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Designing Organizations for the International Environment
Chapter Six Designing Organizations for the International Environment Thomson Learning © 2004
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Motivations for Global Expansion
Economies of Scale – large volume Economies of Scope – number of products / countries Low-cost Production Factors – labour, raw materials, energy, capital, reg’s Thomson Learning © 2004
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Four Stages of International Evolution
Domestic II. International III. Multinational IV. Global Strategic Orientation Domestically oriented Export-oriented, multidomestic Stage of Development Initial foreign involvement Competitive positioning Explosion Structure Domestic structure plus export department Domestic structure plus international division Worldwide geographic, product Matrix, trans-national Market Potential Moderate, mostly domestic Large, multidomestic Very large, multinational Whole world Sources: Based on Nancy J. Adler, International Dimensions of Organizational Behavior (Boston: PWS-KENT, 1991), 7-8; and Theodore T. Herbert, “Strategy and Multinational Organization Structure: An Interorganizational Relationships Perspective,” Academy of Management Review 9 (1984): Thomson Learning © 2004
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Matching Organizational Structure to International Advantage
When Forces for Global Integration are . . . And Forces for National Responsiveness are . . . Strategy Structure Low Export International Division High Globalization Global Product Structure Multidomestic Global Geographic Structure Globalization and Multidomestic Global Matrix Structure Thomson Learning © 2004
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Domestic Hybrid Structure with International Division
CEO Human Resources Corporate Finance Research & Development Electrical Products Division Scientific Products Division Medical Products Division International Division Europe (Sales) Brazil (Subsidiary) Mid East (Sales) Staff (Legal, Licensing) Thomson Learning © 2004
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Partial Global Product Structure Used by Eaton Corporation
Chairman Law & Corporate Relations Engineering President Finance & Administration International Regional Coordinators Global Automotive Components Group Global Industrial Group Global Instruments Product Group Global Materials Handling Group Global Truck Components Group Source: Based on New Directions in Multinational Corporate Organization (New York: Business International Corp., 1981). Thomson Learning © 2004
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Global Matrix Structure
International Executive Committee Country Managers Germany Norway Argentina/ Brazil Spain/ Portugal Business Areas Power Transformers Transportation Industry Local Companies Thomson Learning © 2004
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Building Global Capabilities
The Global Organizational Challenge Increased Complexity and Differentiation Need for Integration Knowledge Transfer Global Coordination Mechanisms Global Teams Headquarters Planning Expanded Coordination Roles Thomson Learning © 2004
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Cultural Differences in Coordination and Control
National Value Systems Power Distance Individualism vs. Collectivism Masculinity vs. Femininity Uncertainty Avoidance Long Term Orientation Three National Approaches to Coordination and Control Centralized Coordination in Japanese Companies European Firms’ Decentralized Approach The United States: Coordination and Control through Formalization Thomson Learning © 2004
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Power Distance “...the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally.” Thomson Learning © 2004
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Power Distance at Work Hierarchy Centralization Salary range
Participation Ideal Boss Privilege & status symbols Thomson Learning © 2004
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Individualism vs. Collectivism
Individualist societies: ties are loose and everyone looks out for himself or herself Collectivist societies: people integrated into strong, cohesive groups; protection is exchanged for loyalty Thomson Learning © 2004
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Individualism / Collectivism at Work
Employee-employer relationship Hiring and promotion decisions Managerial focus Task vs. relationship priority Thomson Learning © 2004
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Masculinity vs. Femininity
Masculine societies: social gender roles are distinct (men focus on material success; women on quality of life) Feminine societies: social gender roles overlap (both quality of life) Thomson Learning © 2004
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Masculinity / Femininity at Work
Centrality of work Ways of managing & decision making Fem: equality, solidarity, quality of work life Mas: equity, compete, performance Conflict resolution Thomson Learning © 2004
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Uncertainty Avoidance
“…the extent to which the members of a culture feel threatened by uncertain or unknown situations.” NOT the same as risk avoidance Presence of rules Thomson Learning © 2004
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Uncertainty Avoidance at Work
Necessity of rules Time orientation Precision & punctuality Interpretation of “What is different…” Appropriateness of emotional displays Thomson Learning © 2004
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Long term orientation Confucian Dynamism
The ‘newest’ dimension three universal dimensions and two fourth dimensions Truth vs. Virtue: What one believes vs. What one does Thomson Learning © 2004
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Confucian Dynamism Short-term orientation
Social pressure to ‘keep up with the Joneses’ small savings expect quick results concern with possessing Truth Long-term orientation Thrift: being sparing with resources large savings perseverance toward slow results concern with respecting the demands of Virtue Thomson Learning © 2004
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Idiosyncracies of North American Management Theory
Stress on Market Processes Stress on the Individual Stress on Managers rather than Workers Thomson Learning © 2004
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Transnational Model of Organizations
Assets and resources are dispersed worldwide into highly specialized operations that are linked together through interdependent relationships. Structures are flexible and ever-changing. Subsidiary managers initiate strategies and innovations that become strategy for the corporation as a whole. Unification and coordination are achieved primarily through corporate culture, shared visions and values, and management style rather than through formal structures and systems Thomson Learning © 2004
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