1. GLOBAL DESIGN ORGANIZATION
Enbe Chen, Luis Chan, Lee Min Quan, Cherylnn Tan (Group3)

2. AGENDA Motivations for Global Expansion
Stages of International Development
International Strategic Alliance
Global Organization Design
Challenges
Transnational Model
Case Study: ABB

3. World’s Largest Auto Market: CHINA

4. Number of Companies on the Global 500 List
Global Expansion
Number of Companies on the Global 500 List
2006
2008
2011
United States
170
153
133
Japan 70 64 68
China 20 29 61
France 38 39 35
Germany 37 34
Britain 30
Switzerland 12 14 15
South Korea
Netherlands 13
Canada 11
Italy 10
Spain 9
India 6 7 8
Taiwan 3
Australia
Brasil 4 5
Russia
Mexico
Sweden
Singapore 1 2
Source: Based on data from "Global 500," Fortune magazine's annual ranking of the world's largest corporations for 2006, 2008, and 2011.

5. Lost Cost Production Factors
Motivations
Economies of Scale
Economies of Scope
Lost Cost Production Factors

6. Economies of Scale
Through large-volume production, companies are able to achieve the lowest possible cost per unit of production.

7. Economies of Scope
The number and variety of products and services a company offers as well as the number and variety of regions, countries, and markets it serves.

8. Low Cost Production Factors
The opportunity to get raw materials, labor, and other resources at the lowest possible cost.

9. Low Cost Production Factors
Lower cost of capital
Sources of cheap energy
Reduced Government Restrictions

10. Stages of International Development
The company deals with each country individually. I.
Domestic
II.
International
III.
Multinational
IV.
Global
Strategic Orientation
Domestically oriented
Export-oriented, multidomestic
Stage of Development
Initial foreign involvement
Competitive position
Explosion
Structure
Domestic structure plus export department
Domestic structure plus international division
Worldwide geographic product structure
Matrix, transnational structure
Market Potential
Moderate, mostly domestic
Large, multidomestic
Very large, multinational
Whole world
Specialist are hired to handle sales, service, and warehousing abroad

11. International Strategic Alliance
Joint Venture
Consortia

12. Joint Venture
Separate entity created with two or more active firms sponsors. This is a popular approach to sharing development and production costs and penetrating new markets.

13. Consortia
Groups of independent companies that join together to share skills, resources, costs and access to one another’s market.

14. National Responsiveness
Global Integration
National Responsiveness
Globalization Strategy
Multidomestic Strategy

16. International Division
Weakness:
Structure can be too complicated when broaden into more countries.

17. Global Product Structure
Weaknesses:
Eliminates economies of scale
Poor coordination across product lines
Competitions between products
Strengths:
Decentralizes decision making
In-depth technical specialization

18. Global Geographic Structure
Weaknesses:
Difficult to plan on a global scale
Poor coordination across different regions
Strengths:
Leads to higher customer satisfaction
Decentralizes decision making

19. Global Matrix Structure
Strengths:
Meet dual demands
Flexible sharing of resources
Opportunities for talent development
Weaknesses:
Dual authority
Needs more training for interpersonal skills
Time-consuming
Power balance

20. Global Organization Design Challenge
Complexity and Differentiation
Need for Coordination
Transfer of Knowledge and Innovation

21. Increased Complexity and Differentiation
Companies have to create a structure to operate in numerous countries that differ in economic development, language, political systems and government regulations, cultural norms & values. And infrastructure such as transportation and communication facilities.

22. Need for Coordination
All organizations working globally face the challenge of getting all the pieces working together in the right way at the right time and in the right place.

23. Transfer of Knowledge and Innovation
Past
Now
From developed countries to less developed countries.
Trickle-up Innovation or Reverse Innovation

24. Challenges Faced Language Barriers
Manager protect the interest of their own division
Knowledge and innovation as power
“Not-invented-here” syndrome
Knowledge is in the mind of employees

25. Global Coordination Mechanisms
Global Teams
Headquarters Planning
Expanded Coordination Roles

26. Global Teams Intercultural Teams Virtual Global Teams
Members from different countries and meet face-to-face.
Members reamin in separate locations and conduct their work electronically.
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27. Challenges of Global Team
Cultural and language differences
“Us-Against-Them” mentality

28. Headquarters Planning
Headquarters to take an active role in planning, scheduling.
Delegating responsibility and decision making authority in some areas while maintaining strong control through centralised systems.
Plans, schedules and formal rules & procedures to ensure greater commnication.
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29. Expanded Coordination Roles
Functional Managers
Country Managers/ Business Integrators
Network Coordinators
Responsibility includes coordinating across countries, identifying and linking organization’s expertise and resources worldwide
Coordinate across functions within a country.
Coordination on a regional basis.
Coordinate information and activities related to key customer accounts.

