertise –Tight centralized control –Relatively lean managerial staff  Disadvantages –Difficulty co-ordinating manufacturing and marketing –Difficulty managing multiple product lines –Only CEO can be held accountable for profits Worldwide operations based primarily on function and secondarily on product

14. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-14 A Global Functional Structure CEO ProductionMarketingFinance Domestic Production Product A Product B Product C Product D Foreign Production Product A Product B Product C Product D Domestic Production Product A Product B Product C Product D Foreign Production Product A Product B Product C Product D

15. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-15 Mixed Organization Structures  Advantages –Allows organization to create the specific type of design to meet its needs  Disadvantages –Complexity increases –Difficulty arises in co-ordinating personnel Combines global product, area, and functional divisions to supplement its primary structure with a secondary one, and perhaps a tertiary (third) one

16. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-16 A Multinational Matrix Structure CEO ProductionMarketingFinancePersonnel Manager, Industrial Goods North America Manager, Industrial Goods Europe North AmericaIndustrial GoodsEurope

17. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-17 Meeting the Challenges of Globalization  Synergy - (2 + 2 = 5) –whole is greater than the sum of its parts  Organizational Synergy –Pooling knowledge across regions –Sharing resources to meet world-wide needs –Pooling purchases for greater negotiating power –Coordinating strategies to become more efficient –Vertically integrating to be more cost effective –Creating new businesses

18. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-18 Strategies:  Mutual adjustment  Use of direct, technically skilled supervisors  Use of integrative leadership  Technical training provided in-house  Use of standard milestones in work design  Flexible design standards Organizing for Product Integration

19. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-19 Information Technology Key Questions:  Which information systems are needed?  Are investments are worthwhile?  How does technology fit into management’s strategic thinking ?  How should users and specialists connect within the company?  How do you design systems to improve organizational performance?

20. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-20 Organizational Characteristics 3 most critical for international operations  Formalization –The use of defined structures used in decision making, communicating, and controlling  Objective - written descriptions  Subjective -informal controls  Specialization –The assigning of individuals to specific, well-defined tasks  Horizontal specialization  Vertical specialization  Centralization –Management system in which important decisions are made at the top

21. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-21 Structural Deficiency Symptoms  Decisions are delayed or lacking in quality  Organization does not respond innovatively to a changing environment  Too much conflict from departments being at cross purposes is evident

22. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-22 Relate “Structure” to “Culture”  How do cultural dimensions affect structural dimensions?  Are some structures inherently more effective in some cultures? Use Hofstede (p. 119-122) & Trompenaar’s (p. 126)

23. Irwin/McGraw-Hill [Modified by EvS] Mgt 485-11-23 Case Study Questions  Dan Simson: Project Mgr. –Cultural dimension(s) of time (e.g. temporal forces, past vs. future orientation, sequential vs. synchronous, orientation and value) and how they apply to this case –Organizational and strategic impacts, focusing on Dan Simson’s responsibilities to maximize his organization’s effectiveness (Profitabity, developing Human Resources, increasing market exposure) –Recommendation as to how Dan Simson can be effective in this environment