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Developing a Global Transnational Organization (TNO)

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1 Developing a Global Transnational Organization (TNO)
2 Lecture 2 Developing a Global Transnational Organization (TNO) Copyright © 2012 Karol Pelc; Copyright © 2011 McGraw-Hill Irwin

2 Initial questions: 1. Is it possible to apply one standard organizational structure in all global transnational organizations? Why or why not? 2. What factors should be taken into account for developing a global transnational organization? 3. How can cultural differences affect global transnational organization? Copyright © 2011 Karol Pelc; Copyright © 2011 McGraw-Hill Irwin

3 Archetypes of Organizational Structure
Competitive advantage is shaped by country of origin, time of expansion, and nature of leadership The challenge is to build new capabilities while protecting existing strengths Three archetypes can be identified…

4 Pre-WW II European Empires: Dominance of Multinational Model
Decentralized Federation Organization... …Strategy of National Responsiveness Expanded abroad in a period of high international barriers; Preferential access to foreign empire markets Organization developed as a portfolio of national companies; heritage of family management, personal control Strategy based on understanding and responding to national markets

5 Post-WW II American Expansion: Dominance of International Model
Coordinated Federation Organization... …Strategy of Knowledge Transfer Expanded abroad in a time of economic reconstruction: large, advanced home market as knowledge source Organization built on strong links to the parent company based on transfer of expertise: heritage of professional management, systems control Strategy based on transferring parent company’s leadership in technology, marketing, and other skills

6 Late XX-th Century Japanese Challenge: Dominance of Global Model
Centralized Hub Organization… …Strategy of Global Efficiency Expanded abroad in a period of falling trade barriers: newly added capacity and government industrial policy as assets Organization grew as dependent foreign units tightly controlled from the center: heritage of culturally dependent management practices dominated by group processes Strategy based on capturing global scale economies

7 Administrative Heritage Meets Industry Characteristics
Telecom Switching Matsushita GE Philips NEC Ericsson Kao P&G Unilever Forces for Global Integration Forces for National Responsiveness Consumer Electronics Branded Package Goods

8 Building and Managing the Transnational Organization
The transnational organization attempts to resolve the inherent limitations of the three organization archetypes Three key characteristics: Builds and legitimizes multiple internal perspectives Dispersed and interdependent physical assets and capabilities Robust and flexible integrative process

9 Characteristics of the Transnational Organization THREE-DIMENSIONAL MODEL
Global Efficiency National Responsiveness Worldwide Innovation & Learning

10 Organizational Configurations
Decentralized Federation Centralized Hub The Integrated Network Coordinated Federation

GM (General Motors) before and after bankruptcy (2008) Pre-bankruptcy strategy: Decentralized Federation Model (Multinational) Multiple federated units, relatively loose control, subsidiaries collected through several acquisitions between (Opel, Vauxhall) and 2002 (Daewoo Motors) Estimated weights of strategic components (Bennett, 2012) National responsiveness 70% Global efficiency 15% Worldwide innovation 15% Post-bankruptcy strategy (2009 -…): Coordinated Federation Model (Global/Internat) Reduced number of brands (only four: Chevrolet, Cadillac, GMC and Buick); orientation to joint ventures Reduced number of executives (by about 35%); globalization of manufacturing Estimated weights of strategic components (balanced) National responsiveness 35% Global efficiency 40% Worldwide innovation 25% Bennett, M., The global strategy of General Motors, MTU Project report BA5780, Houghton 2012

12 The Transnational: A New Type of Organization
A new structural anatomy Redistributing assets and responsibilities A new process physiology Redefining information flows and relationships A new cultural psychology Readjusting mentalities and beliefs

13 Managing the Process of Change: Traditional Model
Classic change process driven by structural reconfiguration Change in formal structure/responsibilities reshapes redefines Organizational processes/relationships Individual attitudes/mentalities

14 Managing the Process of Change: Emerging Model
Change process initiated by changes in attitudes and mentalities Change in individual attitudes and mentalities Changes in interpersonal relationships and processes Change in formal structure and responsibilities

15 Building & Maintaining Multiple Strategic Capabilities
Global Efficiency Requires Protecting the Legitimacy of Multiple Management Tasks Business Management Functional Management National Responsiveness Worldwide Innovation & Learning Area Management

16 Organizational Characteristics
Multinational Global International Transnational Configuration of assets and capabilities Decentralized and nationally self-sufficient Centralized and globally scaled Core competencies centralized, others decentralized Dispersed, interdependent and specialized Role of overseas operation Sensing and exploiting local opportunities Implementing parent company strategy Adapting and leveraging parent company competencies Differentiated contributions by national units to integrated worldwide operations Development and diffusion of knowledge Knowledge developed and retained within each unit Knowledge developed and retained at the center Knowledge developed at the center and transferred to overseas units Knowledge developed jointly and shared worldwide

17 SUMMARY Historical view and three archetypes of TNO organizational structures 2. Characteristics of TNO: global efficiency, national responsiveness, worldwide innovation 3. Building multiple strategic capabilities 4. Four types of organizational configuration and strategy

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