Organization, Implementation, and Control Chapter 13 Organization, Implementation, and Control

Learning Objectives Describe alternative organizational structures for international operations. Highlight factors affecting decisions about the structure of international organizations. Indicate roles for country organizations in the development of strategy and implementation of programs. Outline the need for and challenges of controls in international operations.

Organizational Structure Companies must change strategies as their structures evolve from domestic to multinational. The basic functions of an organization are to provide: A route and locus of decision making and coordination. A system for reporting and communications.

Organizational Designs Types of structures used by companies to manage foreign activities: Little/No Formal Organization International Division Global Organizations

Little or No Formal Organization Domestic operations assume responsibility for international activities in the early stages. The organizational structure reflects the increased demands from the international marketplace. The export department structure becomes obsolete as the firm becomes more involved in foreign markets.

The International Division Centralizes in one entity all of the responsibility for international activities. Best serve firms with few products that do not vary significantly. Coordination is important.

Global Organizational Structures Types: Most often used by multinational corporations. Improved cost efficiency is a major benefit. Second most used approach. Follows the marketing concept most closely. Product Structure Area Structure

Global Organizational Structures (continued) Types: The simplest from the administrative viewpoint. A variation is one that uses processes as a basis for structure. Especially used if customer groups are dramatically different. Functional Structure Customer Structure

Global Organizational Structures (continued) Types: Combines two or more organizational dimensions simultaneously. Integrates the various approaches. Most companies find this arrangement problematic. Complexity of this structure may increase the reaction time of a company. Mixed Structure Matrix Structure

Implementation Locus of Decision Making Decentralized systems have loose and simple controls. Subsidiary operates as a profit center. Centralized systems have tight controls. Strategic decision making is at headquarters. Coordinated decentralization calls for overall strategy to come from headquarters. Subsidiaries are free to implement within agreed upon range.

Decision Making Factors that impact structure and decision making. Degree of involvement in international operations. Products that the firm markets. Size and importance of the firm’s markets. Human resource capability of the firm.

The Networked Global Organization The network avoids problems of effort duplication, inefficiency, and resistance to ideas. Subsidiaries are able to make local business development decisions within the global framework.

Internal Cooperation Success for a global firm involves the ability to move intellectual capital. Boundarylessness describes a situation in which people can act without regard to status while feeling the freedom to search elsewhere for innovative ideas. International teams promote cooperation.

Internal Cooperation (contd.) Greatly assisted by Internet-based technology. Access to virtual teams.

Country Organizations Roles: Contributor Strategic Leader Black Hole Implementor

Country Organizations Strategic Leader A competent national subsidiary that may be serving as a partner in developing and implementing strategy. Contributor Country organization with a distinctive competence.

Country Organizations Implementor Most entities hold this role. It provides critical mass for the global effort. Black Hole The international company has a low competence country organization, or none at all.

Controls Internal benchmarking is of great importance in today’s market. General instruments of control: Bureaucratic/Formalized Control Cultural Control

The Bureaucratic/Formalized Control System Elements: International budget and planning system. Functional reporting system. Policy manuals to direct functional performance.

Cultural Control Requires personal interaction. Requires careful selection and training of corporate personnel.

Exercising Controls Manufacturing subsidiaries tend to be controlled more intensively than sales subsidiaries. U.S.-based multinationals place more emphasis on quantitative data. Control systems must consider the impact of the environment.