30. Benefits of Coordination
Cost Savings
Better Decision Making
Greater Revenues
Increased Innovation

31. Uncertainty Avoidance
Cultural Differences
Power Distance
Uncertainty Avoidance
People’s acceptance of inequality in power among institutions, organizations and people
People’s tolerance with uncertainty and ambiguity.

32. Japan: Centralized Approach
Leverage on knowledge and resources at the corporate centre
Attain global efficiencies
Coordinate across units (avoid turf battles)
USA : Coordination and Control through Formalization
Delegated responsibility to international divisions, yet overall control of enterprise through sophiscated management control system and development of specialist headquarters staff.
Europe: Decentralized Approach
High level of independence and decision making autonomy.
each international unit focuses on its local markets
China: Traditional Approach
Traditional family like business
Distinct hierarchy of authority
Strong centralization

33. Transnational Model Global Efficiency Local Responsiveness
Global Learning

34. Transnational Model Structure are flexible, and ever changing
Assets and resources are dispersed worldwide into highly specialized operations that are linked together through interdependent relationships
Structure are flexible, and ever changing
Subsidiary mangers intiate strategy and innovations that become strategy for the corporation as a while
Assests and resrouces are dispersed worldwide into highly specialized operations that ar elinked together through interdependent relationships
Structure are flexible, and ever changing
Subsidiary mangers intitate strategy and innovations that become strategy for the corporation as a while
Unification and coordination are achieved primarily through corportate culture, shared cision and values, and management style rather than through formal structures and systems.
Unification and coordination are achieved primarily through corportate culture, shared cision and values, and management style rather than through formal structures and systems.

35. CASE STUDY:
ASEA BROWN BOVERI

36. AGENDA Background Information Company Structure – 4 Management Levels
Implications

37. Background Information
ABB started with 2 separate companies – Allmanna Svenska Elektriska Aktiebolaget (ASEA) & Brown, Boveri and Cie (BBC)
ASEA – transformers and first synethic diamonds 1883
BBC – first steam turbine 1891
ASEA
US$6.8 billion revenue, employed 71,000
BBC
SEK58 billion revenue, employed 97,000

38. ASEA + BBC = ABB Merged in 1988 Percy Barnevik HQ in Zurich
US$17 billion revenue
Employed 160,000

39. ABB in the Present Operations in about 100 countries
145,000 employees *
$40 billion revenue for 2011
#186 in Forbes Glocal 2000
*as of June 2012

40. “ Global and local, big and small, radically decentralized but with central control…”
Percy Barnevik, CEO (1988 – 1996)

41. ABB’s Matrix Structure
develop global strategies for ABB by taking into account the local conditions in the countries in which thecompany had its operations.

42. Top Management Group Executive Management Scope CEO Deputy CEO
Executive Vice Presidents (EVPs)
Scope
Devise global strategies
Review performance
develop global strategies for ABB by taking into account the local conditions in the countries in which thecompany had its operations.

43. Middle Management Country Managers Business Area Managers
Formulate strategy for allocated business area
Ensure quality and cost standards
Focus on R&D
develop global strategies for ABB by taking into account the local conditions in the countries in which thecompany had its operations.
Country Managers
Implement ABB’s global strategy
Formulate HR policies

44. Lower Management Front Line Operating Companies (FLOCs)
Segregated according to business areas
Distinct legal entities
Minimal top management involvement
Heads report to 2 managers
develop global strategies for ABB by taking into account the local conditions in the countries in which thecompany had its operations.

45. Profit Center Level Operations of FLOCs split into profit centers
Achieve tasks allocated by FLOCs
Closest link to customers
develop global strategies for ABB by taking into account the local conditions in the countries in which thecompany had its operations.

46. Implications Economies of Scope Quick Response to Market Changes
Selling ABB products from other regions
Quick Response to Market Changes
Due to decentralized structure
*as of June 2012

47. Implications Too much to handle at the top
Difficulty in monitoring all companies
Conflicting interests of middle management
Delayed decision making

48. The End
Questions?