CHAPTER 11 ORGANIZING INTERNATIONAL OPERATIONS

Organizational Consequence of Internationalization Aircraft Cameras Electronics Computers Telecommunications Aerospace High Autos Pressure for Globalization Steel Clothing Packaged goods Synthetic fibers Cement Low Low High Pressure for Local Responsiveness

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

Subsidiaries During the Early Stage of Internationalization CEO Home Office Departments Production Marketing Finance Personnel V.P. International Operations Overseas Subsidiaries France Japan Egypt Australia Argentina

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

An International Division Structure CEO Home Office Departments Production Marketing Finance Personnel Domestic Division Domestic Division Domestic Division Domestic Division International Division Operating Divisions Australia Japan Italy Office Operations Government Relations Marketing

Global Product Division Domestic divisions are given worldwide responsibility for product groups 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

A Global Product Division Structure CEO Production Marketing Finance Personnel Product Division A Product Division B Product Division C Product Division D Product Division E South America Africa Europe Australia Far East Great Britain France Germany Italy Netherlands Production Marketing Finance Personnel

Based on geographic rather than product orientation Global Area Division Based on geographic rather than product orientation 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

A Global Area Division Structure CEO Home Office Departments Production Marketing Finance Personnel Operating Divisions North America South America Europe Asia Africa Great Britain France Germany Italy Netherlands

Global Functional Division Worldwide operations based primarily on function and secondarily on product 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

A Global Functional Structure CEO Production Marketing Finance 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

Mixed Organization Structures Combines global product, area, and functional divisions to supplement its primary structure with a secondary one, and perhaps a tertiary (third) one Advantages Allows organization to create the specific type of design to meet its needs Disadvantages Complexity increases Difficulty arises in co-ordinating personnel

A Multinational Matrix Structure CEO Production Marketing Finance Personnel North America Industrial Goods Europe Manager, Industrial Goods North America Manager, Industrial Goods Europe

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

Organizing for Product Integration 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

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?

Organizational Characteristics 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