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

11. ILLUSTRATION: EXAMPLE OF GM STRATEGIC RECONFIGURATION
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